Document:

exv10w27

 

Exhibit 10.27

     Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

DISTRIBUTION AND LICENSE AGREEMENT

     This Distribution and License Agreement (hereinafter, “Agreement”), is entered into
and made effective as of the 1st day of December, 2005 (“Effective Date”),
between XenoPort, Inc., a Delaware corporation having a place of business at 3410 Central
Expressway, Santa Clara, CA 95051, United States of America (“XenoPort”), and Astellas
Pharma Inc., a Japanese corporation having a place of business at 3-11, Nihonbashi-Honcho 2-chome,
Chuo-ku, Tokyo, 103-8411, Japan (“Astellas”). Each of XenoPort and Astellas shall be a
“Party,” and together the “Parties.”

RECITALS

     A. XenoPort is developing a Transported ProdrugTM of gabapentin (as further defined below, the
“Product”) in the United States, for the treatment of restless legs syndrome
(“RLS”) and the management of neuropathic pain;

     B. Astellas desires to further develop and commercialize the Product in Japan and certain
other countries (as further described below, the “Territory”), and XenoPort desires to have
the Product developed and commercialized in the Territory by Astellas, in accordance with this
Agreement; and

     C. Astellas desires to obtain from XenoPort certain exclusive distribution and license rights
for the Product in the Territory, and XenoPort is willing to grant to Astellas such rights on the
terms and conditions set forth below.

AGREEMENT

     1. DEFINITIONS 

          1.1 “Affiliates” shall mean, in the case of a subject entity, another entity that
controls, is controlled by or is under common control with the subject entity, for so long as such
control exists. For purposes of this definition only, “control” shall mean beneficial ownership
(direct or indirect) of at least fifty percent (50%) of the shares of the subject entity entitled
to vote in the election of directors (or, in the case of an entity that is not a corporation, in
the election of the corresponding managing authority). “Subsidiaries” of a subject entity
shall mean Affiliates that are controlled by such entity.

          1.2 “Astellas Know-How” shall mean any and all scientific, medical, technical and/or
regulatory information relating to the Compound and/or the Product and Data, which are owned or
Controlled by Astellas as of the Effective Date or during the term of this Agreement, which are
needed by or reasonably useful to XenoPort in order to develop and/or commercialize the Product
outside the Territory. Astellas Know-How shall include any developments and improvements relating
to the Compound and/or the Product made by Astellas during the term of this Agreement.

 

 

          1.3 “Competitive Compound” shall mean any compound having as a primary mechanism of
action [... * ...], other than the Compound. For avoidance of doubt, Competitive Compound shall not
include any compound that has a mechanism of action [... * ...]; provided, however, that such compound
[... * ...] by either Party, including without limitation RLS and painful diabetic neuropathy.

          1.4 “Compound” shall mean that certain compound, referred to internally at XenoPort as
XP13512, the structure of which is set forth in Exhibit A, and all isomers and/or mixtures of
isomers thereof.

          1.5 “Control” shall mean possession of the ability to grant a license or sublicense,
of or within the scope set forth in this Agreement, without violating the terms of any agreement or
other arrangement with any Third Party.

          1.6 “Cost of Goods” shall mean the [... * ...] meeting the specifications mutually agreed
by the Parties, [... * ...] for calculating cost of goods, which shall include [... * ...]. Cost of Goods
shall not include [... * ... ]. It is understood that the [... * ...]. In addition, the [... * ...].
As used in this Section 1.6, [... * ...] in Sections 8.2 and 8.3 below.

          1.7 “Data” shall mean all preclinical data, clinical data, clinical pharmacology data
and all regulatory filings and approvals submitted or obtained, together with its supporting data
and regulatory correspondence and rights to reference the same, in each case pertaining to the
Compound and/or the Product, which are Controlled by each Party as of the Effective Date or during
the term of this Agreement.

          1.8 “Diligent Efforts” shall mean the level of efforts required to carry out a
particular task or obligation in a sustained manner, consistent with the efforts generally used by
a Party with respect to its own compounds, with the same level of peak sales potential, for which
Marketing Approval is being sought as expeditiously as practicable or for which Marketing Approval
has been obtained, as the case may be.

          1.9 “First Commercial Sale” shall mean the first bona fide, arm’s length sale of a
Product in a country following receipt of Marketing Approval of such Product in such country;
provided that where such a first sale has occurred in a country for which government pricing or
government reimbursement approval is needed and Astellas chooses to apply for such approval, then
such sales shall not be deemed a First Commercial Sale until such pricing or reimbursement approval
has been obtained.

          1.10 “Field” shall mean any and all indications for human use.

          1.11 “GAAP” shall mean United States generally accepted accounting principles as in
effect from time to time, consistently applied by a Party across its entire business.

 

			
	*	 	Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

          1.12 “IND” shall mean an Investigational New Drug application filed with the U.S. Food
and Drug Administration (“FDA”), or a comparable filing in the Territory.

          1.13 “MAA” shall mean a New Drug Application filed with the FDA (or, in the Territory,
a marketing authorization application comparable to such New Drug Application), including all
supporting documentation and data required for such application to be accepted for review, filed
with the FDA or counterpart health regulatory agency, requesting approval for commercialization of
a product for a particular indication in such country.

          1.14 “Marketing Approval” shall mean, with respect to the United States or in the
Territory, approval by the health regulatory agency in such country that is the counterpart of the
FDA of the MAA for a product filed in such country. It is understood that, as used herein,
Marketing Approval does not include pricing or reimbursement approval.

          1.15 “Net Sales” shall mean the gross amounts invoiced or otherwise received for sales
of the Product by Astellas, its Affiliates and Subdistributors to Third Parties (but not including
sales among Astellas, its Affiliates and their respective Subdistributors) less deductions for:
(a) customary trade, quantity and cash discounts allowed and actually taken; (b) credits to
customers on account of return of Product; (c) [... * ...] of such gross amount to cover outbound
transportation charges, including insurance, freight and packaging; and (d) sales and excise taxes
and duties and any other similar governmental charges imposed upon the sale of Product to the
customer. Notwithstanding the foregoing, the amounts described in (c) and (d) above shall be
deducted only to the extent they are stated separately on the invoice and included within gross
amounts received from sales of the Product. If a Product is sold for consideration other than
solely cash, the monetary value of such other consideration shall be included in the calculation of
Net Sales.

          1.16 “Phase III Trial” shall mean human clinical trial(s), the principal purpose of
which is to establish safety and efficacy of the Product against the disease being studied as
required in 21 C.F.R. §312.21(c) or a similar clinical study in a country other than the United
States. For clarity, a Phase III Trial shall also include any other human clinical trial intended
as a pivotal trial for filing an MAA, whether or not such trial is a traditional Phase III Trial.

          1.17 “Product” shall mean (a) the pharmaceutical product containing the Compound that
is the subject of IND Nos. 68,341 and 71,352 (the “Existing Product”), and (b) any changes
to the formulation, dosage form or other aspects of the Existing Product established by the Parties
pursuant to Section 4.3 or otherwise, provided that the result remains a pharmaceutical product
containing the Compound, alone or in combination with other active ingredients.

          1.18 “Product Trademark” shall mean the trademark identified by XenoPort for the
Product in the Territory, or another mutually agreed trademark for the Product.

          1.19 “Regulatory Authority” shall mean any national (e.g., the FDA or MHLW),
supra-national (e.g., the European Commission, the Council of the European Union or the EMEA),

 

			
	*	 	Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

or other governmental entity in any jurisdiction of the world involved in the granting of
Marketing Approval for pharmaceutical products.

          1.20 “Subdistributor” shall mean an entity to whom Astellas has granted directly or
indirectly the right to market, distribute and/or promote, a Product in the Territory in accordance
with Section 2.3. For avoidance of doubt, “Subdistributor” shall not include a wholesaler who is
not primarily responsible for marketing and promoting the Product for its respective territory or
customer group.

          1.21 “Territory” shall mean Indonesia, Japan, Korea, Philippines, Taiwan and Thailand.

          1.22 “Third Party” shall mean any person or entity other than Astellas, XenoPort and
their Affiliates.

          1.23 “Valid Claim” means (a) a claim of any issued, unexpired patent rights which has
not been revoked or held unenforceable or invalid by a decision of a court or governmental agency
of competent jurisdiction from which no appeal can be taken, or with respect to which an appeal is
not taken within the time allowed for appeal, and which has not been disclaimed, denied or admitted
to be invalid or unenforceable through reissue, disclaimer or otherwise; and (b) a claim in any
patent application pending with an administrative patent authority unless the application has been
(i) abandoned, or (ii) rejected by the relevant patent authority and all options for appeal to the
relevant administrative patent authority for further prosecution of such claim have been exhausted.

          1.24 “XenoPort Patent Rights” shall mean all issued, unexpired patents and all
reissues, renewals, re-examinations and extensions thereof, and patent applications therefor, and
any divisions or continuations, in whole or in part, thereof, including those patents and
applications set forth in Exhibit B, which would, but for the license granted hereunder, be
infringed by use, development, formulation, packaging, import, sale, distribution, promotion or
marketing of the Compound and/or the Product by Astellas, any of its Affiliates or Subdistributors
in the Territory (and countries outside the Territory, to the extent the Compound and/or the
Product is formulated or packaged pursuant to Section 2.2 in such countries, or where Astellas
conducts or, requests XenoPort to conduct, development activities in such countries pursuant to
Section 4.7), to the extent Controlled by XenoPort as of the Effective Date or during the term of
this Agreement.

          1.25 “XenoPort Know-How” shall mean any and all scientific, medical, technical and/or
regulatory information relating to the Compound and/or the Product and Data, which are owned or
Controlled by XenoPort as of the Effective Date or during the term of this Agreement, which are
needed by or reasonably useful to Astellas in order for Astellas to perform its obligations under
this Agreement. XenoPort Know-How shall include any developments and improvements relating to the
Compound and/or the Product made by XenoPort during the term of this Agreement.

          In addition, the following terms shall have the meaning described in the corresponding section
of this Agreement. Other terms may be defined throughout the Agreement.

 

			
	*	 	Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

	 	 	 
	Term	 	Section
	 
	accepted
	 	6.2.3
	Acquisition
	 	2.4.2
	Affected Area
	 	16.2
	Agreement
	 	Preamble
	Annual Net Sales
	 	7.1
	Astellas
	 	Preamble
	Astellas Development Plan
	 	4.2.2
	Astellas Indemnitees
	 	14.2
	Change of Control
	 	2.4.2
	[... * ...]
	 	[... * ...]
	Commercialization Plan
	 	5.1.1
	completion
	 	6.2.2
	Confidential Information
	 	12.1
	[... * ...
	 	... * ...]
	CMC Information
	 	13.2.4
	Damages
	 	10.3
	DMF
	 	4.5
	Effective Date
	 	Preamble
	Enforcement Action
	 	10.4
	Existing Product
	 	1.17
	Fault of Astellas
	 	8.5
	Fault of XenoPort
	 	8.5
	FDA
	 	1.12
	Force Majeure
	 	18.2
	Generic Product
	 	7.3.3
	Improvements
	 	10.1
	Indemnitee, Indemnitor
	 	14.3
	Infringement Action
	 	10.3
	Infringing Product
	 	10.4
	JAMS
	 	17.2
	Joint Development Committee, JDC
	 	3.2
	Joint Steering Committee, JSC
	 	3.1
	Liabilities
	 	14.1
	M&A Acquired Product
	 	2.4.2
	Party, Parties
	 	Preamble
	Panel
	 	17.2.1
	Product Liability Claim
	 	14.4
	Product Materials
	 	16.2.4
	Recall Costs
	 	8.5
	[... * ...]
	 	[... * ...]
	RLS
	 	Preamble
	second indication
	 	6.2.7(a)
	Subsidiaries
	 	1.1
	Supply Agreement
	 	8.1
	third indication
	 	6.2.7(b)
	Third Party Claim
	 	14.1
	Third Party IP
	 	2.5
	Third Party Royalties
	 	7.3.1
	Wind-down Period
	 	16.2.1(b)
	Written Disclosure
	 	12.4
	XenoPort
	 	Preamble
	XenoPort Indemnitees
	 	14.1
	[... * ...]
	 	[... * ...]

     2. GRANT OF DISTRIBUTION RIGHTS AND LICENSE

          2.1 Appointment. During the term of this Agreement, XenoPort appoints Astellas, and
Astellas hereby accepts such appointment, as the exclusive (even as to XenoPort) distributor and
marketer of the Product in the Territory.

          2.2 License. Subject to the terms and conditions of this Agreement, XenoPort hereby
grants to Astellas an exclusive (even as to XenoPort) license during the term of this Agreement
under the XenoPort Patent Rights and XenoPort Know-How to: (a) formulate, have formulated, package
and have packaged the Product using the Compound supplied by XenoPort (if Compound is supplied);
(b) package and have packaged the Product supplied by XenoPort (if Existing Product is supplied, or
if Product is supplied upon mutual agreement pursuant to Section 8.1); and (c) use, develop,
market, import, export, sell, distribute and promote the Compound and the Product; in each case for
use in the Field. Such license shall be limited solely to the Territory, except

 

			
	*	 	Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

that Astellas has the non-exclusive right to formulate or have formulated the Compound and
package and have packaged Product outside the Territory, in each case solely for sale of the
resulting Product within the Territory. It is understood and agreed that the licenses set forth in
this Section 2.2 exclude the right to make or have made Compounds.

          2.3 Subdistributors. Astellas shall have the right to engage its Subsidiaries as
Subdistributors of the Product, and may grant sublicenses under Section 2.2 to such Subsidiaries
solely for such purposes, solely for as long as such entity remains a Subsidiary. Astellas may
otherwise engage Subdistributors and grant sublicenses only upon the approval of XenoPort, which
approval shall not be unreasonably withheld or delayed. In any event, Astellas shall ensure that
all of its Subdistributors are bound by a written agreement containing provisions as protective of
the Product and XenoPort as this Agreement. Without limiting the foregoing, in the event that
Products supplied by Astellas to a Subdistributor are being directly or indirectly sold or used
outside the Territory, Astellas agrees that, upon becoming aware of such sale or use or otherwise
upon the request of XenoPort, it shall not supply further quantities of Products to such
Subdistributor.

          2.4 No Conflict.

               2.4.1 Competitive Compounds. In the event that Astellas and its Affiliates shall, by
themselves or through any Third Party(ies): (a) [... * ...] (b) [... * ...], prior to [... * ...] anywhere in
the world [... * ...] regarding a product containing Competitive Compound(s), [... * ...] with the Product,
[... * ...] XenoPort under this Section 2.4.1 and XenoPort shall [... * ...].

               2.4.2 Notice of M&A Acquired Product. In the event of a Change of Control or
Acquisition, whereby [... * ...] prior to such Change of Control [... * ...] and whether Astellas or its
Affiliate [... * ...] above. In the event Astellas [... * ...] as the case may be, shall not apply with
respect to [... * ...]. However, in such event, unless XenoPort and Astellas [... * ...] upon written
notice, which shall be[... * ...] and XenoPort shall [... * ...]. In the event Astellas [... * ...] fully
apply with respect to [... * ...]. As used herein, “Change of Control” means (a) a merger
involving Astellas, in which the shareholders of Astellas immediately prior to such merger cease to
control (as defined in Section 1.1) Astellas after such merger, (b) a sale of all or substantially
all of the assets of Astellas to an acquiring entity or (c) a sale of a controlling (as defined in
Section 1.1) interest of Astellas to an acquiring entity. As used herein, “Acquisition”
means (a) a merger involving Astellas, in which the shareholders of Astellas immediately prior to
such merger does not cease to control (as defined in Section 1.1) Astellas after such merger, or a
merger involving an Affiliate of Astellas in which the resulting entity remains an Affiliate of
Astellas after such merger, (b) an acquisition of all or substantially all of the assets of an
acquired entity by Astellas or an Affiliate or (c) a sale of a controlling (as defined in Section
1.1) interest of an acquired entity to Astellas or an Affiliate.

 

			
	*	 	Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

               2.4.3 Ex-Territory; No Exploitation except as Licensed. Neither Astellas nor its
Affiliates will develop, file for Marketing Approval with respect to, use, market, import, export,
distribute, promote or sell the Product anywhere in the world, except in the Territory (provided
that Astellas may formulate or have formulated the Compound and package and have packaged Product
outside the Territory, solely for sale of the resulting Product within the Territory), and, within
the Territory, only in accordance with and under this Agreement. Astellas agrees that it and its
Affiliates shall not use nor otherwise exploit XenoPort Patent Rights, XenoPort Know-How and the
Product Trademark, except as licensed in this Agreement.

               2.4.4 Sale of Compounds Only as Part of Products. Astellas agrees that it shall not,
and shall ensure that its Affiliates and Subdistributors do not, sell or otherwise make
commercially available the Compound, other than as part of a Product. This Section 2.4.4 shall
not, however, prohibit sales of Compounds among Astellas, its Affiliates and/or Subdistributors,
provided that such Compounds will be incorporated into Products for resale by such entities, nor
prohibit Astellas, its Affiliates and/or Subdistributors from exercising their rights under Section
2.2 to “have” formulated or “have” packaged the Compound.

               2.4.5 Wind-down Period. For avoidance of doubt, Sections 2.4.1 and 2.4.2 shall not
apply during the Wind-down Period with respect to the Affected Area.

               2.5 XenoPort IP Acquired after the Effective Date. If, after the Effective Date,
XenoPort acquires from a Third Party subject matter within the XenoPort Patent Rights and XenoPort
Know-How (“Third Party IP”) that is subject to royalty or other payment obligations to such
Third Party, then the following shall apply. The licenses granted under Section 2.2 above with
respect to such Third Party IP shall be subject to Astellas promptly reimbursing XenoPort for any
milestones, royalties or other amounts that become owing to such third party by reason of Astellas’
exercise of rights granted in this Agreement with respect to the Third Party IP. Upon request by
Astellas, XenoPort shall disclose to Astellas a true, complete and correct written description of
such payment obligations, and Astellas’ obligation to reimburse such amounts following such request
shall be limited to those payment obligations as so disclosed by XenoPort. In the event Astellas
does not promptly reimburse XenoPort for such amounts upon request, then such Third Party IP shall
thereafter be deemed excluded from the XenoPort Patent Rights and XenoPort Know-How hereunder. The
reimbursement made by Astellas to XenoPort under this Section 2.5 may then be treated by Astellas
as Third Party Royalty payments under Section 7.3.1 below.

               2.6 No Other Rights; No License to Other Therapeutically Active Components. Except
for the rights and licenses expressly granted in this Agreement, each Party retains all rights
under its intellectual property, and no additional rights shall be deemed granted to the other
Party by implication, estoppel or otherwise. The licenses and rights granted in this Agreement
shall not be construed to convey any licenses or rights under the XenoPort Patent Rights with
respect to any active ingredients other than the Compound.

 

			
	*	 	Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

     3. GOVERNANCE

          3.1 Joint Steering Committee. The Parties shall establish a committee (the “Joint
Steering Committee” or “JSC”) to oversee the Party’s collaboration relating to the
Product in the Territory. The JSC will consist of two (2) representatives from each Party, each of
whom shall be a senior executive of a Party. In case a representative of a Party is unavailable
for a scheduled JSC meeting, upon reasonable notice to the other Party, such Party may substitute
in place of such representative for such meeting, a competent person who is authorized by such
Party to act on matters that will be presented to the JSC at such meeting.

               3.1.1 Meetings. The JSC shall meet at least once annually during the term of this
Agreement, unless otherwise agreed by the Parties. Such meeting(s) shall be in person at least
once per year, alternating between the facilities of each Party unless otherwise mutually agreed,
and the other meetings may be through telephone or video conference or other mutually agreeable
means. At the discretion of each Party, other representatives of XenoPort or Astellas may attend
JSC meetings as non-voting observers. Each Party shall bear its own personnel and travel costs and
expenses relating to JSC meetings.

               3.1.2 Responsibility. The JSC will (a) serve as a forum for keeping each Party
informed as to material matters in connection with the development and commercialization of the
Product in and outside of the Territory, (b) provide strategic direction to the JDC, (c) resolve
any disputed matters submitted to the JSC by the JDC under Section 3.2.3 below, (d) review and
discuss the Commercialization Plan, any updates, modifications and additions thereto submitted to
the JSC pursuant to Section 5.1.1 below, and the progress of Astellas thereunder and (e) undertake
and/or approve such other matters as are provided for the JSC under this Agreement, or otherwise
agreed by the Parties.

               3.1.3 Decisions. The objective of the JSC shall be [... * ...] on the JSC. If the JSC
cannot reach agreement on any determination or decision for which it is responsible within [... *
.... ] after the date such matter was initially referred to the JSC, the dispute shall be
referred to [... * ...] to resolve the dispute. If, [... * ...] deciding vote with respect to [... * ...],
unless the matter (a) would materially adversely affect [... * ...], (b) would change [... * ...], (c)
would involve [... * ... ] or [... * ...], or (d) involves [... * ...] for the Compound and/or Product
in the Territory. It is understood that the JSC shall [... * ...]. If the Parties are unable to
resolve a dispute with respect to matters described in Sections 3.1.3(a), (b), (c) or (d), the
Parties shall [... * ...] and until such resolution, neither Party shall proceed with a course of
action that is claimed to fall within Sections 3.1.3(a) through (d) above.

          3.2 Joint Development Committee. The Parties shall establish a committee (the
“Joint Development Committee” or “JDC”) to oversee the development efforts relating
to the Product in the Territory. The JDC will consist of three (3) representatives from each
Party, at least

 

			
	*	 	Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

one of whom shall be a senior executive of each Party. In case a representative of a Party is
unavailable for a scheduled JDC meeting, upon reasonable notice to the other Party, such Party may
substitute in place of such representative for such meeting, a competent person who is authorized
by such Party to act on matters that will be presented to the JDC at such meeting.

               3.2.1 Meetings. The JDC shall meet once each calendar quarter until the first filing
of MAA with respect to the Product in the Territory, and twice annually thereafter, during the term
of this Agreement, unless otherwise agreed by the Parties. Such meetings shall be in person at
least twice per year until the first filing of MAA with respect to the Product in the Territory,
alternating between the facilities of each Party unless otherwise mutually agreed, and the other
meetings may be through telephone or video conference or other mutually agreeable means. With the
consent of the JDC members, other representatives of XenoPort or Astellas may attend JDC meetings
as non-voting observers. Each Party shall bear its own personnel and travel costs and expenses
relating to JDC meetings.

               3.2.2 Responsibility. The JDC will (a) review and approve the Astellas Development
Plan, including the initial Astellas Development Plan pursuant to Section 4.2.2 and any updates,
modifications or additions thereto submitted to the JDC pursuant to Section 4.2.3 below, (b)
oversee the implementation of the Astellas Development Plan, (c) review and approve protocols for
any clinical trials of Product in the Territory, (d) review and approve the translated summaries of
any regulatory filings for Products in the Territory (including the precise wording of the label),
which shall be provided by Astellas to the JDC in the English language, (e) facilitate the exchange
of Data and other information and/or materials between the Parties and (f) undertake and/or approve
such other matters as are provided for the JDC under this Agreement or otherwise agreed by the
Parties.

               3.2.3 Decisions. Decisions of the JDC shall be by unanimous approval of its members,
with at least one (1) representative of each of Astellas and XenoPort voting on the matter;
provided, however, if the JDC cannot reach agreement on a matter within [... * ...] after the date such
matter was initially referred to the JDC, the dispute shall be referred to the JSC who shall meet
promptly and negotiate in good faith to resolve the dispute in accordance with Section 3.1.3 above.

          3.3 Limited Authority. Notwithstanding the creation of the JSC and JDC, each Party
shall retain the rights, powers and discretion granted to it hereunder, and the JSC and JDC shall
not be delegated or vested with such rights, powers or discretion unless such delegation or vesting
is expressly provided herein or the Parties expressly so agree in writing. The JSC and JDC shall
not have the power to amend or modify this Agreement, and its decisions shall not be in
contravention of any terms and conditions of this Agreement. It is understood and agreed that
issues to be formally decided by the JSC and JDC are only those specific issues that are expressly
provided in this Agreement to be decided by the JSC and JDC.

     4. DEVELOPMENT

 

			
	*	 	Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

          4.1 Development.

               4.1.1 Subject to oversight by the JDC, Astellas shall be responsible for conducting, and shall
use Diligent Efforts to conduct, such clinical trials and to obtain such regulatory approvals,
including Marketing Approvals and pricing and/or reimbursement approval, as may be necessary to
commercialize the Product in each country in the Territory, in accordance with the Astellas
Development Plan. Without limiting the foregoing, Astellas agrees to use Diligent Efforts to
conduct such clinical trials and to obtain, as soon as practical, Marketing Approval of the Product
for RLS and painful diabetic neuropathy in the Territory. Astellas agrees to keep XenoPort
reasonably informed as to the progress of its clinical development and regulatory activities
relating to the Product in the Territory, including its correspondence and meetings with regulatory
agencies, by way of updates to the JDC at its meetings and as otherwise reasonably requested by
XenoPort. Astellas agrees to reasonably consider and promptly respond to any comments provided by
XenoPort with respect to such clinical development and regulatory activities. It is understood and
agreed that all development efforts for the Product in the Territory shall be at the sole cost and
expense of Astellas, and shall be conducted in accordance with the Astellas Development Plan
described below.

               4.1.2 XenoPort or its licensee(s) shall be responsible for all development and regulatory
activities of the Product outside the Territory. XenoPort agrees to keep Astellas reasonably
informed as to the progress of its and/or[... * ...] its other licensees’ clinical development and
regulatory activities relating to the Product outside the Territory, including their correspondence
and meetings with regulatory agencies, by way of updates to the JDC at its meetings and as
otherwise reasonably requested by Astellas. XenoPort agrees to reasonably consider and promptly
respond to any comments provided by Astellas with respect to such clinical development and
regulatory activities. It is understood and agreed that all development efforts for Product
outside the Territory shall be at the sole cost and expense of XenoPort, its Affiliates or its
other licensee(s), provided that any development efforts conducted for the Territory requested by
Astellas pursuant to Section 4.7 shall be at the sole cost and expense of Astellas.

          4.2 Astellas Development Plan.

               4.2.1 An initial, preliminary development plan for Astellas’ development of the Product in the
Territory is set forth in Exhibit C. For avoidance of doubt, such initial, preliminary development
plan is not intended to create or constitute any legally binding obligation among the Parties.

               4.2.2 Within [... * ... ] after the Effective Date, the JDC shall discuss and approve the
plan for Astellas’ development of the Product in the Territory (the “Astellas Development
Plan”). Astellas acknowledges and agrees that each Party desires that Astellas commit to
conduct development of the Compound and/or Product in the Territory for both the RLS and painful
diabetic neuropathy indications, in a manner to be described by the JDC in the Astellas

 

			
	*	 	Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

Development Plan; and the JDC shall, during the discussion of such development, take into
account an expected selling price of the Product, expected launch time for respective indications,
communications with the Regulatory Authority in the Territory, advice of the experts in the
Territory, possibility of bridging use of the Data obtained by XenoPort from its pre-clinical
studies and/or clinical trials of the Product outside the Territory for development in the
Territory and any other relevant regulatory and business matters.

               4.2.3 Astellas agrees to provide to the JDC for its review and approval, which approval shall
not be unreasonably withheld or delayed, updated versions of the Astellas Development Plan at least
annually, and any modification or addition to the Astellas Development Plan within a reasonable
period of time prior to adoption and implementation thereof.

          4.3 Change in Formulation. Before modifying or creating a new formulation or dosage
form of the Product, or developing the Compound in combination with another active ingredient,
Astellas shall discuss the proposed modifications or development with XenoPort at the JSC and
obtain the approval of the JSC, which approval shall not be unreasonably withheld or delayed.
Subject to Section 3.1.3(b), XenoPort agrees that Astellas may conduct formulation studies on the
Compound that were so discussed and approved by the JSC for the purpose of developing and
commercializing pharmaceutical formulations of the Compound as a sole active ingredient.

          4.4 Exchange of Data and Know-How. Promptly after the Effective Date, XenoPort shall
provide Astellas with any and all XenoPort Know-How that XenoPort considers as necessary or
reasonably useful for Astellas to develop and/or commercialize the Product in the Territory,
including but not limited to, any and all Data from any and all clinical trials and preclinical
studies of the Compound and/or Product that are completed as of the Effective Date. During the
term of this Agreement, each Party shall provide to the other Party all Data (and, in case of
XenoPort, any and all additional XenoPort Know-How, and in the case of Astellas, any and all
Astellas Know-How) Controlled by such Party, (a) that such Party considers as necessary or
reasonably useful for the other Party to develop and/or commercialize the Product in the Territory
(in the case of Astellas) or outside the Territory (in the case of XenoPort), in a timely fashion
and as promptly as possible or (b) upon the reasonable request of the other Party; in each case,
for use by such other Party in accordance with this Section 4.4.

               4.4.1 Use; Disclosure. Astellas will use and disclose Data and XenoPort Know-How to
its Affiliates or Third Parties only as required to obtain Marketing Approval for the Product in
the Territory and/or as may be necessary in performing its obligations and exercising its rights
under this Agreement (including but not limited to the use of such Data or XenoPort Know-How to
design development activities outside the Territory for Section 4.7), in each case solely to the
extent necessary for development and commercialization of the Product in the Territory and under
reasonable and customary confidentiality restrictions. Astellas may not use any Data and XenoPort
Know-How (or permit any Affiliates or Third Party to use Data or XenoPort Know-How) outside the

 

			
	*	 	Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

Territory (other than for Section 4.7), nor for any products other than the Product. XenoPort
may only use, and disclose to Affiliates and Third Parties, Data and Astellas Know-How provided by
Astellas as is reasonably necessary or useful for development and/or commercialization of the
Product outside the Territory, including for cross-referencing drug master files or other
regulatory filings by XenoPort, its Affiliates or Third Parties, provided that the disclosure of
such Data and Astellas Know-How to a non-governmental Third Party is made under reasonable and
customary confidentiality restrictions, and complies with Section 4.4.2 below.

               4.4.2 Other Licensee(s). XenoPort shall [... * ... ] under this Section 4.4 [... *
....] to the extent that [... * ...]. It is understood that [... * ...], shall not be [... * ...]. However,
XenoPort agrees [... * ...] except to the extent [... * ...].

          4.5 Regulatory Matters. Subject to Section 16.2.2 below, all regulatory filings for
the Product, including the MAA and Marketing Approvals, in the Territory shall be in the name of
Astellas in Japan, or its Affiliate(s) or Subdistributor(s) in countries other than Japan.
Astellas shall, or shall cause its Affiliate(s) or its Subdistributor(s) to, be responsible for the
filing thereof, the payment of fees and all other associated costs, for monitoring clinical
experiences and filing associated reports and fulfilling all of its regulatory obligations
throughout the development and commercialization of the Product in the Territory. Notwithstanding
the foregoing, XenoPort may, and if elected by XenoPort shall be responsible to, file and keep a
Drug Master File (“DMF”) in the Territory at its expense in its own name or in the name of
its suppliers with respect to the bulk supply of the Compound and shall permit Astellas, its
Affiliates and its Subdistributors to cross-reference such DMF in their regulatory filings for the
Product in the Territory.

          4.6 Development within the Territory. Astellas shall commence, promptly after the
Effective Date, its development of the Product in Japan in accordance with this Section 4. The
Parties recognize, however, that Astellas’ development and commercialization of the Product in
countries of the Territory other than Japan may not be achieved, if ever, until a later date as is
customary for pharmaceutical launches in Asia, and may depend upon (a) whether the Data obtained by
XenoPort and/or by Astellas from their respective pre-clinical studies and/or clinical trials of
the Product may be used for obtaining Marketing Approval of the Product in such country(ies) and
(b) whether commercialization of the Product in such country(ies) would be commercially feasible
under the terms and conditions of this Agreement. Subject to the foregoing, a decision by Astellas
not to develop and/or commercialize a Product in a country of the Territory other the Japan shall
not by itself be deemed a breach of its obligations to use Diligent Efforts under this Agreement
with respect to such country, provided that Astellas can and does promptly terminate this Agreement
with respect to such country pursuant to Section 15.2 below.

          4.7 Cooperation in Development. The Parties acknowledge that, from time to time,
Astellas may or, may request XenoPort to, conduct activities outside the Territory (for example, to
conduct certain clinical trials in the United States on Japanese subjects) for use in

 

			
	* 	 	  Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

obtaining Marketing Approval of the Product in the Territory. Any activities outside
the Territory conducted or requested by Astellas pursuant to this Section 4.7 shall be subject to
the consent of XenoPort, which consent shall not be unreasonably withheld or delayed. Subject to
such consent, XenoPort shall cooperate as mutually agreed to perform such activities, the cost of
which shall be reimbursed by Astellas (including without limitation payment of the supply price of
the clinical supplies used in such activities, in accordance with the Supply Agreement).

          4.8 Astellas Know-How. All results, data, information, know-how and technology
obtained by Astellas or its Affiliates in the course of development activities with respect to the
Compound and/or the Product conducted by Astellas or any of its Affiliates shall be solely owned by
Astellas or such Affiliates. Subject to Section 4.4 and 10.1,Astellas shall solely own or Control
all right, title and interest in and to the know-how and technology owned or Controlled by Astellas
which Astellas may decide to use for modifying or creating a new formulation or dosage form of the
Product in accordance with Section 4.3.

     5. COMMERCIALIZATION

          5.1 Commercialization.

               5.1.1 Subject to oversight by the JSC, Astellas shall be responsible for launching and
commercializing, and shall use Diligent Efforts to launch and commercialize, the Product in each
country in the Territory in accordance with a commercialization plan submitted by Astellas to the
JSC (“Commercialization Plan”). Without limiting the foregoing, Astellas agrees to use
Diligent Efforts to launch the Product as soon as practicable in the Territory, and thereafter to
market, promote and sell such Product and to maximize the Net Sales of the Product in the
Territory. Astellas agrees to provide to the JSC updated versions of the Commercialization Plan at
least annually, and any material modification or addition to the Commercialization Plan within a
reasonable period of time prior to adoption and implementation thereof. Astellas shall keep
XenoPort reasonably informed as to the progress of its launch and commercialization activities
relating to the Product in the Territory, by way of updates to the JSC at its meetings and as
otherwise reasonably requested by XenoPort. It is understood and agreed that, subject to oversight
by the JSC, and consistent with the other provisions of this Agreement, all commercialization
efforts for the Product in the Territory shall be at the sole discretion and expense of Astellas,
its Affiliates or Subdistributors.

               5.1.2 XenoPort or its licensee(s) shall be responsible for launching and commercializing the
Product outside the Territory. XenoPort shall keep Astellas reasonably informed as to the progress
of its and/or [... * ...] its other licensees’ launch and commercialization activities relating to
Product outside the Territory, by way of updates to the JSC at its meetings and as otherwise
reasonably requested by Astellas but no more often than once annually other than at the JSC
meeting. It is understood and agreed that all commercialization efforts for the Product outside

 

			
	* 	 	  Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

the Territory shall be at the sole discretion and expense of XenoPort, its Affiliates or its other
licensees.

          5.2 Marketing Materials. Any marketing and promotional materials created or used by
Astellas, its Affiliates and Subdistributors for the Product shall be appropriate to the Marketing
Approval for the Product in the respective country and consistent with XenoPort’s worldwide
profile for the Product, provided that XenoPort shall respect local marketing needs in the
Territory regarding such materials (e.g., the size of letters in such materials). In addition, it
is understood that any claim, message or other material part of promotional materials, samples,
advertising and materials for training sales representatives with respect to Product shall be
consistent with Marketing Approval and comply with applicable laws.

          5.3 Reporting Adverse Drug Reactions/Experiences. Promptly following the Effective
Date, the Parties will prepare a standard operating procedure governing the collection,
investigation, reporting and exchange of information concerning adverse drug reactions, Product
quality and Product complaints, sufficient to permit each Party to comply with its legal
obligations. The standard operating procedure will be promptly updated if required by changes in
legal requirements. Each Party shall keep the other Party informed about any adverse drug
reactions of which such Party becomes aware or is informed regarding the use of a Product in or
outside the Territory. As between the Parties, Astellas shall be responsible for reporting all
adverse drug reactions/experiences to the appropriate regulatory authorities in countries in the
Territory, and XenoPort shall be responsible for reporting all adverse drug reactions/experiences
to the appropriate regulatory authorities in countries outside the Territory, in accordance with
the appropriate laws and regulations of the relevant countries and authorities. Astellas shall
ensure that its Affiliates and Subdistributors comply with such reporting obligations in the
Territory, and XenoPort shall ensure that its Affiliates and licensees (other than Astellas, its
Affiliates and Subdistributors) comply with such reporting obligations outside the Territory.
These reporting obligations shall apply to non-serious adverse events as well, which shall mean
adverse events occurring from Product overdose or from Product withdrawal, as well as any toxicity,
sensitivity, failure of expected pharmacological action or laboratory abnormality that is, or is
thought by the reporter to be, serious or associated with relevant clinical signs or symptoms.
Each Party will designate a regulatory affairs liaison to be responsible for communicating with
the other Party regarding the reporting of adverse drug reactions/experiences. The details of such
exchange shall be separately discussed and agreed upon in writing by and between such regulatory
affairs liaisons within a reasonable period after execution of this Agreement.

     6. INITIAL PAYMENT AND MILESTONES

          6.1 Initial Payment. In partial consideration of the costs incurred by XenoPort in
connection with the research and development of the Product and in exchange for the exclusive

 

			
	*	 	  Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

rights granted herein, Astellas shall pay XenoPort Twenty Five Million Dollars (US $25,000,000)
within [... * ...] after execution of this Agreement.

          6.2 Milestones. In further consideration of the costs incurred by XenoPort in
connection with the research and development of the Product and in exchange for the exclusive
rights granted herein:

               6.2.1 Initiation of U.S. Phase III Trial. Upon the first dosing of a human patient in
a Phase III Trial of the Compound and/or Product in the United States by or under authority of
XenoPort, the date of which XenoPort shall inform Astellas in writing, Astellas shall pay XenoPort
Ten Million Dollars (US $10,000,000).

               6.2.2 Completion of U.S. Phase III Trial. Upon the first completion of a Phase III
trial of the Compound and/or Product in the United States by or under authority of XenoPort,
Astellas shall pay XenoPort Five Million Dollars (US $5,000,000). As used herein, “completion” of
a Phase III trial shall be deemed to occur upon the earliest of (a) receipt by XenoPort of the
final report for such Phase III trial, (b) filing of an MAA for the Product or (c) first issuance
of a press release by XenoPort or its licensee announcing completion of a Phase III trial of the
Compound and/or Product in the United States, the date of which XenoPort shall inform Astellas in
writing.

               6.2.3 MAA Filing in the United States. Upon first acceptance of a filing of an MAA
for the Compound and/or Product in the United States by or under authority of XenoPort, the date of
which XenoPort shall inform Astellas in writing, Astellas shall pay XenoPort [... * ...]. As used
herein, an MAA shall be deemed “accepted” upon the earlier of: (a) the expiration of the period
specified in applicable regulations for any notice by the FDA that such MAA will not be accepted
for review, without XenoPort or its designee having received such notice from such agency; or (b)
the receipt by XenoPort or its designee from such agency that the MAA will be accepted for review;
provided that in any case, if no such period or acceptance is provided for in the applicable
regulations, then the MAA shall be deemed “accepted” on the date such MAA was filed.

               6.2.4 MAA Filing in Japan. Upon first acceptance of a filing of an MAA for the
Compound and/or Product in Japan by or under authority of Astellas, Astellas shall pay XenoPort [...
* ... ].

               6.2.5 Marketing Approval in the United States. Upon obtaining the first Marketing
Approval of the Compound and/or Product for the first indication in the United States by
or under authority of XenoPort, the date of which XenoPort shall inform Astellas in writing,
Astellas shall pay XenoPort [... * ...].

 

			
	* 	 	  Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

               6.2.6 Marketing Approval in Japan. Upon obtaining the first Marketing Approval of the
Compound and/or Product in Japan for the first indication by or under authority of Astellas,
Astellas shall pay XenoPort [... * ...].

               6.2.7 Additional Indications.

                    (a) Second Indication. Upon first acceptance of a filing of an MAA for the Compound
and/or Product for a second indication in Japan by or under authority of Astellas, Astellas shall
pay XenoPort [... * ...]. Upon obtaining the first Marketing Approval of the Compound and/or Product
for a second indication in Japan by or under authority of Astellas, Astellas shall pay XenoPort [...
* ...]. As used herein, a “second indication” shall mean any indication for which Marketing Approval
is obtained, other than the indication triggering payment under Section 6.2.6 above.

                    (b) Third Indication. Upon first acceptance of a filing of an MAA for the Compound
and/or Product for a third indication in Japan by or under authority of Astellas, Astellas shall
pay XenoPort [... * ...]. Upon obtaining the first Marketing Approval of the Compound and/or Product
for a third indication in Japan by or under authority of Astellas, Astellas shall pay XenoPort [... *
....]. As used herein, a “third indication” shall mean any indication for which Marketing Approval is
obtained, other than the indications triggering payment under Section 6.2.6 and 6.2.7(a) above.

                    (c) Subsequent Indications. Astellas shall not be obligated to make any milestone
payments with respect to Marketing Approval for the fourth and subsequent indications of the
Compound and/or Product. It is understood that, for purposes of this Section 6.2.7, a single MAA
or Marketing Approval may include more than one indication, e.g. both the first and second
indications, or the second and third indications, as the case may be.

               6.2.8 Timing of Payment. Each payment provided in Sections 6.2.4, 6.2.6 and 6.2.7
above shall be due within thirty (30) days following the occurrence of each event triggering such
payment, and each payment provided in Sections 6.2.1, 6.2.2, 6.2.3 and 6.2.5 shall be due within
thirty (30) days following XenoPort’s notice to Astellas of the event triggering such payment.

     7. ROYALTY 

          7.1 Royalty. In consideration for Products supplied by XenoPort hereunder and also
for the exclusive rights granted herein, during the term of this Agreement, Astellas shall, subject
to the reduction of royalty rate pursuant to Section 7.2 or 7.3 below, pay to XenoPort the
following running royalties on the Net Sales of the Product in the Territory:

 

			
	* 	 	  Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

	 	 	 
	Annual Net Sales in the Territory	 	Royalty
	That portion of Annual Net Sales in the
Territory up to and including [... * ...]

	 	[... * ...] of such Net Sales
	 
	 	 
	That portion of Annual Net Sales in the
Territory above [... * ...] and up to and
including [... * ...]

	 	[... * ...] of such Net Sales
	 
	 	 
	That portion of Annual Net Sales in the
Territory above [... * ...]

	 	[... * ...] of such Net Sales

As used herein, “Annual Net Sales” of the Product shall mean the Net Sales of Product(s)
sold in the Territory by or under authority of Astellas in each calendar year.

In the event that the Product [... * ...], for the purposes of determining royalty payments, shall be
[... * ...] In the event that [... * ...], such agreement not to be unreasonably withheld or delayed.

          7.2 Royalty Plus Supply Price. In the event the total royalty calculated under
Section 7.1 above (without taking into account Section 7.3) plus the supply price calculated under
the Supply Agreement per unit of Product exceeds [... * ...] of the Net Sales from the sale of such
unit of Product, XenoPort agrees that Astellas may deduct [... * ...] of such excess from the royalty
otherwise due on such unit of Product, provided that the net royalty due to XenoPort on such unit
of Product shall not be so reduced, pursuant to Sections 7.1 and 7.2, to below [... * ...] of the Net
Sales from the sale of such unit of Product, prior to applying Section 7.3 below.

          7.3 Certain Reductions to Royalties.

               7.3.1 Third Party Royalties. In the event Astellas or its Affiliates is required to
pay to a Third Party royalties or any other amounts under agreements for patent rights, trade
secrets or other intellectual property or technology covering the Compound and/or Product
(“Third Party Royalties”), then Astellas may deduct [... * ...] of the Third Party Royalties
from those royalties owed to XenoPort pursuant to Sections 7.1 and 7.2; provided the royalties paid
to XenoPort will not be so reduced to less than [... * ...] of the royalties otherwise due pursuant
Section 7.1 and 7.2, and further provided that neither Sections 7.3.2 nor 7.3.3 applies at the
time.

               7.3.2 Loss of Exclusivity. On a Product-by-Product and country-by-country basis,
after the later of the expiration of (or if there are no) (a) XenoPort Patent Rights or patent
rights Controlled by Astellas containing Valid Claims, which absent a license thereunder, would be
infringed by a Third Party selling such Product in such country and/or (b) regulatory exclusivity
with respect to such Product, in such country, then the royalties payable pursuant to Section 7.1
and 7.2
with respect to such Product sold in such country shall thereafter be reduced by [... * ...],
provided

 

			
	* 	 	  Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

that Section 7.3.3 below does not apply at the time. For avoidance of doubt, clause (a)
above shall be deemed satisfied when all the patents described in subparagraph (i) below are
expired even if any of the patents described in subparagraph (ii) below are unexpired at that time,
as applied on a Product-by-Product and country-by-country basis (i.e., with respect to the Net
Sales of such particular Product in such particular country):

                    (i) in the event of expiration of the patents included in XenoPort Patent Rights or patent
rights Controlled by Astellas containing Valid Claims, which absent a license thereunder, would be
infringed by a Third Party selling such Product in such country, or if there are no such patent
rights in such country, even if

                    (ii) there are unexpired patents included in XenoPort Patent Rights or patent rights
Controlled by Astellas containing Valid Claims, which absent a license thereunder, would NOT be
infringed by a Third Party selling such Product in such country.

          7.3.3 Introduction of Generic Products. On a Product-by-Product and
country-by-country basis, in the event that after the occurrence of both clause (a) and (b) of
Section 7.3.2 above, one or more Generic Product(s) are being marketed for an approved indication
of such Product in such country; and such Generic Product(s) represent a total number of units of
at least [... * ...] of such Product and such Generic Product(s) for all indications, in the aggregate,
in such country in any calendar year, determined by the number of units of such Product and such
Generic Product(s) sold to Third Parties, in the aggregate, during such calendar year (as measured
by IMS data or other data agreed upon by the Parties), and Astellas reasonably determines that
Astellas is not likely to recover such lost market share; then the royalties payable pursuant to
Sections 7.1 and 7.2 with respect to such Product sold in such country shall thereafter be reduced
by [... * ...]. “Generic Product” shall mean a [... * ...] being sold in such country in the
Territory, which [... * ...], and is [... * ...].

          7.3.4 Reductions Not Cumulative. The reductions set forth in this Section 7.3 shall
not be cumulative. Notwithstanding anything to the contrary in this Section 7.3, at any time, at
most one of Sections 7.3.1, 7.3.2 or 7.3.3 shall apply with respect to any Product in any country.
Unless Section 7.3.3 applies, the royalty payable under this Section 7 shall not be reduced by this
Section 7.3 below [... * ...] of the royalties otherwise due pursuant only to Sections 7.1 and 7.2
(i.e., without taking into account any of this Section 7.3). In case Section 7.3.3 applies, the
royalties payable under this Section 7 shall not be reduced by this Section 7.3 to below [... * ...] of
the royalties otherwise due pursuant to Sections 7.1 and 7.2 (i.e., without taking into account any
of this Section 7.3). In case Sections 7.3.1 and 7.3.2 apply simultaneously, only Section 7.3.2
shall apply, and in case all three of Sections 7.3.1, 7.3.2 and 7.3.3 apply simultaneously, only
Section 7.3.3 shall apply.

 

			
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been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

          7.4 Discounting. Astellas, its Affiliates and Subdistributors shall set prices and
discounts for the Product in the Territory solely in the interest of the commercial success of the
Product in the Territory and not for the interest of its other products and services. However, the
foregoing shall not be construed to dictate to Astellas, its Affiliates or Subdistributors any
resale prices for the Products in the Territory.

          7.5 Quarterly Reports. Commencing with the first occurrence of Net Sales of Product
in the Territory, within sixty (60) days after each March 31, June 30, September 30 and December 31
thereafter, Astellas shall deliver to XenoPort a true and accurate report, giving such particulars
of the business conducted by Astellas, its Affiliates and its Subdistributors during the preceding
three (3) calendar months as are pertinent to account for payments under this Section 7.
Simultaneously with the delivery of each such report, Astellas shall pay to XenoPort the total
amounts, if any, due to XenoPort pursuant to this Section 7 for the period of such report.

     8. COMPOUND/PRODUCT SUPPLY

          8.1 Supply. Subject to the terms and conditions of this Agreement, XenoPort shall use
Diligent Efforts to supply or have supplied to Astellas, its Affiliates and Subdistributors all of
their requirements for the Compound and the Product for the Territory, solely in accordance with a
separate written agreement to be negotiated between the Parties pursuant to Section 8.2 and 8.3
below (“Supply Agreement”). Each of Astellas, its Affiliates and Subdistributors shall
exclusively purchase all of their requirements of the Compound and the Product from XenoPort. It
is understood that, unless mutually agreed, XenoPort shall be responsible only for supplying the
Compound and the Existing Product to Astellas, and Astellas shall be responsible for formulating
the Compound in case it develops new formulations or dosage forms for the Product.

          8.2 Clinical Units. The Parties shall execute a supply agreement of the Compound
and/or the Product for development in the Territory promptly after the execution of this Agreement,
which is not inconsistent herewith. [... * ...] Astellas shall be under no obligation to accept any
Product that does not have at least [... * ...] of its approved shelf life (or [... * ...], whichever is
longer) remaining at the time of its delivery hereunder. Such Compound and/or the Product shall be
delivered to Astellas [... * ...]. The title to such Compound and/or the Product shall pass to
Astellas upon the delivery thereof [... * ...] designated by Astellas.

          8.3 Commercial Units. The Parties shall execute a supply agreement of the Compound
and/or the Product for commercialization in the Territory before the Product receives Marketing
Approval, which is not inconsistent herewith. [... * ...]. Astellas shall be under no obligation to
accept any Product that does not have at least [... * ...] of its approved shelf life (or [... * ...],
whichever is longer) remaining at the time of its delivery hereunder. Such Compound and/or the
Product shall be delivered to Astellas [... * ...]. The title to such Compound and/or the Product
shall pass to Astellas upon the delivery thereof [ ... * ...] designated by Astellas.

 

			
	* 	 	  Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

          8.4 Quality Agreement. XenoPort and Astellas shall execute a quality agreement which
allocates roles and responsibilities to each Party with respect to quality control and regulatory
compliance with respect to the Compound and the Product.

          8.5 Recalls. To the extent (a) any governmental or regulatory authority issues a
request, directive or order that the Product be recalled or withdrawn in the Territory, (b) a court
of competent jurisdiction orders a recall or withdrawal of the Product in the Territory or (c)
either Party determines, after consultation with the other Party, that the Product should be
recalled or withdrawn in the Territory, the Parties shall recall or withdraw the Product as set
forth in this Section 8.5. As between the Parties, Astellas shall control and coordinate,
including making all contacts with regulatory authorities, all activities it deems necessary in
connection with such recall or withdrawal in the Territory. All out-of-pocket expenses related to
the execution of any recall or withdrawal of the Product (“Recall Costs”) shall be shared
equally between the Parties, provided that in the case of (c) above, if the Parties do not mutually
agree on having the Product recalled or withdrawn, then the Party requesting the recall or
withdrawal shall bear initially the entire expense of such recall or withdrawal; but in each case
subject to the final allocation between the Parties as follows. In the event that it is finally
determined, or agreed between the Parties, that such recall or withdrawal is caused by: (a) breach
of the representations and warranties of XenoPort set forth in Section 13.2 below, or failure of
the Compounds and/or Product supplied by XenoPort to meet the warranties made by XenoPort in the
Supply Agreement, or the gross negligence or willful misconduct of XenoPort, or the failure by
XenoPort to comply with applicable laws and regulations (collectively, the “Fault of
XenoPort”) XenoPort shall be responsible for Recall Costs to extent of such Fault of XenoPort,
(b) failure of Astellas to properly handle, store, transport, distribute or use the Compounds
and/or Products supplied by XenoPort, or in the event Astellas is engaged in any aspect of
manufacturing, formulating or packaging the Products, the failure to properly perform such
manufacturing, formulation or packaging, or the gross negligence or willful misconduct of Astellas,
or the failure by Astellas to comply with applicable laws and regulations, including its failure to
properly file for Marketing Approval of the Products in the Territory (collectively, the “Fault
of Astellas”), Astellas shall be responsible for Recall Costs to the extent of such Fault of
Astellas and (c) in all other cases, the Recall Costs shall be shared by the Parties as follows:
[... * ... ]shall be borne by Astellas and [... * ...] shall be borne by XenoPort.

          8.6 Discussion Regarding Manufacturing Right for Compounds. In the event that, [... *
....], and the [... * ...], then upon the request of Astellas, the Parties shall [... * ...], including, for
example, [... * ...]. It is understood, however, [... * ...].

          8.7 Cost of Goods Reduction for Clinical Units. Notwithstanding Sections 8.2 above,
if XenoPort [... * ...], provided that, [... * ...] below.

                    (a) such [... * ...],

 

			
	* 	 	  Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

                    (b) [... * ...].

          8.8 Cost of Goods Reduction for Commercial Units. XenoPort shall [... * ...]; provided
that [... * ...]. Notwithstanding [... * ...] below:

          (a) such [... * ...],

          (b) [... * ...],

          (c) [... * ...] below:

               (i) [... * ...],

               (ii) the sum of [... * ...].

     9. PAYMENTS; BOOKS AND RECORDS

          9.1 Payment Method. All payments under this Agreement shall be made by bank wire
transfer in immediately available funds to an account designated by the Party to which such
payments are due. All dollar amounts specified in this Agreement are in U.S. dollars. Any
payments due under this Agreement that are not paid by the date such payments are due under this
Agreement shall bear interest to the extent permitted by applicable law at the prime rate publicly
announced by Citibank on the date such payment is due, plus [... * ...], computed on the basis of a
three hundred sixty (360) day year, actual days elapsed. The applicable interest rate shall be
adjusted each time there shall be a change in the prime rate announced by Citibank. This Section
9.1 shall in no way limit any other remedies available to the Parties. All amounts owed by
Astellas to XenoPort hereunder shall be paid by a Japanese entity from either a bank account in
Japan or the United States.

          9.2 Taxes. If laws or regulations require withholding by Astellas of any taxes
imposed upon XenoPort on account of any royalties, initial or milestone payments paid under this
Agreement, such taxes shall be deducted by Astellas as required by law from such payment and shall
be paid by Astellas to the proper taxing authorities. Official receipts of payment of any
withholding tax shall be secured and sent to XenoPort as evidence of such payment. The Parties
will exercise their reasonable efforts to ensure that any withholding taxes imposed are reduced as
far as possible under the provisions of any applicable tax treaty, and shall cooperate in filing
any forms required for such reduction. Both Parties agree that under the applicable tax treaty as
of the Effective Date, no withholding taxes are due on any amounts due hereunder provided that the
appropriate forms have been filed with the tax authorities in Japan.

          9.3 U. S. Dollars. All sums due under this Agreement shall be payable in U.S.
dollars. Monetary conversion from the currency of a foreign country, in which Product is sold,
into

 

			
	* 	 	  Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

United States currency shall be calculated at the actual average of the buying and selling
rates of exchange for a calendar quarter in which such sales were made as such rates are reported,
as of the last business day of such calendar quarter, by Bank of Tokyo-Mitsubishi.

          9.4 Records; Inspection.

               9.4.1 Astellas. Astellas shall keep, and require its Affiliates and Subdistributors
to keep, complete, true and accurate books of accounts and records for the purpose of determining
the amounts payable to XenoPort pursuant to this Agreement. Such books and records shall be kept
for at least three (3) years following the end of the calendar quarter to which they pertain. Such
records will be open for inspection during such three (3) year period by an independent auditor
chosen by XenoPort and reasonably acceptable to Astellas for the purpose of verifying the amounts
payable by Astellas hereunder. Such inspections may be made no more than once each calendar year,
at reasonable times and on reasonable prior written notice. Such records for any particular
calendar quarter shall be subject to no more than one inspection. The independent auditor shall be
obligated to execute a reasonable confidentiality agreement prior to commencing any such
inspection. Inspections conducted under this Section 9.4.1 shall be at the expense of XenoPort,
unless a variation or error producing an underpayment in amounts payable exceeding [... * ...] of the
amount paid for any period covered by the inspection is established in the course of any such
inspection, whereupon all costs relating to the inspection for such period and any unpaid amounts
that are discovered shall be paid by Astellas, together with interest on such unpaid amounts at the
rate set forth in Section 9.1 above. The Parties will endeavor in such inspection to minimize
disruption of Astellas’ normal business activities to the extent reasonably practicable.

               9.4.2 XenoPort. XenoPort shall keep complete, true and accurate books of accounts and
records for the purpose of determining payments due from Astellas pursuant to this Agreement or the
Supply Agreement (e.g., Cost of Goods). Such books and records shall be kept for at least three
(3) years following the end of the calendar quarter to which they pertain. Such records will be
open for inspection during such three (3) year period by an independent auditor chosen by Astellas
and reasonably acceptable to XenoPort for the purpose of verifying the amounts payable by Astellas
hereunder. Such inspections may be made no more than once each calendar year, at reasonable times
and on reasonable prior written notice. Such records for any particular calendar quarter shall be
subject to no more than one inspection. Astellas’ independent auditor shall be obligated to
execute a reasonable confidentiality agreement prior to commencing any such inspection. Inspections
conducted under this Section 9.4.2 shall be at the expense of Astellas, unless a variation or error
producing an overpayment in amounts payable exceeding [... * ...] of the amount paid for any period
covered by the inspection is established in the course of any such inspection, whereupon all costs
relating to the inspection for such period and any overpaid amounts that are discovered shall be
paid by XenoPort, together with interest on such overpaid amounts at the rate set forth in Section
9.1 above. The Parties will endeavor in such inspection to minimize disruption of XenoPort’s
normal business activities to the extent reasonably practicable.

 

			
	*	 	 Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

     10. INTELLECTUAL PROPERTY

          10.1 Ownership of Inventions. Title to all inventions and other intellectual property
made solely by Astellas personnel in connection with this Agreement shall be owned by Astellas.
Title to all inventions and other intellectual property made solely by XenoPort personnel in
connection with this Agreement shall be owned by XenoPort. Title to all inventions and other
intellectual property made jointly by personnel of XenoPort and Astellas in connection with this
Agreement shall be jointly owned by Astellas and XenoPort. Prosecution of any patent applications
and patents with respect to such jointly owned inventions and intellectual property shall be solely
as mutually agreed. Except as expressly provided in this Agreement, it is understood that neither
Party shall have any obligation to obtain any approval of nor pay a share of the proceeds to the
other Party to exploit or enforce such jointly owned inventions or intellectual property, and that
neither Party shall, without obtaining the approval of the other Party, license or assign the same
to a Third Party other than its licensees of (or an assignee of all or substantially all of its
assets or business in any country pertaining to) the Compound and/or the Product or
Subdistributors. For clarity, each Party shall have the right, without having to obtain the
approval of, nor to pay a share of the proceeds to, the other Party, to license and/or assign such
jointly owned intellectual property to any licensee of the Compound and/or Product or
Subdistributor or to an assignee of all or substantially all of its assets or business pertaining
to the Compound and/or Product in any country. Astellas hereby grants to XenoPort a non-exclusive,
worldwide, irrevocable, fully paid-up license, with the right to sublicense, under any Improvements
to make, have made, use, sell, offer for sale, import, practice and otherwise exploit the same for
the Compound and/or the Product, subject to the exclusive rights granted to Astellas under this
Agreement with respect to the Product in the Territory. As used herein, “Improvements”
means any patent rights or other intellectual property made by or under authority of Astellas in
connection with development and/or commercialization of the Product that is applicable to the
Compound, Product or transported prodrugs thereof or the manufacture, use or formulation thereof.

          10.2 Prosecution and Maintenance of Patents.

               10.2.1 Filings. As between Astellas and XenoPort, XenoPort shall have responsibility
for the filing, prosecution and maintenance of all XenoPort Patent Rights in the Territory at
XenoPort’ expense. Astellas shall have the right to review pending patent applications and make
recommendations to XenoPort concerning the foregoing. XenoPort will consider in good faith all
reasonable suggestions of Astellas with respect thereto. XenoPort agrees to keep Astellas
generally informed of the course of patent prosecution or other proceedings with respect to the
XenoPort Patent Rights within the Territory, including those patents and patent applications
relating to the Compound and/or the Product in the Territory which shall not be listed in Exhibit B
as of the Effective Date.

 

			
	*	 	 Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

               10.2.2 Extensions. XenoPort shall, [... * ...] file for extensions of the terms of any
and all of the XenoPort Patent Rights if legally possible in any country of the Territory with
respect to the Product and shall be responsible for prosecuting any required actions for such
extensions at its own expense.

          10.3 Third Party Infringement Claims. If the production, sale or use of any Compound
or Product in the Territory pursuant to this Agreement results in a claim, suit or proceeding
alleging patent infringement against XenoPort or Astellas (or their respective Affiliates or
Subdistributors) (collectively, “Infringement Actions”), such Party shall promptly notify
the other Party hereto in writing. The Party subject to such Infringement Action shall have the
right to direct and control the defense thereof (including the conclusion of a potential
settlement, but limited to the rights granted pursuant to this Agreement) using counsel reasonably
acceptable to the other Party, and the Infringement Action shall be at the expense of the Party
subject to such Infringement Action; provided, however, that the other Party may participate in the
defense and/or settlement thereof at its own expense with counsel of its choice. In any event, the
Party that is subject to the Infringement Action agrees to keep the other Party hereto reasonably
informed of all material developments in connection with any such Infringement Action. Astellas
agrees not to settle any Infringement Action, or make any admissions or assert any position in such
Infringement Action, in a manner that would adversely affect the Product or the manufacture, use or
sale thereof in or outside the Territory, without the prior written consent of XenoPort. XenoPort
agrees not to settle any Infringement Action in a manner that would adversely affect the Product or
the manufacture, use or sale thereof in the Territory, without the prior written consent of
Astellas. Astellas may treat its Damages from such Infringement Action as Third Party Royalties
under Section 7.3.1 above, and XenoPort may treat its Damages from such Infringement Action as
payments for Third Party IP under Section 2.5 above. As used herein, “Damages” shall mean
out-of-pocket costs incurred by a Party, including reasonable attorney’s fees, damages and other
liabilities that are part of any final judgment awarded against such Party, and any amounts paid by
such Party in a settlement of the action that is approved by the other Party, such approval not to
be unreasonably withheld or delayed.

          10.4 Enforcement. Subject to the provisions of this Section 10.4, in the event that
Astellas reasonably believes that any XenoPort Patent Rights in the Territory is infringed or
misappropriated by a third party or is subject to a declaratory judgment action in the Territory
arising from such infringement, in each case with respect to the manufacture, sale or use within
the Field in the Territory of a product comprising a prodrug of gabapentin (an “Infringing
Product”), Astellas shall promptly notify XenoPort. XenoPort shall have the initial right (but
not the obligation), at its own expense, to enforce the XenoPort Patent Rights with respect to such
infringement or defend any declaratory judgment action with respect thereto in the Territory (for
purposes of this Section 10.4, an “Enforcement Action”). Astellas shall, at its expense,
have the right to join in as a party plaintiff and to give reasonable assistance to such
Enforcement Action. XenoPort shall keep Astellas reasonably informed of the progress of any such
Enforcement Action. XenoPort agrees not to settle any Enforcement Action, or make any admissions
or assert any position in such Enforcement Action,

 

			
	*	 	 Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

in a manner that would materially adversely affect Astellas’ rights or interests in the
Territory, without the prior written consent of Astellas, which shall not be unreasonably withheld
or delayed.

               10.4.1 Initiating Enforcement Actions. In the event that XenoPort fails to initiate
an Enforcement Action to enforce the XenoPort Patent Rights against a commercially significant
infringement by a third party in a country in the Territory, which infringement consists of the
manufacture, sale or use of an Infringing Product in the Field in such country, within [... * ...] of a
request by Astellas to initiate such Enforcement Action, Astellas may initiate an Enforcement
Action against such infringement at its own expense. Upon [... * ...], provided that [... * ...].
Astellas shall keep XenoPort hereto reasonably informed of the progress of any such Enforcement
Action. XenoPort shall, at its expense, have the right to join in as a party plaintiff and to give
reasonable assistance to such Enforcement Action . Astellas agrees not to settle any Enforcement
Action, or make any admissions or assert any position in such Enforcement Action, in a manner that
would materially adversely affect the validity, enforceability or scope of the XenoPort Patent
Rights in or outside the Territory, without the prior written consent of XenoPort, which shall not
be unreasonably withheld or delayed.

               10.4.2 Recoveries. Any damages or other monetary awards recovered from an
Enforcement Action shall be allocated first to reimburse the costs and expenses of Party who
initiates the Enforcement Action and, if the other Party joins as a party plaintiff, then the costs
and expenses of the other Party. Any amounts remaining shall be shared [... * ... ] to
Astellas and [... * ...] to XenoPort.

          10.5 Third Party Rights. The obligations of XenoPort and the rights of Astellas under
Sections 10.2 and 10.4 above shall be subject to, and limited by, any agreements pursuant to which
XenoPort acquired or licensed any particular XenoPort Patent Rights, Data or other subject matter.
With respect to the prosecution or enforcement of XenoPort Patent Rights licensed by XenoPort from
a Third Party, to the extent XenoPort has the right to do so, XenoPort shall cooperate with
Astellas to prosecute and enforce such XenoPort Patent Rights in the same manner as set forth in
Sections 10.2 and 10.4 above. As between XenoPort and Astellas, any recoveries from enforcement of
such XenoPort Patent Rights licensed from a Third Party (including any amounts that XenoPort
receives from the Third Party licensor as a result of such enforcement) shall be shared in
accordance with Sections 10.4.2, after deducting from such recoveries any amounts owed to the Third
Party licensor for such enforcement; provided that any Enforcement Actions initiated by the Third
Party licensor shall be deemed initiated by XenoPort for purposes of Section 10.4.2 above, and the
costs and expenses incurred by XenoPort in such Enforcement Action shall include the costs and
expenses reimbursed or required to be reimbursed by XenoPort to the Third Party licensor in such
Enforcement Action.

          10.6 Patent Marking. Astellas agrees to mark and have its Affiliates and
Subdistributors mark all patented Products they sell or distribute pursuant to this Agreement in

 

			
	*	 	Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

accordance with the applicable patent statutes or regulations in the country or countries of
manufacture and sale thereof.

     11. TRADEMARKS 

          11.1 Display. All packaging materials, labels and promotional materials for the
Product in the Territory shall display the Product Trademark to the extent such packaging
materials, labels and promotional materials have enough space for such display. Astellas shall
include in its packaging materials, labels and promotional materials a statement, of reasonable
size and prominence approved by XenoPort, acknowledging that the Product is sold under license from
XenoPort to the extent such packaging materials, labels and promotional materials have enough space
for such statement. The Astellas trade dress and style of packaging with respect to each Product
may be determined by Astellas so as to be consistent with Astellas’ standard trade dress and style,
but shall, so far as is reasonable, be consistent with XenoPort’s worldwide branding strategy for
the Product, provided that XenoPort shall respect local marketing needs in the Territory regarding
trade dress and style.

          11.2 License. XenoPort hereby grants to Astellas an exclusive (even as to XenoPort),
royalty-free license to use the Product Trademark solely in connection with formulation, packaging,
marketing, promoting, distributing and selling the Product in the Territory in accordance with this
Agreement. The ownership and all goodwill from the use of the Product Trademark shall vest in and
inure to the benefit of XenoPort.

          11.3 Registration. XenoPort agrees to file, register and be responsible to maintain a
registration for the Product Trademark in Japan (and in countries of the Territory outside Japan,
upon notice from Astellas that an MAA for the Product is being filed in such country), for the term
of this Agreement, for use with the Product. The costs of filing and maintaining such
registrations in the Territory shall be borne by XenoPort.

          11.4 Ownership. Astellas hereby acknowledges XenoPort’s exclusive ownership rights in
the Product Trademark, and accordingly agrees that at no time during the term of this Agreement or
for [... * ...] thereafter to challenge or assist others to challenge the Product Trademark or the
registration thereof, nor during the term of this Agreement to attempt to register any trademarks,
marks or trade names confusingly similar to such Product Trademark.

          11.5 Recordation. In those countries where a trademark license must be recorded,
XenoPort will provide and record a separate trademark license for the Product Trademark, at
XenoPort’s sole expense. Astellas shall cooperate in the preparation and execution of such
documents.

          11.6 Approval of Promotional Materials. Astellas shall submit representative samples
of promotional materials, packaging and Product using the Product Trademark to XenoPort

 

			
	*	 	Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

for
XenoPort’s reasonable approval, which approval shall not be unreasonably withheld or delayed, prior
to their first use and prior to any subsequent change or addition to such promotional materials,
provided that if XenoPort has not responded within four (4) weeks after receiving such submissions,
XenoPort’s approval will be deemed to have been received.

          11.7 Termination. Astellas’ right to use the Product Trademark shall terminate in
each country of the Territory in which Astellas’ rights to distribute the Product are terminated in
accordance with this Agreement. Astellas shall cooperate in the cancellation of any trademark
licenses recorded or entered into in such countries.

     12. CONFIDENTIALITY 

          12.1 Confidential Information. Except as expressly provided in this Agreement, the
Parties agree that the receiving Party shall not publish or otherwise disclose and shall not use
for any purpose any information furnished to it by the other Party hereto pursuant to this
Agreement (collectively, “Confidential Information”). Notwithstanding the foregoing,
Confidential Information shall not include information that, in each case as demonstrated by
written documentation:

               12.1.1 was already known to the receiving Party, other than under an obligation of
confidentiality, at the time of disclosure or, as shown by written documentation, was developed by
the receiving Party independent of disclosure by the disclosing Party;

               12.1.2 was generally available to the public or otherwise part of the public domain at the
time of its disclosure to the receiving Party;

               12.1.3 became generally available to the public or otherwise part of the public domain after
its disclosure and other than through any act or omission of the receiving Party in breach of this
Agreement;

               12.1.4 was subsequently lawfully disclosed to the receiving Party by a person other than the
disclosing Party, and who did not directly or indirectly receive such information from disclosing
Party; or

               12.1.5 is developed by the receiving Party without use of or reference to any information or
materials disclosed by the disclosing Party.

          12.2 Permitted Disclosures. Notwithstanding the provisions of Section 12.1 above,
each Party hereto may disclose the other Party’s Confidential Information to its Affiliates,
licensees, Subdistributors and any other Third Parties to the extent such disclosure is reasonably
necessary to exercise the rights granted to it, or reserved by it, under this Agreement (including
the right to grant sublicenses, as applicable), prosecuting or defending litigation, complying with
applicable governmental laws or regulations, submitting information to tax or other governmental
authorities or

 

			
	*	 	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

conducting clinical trials hereunder with respect to the Product. If a Party is
required by law or regulations to make any such disclosure of the other Party’s Confidential
Information, to the extent it may legally do so, it will give reasonable advance notice to the
latter Party of such disclosure and, save to the extent inappropriate in the case of patent
applications or otherwise, will use its good faith efforts to secure confidential treatment of such
Confidential Information prior to its disclosure (whether through protective orders or otherwise).
For any other disclosures of the other Party’s Confidential Information, including to Affiliates,
licensees, Subdistributors and other Third Parties, a Party shall ensure that the recipient thereof
is bound by a written confidentiality agreement as materially protective of such Confidential
Information as this Section 12. If the Party whose Confidential Information is to be disclosed has
not filed a patent application with respect to such Confidential Information, it may require the
other Party to delay the proposed disclosure (to the extent the disclosing Party may legally do
so), for up to ninety (90) days, to allow for the filing of such an application.

          12.3 Terms of this Agreement. Each Party agrees [... * ...], except [... * ...]. In [... * ...]
pursuant to clause (a) above, the [... * ...].

          12.4 Publicity. Subject to Section 12.3 above, neither Party shall originate any
written publicity, news release or other announcement or statement relating to this Agreement
(collectively, a “Written Disclosure”), without the prompt prior review and written
approval of the other Party, which approval shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, either Party may make any public Written Disclosure it believes in
good faith based upon the advice of counsel is required by applicable law, rule or regulation or
any listing or trading agreement concerning its or its Affiliates’ publicly traded securities. In
addition, the Parties shall agree upon a press release to announce the execution of this Agreement,
together with a corresponding Question & Answer outline for use in responding to inquiries about
the Agreement; thereafter, Astellas and XenoPort may each disclose to third parties the information
contained in such press release and Question & Answer outline without the need for further approval
by the other.

          12.5 Prior Non-Disclosure Agreements. Upon execution of this Agreement, the terms of
this Section 12 shall supersede any prior non-disclosure, secrecy or confidentiality agreement
between the Parties. Any information disclosed under such prior agreements shall be deemed
disclosed under this Agreement.

          12.6 Publication of Product Information. Prior to publishing, publicly presenting
and/or submitting for written or oral publication a manuscript, abstract or the like that includes
Data or other information relating to Product that has not previously published pursuant to this
Section 12.6, a Party shall provide the other Party a copy thereof in English for its review for at
least thirty (30) days (unless such Party is required by law to publish such information sooner).
Such Party shall consider in good faith any comments provided by the other Party during such thirty
(30) day period. In addition, such Party shall, at the request of the other Party, remove any
Confidential Information

 

			
	*	 	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

of the other Party therefrom, except each Party shall have the right to
publicly disclose any information, including Confidential Information, pertaining to safety or
efficacy of the Compound and/or Product that such Party believes in good faith it is obligated or
appropriate to disclose. The contribution of each Party shall be noted in all publications or
presentations by acknowledgment or coauthorship, whichever is appropriate.

     13. REPRESENTATIONS AND WARRANTIES

          13.1 Mutual Warranty. Each Party represents and warrants to the other that this
Agreement is a legal and valid obligation binding upon such Party and enforceable in accordance
with its terms. The execution, delivery and performance of this Agreement by such Party does not
conflict with any agreement, instrument or understanding, oral or written, to which it is a party
or by which it is bound, nor, to such Party’s knowledge, violate any law or regulation of any
court, governmental body or administrative or other agency having jurisdiction over it.

          13.2 XenoPort Warranties. XenoPort represents, warrants to Astellas that, as of the
Effective Date:

               13.2.1 it has the full right and authority to enter into this Agreement and grant the rights
and licenses as provided herein;

               13.2.2 it has not previously granted any right, license or interest in or to the XenoPort
Patent Rights, or any portion thereof, that is in conflict with the rights or licenses granted to
Astellas under this Agreement;

               13.2.3 XenoPort has not knowingly withheld from Astellas any material information in the
possession of XenoPort related to the safety or efficacy of the Compound and/or the Product (a)
that has been requested by Astellas, or (b) that XenoPort considered to be reasonably material to
Astellas’ evaluation of the safety and/or efficacy of the Compound and/or Product;

               13.2.4 XenoPort has not knowingly withheld from Astellas any material CMC Information in the
possession of XenoPort regarding the Existing Product (a) that has been requested by Astellas, or
(b) that XenoPort considered to be reasonably material to Astellas’ evaluation of the quality of
the Compound and/or Product. As used herein, “CMC Information” means information of the
type required to appear in Section 7.0 of IND Nos. 68,341 and 71,352;

               13.2.5 to its best knowledge, there are no actual, pending, alleged or threatened action,
suits, claims, interference or governmental investigations involving the Compound and/or the
Product, the XenoPort Patent Rights, the XenoPort Know-How or the Product Trademark by or against
XenoPort, or any of its Affiliates or other licensees in or before any court, governmental or
regulatory authority. In particular, to its best knowledge, there is no pending or

 

			
	*	 	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

threatened
product liability action nor intellectual property right litigation in relation to the Compound
and/or the Product;

               13.2.6 all necessary consents, approvals and authorizations of all governmental authorities
and other persons or entities required to be obtained by XenoPort in order to enter into this
Agreement have been obtained;

               13.2.7 to its best knowledge, there are no actual, pending, alleged or threatened infringement
by a Third Party of any of the XenoPort Patent Rights or the XenoPort Know-How;

               13.2.8 to its best knowledge, none of the issued XenoPort Patent Rights are invalid or
unenforceable.

               13.2.9 there are no XenoPort Patent Right that are licensed by XenoPort from any Third Party,
which would, but for the license granted hereunder, be infringed by use, development, formulation,
packaging, import, sale, distribution, promotion or marketing of the Compound and/or the Product by
Astellas, any of its Affiliates or Subdistributors in accordance with
this Agreement. There are no Data licensed by XenoPort from any Third Party relating to the
Compound and/or the Product.

               13.2.10 XenoPort has not granted a lien or other encumbrances on any of the subject matter of
this Agreement or on any of XenoPort’s rights, benefits or obligations hereunder or on any of the
XenoPort Patent Rights, which would conflict with the rights or licenses of Astellas hereunder.

               13.2.11 Notwithstanding the foregoing, it is understood that substantial information has been
published in XenoPort’s SEC filings and in its scientific publications regarding the Compound
and/or the Product, and is available to the public. Accordingly, for purposes of this Section
13.2, Astellas shall be deemed to be on notice of and to have received disclosures of such
information, and the representations and warranties set forth in this Section 13.2 shall be subject
to such disclosures.

          13.3 XenoPort Covenants. XenoPort covenants to Astellas that, during the term of this
Agreement (a) it shall not grant any right, license or interest in or to the XenoPort Patent
Rights, or any portion thereof, that is in conflict with the rights or licenses granted under this
Agreement, and (b) it shall not grant a lien or other encumbrances on any of the subject matter of
this Agreement or on any of XenoPort’s rights, benefits or obligations hereunder or on any of the
XenoPort Patent Rights, which would conflict with the rights or licenses of Astellas hereunder.

 

			
	*	 	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

          13.4 Astellas Warranties. Astellas represents and warrants to XenoPort that, as of
the Effective Date: (a) it has the full right and authority to enter into this Agreement and grant
the rights granted herein; (b) Astellas and its Affiliates have not initiated any human clinical
trials with respect to, and are not commercializing, any products containing the Compound or any
Competitive Compound, and are not engaged in contract negotiations with respect to in-licensing or
acquiring any specific product or technology relating to the Compound or any Competitive
Compound(s); (c) all necessary consents, approvals and authorizations of all governmental
authorities and other persons or entities required to be obtained by Astellas in order to enter
into this Agreement have been obtained; and (d) Astellas does not have any knowledge that any of
XenoPort’s representations and warranties set forth in Section 13.2 above are inaccurate.

          13.5 DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER
PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTIES OF ANY KIND EITHER EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NONINFRINGEMENT OR VALIDITY OF ANY PATENTS ISSUED OR PENDING.

          13.6 LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT OR
OTHERWISE, NEITHER PARTY SHALL BE LIABLE TO THE OTHER WITH RESPECT TO ANY SUBJECT MATTER OF THIS
AGREEMENT, WHETHER UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY, FOR ANY
INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY, PUNITIVE, MULTIPLE, OR CONSEQUENTIAL DAMAGES (INCLUDING,
WITHOUT LIMITATION, LOST PROFITS, LOSS OF USE, DAMAGE TO GOODWILL, OR LOSS OF BUSINESS) EXCEPT IN
THE CASE OF (A) BREACH OF SECTION 2.4.3 BY ASTELLAS OR ITS AFFILIATES, (B) BREACH OF SECTION 12,
(C) SUCH DAMAGES OWED TO THIRD PARTIES PURSUANT TO SECTION 14 OR (D) BREACH OF ASTELLAS’ OBLIGATION
TO USE DILIGENT EFFORTS TO DEVELOP AND/OR COMMERCIALIZE THE PRODUCT PURSUANT TO SECTIONS 4.1.1 AND
5.1.1, PROVIDED IT IS UNDERSTOOD THAT IN THE CASE OF (D) DAMAGES SHALL BE CALCULATED BASED ON LOSS
OF ROYALTIES AND OTHER AMOUNTS OWED TO XENOPORT HEREUNDER AS A RESULT OF SUCH BREACH, AND NOT BASED
ON THE LOSS OF NET SALES RECEIVED BY ASTELLAS.

     14. INDEMNIFICATION

          14.1 Indemnification of XenoPort. Astellas shall indemnify and hold harmless each of
XenoPort, its Affiliates and the directors, officers and employees of such entities and the
successors and assigns of any of the foregoing (the “XenoPort Indemnitees”), from and
against any and all liabilities, damages, penalties, fines, costs or expenses (including, without
limitation, reasonable attorneys’ fees and other expenses of litigation) (“Liabilities”)
from any claims, actions, suits or proceedings brought by a Third Party (any of the foregoing, a
“Third Party Claim”) incurred

 

			
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by any XenoPort Indemnitee, arising from, or occurring as a
result of: (a) the use, marketing, distribution or sale of any Product by Astellas, its Affiliates
or Subdistributors in the Territory (and formulation and packaging activities by or under authority
of Astellas outside the Territory pursuant to Section 2.2 or development activities by Astellas or
requested by Astellas outside the Territory pursuant to 4.7), including, without limitation, any
Products Liability Claim (subject to and shared in accordance with the mechanism set forth in
Section 14.4 below) and Third Party infringement claims (subject to Section 10.3 above), or (b) any
material breach of any representations, warranties or covenants by Astellas in Section 13 above;
except to the extent such Third Party Claims fall within the scope of XenoPort’s indemnification
obligations set forth in Section 14.2 below.

          14.2 Indemnification of Astellas. XenoPort shall indemnify and hold harmless each of
Astellas, its Affiliates and Subdistributors and the directors, officers and employees of Astellas,
its Affiliates and Subdistributors and the successors and assigns of any of the foregoing (the
“Astellas Indemnitees”), from and against any and all Liabilities from any Third Party
Claims incurred by any Astellas Indemnitee, arising from, or occurring as a result of: (a) the use,
marketing, distribution or sale of any Product by XenoPort or its licensee outside the Territory
(other than formulation and packaging activities by or under authority of Astellas outside the
Territory pursuant to Section 2.2 and development activities by Astellas or requested by Astellas
outside the Territory pursuant to 4.7), (b) any material breach of any representations, warranties
or covenants by XenoPort in Section 13 above, or (c) subject to and shared in accordance with the
mechanism set forth in Section 14.4 below, any Product Liability Claim asserted against the Astellas Indemnitees.
Additional indemnification obligations between the Parties may be specified in the Supply Agreement
as mutually agreed.

          14.3 Procedure. Except with respect to Third Party infringement claims subject to
Section 10.3 above, and Product Liability Claims subject to Section 14.4 below, a Party that
intends to claim indemnification under this Section 14 (the “Indemnitee”) shall promptly
notify the other Party (the “Indemnitor”) in writing of any Third Party Claim, in respect
of which the Indemnitee intends to claim such indemnification, and the Indemnitor shall have sole
control of the defense and/or settlement thereof. The indemnity arrangement in this Section 14
shall not apply to amounts paid in settlement of any action with respect to a Third Party Claim, if
such settlement is effected without the consent of the Indemnitor, which consent shall not be
withheld or delayed unreasonably. The failure to deliver written notice to the Indemnitor within a
reasonable time after the commencement of any action with respect to a Third Party Claim, if
prejudicial to its ability to defend such action, shall relieve such Indemnitor of any liability to
the Indemnitee under this Section 14, but the omission to so deliver written notice to the
Indemnitor shall not relieve the Indemnitor of any liability that it may have to any Indemnitee
otherwise than under this Section 14. The Indemnitee under this Section 14 shall cooperate fully
with the Indemnitor and its legal representatives in the investigation of any action with respect
to a Third Party Claim covered by this indemnification.

 

			
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          14.4 Products Liability Claims. Each Party shall notify the other Party as promptly
as practicable if any Third Party Claim is commenced or threatened against such Party alleging
product liability, product defect, design, manufacturing, packaging or labeling defect, failure to
warn, or any similar action relating to the formulation, manufacture, use or safety of those
Products sold by or under authority of Astellas in the Territory hereunder (“Product Liability
Claim”). Each Party shall cooperate with the other Party in connection with any such Product
Liability Claim that is commenced or threatened against the other Party. If a Product Liability
Claim is asserted against both Parties, each Party will have the right to designate counsel to
defend itself in the Product Liability Claim. If a Product Liability Claim is brought against one
Party but not the other Party, the named Party shall control the defense and/or settlement thereof
at its own expense with counsel of its choice, subject to this Section 14.4. In such case, the
other Party may participate in the defense and/or settlement thereof at its own expense with
counsel of its choice. In any event, the Party that is subject to the Product Liability Claim (if
not asserted against both Parties) agrees to keep the other Party hereto reasonably informed of all
material developments in connection with any such Product Liability Claim. Astellas agrees not to
settle any Product Liability Claim, or make any admissions or assert any position in such Product
Liability Claim, in a manner that would adversely affect the Product or the manufacture, use or
sale thereof in or outside the Territory, without the prior written consent of XenoPort. XenoPort
agrees not to settle any Product Liability Claim, or make any admissions or assert any position in
such Product Liability Claim, in a manner that would adversely affect the Product or the
manufacture, use or sale thereof in the Territory, without the prior written
consent of Astellas. To the extent a Product Liability Claim is caused by: (a) the Fault of
XenoPort (as defined in Section 8.5 above), XenoPort shall bear all Liabilities from such Product
Liability Claim to the extent of its Fault, (b) the Fault of Astellas (as defined in Section 8.5
above), Astellas shall bear all Liabilities from such Product Liability Claim to the extent of its
Fault and (c) neither the Fault of XenoPort nor the Fault of Astellas, the Parties shall share the
Liabilities from such Product Liability Claim as follows: [... * ...] shall be borne by Astellas, and
[... * ...] shall be borne by XenoPort.

          14.5 Insurance. Each Party shall secure and maintain in effect during the term of
this Agreement and for a period of [... * ...] thereafter insurance policy(ies) underwritten by a
reputable insurance company in a form and having limits standard and customary for entities in the
biopharmaceutical industry for exposures related to the Product. Such policies shall include
coverage for clinical trial liability and products liability. Upon request by the other Party
hereto, certificates of insurance evidencing the coverage required above shall be provided to the
other Party.

     15. TERM AND TERMINATION

          15.1 Term. This Agreement shall become effective as of the Effective Date and, shall
continue, on a country-by-country basis, until terminated pursuant to Section 15.2 or 15.3 below or
Section 2.4 above.

 

			
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          15.2 Termination By Astellas. Astellas may terminate this Agreement for any reason
under this Section 15.2 without any penalty, consequence, termination compensation, loss of
profits, goodwill indemnity or otherwise solely by reason of such termination (i.e., without
prejudice to any remedies XenoPort may have for a breach of this Agreement by Astellas), as a whole
or on a country-by-country basis with respect to countries in the Territory upon written notice to
XenoPort; provided that such notice is given after the third anniversary of the Effective Date. In
the event Astellas elects to terminate this Agreement under this Section 15.2 with respect to
Japan, Astellas shall have elected to terminate this Agreement in whole. Without limiting the
other provisions of this Agreement, if, at any time after the First Commercial Sale of a Product in
a country, [... * ...] with respect to such country (if a country in the Territory other than Japan),
or as a whole (if such country is Japan); and this Agreement shall so terminate upon such notice by
XenoPort without any penalty, consequence, termination compensation, loss of profits, goodwill
indemnity or otherwise solely by reason of such deemed termination.

          15.3 Termination for Cause. In the event a Party fails to pay any amount due under
this Agreement or otherwise materially breaches any obligation, covenant or warranty under this
Agreement, the other Party shall have the right to terminate this Agreement upon written notice,
provided that such breach is not cured within [... * ...] (if a failure to pay), or within [... * ...] (if
any other material breach), after notice thereof specifying such breach.

     16. EFFECT OF TERMINATION

          16.1 Accrued Obligations. Termination of this Agreement for any reason shall 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 all rights and remedies it may have hereunder or at law or in
equity with respect to any breach of this Agreement.

          16.2 Rights on Termination. This Section 16.2 shall apply upon any termination of
Astellas’ rights under this Agreement in whole or with respect to a particular country, excluding
only termination of this Agreement pursuant to Section 15.3 for XenoPort’s breach. As used herein,
the “Affected Area” shall mean the Territory in case of termination of this Agreement as a
whole, or the terminated country(ries) in case of termination of this Agreement with respect to
such country(ries).

               16.2.1 Wind-down Period.

                    (a) Development. In the event there are any on-going clinical trials of the Product
in an Affected Area, at XenoPort’s request, Astellas agrees to either promptly transition such
clinical trials to XenoPort, or continue to conduct such clinical trials (i) in the case of
termination by XenoPort pursuant to Section 15.3 or 2.4, or termination by Astellas pursuant to
Section 15.2, at Astellas’ own expense and (ii) in the case of any other termination, at XenoPort’s
expense for a period requested by XenoPort up to a maximum of [... * ...] after such termination.

 

			
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                    (b) Commercialization. In case of termination by XenoPort pursuant to Section 15.3 or
2.4, or termination by Astellas pursuant to Section 15.2, Astellas and its Subdistributors shall
continue to distribute Products in each country of the Affected Area for which Marketing Approval
therefor has been obtained, in accordance with the terms and conditions of this Agreement, for a
period requested by XenoPort not to exceed [... * ...] from such termination (for purposes of this
Section 16.2, the “Wind-down Period”); provided that XenoPort may terminate the Wind-down
Period upon [... * ...] written notice to Astellas. Notwithstanding any other provision of this
Agreement, during the Wind-down Period, Astellas’ and its Subdistributors’ rights with respect to
the Product in the Affected Area shall be non-exclusive, and XenoPort shall have the right to
engage one or more other distributor(s) and/or sublicensee(s) of the Product in all or part of the
Affected Area. Any Products sold or disposed by Astellas in the Affected Area during the Wind-down
Period shall be subject to royalties under Section 7 above.

               16.2.2 Assignment of MAA and Marketing Approvals. Astellas shall assign or cause to
be assigned to XenoPort (or if not so assignable, Astellas shall take all reasonable actions to
make available to XenoPort the benefits of) all regulatory filings and registrations (including
INDs, MAAs and Marketing Approvals) for the Product in the Affected Area, including any such
regulatory filings and registrations made or owned by its Affiliates and/or Subdistributors. In
each case, unless otherwise required by any applicable law or regulation, the foregoing assignment
(or availability) shall be made within [... * ...] after termination of the Affected Area. In
addition, Astellas shall promptly provide to XenoPort a copy of all Data and Astellas Know-How
pertaining to the Product in the Affected Area to the extent not previously provided to XenoPort.

               16.2.3 Transition. Astellas shall use Diligent Efforts to cooperate with XenoPort
and/or its designee to effect a smooth and orderly transition in the development and sale of the
Product in the Affected Area during the Wind-down Period. Without limiting the foregoing, Astellas
shall, upon written request from XenoPort, provide XenoPort copies of customer lists, customer data
and other customer information relating to the Product in the Affected Area (except as prevented by
the applicable laws and regulations relating to the protection of personal information), which
XenoPort shall have the right to use and disclose for any purpose after termination of this
Agreement. In addition, Astellas shall refer all inquiries after the Wind-down Period (or after
the termination of this Agreement, in case there is no Wind-down Period) regarding the Product in
the Affected Area to XenoPort or any newly appointed distributors.

               16.2.4 Return of Materials. Within fifteen (15) days after the end of the Wind-down
Period (or after the termination of this Agreement, in the event there is no Wind-down Period),
Astellas shall destroy all tangible items comprising, bearing or containing trademarks, marks,
tradenames, patents, copyrights, designs, drawings, formulas or other Data, photographs, samples,
literature, sales and promotional aids (“Product Materials”) and Confidential Information
of XenoPort, that is in Astellas’ possession, and provide written certification of such
destruction, or prepare such tangible items of Product Materials and Confidential Information for
shipment to

 

			
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XenoPort, as XenoPort may direct, at XenoPort’s expense; provided that Astellas may
retain copies of Product Materials and Confidential Information relating to countries in the
Territory outside the Affected Area as reasonably necessary for its continued promotion, marketing,
sale and distribution of the Product in such countries under this Agreement. Effective upon the
end of the Wind-down Period (or upon termination of this Agreement, in the event there is no
Wind-down Period), Astellas shall cease to use all trademarks and trade names of XenoPort in the
Affected Area, and all rights granted to Astellas hereunder with respect to the Product in the
Affected Area shall terminate.

               16.2.5 Subdistributors. Any contracts with Subdistributors of the Product in the
Affected Area engaged by Astellas other than Astellas’ Affiliates shall, at the request of XenoPort
in its discretion, be assigned to XenoPort to the furthest extent possible, provided that such
assignment is accepted by the Subdistributor(s) for such Affected Area. In the event such
assignment is not requested by XenoPort or is not accepted by such Subdistributor(s), then the
rights of such Subdistributors with respect to the Product in the Affected Area shall terminate
upon termination of Astellas’ rights with respect to such Affected Area. Astellas shall ensure
that its Affiliates and such Subdistributors (if not assigned to XenoPort pursuant to this Section
16.2.5) shall transition the Product back to XenoPort in the manner set forth in this Section 16.2
as if such Affiliate or Subdistributor were named herein.

          16.3 No Renewal, Extension or Waiver. Acceptance of any order from, or sale or
license of, any Product to Astellas after the effective date of termination of this Agreement shall
not be construed as a renewal or extension hereof, or as a waiver of termination of this Agreement.

          16.4 Survival. Upon termination of this Agreement in whole, all rights and
obligations of the parties under this Agreement shall terminate except: (a) Sections [... * ...], and
(b) those provisions of this Agreement [... * ...]. For clarity, in the event this Agreement is
terminated with respect to one or more countries, but not the entire Territory, then the Affected
Area shall thereafter cease to be within the Territory for all purposes of this Agreement, but
Sections [... * ...] shall survive such termination with respect to the Affected Area.

     17. DISPUTE RESOLUTION

          17.1 Disputes. In the event of any dispute between the Parties arising out of or in
connection with this Agreement, either Party may, by written notice to the other, have such dispute
referred to the CEO of XenoPort and the CEO of Astellas for attempted resolution by good faith
negotiations within thirty (30) days after such notice is received, and, in such event, each Party
shall cause its representative to meet and be available to attempt to resolve such issue.
Notwithstanding the foregoing, neither Party shall be obligated to negotiate for more than thirty
(30) days. If the Parties should resolve such dispute or claim, a memorandum setting forth their
agreement will be prepared and signed by both Parties if requested by either Party.

 

			
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          17.2 Arbitration. Any dispute, controversy or claim with respect to the breach,
interpretation or enforcement of this Agreement, including disputes relating to termination of this
Agreement that cannot be resolved pursuant to Section 17.1 (or which this Agreement directs shall
be resolved pursuant to this Section 17.2) shall be settled by binding arbitration in the manner
described in this Section 17. The arbitration shall be conducted by the Judicial Arbitration and
Mediation Services, Inc. (“JAMS”) under its rules of arbitration then in effect.
Notwithstanding those rules, the following provisions shall apply to the arbitration hereunder:

               17.2.1 Arbitrators. The arbitration shall be conducted by a single JAMS arbitrator;
provided that at the request of either Party, the arbitration shall be conducted by a panel of
three (3) arbitrators, with one (1) JAMS arbitrator chosen by each of Astellas and XenoPort and the
third appointed by the other two (2) arbitrators. If the Parties are unable to agree upon a single
arbitrator, or the other two arbitrators are unable to agree upon the third arbitrator in case of a
panel of three (3), such single or third arbitrator (as the case may be) shall be appointed in
accordance with the rules of JAMS. In any event, the arbitrator or arbitrators selected in
accordance with this Section 17.2.1 are referred to herein as the “Panel” and shall be
comprised of arbitrators who are familiar with worldwide research and business development in the
pharmaceutical industry, unless otherwise agreed.

               17.2.2 Proceedings. Except as otherwise provided herein, the Parties and the
arbitrators shall use their best efforts to complete the arbitration within one (1) year after the
appointment of the Panel under Section 17.2.1 above, unless a Party can demonstrate to the Panel
that the complexity of the issues or other reasons warrant the extension of one or more of the time
tables. In such case, the Panel may extend such time table as reasonably required. The Panel
shall, in rendering its decision, apply the substantive law of the State of New York, without
regard to its conflicts of laws provisions, except that the interpretation and enforcement of this
Section 17 shall be governed by the U.S. Federal Arbitration Act. The proceeding shall take place
in San Francisco, California, United States of America. The arbitral proceedings and all
pleadings, responses and evidence shall be in the English language. If so requested by the
arbitrator(s), any evidence originally in a language other than English shall be submitted with an
English translation accompanied by an original or true copy thereof. The decision and/or award
rendered by the arbitrator(s) shall be written, final and non-appealable, and judgment on such
decision and/or award may be entered in any court of competent jurisdiction. If the Panel
determines that it is reasonable to do so, the fees of the Panel shall be paid by the losing Party,
which Party shall be designated by the Panel. Otherwise, the fees of the Panel shall be split
equally between the Parties. Each Party shall bear the costs of its own attorneys’ and experts’
fees; provided that the Panel may in its discretion award the prevailing Party all or part of the
costs and expenses incurred by the prevailing Party in connection with the arbitration proceeding.

               17.2.3 Interim Relief. Notwithstanding anything in this Section 17.2 to the contrary,
Astellas and XenoPort shall each have the right to apply to any court of competent

 

			
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jurisdiction for
a temporary restraining order, preliminary injunction or other similar interim or conservatory
relief, as necessary, pending resolution under the above described arbitration procedures. Nothing
in the preceding sentence shall be interpreted as limiting the powers of the arbitrators with
respect to any dispute subject to arbitration under this Agreement. The Panel may award injunctive
relief.

     18. MISCELLANEOUS

          18.1 Governing Law, Venue. This Agreement and any dispute arising from the
performance or breach hereof shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York, U.S.A., without reference to conflicts of laws principles. The
U.N. Convention on the Sale of Goods shall not apply to this Agreement.

          18.2 Force Majeure. Nonperformance of any Party, except for failure to pay amounts
due hereunder, shall be excused to the extent that performance is prevented by strike, fire,
earthquake, flood, acts of terrorism, governmental acts or orders or restrictions, failure of
suppliers or any other reason where failure to perform is beyond the reasonable control of the
nonperforming Party (“Force Majeure”). In such event, Astellas or XenoPort, as the case
may be, shall promptly notify the other Party of such inability and of the period for which such
inability is anticipated to continue. Without limiting the foregoing, the Party subject to such inability shall use
reasonable efforts to minimize the duration of any Force Majeure event.

          18.3 No Implied Waivers; Rights Cumulative. No failure on the part of XenoPort or
Astellas to exercise and no delay in exercising any right under this Agreement, or provided by
statute or at law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any
such right, nor shall any partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right.

          18.4 Independent Contractors. Nothing contained in this Agreement is intended
implicitly, or is to be construed, to constitute XenoPort or Astellas as partners in the legal
sense. No Party hereto shall have any express or implied right or authority to assume or create
any obligations on behalf of or in the name of any other Party or to bind any other Party to any
contract, agreement or undertaking with any third party. This Agreement does not create a
partnership for United States federal income tax purposes (as defined in Section 761 of the United
States Internal Revenue Code), for any state or local jurisdiction in the United States or in any
country other than the United States. Therefore, except for filing regarding withholding tax
which, if not filed, shall be imposed upon royalties and milestone payments paid under this
Agreement, there is no requirement to file Form 1065, United States Partnership Return of Income,
any similar state or local income tax return or any similar document with tax authorities in any
country other than the United States.

          18.5 Notices. All notices, requests and other communications hereunder shall be in
writing and shall be personally delivered or sent by registered or certified airmail, return
receipt

 

			
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requested, postage prepaid, in each case to the respective address specified below, or such
other address as may be specified in writing to the other Parties hereto:

	 	 	 	 	 
	 

	 	Astellas:
	 	Astellas Pharma Inc.
	 

	 	 	 	3-11, Nihonbashi-Honcho 2-chome
	 

	 	 	 	Chuou-ku, Tokyo, 103-8411, Japan
	 

	 	 	 	Attn: Vice President, Licensing, Corporate Strategy
	 

	 	 	 	Fax: +81-3-5203-7164
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Astellas Pharma Inc.
	 

	 	 	 	3-11, Nihonbashi-Honcho 2-chome
	 

	 	 	 	Chuou-ku, Tokyo, 103-8411, Japan
	 

	 	 	 	Attn: Vice President, Legal, Corporate Administration
	 

	 	 	 	Fax: +81-3-3244-5811
	 
	 	 	 	 
	 

	 	XenoPort:
	 	XenoPort, Inc.
	 

	 	 	 	3410 Central Expressway
	 

	 	 	 	Santa Clara, California 95051,
	 

	 	 	 	United States of America
	 

	 	 	 	Attn: CEO
	 

	 	 	 	Fax: +1 (408) 616-7211
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Wilson Sonsini Goodrich & Rosati
	 

	 	 	 	650 Page Mill Road
	 

	 	 	 	Palo Alto, California 94304-1050
	 

	 	 	 	United States of America
	 

	 	 	 	Attn: Kenneth A. Clark, Esq.
	 

	 	 	 	Fax: +1 (650) 493-6811

          18.6 Assignment. This Agreement shall not be assignable by either Party to any Third
Party hereto without the written consent of the other Party hereto; except either Party may assign
this Agreement without the other Party’s consent to an entity that acquires substantially all of
the business or assets of the assigning Party, whether by merger, acquisition or otherwise,
provided that the acquiring Party assumes this Agreement in writing or by operation of law. In
addition, either Party shall have the right to assign this Agreement to a Subsidiary upon written
notice to the non-assigning Party; provided that the assigning Party guarantees the performance of
this Agreement by such Subsidiary, and further provided that if the non-assigning Party reasonably
believes such assignment could result in material adverse tax consequences to the non-assigning
Party, such assignment shall not be made without the non-assigning Party’s consent. Subject to the
foregoing, this Agreement shall inure to the benefit of each Party, its successors and permitted
assigns. Any assignment of this Agreement in contravention of this Section 18.6 shall be null and
void.

 

			
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          18.7 Modification. No amendment or modification of any provision of this Agreement
shall be effective unless in writing signed by all Parties hereto. No provision of this Agreement
shall be varied, contradicted or explained by any oral agreement, course of dealing or performance
or any other matter not set forth in an agreement in writing and signed by all Parties.

          18.8 Severability. If any provision hereof should be held invalid, illegal or
unenforceable in any jurisdiction, the Parties shall negotiate in good faith a valid, legal and
enforceable substitute provision that most nearly reflects the original intent of the Parties and
all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be
liberally construed in order to carry out the intentions of the Parties hereto as nearly as may be
possible. Such invalidity, illegality or unenforceability shall not affect the validity, legality
or enforceability of such provision in any other jurisdiction. In the event a Party seeks to avoid
a provision of this Agreement by asserting that such provision is invalid, illegal or otherwise
unenforceable, the other Party shall have the right to terminate this Agreement upon sixty (60)
days’ prior written notice to the asserting Party, unless such assertion is eliminated and the
effect of such assertion is cured within such sixty (60) day period. Any termination in accordance
with the foregoing sentence shall be deemed an election by Astellas to terminate pursuant to
Section 15.2 if XenoPort exercises its right to terminate under this Section 18.8, and a termination for the breach of XenoPort pursuant to
Section 15.3 if Astellas exercises its right to terminate under this Section 18.8.

          18.9 Counterparts. This Agreement may be executed in two counterparts, each of which
shall be deemed an original, and all of which, together, shall constitute one and the same
instrument.

          18.10 Headings. Headings used herein are for convenience only and shall not in any
way affect the construction of, or be taken into consideration in interpreting, this Agreement.

          18.11 Export Laws. Notwithstanding anything to the contrary contained herein, all
obligations of XenoPort and Astellas are subject to prior compliance with United States and foreign
export regulations and such other United States and foreign laws and regulations as may be
applicable, and to obtaining all necessary approvals required by the applicable agencies of the
governments of the United States and foreign jurisdictions. XenoPort and Astellas shall cooperate
with each other and shall provide assistance to the other as reasonably necessary to obtain any
required approvals.

[continued on next page]

 

			
	*	 	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

          18.12 Entire Agreement. This Agreement, together with all the Exhibits thereto,
constitute the entire agreement, both written or oral, with respect to the subject matter hereof,
and supersede all prior or contemporaneous understandings or agreements, whether written or oral,
between XenoPort and Astellas with respect to such subject matter.

     IN WITNESS WHEREOF, the Parties hereto have caused this Distribution and License Agreement to
be duly executed and delivered in duplicate originals as of the date first above written.

	 	 	 	 	 	 	 	 	 	 	 
	XENOPORT, INC.	 	 	 	ASTELLAS PHARMA, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Ronald W. Barrett
 

	 	 	 	By:
	 	/s/ Toichi Takenaka
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Name:

	 	Ronald W. Barrett
 

	 	 	 	Name:
	 	Toichi Takenaka
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title:

	 	Chief Executive Officer
 

	 	 	 	Title:
	 	President and Chief Executive Officer
 

	 	 

 

			
	*	 	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

EXHIBIT A

COMPOUND

[... * ...]

 

			
	*	 	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

EXHIBIT B

XENOPORT PATENT RIGHTS

[... * ...]

 

			
	*	 	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

EXHIBIT C

INITIAL DEVELOPMENT PLAN

[... * ...]

 

			
	*	 	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.exv4w1

 

Exhibit 4.1

Ace Cash Express, Inc. Non-Employee Directors Stock Incentive Plan.

 

 

ACE CASH EXPRESS, INC.

NON-EMPLOYEE DIRECTORS STOCK INCENTIVE PLAN

AUGUST 23, 2005

     On August 23, 2005 (the “Effective Date”), the Board of Directors of Ace Cash Express, Inc.
(the “Company”) adopted the following Non-Employee Directors Stock Incentive Option Plan:

     1. PURPOSE. The purpose of the Plan is to provide non-employee directors with a proprietary
interest in the Company through the granting of Options and Restricted Stock Awards which will

     (a) increase the interest of the non-employee directors in the Company’s welfare;

     (b) furnish an incentive to the non-employee directors to continue their services for
the Company; and

     (c) provide a means through which the Company may attract able persons to serve on the
Board.

     2. ADMINISTRATION. The Plan will be administered by the Committee.

     3. PARTICIPANTS. The Committee shall, from time to time, select the particular non-employee
directors of the Company to whom Options and Restricted Stock Awards are to be granted under the
Plan and who will, upon such grant, become participants in the Plan (or Grantees).

     4. SHARES SUBJECT TO PLAN. The Committee may not grant Options and Restricted Stock Awards
under the Plan in the aggregate for more than 200,000 shares of Common Stock of the Company, but
this number may be adjusted to reflect, as deemed appropriate by the Committee, any stock dividend,
stock split, share combination, recapitalization, or the like of or by the Company. Shares to be
optioned and sold or to be granted as Restricted Stock Awards may be made available or granted from
either authorized but unissued Common Stock or Common Stock held by the Company in its treasury.
Shares that by reason of the expiration, forfeiture or cancellation of an Option or Restricted
Stock Award or otherwise are no longer subject to purchase pursuant to an Option, or are no longer
outstanding as a Restricted Stock Award, granted under the Plan may be re-offered or re-granted
under the Plan.

     5. ALLOTMENT OF SHARES. The Committee shall determine the number of shares of Common Stock to
be offered, sold or delivered from time to time by grant of Options and Restricted Stock Awards to
particular non-employee directors of the Company. The grant of an Option or a Restricted Stock
Award to a non-employee director shall not be deemed to entitle the non-employee director to, or to
disqualify the non-employee director from, participation in any other grant of Options or
Restricted Stock Awards under the Plan.

     6. TERMS AND CONDITIONS OF OPTIONS. Subject to any other specific provisions or limitations
of the Plan, the Committee shall determine the provisions, terms and conditions of each Option,
including (but not limited to) the

 

 

vesting schedule, the number of shares of Common Stock subject
to the Option, the period during which the Option may be exercised, forfeiture provisions, methods
of payment, and all other terms and conditions of the Option.

     (a) Option Agreements and Grant Date. Each Option granted under the Plan shall
be evidenced by an Option Agreement in such form (which need not be the same for each
Grantee) as the Committee from time to time approves, but which is not inconsistent with the
Plan. The Company shall execute Option Agreements upon instructions from the Committee.
The date of grant of an Option will be the date on which the Committee makes the
determination to grant such Option unless otherwise specified by the Committee. The Option
Agreement evidencing the Option will be delivered to the Grantee with a copy of the Plan and
other relevant Option documents, within a reasonable time after the date of grant.

     (b) Exercise Price. The Committee shall determine the exercise price of each
Option at the time a grant is made; provided, that the exercise price shall not be less than
the Fair Market Value of the shares of Common Stock covered by the Option on the date of
grant.

     (c) Option Period. Options shall be exercisable within the time or times or
upon the event or events determined by the Committee and set forth in the Option Agreement;
provided, however, that no Option shall be exercisable later than the tenth anniversary of
the grant date of the Option.

     (d) Transferability of Options. Options granted under the Plan, and any
interest therein, shall not be transferable or assignable by the Grantee, and may not be
made subject to execution, attachment or similar process, other than by will or by the laws
of descent and distribution and shall be exercisable during the lifetime of the Grantee only
by the Grantee; provided, that the Grantee may designate any person or persons who may
exercise his Options following his death.

     (e) Exercise of Options; Notice. Options may be exercised only by delivery to
the Company of a written exercise notice approved by the Committee (which need not be the
same for each Grantee), stating the number of shares of Common Stock being purchased, the
method of payment, and such other matters as may be deemed appropriate by the Company in
connection with the issuance of shares of Common Stock upon exercise of the Option, together
with payment in full of the exercise price for the number of shares of Common Stock being
purchased. The form of such exercise notice may be set forth as part of an Option
Agreement.

     (f) Rights in Event of Death or Disability. If a Grantee dies or becomes
disabled before termination of his right to exercise an Option under his Option Agreement
without having totally exercised the Option, the Option may be exercised, to the extent of
the shares with respect to which the Option could have been exercised by the Grantee on the
date of his death or disability, by (i) the Grantee’s estate or by the person or persons who
acquired the right to exercise the Option by bequest or inheritance or by reason of the
death of the Grantee, or (ii)
the Grantee or his personal representative in the event of the Grantee’s disability;
provided, that the Option may be exercised only before the date of its expiration or not
more than 180 days after the date of the Grantee’s death or

2

 

disability, whichever first
occurs. The disability and the date of disability of a Grantee shall be determined by the
Committee.

     (g) Payment. Full payment for shares purchased upon exercising an Option shall
be made in cash or by check at the time of exercise, or on such other terms as are set forth
in the applicable Option Agreement. No shares of Common Stock may be issued until full
payment of the purchase price therefor has been made, and a Grantee will have none of the
rights of a shareholder until shares are issued to him.

     7. TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS. Each Restricted Stock Agreement shall be
in such form and shall contain such terms and conditions as the Committee shall deem appropriate.
The terms and conditions of such Restricted Stock Agreements may change from time to time, and the
terms and conditions of separate Restricted Stock Agreements need not be identical, but each such
Restricted Stock Agreement shall be subject to the terms and conditions of this Section 7.

     (a) Forfeiture Restrictions. Shares of Common Stock that are the subject of a
Restricted Stock Award shall be subject to restrictions on disposition by the Grantee and to
an obligation of the Grantee to forfeit and surrender the shares to the Company under
certain circumstances (“Forfeiture Restrictions”). The Forfeiture Restrictions
shall be determined by the Committee in its sole discretion, and the Committee may provide
that the Forfeiture Restrictions shall lapse on the passage of time, the attainment of one
or more performance targets established by the Committee, or the occurrence of such other
event or events determined to be appropriate by the Committee. The Forfeiture Restrictions
applicable to a particular Restricted Stock Award (which may differ from any other such
Restricted Stock Award) shall be stated in the Restricted Stock Agreement.

     (b) Restricted Stock Awards. At the time any Restricted Stock Award is granted
under the Plan, the Company and the Grantee shall enter into a Restricted Stock Agreement
setting forth each of the matters addressed in this Section 7 and such other matters as the
Committee may determine to be appropriate. Shares of Common Stock granted pursuant to a
Restricted Stock Award shall be represented by one or more stock certificates registered in
the name of the Grantee of such Restricted Stock Award. The Grantee shall have the right to
receive dividends with respect to the shares of Common Stock subject to a Restricted Stock
Award, to vote the shares of Common Stock subject thereto and to enjoy all other shareholder
rights with respect to the shares of Common Stock subject thereto, except that, unless
provided otherwise in the Restricted Stock Agreement or agreed to or approved by the
Committee, (i) the Grantee shall not be entitled to delivery of the shares of Common Stock
or any certificate representing them until the Forfeiture Restrictions have expired, (ii)
the Company or an escrow agent shall retain custody of shares of Common Stock and the
certificate or certificates representing them until the Forfeiture Restrictions have
expired, (iii) the Grantee may not sell, transfer, pledge, exchange, hypothecate or
otherwise dispose of the shares of Common Stock until the Forfeiture Restrictions subject
thereto have expired, and (iv) a
breach of the terms and conditions established by the Committee pursuant to the
Restricted Stock Agreement shall cause a forfeiture of the Restricted Stock Award. At the
time of any Restricted Stock Award, the Committee may, in its sole discretion, prescribe
additional terms, conditions or restrictions relating to the Restricted Stock Award,
including (without limitation) rules pertaining to the termination of the Grantee’s service
as a director of the

3

 

Company (by retirement, disability, death or otherwise) before
expiration of the Forfeiture Restrictions. Such additional terms, conditions or
restrictions shall also be set forth in a Restricted Stock Agreement made in connection with
the Restricted Stock Award.

     (c) Rights and Obligations of Grantee. One or more stock certificates
representing shares of Common Stock, free of Forfeiture Restrictions, shall be delivered to
the Grantee as soon as administratively practicable after, and only after, the Forfeiture
Restrictions with respect to such shares have expired and any other conditions set forth in
the Restricted Stock Agreement have been satisfied. Each Restricted Stock Agreement shall
require that (i) the Grantee, by acceptance of the Restricted Stock Award, shall irrevocably
grant to the Company a power of attorney to transfer any shares so forfeited to the Company
and agrees to execute any documents requested by the Company in connection with such
forfeiture and transfer, and (ii) such provisions regarding transfers of forfeited shares of
Common Stock shall be specifically performable by the Company in a court of equity or law.

     (d) Restriction Period. The Restriction Period for a Restricted Stock Award
shall commence on the date of grant of the Restricted Stock Award and, unless otherwise
established by the Committee and stated in the corresponding Restricted Stock Agreement,
shall expire upon satisfaction of the conditions set forth in the Restricted Stock Agreement
pursuant to which the Forfeiture Restrictions will lapse.

     (e) Securities Restrictions. The Committee may impose other conditions on any
shares of Common Stock subject to a Restricted Stock Award as it may deem advisable,
including, without limitation, (i) restrictions under applicable state or federal securities
laws, and (ii) the requirements of any stock exchange or market quotation system upon which
shares of Common Stock are then listed or quoted.

     (f) Payment for Restricted Stock. The Committee shall determine the amount and
form of any payment required to be made for shares of Common Stock subject to a Restricted
Stock Award. In the absence of such a determination, the Grantee shall not be required to
make any payment for shares of Common Stock subject to a Restricted Stock Award, except to
the extent otherwise required by law.

     (g) Forfeiture of Restricted Stock. Subject to the provisions of the
particular Restricted Stock Agreement, on termination of the Grantee’s service as a director
of the Company during the Restriction Period, the shares of Common Stock subject to the
Restricted Stock Award shall be forfeited by the Grantee. Upon any forfeiture, all rights
of the Grantee with respect to the forfeited shares of Common Stock subject to the
Restricted Stock Award shall cease and terminate, without any further obligation on the part
of the Company, except that if so provided in the Restricted Stock Agreement applicable to
the Restricted Stock Award, the Company shall repurchase each of the shares of Common Stock
forfeited for the purchase price per share paid by the Grantee. The
Committee will have discretion to determine whether the service as a director by
Grantee has terminated and the date on which such service terminated.

     (h) Lapse of Forfeiture Restrictions in Certain Events; Committee’s Discretion.
Notwithstanding the provisions of Section 7(g) or any other provision in the Plan to the
contrary, the Committee may, in its discretion

4

 

and as of a date determined by the Committee,
fully vest any or all Common Stock awarded to the Grantee pursuant to a Restricted Stock
Award, and upon such vesting, all Forfeiture Restrictions applicable to such Restricted
Stock Award shall lapse or terminate. Any action by the Committee pursuant to this Section
7(h) may vary among individual Grantees and may vary among the Restricted Stock Awards held
by any individual Grantee. Notwithstanding the preceding provisions of this Section 7(h),
the Committee may not take any action described in this Section 7(h) if such action would
cause the Restricted Stock Award or the Plan to become subject to Section 409A of the
Internal Revenue Code of 1986, as amended.

     8. CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The number of shares of Common Stock covered by
each outstanding Option and each outstanding Restricted Stock Award granted under the Plan and the
Option exercise or purchase price may be adjusted to reflect, as deemed appropriate by the
Committee, any stock dividend, stock split, share combination, exchange of shares, sale of all or
substantially all outstanding capital stock, recapitalization, merger, consolidation, separation,
reorganization, sale of all or substantially all assets, liquidation, or the like of or by the
Company.

     In the event of a merger, consolidation, share exchange, sale of all or substantially all
outstanding capital stock, reorganization, sale of all or substantially all assets, liquidation,
recapitalization, separation, or the like of or by the Company, (a) the Company (acting by or
through the Board or the Committee) may make such arrangements as it deems advisable with respect
to outstanding Options granted under the Plan, and those arrangements shall be binding upon each
Grantee who holds an outstanding Option granted under the Plan, including (without limitation)
arrangements for the substitution of new Options for any Options then outstanding (by conversion or
otherwise), the assumption of any such outstanding Options, or the payment for any such outstanding
Options, and (b) unless the terms of the applicable Restricted Stock Agreement otherwise provide,
the Forfeiture Restrictions applicable to each outstanding Restricted Stock Award shall lapse and
shares of Common Stock subject to such Restricted Stock Award shall be released from escrow, if
applicable, and delivered to the Grantee free of any Forfeiture Restriction.

     9. INTERPRETATION. The Committee shall interpret the Plan and shall prescribe such rules and
regulations in connection with the operation of the Plan as it determines to be advisable for the
administration of the Plan. The Committee may rescind and amend its rules and regulations.

     10. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or discontinued by the Board without
the approval of the shareholders of the Company, except that any amendment that would (a)
materially increase the benefits accruing to participants under the Plan, (b) materially increase
the number of securities that may be issued under the Plan, or (c) materially modify the
requirements of eligibility for participation in the Plan, must be approved by the shareholders of
the Company. In addition, to the extent necessary to comply with applicable laws or the applicable
requirements of any stock exchange or national market-quotation system, the Company shall
obtain shareholder approval of any Plan amendment in such manner and to such decree as required.

     11. EFFECT OF PLAN. Neither the adoption of the Plan nor any action of the Committee shall be
deemed to give any non-employee director any rights other than as may be evidenced by the Plan,
each Option Agreement or each Restricted Stock Agreement, or any amendment thereto, duly authorized
by the Committee and executed on behalf of the

5

 

Company in accordance with the Plan, and then only
to the extent and on the terms and conditions expressly set forth herein and therein.

     12. TERM. Unless sooner terminated by action of the Board, the Plan will terminate on the
earlier of August 23, 2015 or the date on which no shares of Common Stock subject to the Plan
remain available to be granted under the Plan according to its provisions. No Options or
Restricted Stock Awards will be granted under the Plan after that date, but Options and Restricted
Stock Awards granted before that date will continue to be effective in accordance with their terms.

     13. GOVERNING LAW. The Plan shall be governed by, and construed and interpreted in accordance
with, the laws of the State of Texas.

     14. DEFINITIONS. For the purposes of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:

     (a) “Board” means the Board of Directors of the Company.

     (b) “Committee” means the Compensation Committee, as constituted from time to
time, of the Board or, if determined by the Board in its sole discretion, the Board.

     (c) “Common Stock” means the Common Stock, $0.01 par value per share, of the
Company or the common stock that the Company may in the future be authorized to issue (as
long as the common stock varies from that currently authorized, if at all, only in amount of
par value).

     (d) “Fair Market Value” means, as of any date, the value of the Common Stock
determined as follows:

     (i) If the Common Stock is listed on any established stock exchange or
quoted on any market-quotation system (such as the NASDAQ National Market System),
the Fair Market Value of a share of Common Stock shall be the closing sales price for
such a share of Common Stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or, if more than one, the exchange or market with
the greatest volume of trading in the Common Stock) either, as determined by the
Committee, on the day of determination or on last market trading day before the day
of determination.

     (ii) In the absence of any such established markets for the Common
Stock, the Fair Market Value shall be determined in good faith by the Committee.

     (e) “Grantee” means a non-employee director to whom an Option or a Restricted
Stock Award has been granted under the Plan.

     (f) “Option” means a stock option granted pursuant to the Plan to purchase a
specified number of shares of Common Stock.

6

 

     (g) “Option Agreement” means the written agreement evidencing the grant of an
Option executed by the Company and the Grantee, including (without limitation) any
amendments or supplements thereto.

     (h) “Option Period” means the period during which an Option may be exercised.

     (i) “Plan” means this Ace Cash Express, Inc. Non-Employee Directors Stock
Option Plan, as may be amended or supplemented from time to time.

     (j) “Restriction Period” means the period during which the Common Stock under a
Restricted Stock Award is nontransferable and subject to Forfeiture Restrictions, as defined
in Section 7(a) of the Plan, set forth in the related Restricted Stock Agreement.

     (k) “Restricted Stock Agreement” means the written agreement evidencing the
grant of a Restricted Stock Award executed by the Company and the Grantee, including
(without limitation) any amendments or supplements thereto.

     (l) “Restricted Stock Award” means an award, granted under the Plan, of shares
of Common Stock issued to the Grantee for such consideration, if any, and subject to such
restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture
provisions and other terms and conditions as are established by the Committee.

     (m) “Section” means a section of the Plan unless otherwise stated or the
context otherwise requires.

7

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