Document:

Exhibit 4.1

 

 

 

RIGHTS AGREEMENT

 

by and between

 

TSR, INC.

 

and

 

CONTINENTAL STOCK TRANSFER & TRUST COMPANY

 

as Rights Agent

 

Dated as of

 

August 29, 2018

 

 

 

     

     

    

 

TABLE OF CONTENTS

 

	 	 	Page
	Section 1.	Certain Definitions.	1
	Section 2.	Appointment of Rights Agent.	6
	Section 3.	Issuance of Rights Certificates.	6
	Section 4.	Form of Rights Certificates.	9
	Section 5.	Countersignature and Registration.	9
	Section 6.	Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.	10
	Section 7.	Exercise of Rights; Exercise Price; Expiration Date of Rights.	11
	Section 8.	Cancellation and Destruction of Rights Certificates.	12
	Section 9.	Reservation and Availability of Shares of Preferred Stock.	12
	Section 10.	Preferred Stock Record Date.	14
	Section 11.	Adjustment of Exercise Price, Number of Shares or Number of Rights.	14
	Section 12.	Certification of Adjusted Exercise Price or Number of Shares.	20
	Section 13.	Consolidation, Merger or Sale or Transfer of Assets or Earning Power.	20
	Section 14.	Fractional Rights and Fractional Shares.	23
	Section 15.	Rights of Action.	25
	Section 16.	Agreement of Right Holders.	25
	Section 17.	Rights Certificate Holder Not Deemed a Stockholder.	26
	Section 18.	Concerning the Rights Agreement.	26
	Section 19.	Merger or Consolidation of, or Change in Name of, the Rights Agent.	27
	Section 20.	Duties of Rights Agent.	27
	Section 21.	Change of Rights Agent.	30
	Section 22.	Issuance of New Rights Certificates.	30
	Section 23.	Redemption.	31
	Section 24.	Notice of Proposed Actions.	32
	Section 25.	Notices.	33
	Section 26.	Supplements and Amendments.	33
	Section 27.	Exchange.	34
	Section 28.	Successors.	35
	Section 29.	Benefits of this Rights Agreement.	35
	Section 30.	Delaware Contract.	35
	Section 31.	Counterparts.	35
	Section 32.	Descriptive Headings.	35
	Section 33.	Severability.	35
	Section 34.	Determinations and Actions By the Board of Directors, Etc.	35

 

	Exhibit A	Summary of Rights	A - 1
	Exhibit B	Form of Rights Certificate	B - 1
	Exhibit C	Form of Certificate of Designations Relating to the Terms of the Class A Preferred Stock, Series One	C - 1

 

     

     

    

 

RIGHTS AGREEMENT

 

This RIGHTS AGREEMENT is dated as of August
29, 2018, by and between TSR, INC., a Delaware corporation (the “Corporation”), and CONTINENTAL
STOCK TRANSFER & TRUST COMPANY (the “Rights Agent”).

 

W I T N E S S E T H:

 

WHEREAS, on August
29, 2018, the Board of Directors of the Corporation authorized the issuance of, and declared a dividend payable in, one
right (a “Right”) for each share of Common Stock, $0.01 par value per share, of the Corporation outstanding
as of the close of business on August 29, 2018 (the “Record
Date”), each such Right representing the right to purchase one one-hundredth of a share of Class A Preferred Stock,
Series One of the Corporation (the “Preferred Stock”) having the rights and preferences set forth in
the Certificate of Designations attached hereto as Exhibit C, authorized by the Board of Directors on August
29, 2018, upon the terms and subject to the conditions hereinafter set forth; and

 

WHEREAS, the Board of Directors of
the Corporation further authorized the issuance of one Right (subject to adjustment) with respect to each share of Common Stock
which may be issued between the Record Date and the earlier to occur of the Distribution Date or the Expiration Date (as such terms
are hereinafter defined);

 

NOW, THEREFORE, in consideration
of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:

 

Section 1.Certain Definitions.

 

For purposes of this Agreement, the following
terms shall have the meanings indicated:

 

(a) “Acquiring
Person” shall mean any Person who or which, together with all Affiliates and Associates of such Person and any other
Person with whom such Person is Acting in Concert, shall be the Beneficial Owner of 5% or more of the Corporation’s Common
Stock then outstanding, but shall not include (i) an Exempt Person or (ii) any Person who or which, at the time of the
first public announcement of this Rights Agreement, is a Beneficial Owner of 5% or more of the Corporation’s Common Stock
then outstanding (a “Grandfathered Stockholder”); provided, however, that if a Grandfathered
Stockholder becomes, after such time, the Beneficial Owner of any additional shares of the Corporation’s Common Stock (regardless
of whether, thereafter or as a result thereof, there is an increase, decrease or no change in the percentage of shares of the Corporation’s
Common Stock then outstanding beneficially owned by such Grandfathered Stockholder) then such Grandfathered Stockholder shall be
deemed to be an Acquiring Person unless, upon such acquisition of Beneficial Ownership of additional shares of the Corporation’s
Common Stock, such Person is not the Beneficial Owner of 5% or more of the Corporation’s Common Stock then outstanding; provided,
further, that upon the first decrease of a Grandfathered Stockholder’s Beneficial Ownership below 5%, such Grandfathered
Stockholder shall cease to be a Grandfathered Stockholder and this clause (ii) shall have no further force or effect with
respect to such Person. For the avoidance of doubt, in the event that after the time of the first public announcement of this Rights
Agreement, any agreement, arrangement or understanding pursuant to which any Grandfathered Stockholder is deemed to be the Beneficial
Owner of shares of the Corporation’s Common Stock expires, terminates or no longer confers any benefit to or imposes any
obligation on the Grandfathered Stockholder, any direct or indirect replacement, extension or substitution of such agreement, arrangement
or understanding with respect to the same or different shares of the Corporation’s Common Stock that confers Beneficial Ownership
of shares of the Corporation’s Common Stock shall be considered the acquisition of Beneficial Ownership of additional shares
of the Corporation’s Common Stock by the Grandfathered Stockholder and render such Grandfathered Stockholder an Acquiring
Person for purposes of this Rights Agreement unless, upon such acquisition of Beneficial Ownership of additional shares of the
Corporation’s Common Stock, such Person is not the Beneficial Owner of 5% or more of the Corporation’s Common Stock
then outstanding.

 

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Notwithstanding the foregoing, no Person shall
become an Acquiring Person as the result of an acquisition of shares of the Corporation’s Common Stock which, by reducing
the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 5% (or such
other percentage as would otherwise result in such Person becoming an Acquiring Person) or more of the Corporation’s Common
Stock then outstanding; provided, however, that if a Person would, but for the provisions of this paragraph, become
an Acquiring Person by reason of an acquisition of shares of the Corporation’s Common Stock by the Corporation and shall,
after such share purchases by the Corporation, become the Beneficial Owner of any additional shares of the Corporation’s
Common Stock at any time such that the Person is or thereby becomes the Beneficial Owner of 5% (or such other percentage as would
otherwise result in such Person becoming an Acquiring Person) or more of the Corporation’s Common Stock then outstanding
(other than shares of Common Stock acquired solely as a result of corporate action of the Corporation not caused, directly or indirectly,
by such Person), then such Person shall be deemed to be an Acquiring Person.

 

Notwithstanding the foregoing paragraphs of
this Section 1(a), if the Board of Directors determines in good faith that a Person who would otherwise be an Acquiring
Person has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of shares of the Corporation’s
Common Stock so that such Person would no longer be an Acquiring Person, then such Person shall not be deemed to have become an
Acquiring Person. Notwithstanding the foregoing, if a bona fide swaps dealer who would otherwise be an “Acquiring Person”
has become so as a result of its actions in the ordinary course of its business that the Board of Directors determines, in its
sole discretion, were taken without the intent or effect of evading or assisting any other Person to evade the purposes and intent
of this Rights Agreement, or otherwise seeking to control or influence the management or policies of the Corporation, then, and
unless and until the Board of Directors shall otherwise determine, such Person shall not be deemed to be an “Acquiring Person.”

 

(b) A
Person shall be deemed to be “Acting in Concert” with another Person if such Person knowingly acts (whether
or not pursuant to an express agreement, arrangement or understanding) in concert or in parallel with such other Person, or towards
a common goal with such other Person, relating to (i) acquiring, holding, voting or disposing of voting securities of the
Corporation or (ii) changing or influencing the control of the Corporation or in connection with or as a participant in any
transaction having that purpose or effect, where (A) each Person is conscious of the other Person’s conduct or intent
and this awareness is an element in their decision-making processes and (B) at least one additional factor supports a determination
by the Board of Directors that such Persons intended to act in concert or in parallel, which such additional factors may include,
without limitation, exchanging information, attending meetings, conducting discussions, or making or soliciting invitations to
act in concert or in parallel. A Person who is Acting in Concert with another Person shall also be deemed to be Acting in Concert
with any third Person who is also Acting in Concert with such other Person.

 

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(c) 
“Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as in effect on the date of this Rights
Agreement.

 

(d) “Associate”
of a Person (as such term is hereinafter defined) shall mean (i) with respect to a corporation, any officer or director thereof
or of any Subsidiary (as such term is hereinafter defined) thereof, or any Beneficial Owner (as such term is hereinafter defined)
of 10% or more of any class of equity security thereof, (ii) with respect to an association, joint venture or other unincorporated
organization, any officer or director thereof or of a Subsidiary thereof or any Beneficial Owner of 10% or more ownership interest
therein, (iii) with respect to a partnership, any general partner thereof or any limited partner thereof who is, directly or indirectly,
the Beneficial Owner of a 10% or greater ownership interest therein, (iv) with respect to a limited liability company, any officer,
director or manager thereof or of a Subsidiary thereof or any member thereof who is, directly or indirectly, the Beneficial Owner
of a 10% or greater ownership interest therein, (v) with respect to a business trust, any officer or trustee thereof or of any
Subsidiary thereof, (vi) with respect to any other trust or an estate, any trustee, executor or similar fiduciary or any Person
who has a 10% or greater interest as a beneficiary in the income from or principal of such trust or estate, (vii) with respect
to a natural person, any relative or spouse of such person, or any relative of such spouse, who has the same home as such person,
and (viii) any Affiliate of such Person.

 

(e) A
Person shall be deemed the “Beneficial Owner” of, or to “Beneficially Own,”
any securities (and correlative terms shall have correlative meanings):

 

(i) which
such Person or any of such Person’s Affiliates or Associates beneficially owns, directly or indirectly, within the meaning
of Rules 13d-3 or 13d-5 promulgated under the Exchange Act, as in effect on the date of this Agreement;

 

(ii) which
such Person or any of such Person’s Affiliates or Associates has (A) the right or ability to vote, cause to be voted
or control or direct the voting of pursuant to any agreement, arrangement or understanding, whether or not in writing; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement,
arrangement or understanding to vote such security (x) arises solely from a revocable proxy or consent given to such Person
in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations
promulgated under the Exchange Act and (y) is not also then reportable on a statement on Schedule 13D under the Exchange
Act (or any comparable or successor report) or (B) the right or the obligation to become the Beneficial Owner (whether such
right is exercisable or such obligation is required to be performed immediately or only after the passage of time, the occurrence
of conditions or the satisfaction of regulatory requirements) pursuant to any agreement, arrangement or understanding, whether
or not in writing (other than customary agreements with and between underwriters and selling group members with respect to a bona
fide public offering of securities), written or otherwise, or upon the exercise of conversion rights, exchange rights, rights (other
than the Rights), warrants or options, or otherwise, through conversion of a security, pursuant to the power to revoke a trust,
discretionary account or similar arrangement, pursuant to the power to terminate a repurchase or similar so-called “stock-borrowing”
agreement or arrangement, or pursuant to the automatic termination of a trust, discretionary account or similar arrangement; provided,
however, that a Person shall not be deemed to be the Beneficial Owner of, or to beneficially own, securities tendered pursuant
to a tender or exchange offer made pursuant to, and in accordance with, the applicable rules and regulations promulgated under
the Exchange Act until such tendered securities are accepted for purchase or exchange; or

 

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(iii) which
are beneficially owned (within the meaning of the preceding subsections of this Section 1(e), directly or indirectly,
by any other Person with which such Person or any of such Person’s Affiliates or Associates (A) has any agreement, arrangement
or understanding, whether or not in writing, for the purpose of acquiring, holding, voting or disposing of any securities of the
Corporation or cooperating in obtaining, changing or influencing the control of the Corporation or (B) is Acting in Concert;
or

 

(iv) which
are the subject of, or the reference securities for, or that underlie, any Derivative Position of such Person or any of such Person’s
Affiliates or Associates or any other Person with whom such Person is Acting in Concert, with the number of shares of Common Stock
deemed beneficially owned in respect of a Derivative Position being the notional or other number of shares of Common Stock in respect
of such Derivative Position (without regard to any short or similar position) that is specified in (A) one or more filings
with the Securities and Exchange Commission by such Person or any of such Person’s Affiliates or Associates or any other
Person with whom such Person is Acting in Concert or (B) the documentation evidencing such Derivative Position as the basis
upon which the value or settlement amount of such Derivative Position, or the opportunity of the holder of such Derivative Position
to profit or share in any profit, is to be calculated in whole or in part (whichever of (A) or (B) is greater), or if
no such number of shares of Common Stock is specified in such filings or documentation (or such documentation is not available
to the Board of Directors ), as determined by the Board of Directors in its reasonable discretion.

 

Notwithstanding anything in this paragraph
(e) to the contrary, a Person engaged in the business of underwriting securities shall not be deemed the “Beneficial Owner”
of, or to “Beneficially Own,” any securities acquired in good faith in a firm commitment underwriting, until the expiration
of forty days after the date of such acquisition.

 

(f) “Book-Entry”
shall mean an uncertificated book-entry for the Corporation’s Common Stock.

 

(g) “Business Day”
shall mean any day other than a Saturday, Sunday, or day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.

 

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(h) “Close
of Business” on any given date shall mean 5:00 p.m., New York City time, on such date; provided, however, that if
such date is not a Business Day it shall mean 5:00 p.m., New York City time, on the next succeeding Business Day.

 

(i) “Common
Stock,” when used with reference to the Corporation, shall mean the common stock, $0.01 par value, of the Corporation.
“Common Stock,” when used with reference to any Person other than the Corporation which shall be organized in corporate
form, shall mean the capital stock or other equity security with the greatest voting power of such Person. “Common Stock,”
when used with reference to any Person other than the Corporation which shall not be organized in corporate form, shall mean units
of beneficial interest which shall represent the right to participate in profits, losses, deductions and credits of such Person
and which shall be entitled to exercise the greatest voting power of such Person.

 

(j) “Derivative
Position” shall mean any option, warrant, convertible security, stock appreciation right, or other security, contract
right or derivative position or similar right (including any “swap” transaction with respect to any security, other
than a broad based market basket or index), whether or not presently exercisable, that has an exercise or conversion privilege
or a settlement payment or mechanism at a price related to the value of the Common Stock or a value determined in whole or in part
with reference to, or derived in whole or in part from, the value of the Common Stock and that increases in value as the market
price or value of the Common Stock increases or that provides an opportunity, directly or indirectly, to profit or share in any
profit derived from any increase in the value of the Common Stock, in each case regardless of whether (i) it conveys any voting
rights in such Common Stock to any Person, (ii) it is required to be, or capable of being, settled through delivery of Common
Stock or (iii) any Person (including the holder of such Derivative Position) may have entered into other transactions that
hedge its economic effect.

 

(k) 
“Distribution Date” shall have the meaning set forth in Section 3(b) hereof.

 

(l) “Exchange
Act” shall have the meaning set forth in Section 1(b) hereof.

 

(m) “Exempt
Person” shall mean (i) the Corporation, (ii) any Subsidiary of the Corporation, or (iii) any employee benefit plan
or employee stock plan of the Corporation or any Subsidiary of the Corporation, or any trust or other entity organized, appointed,
established or holding Common Stock for or pursuant to the terms of any such plan.

 

(n) “Exercise
Price” shall have the meaning set forth in Section 4 and Section 7(b) hereof.

 

(o) “Expiration
Date” shall have the meaning set forth in Section 7(a) hereof.

 

(p) “Fair
Market Value” of any property shall mean the fair market value of such property as determined in accordance with
Section 11(b) hereof.

 

(q) “Person”
shall mean any individual, firm, corporation or other entity.

 

(r) “Principal
Party” shall have the meaning set forth in Section 13(b) hereof.

 

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(s) “Record
Date” shall have the meaning set forth in the first Recital hereof.

 

(t) “Redemption
Price” shall have the meaning set forth in Section 23(a) hereof.

 

(u) “Rights
Certificate” shall have the meaning set forth in Section 3(d) hereof.

 

(v) “Stock
Acquisition Date” shall mean the first date on which there shall be a public announcement by the Corporation or an
Acquiring Person that an Acquiring Person has become such (which, for purposes of this definition, shall include, without limitation,
a report filed pursuant to Section 13(d) of the Exchange Act) or such earlier date as a majority of the Board of Directors shall
become aware of the existence of an Acquiring Person.

 

(w) “Subsidiary”
of a Person shall mean any corporation or other entity of which such Person Beneficially Owns at least 50% of the outstanding voting
securities.

 

(x) “Summary
of Rights” shall have the meaning set forth in Section 3(a) hereof.

 

(y) “Trading
Day” shall have the meaning set forth in Section 11(b) hereof.

 

(z) “Transfer
Tax” shall mean any tax or charge, including any documentary stamp tax, imposed or collected by any governmental
or regulatory authority, in respect of any transfer of any security, instrument or right, including Rights, shares of Common Stock
and shares of Preferred Stock.

 

Any determination required to be made by
the Board of Directors of the Corporation for purposes of applying the definitions contained in this Section 1 shall be
made by the Board of Directors in its good faith judgment, and such determination shall be binding on the Rights Agent and the
holders of the Rights.

 

Section 2.Appointment of Rights Agent.

 

The Corporation hereby appoints the Rights
Agent to act as agent for the Corporation and the holders of the Rights in accordance with the terms and conditions hereof, and
the Rights Agent hereby accepts such appointment. The Corporation may from time to time appoint such Co-Rights Agents as it may
deem necessary or desirable, upon ten (10) days’ prior written notice to the Rights Agent. The Rights Agent shall have
no duty to supervise, and shall in no event be liable for, the acts or omissions of any such co-rights agent. In the event the
Corporation appoints one or more Co-Rights Agents, the respective duties of the Rights Agent and any Co-Rights Agent shall be as
the Corporation shall reasonably determine, provided that such duties and determination are consistent with the terms and provisions
of this Agreement and that contemporaneously with such appointment, if any, the Corporation shall notify the Rights Agent in writing
thereof.

 

Section 3.Issuance of Rights Certificates.

 

(a) On
the Record Date (or as soon as practicable thereafter), the Corporation or the Rights Agent shall send a copy of a Summary of Rights,
in substantially the form attached hereto as Exhibit A (the “Summary of Rights”), by first class
mail, postage prepaid, to each record holder of the Common Stock as of the Close of Business on the Record Date, at the address
of such holder shown on the records of the Corporation.

 

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(b) Until
the Close of Business on the day which is the earlier of (i) the tenth day after the Stock Acquisition Date or such earlier or
later date (not beyond the thirtieth day after the Stock Acquisition Date) as the Board of Directors may from time to time fix
by resolution adopted prior to the Distribution Date that otherwise would have occurred or (ii) the tenth business day (or such
later date as may be determined by action of the Board of Directors prior to such time as any Person becomes an Acquiring Person)
after the date of the commencement by any Person (other than an Exempt Person) of, or the first public announcement of the intent
of any Person (other than an Exempt Person) to commence, a tender or exchange offer upon the successful consummation of which such
Person, together with its Affiliates and Associates and Persons with whom such Person is Acting in Concert, would be the Beneficial
Owner of 5% or more of the then-outstanding shares of the Corporation’s Common Stock (irrespective of whether any shares
are actually purchased pursuant to any such offer) (the earlier of such dates being herein referred to as the “Distribution
Date”); provided, however, that if such tender or exchange offer is terminated prior to the occurrence
of a Distribution Date, then no Distribution Date shall occur as a result of such tender or exchange offer, (x) the Rights shall
be evidenced by the Book-Entries, or certificates for, Common Stock registered in the name of the holders of Common Stock (together
with, in the case of Book-Entries representing, or the certificates for, Common Stock outstanding as of the Record Date, the Summary
of Rights) and not by separate Book-Entries or Rights Certificates and the record holders of the Common Stock represented by such
Book-Entries or certificates shall be the record holders of the Rights represented thereby and (y) each Right shall be transferable
only simultaneously and together with the transfer of shares of Common Stock (subject to adjustment as hereinafter provided). Until
the Distribution Date (or, if earlier, the Expiration Date), transfer on the Corporation’s direct registration system of
any Common Stock represented by a Book-Entry or the surrender for transfer of any certificate for Common Stock shall constitute
the surrender for transfer of the Right or Rights associated with the Common Stock evidenced thereby, whether or not accompanied
by a copy of the Summary of Rights.

 

(c) Rights
shall be issued in respect of all shares of Common Stock that become outstanding after the Record Date but prior to the earlier
of the Distribution Date or the Expiration Date and, in certain circumstances provided in Section 22 hereof, may be issued
in respect of shares of Common Stock that become outstanding after the Distribution Date. Certificates for Common Stock (including,
without limitation, certificates issued upon original issuance, dispensation from the Corporation’s treasury or transfer
or exchange of Common Stock) after the Record Date but prior to the earliest of the Distribution Date or the Expiration Date (or,
in certain circumstances as provided in Section 22 hereof, after the Distribution Date) shall have impressed, printed, written
or stamped thereon or otherwise affixed thereto the following legend:

 

This certificate also evidences
and entitles the holder hereof to the same number of Rights (subject to adjustment) as the number of shares of Common Stock represented
by this certificate, such Rights being on the terms provided under the Rights Agreement between TSR, Inc. (the “Corporation”)
and Continental Stock Transfer & Trust Company (the “Rights Agent”), dated as of August
29, 2018, as it may be amended from time to time (the “Rights Agreement”), the terms of which are incorporated
herein by reference and a copy of which is on file at the principal executive offices of the Corporation. Under certain circumstances,
as set forth in the Rights Agreement, such Rights shall be evidenced by separate certificates and shall no longer be evidenced
by this certificate. The Corporation shall mail to the registered holder of this certificate a copy of the Rights Agreement without
charge within five days after receipt of a written request therefor. UNDER CERTAIN CIRCUMSTANCES AS PROVIDED IN SECTION 11(a)(ii)
OF THE RIGHTS AGREEMENT, RIGHTS ISSUED TO OR BENEFICIALLY OWNED BY ACQUIRING PERSONS OR THEIR AFFILIATES OR ASSOCIATES OR PERSONS
WITH WHOM SUCH PERSONS ARE ACTING IN CONCERT (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS SHALL BE NULL AND VOID AND MAY NOT BE TRANSFERRED TO ANY PERSON.

 

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(d) As
soon as practicable after the Distribution Date, the Corporation will prepare and execute, the Rights Agent will countersign, and
the Corporation will send or cause to be sent (and the Rights Agent will, if requested, send), by first class mail, postage prepaid,
to each record holder of the Common Stock as of the Close of Business on the Distribution Date, as shown by the records of the
Corporation, at the address of such holder shown on such records, a certificate in the form provided by Section 4 hereof
(a “Rights Certificate”), evidencing one Right (subject to adjustment as provided herein) for each share
of Common Stock so held; provided, however, that the Rights may instead be recorded in Book-Entry or other uncertificated
form, in which case such Book-Entries or other evidence of ownership shall be deemed to be Rights Certificates for all purposes
of this Rights Agreement ; provided, further, that all procedures relating to actions to be taken or information
to be provided with respect to such Rights recorded in Book-Entry or other uncertificated forms, and all requirements with respect
to the form of any Rights Certificate set forth in this Rights Agreement, may be modified as necessary or appropriate to reflect
Book-Entry or other uncertificated ownership. As of and after the Distribution Date, the Rights shall be evidenced solely by such
Rights Certificates and may be transferred by the transfer of the Rights Certificate as permitted hereby, separately and apart
from any transfer of one or more shares of Common Stock.

 

(e) In
addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date and prior to the Expiration
Date, the Corporation (i) shall, with respect to shares of Common Stock so issued or sold (x) pursuant to the exercise of stock
options or under any employee plan or arrangement or (y) upon the exercise, conversion or exchange of other securities issued by
the Corporation prior to the Distribution Date and (ii) may, in any other case, if deemed necessary or appropriate by the Board
of Directors of the Corporation, issue Rights certificates representing the appropriate number of Rights in connection with such
issuance or sale; provided that no such Rights Certificate shall be issued if, and to the extent that, (i) the Corporation
shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Corporation
or the Person to whom such Rights Certificate would be issued or (ii) appropriate adjustment shall otherwise have been made in
lieu of the issuance thereof.

 

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Section 4.Form of Rights Certificates.

 

(a) The
Rights Certificates (and the forms of election to purchase shares and of assignment to be printed on the reverse thereof), when,
as and if issued, shall be substantially in the form set forth in Exhibit B hereto and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as may be required to comply with any law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Common Stock or the
Rights may from time to time be listed or as the Corporation may deem appropriate to conform to usage or otherwise and as are not
inconsistent with the provisions of this Rights Agreement (but which do not affect the rights, duties, liabilities or responsibilities
of the Rights Agent). Subject to the provisions of Section 22 hereof, Rights Certificates evidencing Rights whenever issued,
(i) shall be dated as of the date of issuance of the Rights they represent and (ii) subject to adjustment from time to time as
provided herein, on their face shall entitle the holders thereof to purchase such number of shares (including fractional shares
which are integral multiples of one one-hundredth of a share) of Preferred Stock as shall be set forth therein at the price payable
upon exercise of a Right provided by Section 7(b) hereof as the same may from time to time be adjusted as provided herein
(the “Exercise Price”).

 

(b) Notwithstanding
any other provision of this Rights Agreement, any Rights Certificate that represents Rights Beneficially Owned by an Acquiring
Person or any Affiliate or Associate thereof or any other Person whose Rights shall become void pursuant to Section 11(a)(ii)
shall have impressed on, printed on, written on or otherwise affixed to it (if the Corporation or the Rights Agent has knowledge
that such Person is an Acquiring Person or an Associate or Affiliate or a nominee of any of the foregoing) the following legend:

 

The Beneficial Owner of the
Rights represented by this Rights Certificate is an Acquiring Person or an Affiliate or an Associate of an Acquiring Person. Accordingly,
this Rights Certificate and the Rights represented hereby shall become void in the circumstances specified in Section 11(a)(ii)
of the Rights Agreement.

 

Section 5.Countersignature and Registration.

 

(a) Each
Rights Certificate shall be executed on behalf of the Corporation by its Chairman of the Board, Chef Executive Officer, President
or any Vice President, either manually or by facsimile signature, and have affixed thereto the Corporation’s seal or a facsimile
thereof which shall be attested to by the Secretary or an Assistant Secretary of the Corporation, either manually or by facsimile
signature. Each Rights Certificate shall be countersigned by the Rights Agent either manually or by facsimile signature and shall
not be valid for any purpose unless so countersigned. In case any officer of the Corporation who shall have signed any Rights Certificate
shall cease to be such officer of the Corporation before countersignature by the Rights Agent and issuance and delivery of the
certificate by the Corporation, such Rights Certificate, nevertheless, may be countersigned by the Rights Agent and issued and
delivered with the same force and effect as though the person who signed such Rights Certificate had not ceased to be such officer
of the Corporation. Any Rights Certificate may be signed on behalf of the Corporation by any person who, on the date of the execution
of such Rights Certificate, shall be a proper officer of the Corporation to sign such Rights Certificate, although at the date
of the execution of this Rights Agreement any such person was not such an officer.

 

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(b) Following
the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office or one or more offices designated
as the appropriate place for the surrender of Rights Certificates upon exercise or transfer, and in such other locations as may
be required by law, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of
the Rights Certificates and the date of each of the Rights Certificates and any Rights Certificates that have a legend printed
thereon pursuant to Section 4(b).

 

Section 6.Transfer, Split Up, Combination
and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

 

(a) Subject
to the provisions of Section 11(a)(ii), Section 7(e) and Section 14(b) hereof, at any time after the Close
of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Rights Certificate (other
than a Rights Certificate representing Rights that have become void pursuant to Section 11(a)(ii) or that have been exchanged
pursuant to Section 27) may be (i) transferred or (ii) split up, combined or exchanged for one or more other Rights Certificates,
entitling the registered holder to purchase a like number of shares of Preferred Stock as the Rights Certificate or Rights Certificates
surrendered then entitled such holder to purchase. Any registered holder desiring to transfer any Rights Certificate shall surrender
the Rights Certificate at the office of the Rights Agent designated for the surrender of Rights Certificates with the form of certificate
and assignment on the reverse side thereof duly endorsed (or, enclosed with such Rights Certificate, a written instrument of transfer
in a form satisfactory to the Corporation and the Rights Agent), duly executed by the registered holder thereof or his attorney
duly authorized in writing, and with such signature duly guaranteed. Any registered holder desiring to split up, combine or exchange
any Rights Certificate shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate
to be split up, combined or exchanged at the office of the Rights Agent. Thereupon, the Rights Agent shall countersign and deliver
to the person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Corporation
or the Rights Agent may require payment from the holders of the Rights Certificates of a sum sufficient to cover any Transfer Tax
that may be imposed in connection with any transfer, split up, combination or exchange of any Rights Certificates. The Rights Agent
shall not have any duty or obligation to take any action under any section of this Rights Agreement that requires payment of taxes
and/or charges unless and until it is satisfied that all such payments have been made.

 

(b) Subject
to the provisions of Section 11(a)(ii), Section 7(e) and Section 14(b) hereof, upon receipt by the Corporation
and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate
and the identity of the Beneficial Owner (or former Beneficial Owner) thereof including a signature guarantee and such other documentation
as the Rights Agent may reasonably request), and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory
to them and, if requested by the Corporation, reimbursement to the Corporation and the Rights Agent of all reasonable expenses
incidental thereto, or upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Corporation
shall issue and deliver a new Rights Certificate of like tenor to the Rights Agent for delivery to the registered owner in lieu
of the Rights Certificate so lost, stolen, destroyed or mutilated.

 

    	 	10	 

     

    

 

Section 7.Exercise of Rights; Exercise
Price; Expiration Date of Rights.

 

(a) The
Rights shall not be exercisable until, and shall become exercisable on, the Distribution Date (unless otherwise provided herein,
including, without limitation, the restrictions on exercisability set forth in Section 11(a)(ii) and Section 23(a)
hereof). Except as otherwise provided herein, the Rights may be exercised, in whole or in part, at any time commencing with the
Distribution Date upon surrender of the Rights Certificate, with the form of election to purchase and certificate on the reverse
side thereof duly executed (with signatures duly guaranteed), to the Rights Agent at the principal office of the Rights Agent in
New York, New York together with payment of the Exercise Price for each Right exercised, subject to adjustment as hereinafter provided,
at or prior to the Close of Business on the earlier of (i) August 29, 2021 (or if the Distribution Date shall have occurred before
August 29, 2021, at the Close of Business on the 90th day following the Distribution Date) or (ii) the date on which the Rights
are redeemed as provided in Section 23 hereof (such earlier date being herein referred to as the “Expiration
Date”).

 

(b) The
Exercise Price shall initially be $24.78 for each one one-hundredth (1/100th) of a share of Preferred Stock issued pursuant to
the exercise of a Right. The Exercise Price and the number of shares of Preferred Stock or other securities to be acquired upon
exercise of a Right shall be subject to adjustment from time to time as provided in Section 11 and Section 13 hereof.
The Exercise Price shall be payable in lawful money of the United States of America, in accordance with paragraph (c) below.

 

(c) Except
as otherwise provided herein, upon receipt of a Rights Certificate representing exercisable Rights with the form of election to
purchase duly executed, accompanied by payment by certified check, cashier’s check, bank draft or money order payable to
the Corporation or the Rights Agent of the Exercise Price for the shares to be purchased and an amount equal to any applicable
Transfer Tax required to be paid by the holder of the Rights Certificate in accordance with Section 9(e) hereof, the Rights
Agent shall thereupon promptly (i)(A) requisition from any registrar or transfer agent (as may be appropriate) of the Preferred
Stock of the Corporation one or more certificates representing the number of shares of Preferred Stock to be so purchased, and
the Corporation hereby authorizes and directs such registrar or transfer agent (as may be appropriate) to comply with all such
requests or (B) requisition from any depositary agent for the Preferred Stock of the Corporation depositary receipts representing
such number of shares of Preferred Stock to be so purchased (in which case certificates for the shares of Preferred Stock represented
by such receipts shall be deposited by the transfer agent with the depositary agent), and the Corporation hereby directs any such
depositary agent to comply with such request, (ii) as provided in Section 14(b), at the election of the Corporation, cause
depositary receipts to be issued in lieu of fractional shares of Preferred Stock, (iii) if the election provided for in the immediately
preceding clause (ii) has not been made, requisition from the Corporation the amount of cash to be paid in lieu of the issuance
of fractional shares in accordance with Section 14(b) hereof, (iv) after receipt of such Preferred Stock certificates and,
if applicable, depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such holder and (v) when appropriate, after receipt, promptly
deliver such cash to or upon the order of the registered holder of such Rights Certificate; provided, however, that
in the case of a purchase of securities, other than Preferred Stock, pursuant to Section 13 hereof, the Rights Agent shall
promptly take the appropriate actions corresponding in such case to that referred to in the foregoing clauses (i) through (v) of
this Section 7(c). Notwithstanding the foregoing provisions of this Section 7(c), the Corporation may suspend the
issuance of shares of Preferred Stock upon exercise of a Right for a reasonable period, not in excess of 120 days, during which
the Corporation seeks to register under the Securities Act of 1933, as amended (the “Act”), and any applicable
securities law of any other jurisdiction, the shares of Preferred Stock to be issued pursuant to the Rights; provided, however,
that nothing contained in this Section 7(c) shall relieve the Corporation of its obligations under Section 9(c) hereof.

 

    	 	11	 

     

    

 

(d) In
case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of
such Rights Certificate or his assignee, subject to the provisions of Section 14(b) hereof.

 

(e) Notwithstanding
anything in this Agreement to the contrary, neither the Rights Agent nor the Corporation shall be obligated to undertake any action
with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless
such registered holder shall have (i) completed and signed the certificate following the form of election to purchase set forth
on the reverse side of the Rights Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof or a Person referred to in clause (y)
or (z) of Section 11(a)(ii) and such other information as the Corporation shall reasonably request.

 

Section 8.Cancellation and Destruction
of Rights Certificates.

 

All Rights Certificates surrendered for
the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Corporation or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be
canceled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions
of this Rights Agreement. The Corporation shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent
shall cancel and retire, any Rights Certificate purchased or acquired by the Corporation otherwise than upon the exercise thereof.
The Rights Agent shall deliver all canceled Rights Certificates to the Corporation, or shall, at the written request of the Corporation,
destroy such canceled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Corporation.

 

Section 9.Reservation and Availability
of Shares of Preferred Stock.

 

(a) The
Corporation covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares
of Preferred Stock or out of authorized and issued shares of Preferred Stock held in its treasury, such number of shares of Preferred
Stock as will from time to time be sufficient to permit the exercise in full of all outstanding Rights. The Corporation shall take
such action as may be required for it to comply with the foregoing sentence of this Section 9(a).

 

    	 	12	 

     

    

 

(b) The
Corporation shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares of Preferred
Stock issued or reserved for issuance in accordance with this Rights Agreement to be listed, upon official notice of issuance,
on the NASDAQ Capital Market or successor thereto or, if the principal market for the Common Stock is not the NASDAQ Capital Market,
to be eligible for quotation on any other national securities exchange or other comparable quotation system.

 

(c) The
Corporation covenants and agrees that it will take all such actions as may be necessary to insure that all shares of Preferred
Stock delivered upon exercise of Rights shall, at the time of delivery of the certificates, for such shares (subject to payment
of the Exercise Price in respect thereof), be duly and validly authorized and issued and fully paid and nonassessable shares.

 

(d) The
Corporation shall use its best efforts to (i) file, as soon as practicable following the occurrence of the event described in Section
11(a)(ii), or as soon as is required by law following the Distribution Date, as the case may be, a registration statement under
the Act, with respect to the shares of Preferred Stock purchasable upon exercise of the Rights on an appropriate form, (ii) cause
such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement
to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for Preferred Stock, or (B) the Expiration Date. The Corporation may temporarily suspend,
for a period of time not to exceed 120 days, the issuance of shares of Preferred Stock upon exercise of a Right in order to prepare
and file a registration statement under the Act and permit it to become effective. The Corporation will also take such action as
may be appropriate under, or to ensure compliance with, the securities or “blue sky” laws of the various states in
connection with the exercisability of the Rights. Notwithstanding any provision of this Agreement to the contrary, the Rights shall
not be exercisable in any jurisdiction unless the requisite qualification in such jurisdiction shall have been obtained and until
a registration statement under the Act (if required) shall have been declared effective.

 

(e) The
Corporation covenants and agrees that it will pay when due and payable any and all federal and state Transfer Taxes which may be
payable in respect of the issuance or delivery of the Rights Certificates or of any shares of Preferred Stock issued or delivered
upon the exercise of Rights. The Corporation shall not, however, be required to pay any Transfer Tax which may be payable in respect
of any transfer or delivery of a Rights Certificate to a Person other than, or the issuance or delivery of certificates or depositary
receipts for Preferred Stock upon exercise of Rights in a name other than that of, the registered holder of the Rights Certificate
evidencing Rights surrendered for exercise, and the Corporation shall not be required to or issue or deliver a Rights Certificate
or certificate or depositary receipt for Preferred Stock to a Person other than such registered holder until any such Transfer
Tax shall have been paid (any such Transfer Tax being payable by the holder of such Rights Certificate at the time of surrender)
or until it has been established to the Corporation’s satisfaction that no such Transfer Tax is due.

 

    	 	13	 

     

    

 

Section 10.Preferred Stock Record
Date.

 

Each Person in whose name any certificate
for shares of Preferred Stock is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder
of record of the Preferred Stock represented thereby on, and such certificate shall be dated as of, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the Exercise Price (and any applicable Transfer Taxes) was
made; provided, however, that, if the date of such surrender and payment is a date upon which the Preferred Stock
transfer books of the Corporation are closed, such Person shall be deemed to have become the record holder of such shares on, and
such certificate shall be dated as of, the next succeeding Business Day on which the Preferred Stock transfer books of the Corporation
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate, as such, shall not be entitled
to any rights of a stockholder of the Corporation with respect to shares for which the Rights shall be exercisable, including,
without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Corporation, except as provided herein.

 

Section 11.Adjustment of Exercise
Price, Number of Shares or Number of Rights.

 

The Exercise Price and the number of shares
of Preferred Stock which may be purchased upon exercise of a Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.

 

(a)(i)In the event the Corporation
shall at any time after the date of this Rights Agreement (i) declare a dividend on the shares of Preferred Stock payable
in shares of Preferred Stock, (ii) subdivide the outstanding shares of Preferred Stock, (iii) combine the outstanding
shares of Preferred Stock into a smaller number of shares of Preferred Stock or (iv) issue any shares of its capital stock
in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger
in which the Corporation is the continuing or surviving corporation), except as otherwise provided in this Section 11(a),
the Exercise Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination
or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares
of capital stock which, if such Right had been exercised immediately prior to such date, the holder would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided,
however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par
value of the shares of capital stock of the Corporation issuable upon exercise of one Right.

 

(ii) 
Subject to the second paragraph of this Section 11(a)(ii) and to Section 27, from and after the
Stock Acquisition Date, each holder of a Right shall have a right to receive, upon exercise of each Right, in accordance with the
terms of this Rights Agreement and in lieu of shares of Preferred Stock, such number of shares of the Corporation’s Common
Stock as shall equal the result obtained by dividing the current Exercise Price by 50% of the then Current Per Share Market Price
of the Corporation’s Common Stock (determined pursuant to Section 11(d)) on the Stock Acquisition Date.

 

    	 	14	 

     

    

 

From and after the Stock Acquisition Date, any Rights that are
or were acquired or beneficially owned by (1) an Acquiring Person (or any Associate or Affiliate of such Acquiring Person
or any other Person with whom such Person is Acting in Concert), (2) a transferee of any Acquiring Person (or of any such
Associate or Affiliate or any other Person with whom such Person is Acting in Concert) who becomes such a transferee after the
Acquiring Person becomes an Acquiring Person or (3) a transferee of an Acquiring Person (or of any such Associate or Affiliate
or any other Person with whom such Person is Acting in Concert) who becomes such a transferee prior to or concurrently with the
Acquiring Person becoming an Acquiring Person and who receives such Rights (I) with actual knowledge that the transferor is
or was an Acquiring Person or (II) pursuant to either (x) a transfer (whether or not for consideration) from the Acquiring
Person (or any such Associate or Affiliate or any other Person with whom such Person is Acting in Concert) to holders of equity
interests in such Acquiring Person (or any such Associate or Affiliate or any other Person with whom such Person is Acting in Concert)
or to any Person with whom the Acquiring Person (or such Associate or Affiliate or any other Person with whom such Person is Acting
in Concert) has any continuing agreement, arrangement, understanding or relationship (whether or not in writing) regarding the
transferred Rights or (y) a transfer which the Board of Directors has determined is part of a plan, arrangement or understanding
(whether or not in writing) which has as a primary purpose or effect of the avoidance of this Section 11(a)(ii), (each
such Person described in (1)-(3) above, an “Excluded Person”) shall, in each such case, be null
and void, and any holder of such Rights (whether or not such holder is an Acquiring Person or an Associate or Affiliate of an Acquiring
Person or any other Person with whom such Person is Acting in Concert) shall thereafter have no right to exercise such Rights under
any provision of this Rights Agreement. No Rights Certificates shall be issued pursuant to Section 3, Section 6,
Section 7(d) or Section 11 or otherwise hereof that represents Rights that are or have become null and void pursuant
to the provisions of this paragraph and any Rights Certificate delivered to the Rights Agent that represents Rights that are or
have become null and void pursuant to the provisions of this paragraph shall, upon receipt of written notice directing it to do
so, be canceled by the Rights Agent.

 

(iii) 
If there are not sufficient authorized but unissued shares of the Corporation’s Common Stock to permit the exercise
in full of the Rights in accordance with Section 11(a)(ii), or should the Board of Directors so elect, the Corporation
shall with respect to such deficiency, to the extent permitted by applicable law and any material agreements to which the Corporation
is a party, (i) determine the excess (the “Spread”) of (A) the value of the shares of the Corporation’s
Common Stock issuable upon the exercise of a Right as provided in Section 11(a)(ii) (the “Current Value”)
over (B) the Exercise Price, and (ii) with respect to each Right, make adequate provision to substitute for such shares
of Common Stock, upon payment of the applicable Exercise Price, any one or more of the following having an aggregate value determined
by the Board of Directors to be equal to the Current Value: (A) cash, (B) a reduction in the Exercise Price, (C) shares
of the Corporation’s Common Stock or other equity securities of the Corporation (including, without limitation, shares, or
units of shares, of preferred stock which the Board of Directors has determined to have the same value as the Corporation’s
Common Stock (“Common Stock Equivalents”)), (D) debt securities of the Corporation or (E) other
assets; provided, however, that if the Corporation shall not have made adequate provision to deliver value pursuant
to clause (ii) above within thirty days following the Stock Acquisition Date, then the Corporation shall be obligated to deliver,
upon the surrender for exercise of a Right and without requiring payment of the Exercise Price, shares of the Corporation’s
Common Stock (to the extent available) and then, if necessary, cash, which shares and cash shall have an aggregate value equal
to the Spread.

 

    	 	15	 

     

    

 

(b) If
the Board of Directors shall determine in good faith that it is likely that sufficient additional shares of the Corporation’s
Common Stock could be authorized for issuance upon exercise in full of the Rights, the 30-day period set forth above may be extended
to the extent necessary, but not more than 180 days after the Stock Acquisition Date, in order that the Corporation may seek
stockholder approval for the authorization of such additional shares (such period, as it may be extended, the “Substitution
Period”). If the Corporation determines that action need be taken pursuant to this Section 11(a)(iii),
the Corporation (x) shall provide, subject to Section 7(f) and the last paragraph of Section 11(a)(ii),
that such action shall apply uniformly to all outstanding Rights, and (y) may suspend the exercisability of the Rights until
the expiration of the Substitution Period in order to seek any authorization of additional shares, decide the appropriate form
of distribution to be made and determine the value thereof. If the exercisability of the Rights is suspended pursuant to this Section 11(a)(iii),
the Corporation shall make a public announcement, and shall deliver to the Rights Agent a statement, stating that the exercisability
of the Rights has been temporarily suspended. When the suspension is no longer in effect, the Corporation shall make another public
announcement, and deliver to the Rights Agent a statement, so stating. For purposes of this Section 11(a)(iii), the
value of the Corporation’s Common Stock shall be the Current Per Share Market Price (as determined pursuant to Section 11(d)(i))
of the Corporation’s Common Stock as of the Stock Acquisition Date, and the value of any Common Stock Equivalent shall be
deemed to have the same value as the Corporation’s Common Stock on such date.

 

(c) If
the Corporation fixes a record date for the making of a distribution to all holders of the Preferred Stock (including any distribution
made in connection with a consolidation or merger in which the Corporation is the continuing or surviving corporation) of evidences
of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in shares of Preferred Stock ) or
subscription rights or warrants (excluding those referred to in Section 11(b)), the Exercise Price to be in effect
after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by
a fraction, (i) the numerator of which shall be the then Current Per Share Market Price of the Preferred Stock on such record
date, less the fair market value (as determined in good faith by the Board of Directors, whose determination shall be described
in a statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness to be distributed or of such
subscription rights or warrants applicable to one share of Preferred Stock and (ii) the denominator of which shall be the
then Current Per Share Market Price of the Preferred Stock; provided, however, that in no event shall the consideration
to be paid upon the exercise of one Right be less than the aggregate par value of the shares of Preferred Stock to be issued upon
exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed. If such distribution is
not so made, the Exercise Price shall again be adjusted to be the Exercise Price that would then be in effect if such record date
had not been fixed.

 

    	 	16	 

     

    

 

(d) Current
Per Share Market Price.

 

(i) For
the purpose of any computation hereunder, the “Current Per Share Market Price” of any security on any
date shall be deemed to be the average of the daily closing prices per share of such security for the thirty consecutive Trading
Days immediately prior to such date; provided, however, that if the Current Per Share Market Price of the security
is determined during a period (i) following the announcement by the issuer of such security of (A) a dividend or distribution
on such security payable in shares of such security or other securities convertible into such shares, or (B) any subdivision,
combination or reclassification of such security, and (ii) prior to the expiration of 30 Trading Days after the ex-dividend
date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in
each such case, the Current Per Share Market Price shall be appropriately adjusted to reflect the current market price per share
equivalent of such security. The closing price for each day shall be the last sale price or, if no such sale takes place on such
day, the average of the closing bid and asked prices, in either case as reported by NASDAQ, or, if on any such date the security
is not listed on NASDAQ, the average of the closing bid and asked prices as furnished by a professional market maker making a market
in the security selected by the Board of Directors. If on any such date no such market maker is making a market in the security,
the fair value of the security on such date as determined in good faith by the Board of Directors shall be used.

 

(ii) For
the purpose of any computation hereunder, the “Current Per Share Market Price” of the Preferred Stock
shall be determined in accordance with the method set forth in Section 11(d)(i). If the Preferred Stock is not publicly
traded, the “Current Per Share Market Price” of the Preferred Stock shall be conclusively deemed to be
the Current Per Share Market Price of the Corporation’s Common Stock as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof) multiplied
by one hundred. If neither the Common Stock nor the Preferred Stock is publicly held or so listed or traded, “Current
Per Share Market Price” means the fair value per share as determined in good faith by the Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent.

 

(e) No adjustment
in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise
Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required
to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one ten-thousandth of a share of Preferred Stock or one ten-thousandth of any
other share or security as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than three years from the date of the transaction which requires
such adjustment.

 

(f) If,
as a result of an adjustment made pursuant to Section 11(a), the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Corporation other than Preferred Stock, the number of such other shares
so receivable upon exercise of any Right shall thereafter be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Section 11(a)-(c),
inclusive, and the provisions of Section 7, Section 9, Section 10 and Section 13 with respect
to the Preferred Stock shall apply on like terms to any such other shares.

 

    	 	17	 

     

    

 

(g) All
Rights originally issued by the Corporation subsequent to any adjustment made to the Exercise Price hereunder shall evidence the
right to purchase, at the adjusted Exercise Price, the number of shares of Preferred Stock purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment as provided herein.

 

(h) Unless
the Corporation exercises its election as provided in Section 11(i), upon each adjustment of the Exercise Price as
a result of the calculations made in Section 11(b) and Section 11(c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number
of one one-hundredth of a share of Preferred Stock (calculated to the nearest one one-thousandth of a share of Preferred Stock)
obtained by (i) multiplying the number of one one-hundredth of a shares of Preferred Stock covered by a Right immediately
prior to this adjustment by the Exercise Price in effect immediately prior to such adjustment of the Exercise Price and (ii) dividing
the product by the Exercise Price in effect immediately after such adjustment of the Exercise Price.

 

(i) The
Corporation may elect on or after the date of any adjustment of the Exercise Price to adjust the number of Rights in substitution
for any adjustment in the number of shares of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding
after such adjustment of the number of Rights shall be exercisable for the number of shares of Preferred Stock for which a Right
was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights
shall become that number of Rights (calculated to the nearest one hundred-thousandth) obtained by dividing the Exercise Price in
effect immediately prior to adjustment of the Exercise Price by the Exercise Price in effect immediately after adjustment of the
Exercise Price. The Corporation shall make a public announcement (with prompt written notice thereof to the Rights Agent) of its
election to adjust the number of Rights, indicating the record date for the adjustment and, if known at the time, the amount of
the adjustment to be made. The record date may be the date on which the Exercise Price is adjusted or any day thereafter but, if
the Rights Certificates have been distributed, shall be at least 10 days after the date of the public announcement. If Rights
Certificates have been distributed, upon each adjustment of the number of Rights pursuant to this Section 11(i), the
Corporation shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record
date Rights Certificates evidencing, subject to Section 14, the additional Rights to which such holders shall be entitled
as a result of such adjustment or, at the option of the Corporation, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender
thereof if required by the Corporation, new Rights Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Rights Certificates to be so distributed shall be issued, executed and countersigned in the manner provided
for herein and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in
the public announcement.

 

(j) Irrespective
of any adjustment or change in the Exercise Price or the number of shares of Preferred Stock issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Exercise Price and the number of
shares of Preferred Stock which were expressed in the initial Rights Certificates issued hereunder.

 

    	 	18	 

     

    

 

(k) Before
taking any action that would cause an adjustment reducing the Exercise Price below the then par value of the Preferred Stock issuable
upon exercise of the Rights, the Corporation shall take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Preferred Stock at such adjusted
Exercise Price.

 

(l) If
this Section 11 requires that an adjustment in the Exercise Price be made effective as of a record date for a specified
event, the Corporation may defer, until the occurrence of such event, issuing to the holder of any Right exercised after such record
date shares of Preferred Stock and other capital stock or securities of the Corporation, if any, issuable upon such exercise over
and above the Preferred Stock and other capital stock or securities of the Corporation, if any, issuable upon such exercise on
the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Corporation shall
deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional
shares upon the occurrence of the event requiring adjustment.

 

(m) Anything
in this Section 11 to the contrary notwithstanding, the Corporation shall be entitled to make such reductions in the
Exercise Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it
in its sole discretion shall determine to be advisable in order that any (i) combination or subdivision of the Preferred Stock,
(ii) issuance wholly for cash of any shares of Preferred Stock at less than the Current Per Share Market Price, (iii) issuance
wholly for cash of shares of Preferred Stock or securities which by their terms are convertible into or exchangeable for shares
of Preferred Stock, (iv) dividends on the Preferred Stock payable in shares of Preferred Stock, or (v) issuance of any
rights, options or warrants referred to in Section 11(b) made by the Corporation after the date of this Rights Agreement
to holders of its Preferred Stock shall not be taxable to such stockholders.

 

(n) If,
at any time after the date of this Rights Agreement and prior to the Distribution Date, the Corporation (i) declares or pays
any dividend on the Corporation’s Common Stock payable in shares of Common Stock or (ii) effects a subdivision, combination
or consolidation of the Corporation’s Common Stock (by reclassification or otherwise other than by payment of dividends in
shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in any such case (x) the number of
one one-hundredths of a share of Preferred Stock purchasable after such event upon exercise of each Right shall be determined by
multiplying the number of one one-thousandths of a share of Preferred Stock so purchasable immediately prior to such event by a
fraction, the numerator of which is the number of shares of Common Stock outstanding immediately before such event and the denominator
of which is the number of shares of Common Stock outstanding immediately after such event, and (y) each share of the Corporation’s
Common Stock outstanding immediately after such event shall have issued with respect to it that number of Rights which each share
of Common Stock outstanding immediately prior to such event had issued with respect to it. The adjustments provided for in this
Section 11(n) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.

 

    	 	19	 

     

    

 

Section 12.Certification of Adjusted
Exercise Price or Number of Shares.

 

Whenever an adjustment is made as provided
in Section 11, Section 13 or Section 23(c), the Corporation shall (a) promptly prepare a certificate setting
forth such adjustment, and a brief statement of the facts giving rise to such adjustment and the computation, methodology and accounting
for such adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Preferred Stock a copy of such
certificate and (c) mail a brief summary thereof to each holder of a Rights Certificate in accordance with Section 25. Notwithstanding
the foregoing sentence, the failure of the Corporation to make such certification or give such notice shall not affect the validity
of or the force or effect of the requirement for such adjustment. Any adjustment to be made pursuant to Section 11, Section
13 or Section 23(c) of this Rights Agreement shall be effective as of the date of the event giving rise to such adjustment.
The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall
not be deemed to have knowledge of any adjustment unless and until it shall have received such certificate.

 

Section 13.Consolidation, Merger
or Sale or Transfer of Assets or Earning Power.

 

(a) In
the event that, at any time after the time that any Person becomes an Acquiring Person, (x) the Corporation shall, directly or
indirectly, consolidate with, or merge with and into, any other Person or Persons (other than an Exempt Person or Persons) and
the Corporation shall not be the surviving or continuing corporation of such consolidation or merger, or (y) any Person or Persons
(other than an Exempt Person) shall, directly or indirectly, consolidate with, or merge with and into, the Corporation, and the
Corporation shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation
or merger, all or part of the outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities
of any other Person (other than an Exempt Person) or of the Corporation or cash or any other property, or (z) the Corporation or
one or more of its Subsidiaries shall, directly or indirectly, sell or otherwise transfer to any other Person or any Affiliate
or Associate of such Person, in one or more transactions, or the Corporation or one or more of its Subsidiaries shall sell or otherwise
transfer to any Persons in one or a series of related transactions, assets or Earning Power (as defined herein) aggregating more
than 50% of the assets or Earning Power of the Corporation and its Subsidiaries (taken as a whole), then, on the first occurrence
of any such event, proper provision shall be made so that (i) each holder of record of a Right, except as provided in Section
11(a)(ii) hereof, shall thereafter have the right to receive, upon the exercise thereof and payment of the Exercise Price in
accordance with the terms of this Rights Agreement and in lieu of shares of Preferred Stock, such number of shares of validly issued,
fully paid, non-assessable and freely tradable Common Stock of the Principal Party (as defined herein), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall equal the result obtained by dividing the Exercise Price
by 50% of the Fair Market Value of the Common Stock of the Principal Party on the date of the consummation of such consolidation,
merger, sale or transfer; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale or transfer, all the obligations and duties of the Corporation pursuant to this Rights Agreement; (iii) the term “Corporation”
for all purposes of this Rights Agreement shall thereafter be deemed to refer to such Principal Party; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock in accordance
with the provisions of Section 9 hereof applicable to the reservation of Preferred Stock) in connection with such consummation
as may be necessary to insure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation
to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; provided, however, that, upon
the subsequent occurrence of any merger, consolidation, sale of all or substantially all of the assets, recapitalization, reclassification
of shares, reorganization or other extraordinary transaction in respect of such Principal Party, each holder of a Right shall thereupon
be entitled to receive, upon exercise of a Right and payment of the Exercise Price, such cash, shares, rights, warrants and other
property which such holder would have been entitled to receive had it, at the time of such transaction, owned the shares of Common
Stock of the Principal Party purchasable upon the exercise of a Right, and such Principal Party shall take such steps (including,
but not limited to, reservation of shares of stock) as may be necessary to permit the subsequent exercise of the Rights in accordance
with the terms hereof for such cash, shares, rights, warrants and other property; and (v) the provisions of Section 11 (a)(ii)
hereof shall be of no effect following the occurrence of any event described in clause (x), (y) or (z) above of this Section
13(a).

 

    	 	20	 

     

    

 

(b) “Earning
Power” of the Corporation and its Subsidiaries shall be determined in good faith by the Corporation’s Board
of Directors on the basis of the operating earnings of each business operated by the Corporation and its Subsidiaries during the
three fiscal years preceding the date of such determination (or, in the case of any business not operated by the Corporation or
any Subsidiary during three full fiscal years preceding such date, during the period such business was operated by the Corporation
or any Subsidiary).

 

(c) 
“Principal Party” shall mean:

 

(i) in
the case of any transaction described in (x) or (y) of the first sentence of Section 13(a) hereof: (A) the Person that is
the issuer of the securities into which shares of Common Stock of the Corporation are changed or otherwise exchanged or converted
in such merger or consolidation, or, if there is more than one such issuer, the issuer of the Common Stock of which has the greatest
market value or (B) if no securities are so issued, (x) the Person that is the other party to the merger or consolidation and that
survives such merger or consolidation, or, if there is more than one such Person, the Person the Common Stock of which has the
greatest market value or (y) if the Person that is the other party to the merger or consolidation does not survive the merger or
consolidation, the Person that does survive the merger or consolidation (including the Corporation if it survives); and

 

(ii) in
the case of any transaction described in (z) of the first sentence in Section 13(a), the Person that is the party receiving
the greatest portion of the assets or Earning Power transferred pursuant to such transaction or transactions, or, if each Person
that is a party to such transaction or transactions receives the same portion of the assets or Earning Power so transferred or
if the Person receiving the greatest portion of the assets or Earning Power cannot be determined, whichever of such Persons as
is the issuer of Common Stock having the greatest market value of shares outstanding;

 

    	 	21	 

     

    

 

provided, however, that in any
case, (1) if the Common Stock of such Person is not at such time and has not been continuously over the preceding 12-month period
registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common
Stock of which is and has been so registered, the term “Principal Party” shall refer to such other Person; (3) if such
Person is a Subsidiary, directly or indirectly, or Affiliate of more than one Person, the Common Stock of two or more of which
are and have been so registered, the term “Principal Party” shall refer to whichever of such Persons is the issuer
of the Common Stock having the greatest market value of shares outstanding; and (3) if such Person is owned, directly or indirectly,
by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set
forth in (1) and (2) above shall apply to each of the chains of ownership having an interest in such joint venture as
if such party were a “Subsidiary” of both or all of such joint venturers and the Principal Parties in each such chain
shall bear the obligations set forth in this Section 13 in the same ratio as their direct or indirect interests in
such Person bear to the total of such interests.

 

(d) The
Corporation shall not consummate any consolidation, merger or sale or transfer of assets or Earning Power referred to in Section
13(a) unless the Principal Party shall have a sufficient number of authorized shares of its Common Stock that have not been
issued or reserved for issuance to permit exercise in full of all Rights in accordance with this Section 13 and unless prior
thereto the Corporation and each Principal Party and each other Person that may become a Principal Party as a result of such consolidation,
merger, sale or transfer shall have executed and delivered to the Rights Agent an agreement confirming that the Principal Party
shall, upon consummation of such consolidation, merger or sale or transfer of assets or Earning Power, assume this Rights Agreement
in accordance with Section 13(a) hereof and that all rights of first refusal or preemptive rights in respect of the issuance
of shares of Common Stock of the Principal Party upon exercise of outstanding Rights have been waived and that such transaction
shall not result in a default by the Principal Party under this Rights Agreement, and further providing that, as soon as practicable
after the date of any consolidation, merger or sale or a transfer of assets or Earning Power referred to in Section 13(a)
hereof, the Principal Party will:

 

(i) prepare
and file a registration statement under the Act with respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, use its best efforts to cause such registration statement to become effective as soon as practicable
after such filing and use its best efforts to cause such registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the date of expiration of the Rights, and similarly comply with applicable state securities
laws;

 

(ii) use
its best efforts to (1) list (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights
on a national securities exchange or to meet the eligibility requirements for quotation on the NASDAQ Capital Market, and (2) qualify
or register the Rights and the securities purchasable upon exercise of the Rights under the blue sky laws of such jurisdictions
as may be necessary or appropriate; and

 

(iii) deliver
to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all
respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act. In the event that any
of the transactions described in Section 13(a) hereof shall occur at any time after the occurrence of a transaction described
in Section 11(a)(ii) hereof, the Rights which have not theretofore been exercised shall, subject to the provisions of Section
11(a)(ii) hereof, thereafter be exercisable in the manner described in Section 13(a).

 

    	 	22	 

     

    

 

(e) In
case the Principal Party which is to be a party to a transaction referred to in this Section 13 has a provision in any of
its authorized securities or in its Certificate of Incorporation, as amended, or Amended and Restated By-laws, as amended, or other
instrument governing its corporate affairs, which provision would have the effect of (i) causing such Principal Party to issue,
in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, shares of
Common Stock of such Principal Party at less than the then Fair Market Value per share (determined pursuant to Section 11(b)
hereof) or securities exercisable for, or convertible into, Common Stock of such Principal Party at less than such then Fair Market
Value (other than to holders of Rights pursuant to this Section 13) or (ii) providing for any special or similar payment
in connection with the issuance to any holder of a Right of Common Stock of such Principal Party pursuant to the provisions of
this Section 13, then, in such event, the Corporation shall not consummate any such transaction unless prior thereto the
Corporation and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that
the provision in question of such Principal Party shall have been canceled, waived or amended, or that the authorized securities
shall be redeemed, so that the applicable provision will have no effect in connection with, or as a consequence of, the consummation
of the proposed transaction.

 

Section 14.Fractional Rights and
Fractional Shares.

 

(a) The
Corporation shall not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional Rights
(i.e., Rights to acquire less than one one-hundredth of a share of Preferred Stock). If the Corporation shall determine not to
issue such fractional Rights, then, in lieu of such fractional Rights, there shall be paid to the holders of record of the Rights
Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction
of the Fair Market Value of a whole Right. For the purposes of this Section 14(a), the Fair Market Value of a whole
Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights
would have been otherwise issuable.  The closing price for any day shall be the last sale price, regular way, or, in case
no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported
in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on NASDAQ,
or, if the Rights are not listed or admitted to trading on NASDAQ, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted
to trading, or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by such other
system then in use, or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors,
or, if on any such date no professional market maker is making a market in the Rights, the Fair Market Value of a whole Right shall
be determined by an independent investment banking firm experienced in the valuation of securities selected in good faith by the
Board of Directors of the Corporation, or, if no such investment banking firm is, in the good faith judgment of the Board of Directors,
available to make such determination, the Fair Market Value of a whole Right on such date shall be determined in good faith by
the Board of Directors.

 

    	 	23	 

     

    

 

(b) The
Corporation shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples
of one-hundredth of a share) upon exercise of the Rights or to distribute certificates which evidence fractional shares (other
than fractions which are integral multiples of one-hundredth of a share). In lieu of issuing fractions of shares of Preferred Stock,
the Corporation may, at its election, issue depositary receipts evidencing fractions of shares pursuant to an appropriate agreement
between the Corporation and a depositary selected by it, provided that such agreement shall provide that the holders of such depositary
receipts shall have all of the rights, privileges and preferences to which they would be entitled as owners of the Preferred Stock.
With respect to fractional shares that are not integral multiples of one-hundredth of a share, if the Corporation does not issue
such fractional shares or depositary receipts in lieu thereof, there shall be paid to the holders of record of Rights Certificates
at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the Fair Market Value
of a share of Preferred Stock.

 

(c) Following
the occurrence of one of the transactions or events specified in Section 11 hereof giving rise to the right to receive
shares of Common Stock, capital stock equivalents (other than shares of Preferred Stock) or other securities upon the exercise
of a Right, the Corporation shall not be required to issue fractions of shares of Common Stock or units of such Common Stock, capital
stock equivalents or other securities upon exercise of the Rights or to distribute certificates that evidence fractional shares
of Common Stock, capital stock equivalents or other securities.  In lieu of fractional shares of Common Stock, capital
stock equivalents or other securities, the Corporation shall pay to the registered holders of Rights Certificates at the time such
Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one share of
Common Stock or unit of such Common Stock, capital stock equivalents or other securities.  For purposes of this Section 14(c),
the Fair Market Value shall be the current closing price for the Trading Day immediately prior to the date of such exercise and,
if such capital stock equivalent is not traded, each such capital stock equivalent shall have the value of one one-hundredth of
a share of Preferred Stock.

 

(d) Whenever
a payment for fractional Rights or fractional shares is to be made by the Rights Agent under any section of this Rights Agreement,
the Corporation shall (i) promptly prepare and deliver to the Rights Agent a certificate setting forth in reasonable detail
the facts related to such payments and the prices and formulas utilized in calculating such payments, and (ii) provide sufficient
monies to the Rights Agent in the form of fully collected funds to make such payments. The Rights Agent shall be fully protected
in relying upon such a certificate and shall have no duty with respect to, and shall not be deemed to have knowledge of, any payment
for fractional Rights or fractional shares under any section of this Rights Agreement relating to the payment of fractional Rights
or fractional shares unless and until the Rights Agent shall have received such a certificate and sufficient monies.

 

(e) The
holder of a Right by the acceptance of a Right expressly waives his, her or its right to receive any fractional Right or any fractional
shares of Preferred Stock (other than fractions which are integral multiples of one one-hundredth of a share) upon exercise of
a Right.

 

    	 	24	 

     

    

 

Section 15.Rights of Action.

 

All rights of action in respect of this
Rights Agreement, except the rights of action given to the Rights Agent in Section 18 and Section 20 hereof, are
vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the holders of record
of the Common Stock); and any holder of record of any Rights Certificate (or, prior to the Distribution Date, of the Common Stock),
without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of
the Common Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Corporation to enforce, or otherwise act in respect of, his, her or its right to exercise the Rights evidenced
by such Rights Certificate in the manner provided in such Rights Certificate and in this Rights Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would
not have an adequate remedy at law for any breach of this Rights Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations of, the obligations of any Person subject to this
Rights Agreement.

 

Section 16.Agreement of Right Holders.

 

Each holder of a Right, by accepting the
same, consents and agrees with the Corporation and the Rights Agent and with every other holder of a Right that:

 

(a) Prior
to the Distribution Date, the Rights shall be evidenced by the Book-Entries representing, or the certificates for, Common Stock
registered in the name of the holders of Common Stock (together, as applicable, with the Summary of Rights), which Book Entries
representing, or the certificates for, Common Stock shall also constitute certificates for Rights, and not by separate Rights Certificates,
and each Right shall be transferable only simultaneously and together with the transfer of shares of Common Stock;

 

(b) After
the Distribution Date, the Rights Certificates are transferable (subject to the provisions of this Rights Agreement) only on the
registry books of the Rights Agent if surrendered at the office of the Rights Agent designated for such purpose, duly endorsed
or accompanied by a proper instrument of transfer;

 

(c) The
Corporation and the Rights Agent may deem and treat the person in whose name the Rights Certificate (or, prior to the Distribution
Date, the associated Book Entry representing, or certificate for, Common Stock) is registered as the absolute owner thereof and
of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated
Common Stock certificate made by anyone other than the Corporation or the Rights Agent) for all purposes whatsoever, and neither
the Corporation nor the Rights Agent shall be affected by any notice to the contrary;

 

(d) Notwithstanding
anything in this Rights Agreement to the contrary, neither the Corporation nor the Rights Agent shall have any liability to any
holder of a Right or a beneficial interest in a Right or other Person as a result of its inability to perform any of its obligations
under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation
or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such
obligation; provided, however, the Corporation must use its best efforts to have any such order, decree or ruling
lifted or otherwise overturned as soon as possible; and

 

    	 	25	 

     

    

 

(e) Rights
Beneficially Owned by certain persons will under certain circumstances set forth in this Rights Agreement become null and void
pursuant to Section 11(a)(ii) hereof; and

 

(f) This
Rights Agreement may be supplemented or amended from time to time pursuant to Section 26 hereof.

 

Section 17.Rights Certificate Holder
Not Deemed a Stockholder.

 

No holder, as such, of any Rights Certificate
shall be entitled to vote, receive dividends or be deemed for any purpose the holder of Preferred Stock or any other securities
which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in
any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder
of the Corporation or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders
(except as provided in Section 26 hereof), or to receive dividends or subscription rights, or otherwise, until the Right
or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof.

 

Section 18.Concerning the Rights
Agreement.

 

(a) The
Corporation agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration
and execution of this Rights Agreement and the exercise and performance of its duties hereunder. The Corporation also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense (including, without limitation,
the reasonable fees and expenses of legal counsel) incurred without gross negligence, bad faith or willful misconduct on the part
of the Rights Agent, for anything done or failed to be done by the Rights Agent in connection with the acceptance and administration
of this Rights Agreement, including the costs and expenses of defending against any claim of liability relating to the Rights or
this Rights Agreement. The provisions under this Section 18 and Section 20 below shall survive the expiration
of the Rights and the termination of this Agreement and the resignation, replacement or removal of the Rights Agent. The reasonable
costs and expenses incurred in enforcing this right of indemnification shall be paid by the Corporation to the extent that the
Rights Agent is successful in so enforcing its right of indemnification.

 

(b) The
Rights Agent shall be protected against, and shall incur no liability for or in respect of, any action taken, suffered or omitted
by it in connection with its administration of this Rights Agreement in reliance upon any Rights Certificate or certificate for
Preferred Stock or for other securities of the Corporation, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent certificate, statement or other paper or document believed by it to be genuine and
to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons, or otherwise upon the advice
of counsel as set forth in Section 20 hereof.  In no case will the Rights Agent be liable for special, indirect,
incidental or consequential or consequential loss or damage at any kind whatsoever (including but not limited to lost profits),
even if the Rights Agent has been advised of such loss or damage.

 

    	 	26	 

     

    

 

Section 19.Merger or Consolidation
of, or Change in Name of, the Rights Agent.

 

(a) Any
Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person
succeeding to the corporate trust or stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor
to the Rights Agent under this Rights Agreement without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided that such Person would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created
by this Rights Agreement any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights
Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and
in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign
such Rights Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Rights Agreement.

 

(b) In
case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates
so countersigned; in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign
such Rights Certificates either in its prior name or in its changed name; in all such cases such Rights Certificates shall have
the full force provided in the Rights Certificates and in this Rights Agreement.

 

Section 20.Duties of Rights Agent.

 

The Rights Agent undertakes to perform only
the duties and obligations expressly set forth in this Rights Agreement and no implied duties or obligations shall be read into
this Rights Agreement against the Rights Agent. The Rights Agent shall perform its duties and obligations hereunder upon the following
terms and conditions, by all of which the Corporation and the holders of Rights Certificates, by their acceptance thereof, shall
be bound:

 

(a) The
Rights Agent may consult with legal counsel (who may be legal counsel for the Corporation), and the advice or opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith
and in accordance with such opinion.

 

    	 	27	 

     

    

 

(b) Whenever
in the performance of its duties under this Rights Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Corporation prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by
a certificate signed by the Chairman of the Board, Chief Executive Officer, President or any Vice President and by the Treasurer
or the Secretary of the Corporation and delivered to the Rights Agent. Any such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under the provisions of this Rights Agreement in reliance upon
such certificate.

 

(c) The
Rights Agent shall be liable hereunder to the Corporation and any other Person only for its own gross negligence, bad faith or
willful misconduct.

 

(d) The
Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Rights Agreement
or in the Rights Certificates (except its countersignature thereof) or be required to verify the same, but all such statements
and recitals are and shall be deemed to have been made by the Corporation only.

 

(e) The
Rights Agent shall not be under any responsibility in respect of the validity of this Rights Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate
(except its countersignature thereof); nor shall it be responsible for any breach by the Corporation of any covenant or condition
contained in this Rights Agreement or in any Rights Certificate; nor shall it be responsible for any change in the exercisability
of the Rights (including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment required
under the provisions of Section 11 or Section 13 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise
of Rights evidenced by Rights Certificates after receipt of a certificate describing any such adjustment); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Preferred
Stock to be issued pursuant to this Rights Agreement or any Rights Certificate or as to whether any shares of Preferred Stock will,
when issued, be validly authorized and issued, fully paid and nonassessable.

 

(f) The
Corporation agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the
carrying out or performing by the Rights Agent of the provisions of the Rights Agreement.

 

(g) The
Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, Chief Executive Officer, President or any Vice President or the Secretary or the Treasurer of the Corporation,
and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action
taken or suffered to be taken by it in good faith in accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions. Any application by the Rights Agent for written instructions from the Corporation may, at
the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent with respect
to its duties or obligations under this Rights Agreement and the date on and/or after which such action shall be taken or omitted
and the Rights Agent shall not be liable for any action taken or omitted in accordance with a proposal included in any such application
on or after the date specified therein (which date shall not be less than three Business Days after the date indicated in such
application unless any such officer shall have consented in writing to an earlier date) unless, prior to taking or omitting any
such action, the Rights Agent has received written instructions in response to such application specifying the action to be taken
or omitted.

 

    	 	28	 

     

    

 

(h) The
Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights
or other securities of the Corporation or become financially interested in any transaction in which the Corporation may be interested,
or contract with or lend money to the Corporation or otherwise act as fully and freely as though it were not the Rights Agent under
this Rights Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Corporation or
for any other legal entity.

 

(i) The
Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect
or misconduct of any such attorneys or agents or for any loss to the Corporation resulting from any such act, default, neglect
or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.

 

(j) No provision
of this Rights Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its rights if the Rights Agent believes that repayment
of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

 

(k) The
Rights Agent shall not be required to take notice or be deemed to have notice of any fact, event or determination (including, without
limitation, any dates or events defined in this Rights Agreement or the designation of any Person as an Acquiring Person, Affiliate
or Associate or Person with whom another Person is Acting in Concert) under this Rights Agreement unless and until the Rights Agent
shall be specifically notified in writing by the Corporation of such fact, event or determination.

 

(l) If,
with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the
form of assignment or form of election to purchase, as the case may be, has not been executed, the Rights Agent shall not take
any further action with respect to such requested exercise of transfer without first consulting with the Corporation.

 

    	 	29	 

     

    

 

Section 21.Change of Rights Agent.

 

The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Rights Agreement upon 30 days notice in writing mailed to the Corporation
and to each transfer agent of the Common Stock and the Preferred Stock by registered or certified mail. The Corporation may remove
the Rights Agent or any successor Rights Agent (with or without cause) upon 30 days notice in writing, mailed to the Rights Agent
or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and the Preferred Stock by registered
or certified mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Corporation
shall appoint a successor to the Rights Agent. Notwithstanding the foregoing provisions of this Section 21, in no event
shall the resignation or removal of a Rights Agent be effective until a successor Rights Agent shall have been appointed and have
accepted such appointment. If the Corporation shall fail to make such appointment within a period of 30 days after such removal
or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Corporation),
then the incumbent Rights Agent or the holder of record of any Rights Certificate may apply to any court of competent jurisdiction
for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Corporation or by such a court,
shall be (a) a Person organized and doing business under the laws of the United States or of any state thereof, in good standing,
which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination
in the conduct of its corporate trust or stock transfer business by federal or state authorities and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an Affiliate controlled by a Person described
in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Rights Agent without further act or deed, but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment,
the Corporation shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock
and Preferred Stock, and mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Notwithstanding
the foregoing provisions, in the event of resignation, removal or incapacity of the Rights Agent, the Corporation shall have the
authority to act as the Rights Agent until a successor Rights Agent shall have assumed the duties of the Rights Agent hereunder.

 

Section 22.Issuance of New Rights
Certificates.

 

Notwithstanding any of the provisions of
this Rights Agreement or of the Rights to the contrary, the Corporation may, at its option, issue new Rights Certificates evidencing
Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Exercise Price per
share and the number or kind or class of shares of stock or other securities or property purchasable under the Rights Certificates
made in accordance with the provisions of this Rights Agreement. In addition, in connection with the issuance or sale of shares
of Common Stock following the Distribution Date and prior to the earlier of the Redemption Date (as defined herein) and the Close
of Business on the Expiration Date, the Corporation may, with respect to shares of Common Stock so issued or sold (a) pursuant
to the exercise of stock options; (b) under any employment plan or arrangement; (c) upon the exercise, conversion or
exchange of securities, notes or debentures issued by the Corporation; or (d) pursuant to a contractual obligation of the
Corporation, in each case existing prior to the Distribution Date, issue Rights Certificates representing the appropriate number
of Rights in connection with such issuance or sale; provided, however, that (i) the Corporation shall not be
obligated to issue any such Rights Certificates if, and to the extent that, the Corporation shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to the Corporation or the Person to whom such Rights
Certificate would be issued, and (ii) no Rights Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.

 

    	 	30	 

     

    

 

Section 23.Redemption.

 

(a) The
Corporation may, at its option, but only by the vote of a majority of the Board of Directors, redeem all but not less than all
of the then outstanding Rights, at any time prior to the Close of Business on the earlier of (i) the tenth day following the Stock
Acquisition Date (subject to extension by the Corporation as provided in Section 26 hereof) or (ii) the Expiration Date,
at a redemption price of $0.01 per Right, subject to adjustments as provided in subsection (c) below (the “Redemption
Price”). The redemption of the Rights by the Board of Directors may be made effective at such time, on such basis
and subject to such conditions as the Board of Directors in its sole discretion may establish.

 

(b) Immediately
upon the action of the Board of Directors ordering the redemption of the Rights pursuant to Section 23(a) hereof,
and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter
of the holders of Rights shall be to receive the Redemption Price.  The Corporation shall promptly give public notice of any
such redemption; provided, however, that the failure to give, or any defect in, any such notice shall not affect
the validity of such redemption. Within 10 days after the effective time of the action of the Board of Directors ordering the redemption
of the Rights, the Corporation shall give notice of such redemption to the holders of the then outstanding Rights by mailing such
notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common Stock; provided, however, that failure
to give, or any defect in, any such notice shall not affect the validity of such redemption. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives the notice. Each notice of redemption will state
the method by which the payment of the Redemption Price will be made. At the option of the Board of Directors, the Redemption Price
may be paid in cash to each Rights holder or by the issuance of shares (and, at the Corporation’s election pursuant to Section
14(b) hereof, cash or depositary receipts in lieu of fractions of shares other than fractions which are integral multiples
of one one-hundredth (1/100th) of a share) of Preferred Stock or Common Stock having a Fair Market Value equal to such cash payment.

 

(c) In
the event the Corporation shall at any time after the date of this Rights Agreement (i) pay any dividend on Common Stock in shares
of Common Stock; (ii) subdivide or split the outstanding shares of Common Stock into a greater number of shares; (iii) combine
or consolidate the outstanding shares of Common Stock into a smaller number of shares or effect a reverse split of the outstanding
shares of Common Stock; or (iv) combine or consolidate the outstanding shares of Common Stock into a smaller number of shares of
its capital stock in a reclassification of the Common Stock (including any such reclassification in connection with a consolidation
or merger in which the Corporation is the continuing or surviving corporation), then, and in each such event, the Redemption Price
shall be appropriately adjusted to reflect the foregoing.

 

    	 	31	 

     

    

 

(d) The
Corporation may, at its option, discharge all of its obligations with respect to any redemption of the Rights by (i) issuing
a press release announcing the manner of redemption of the Rights and (ii) mailing payment of the Redemption Price to the
registered holders of the Rights at their last addresses as they appear on the registry books of the Rights Agent or, prior to
the Distribution Date , on the registry books of the transfer agent for the Common Stock, and upon such action, all outstanding
Rights Certificates shall be null and void without any further action by the Corporation.

 

Section 24.Notice of Proposed Actions.

 

(a) If
the Corporation shall after the Distribution Date propose (i) to pay any dividend payable in stock of any class to the holders
of its Preferred Stock or to make any other distribution to the holders of its Preferred Stock (other than a regular quarterly
cash dividend); (ii) to offer to the holders of its Preferred Stock rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options; (iii) to
effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding
Preferred Stock ); (iv) to effect any consolidation or merger into or with any other Person, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of 50%
or more of the assets or Earning Power of the Corporation and its Subsidiaries (taken as a whole) to any other Person; (v) to
effect the liquidation, dissolution or winding-up of the Corporation; or (vi) to declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or to effect a subdivision, combination or consolidation of the Common Stock (by reclassification
or otherwise than by payment of dividends in shares of Common Stock), then, in each such case, the Corporation shall give to each
holder of a Rights Certificate and the Rights Agent, in accordance with Section 25, a notice of such proposed action,
which shall specify the record date for the purposes of such stock dividend, or distribution of rights or warrants, or the date
on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding-up is to take place
and the date of participation therein by the holders of the Common Stock or Preferred Stock or both, if any such date is to be
fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least ten days
prior to the record date for determining holders of the Preferred Stock for purposes of such action, and in the case of any such
other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by
the holders of the Common Stock or Preferred Stock or both, whichever shall be the earlier. The failure to give notice required
by this Section 24 or any defect therein shall not affect the legality or validity of the action taken by the Corporation
or the vote upon any such action.

 

(b) The
Corporation shall, as soon as practicable after a Stock Acquisition Date, give to each holder of a Rights Certificate, in accordance
with Section 25, a notice that describes the transaction in which the a Person became an Acquiring Person and the consequences
of the transaction to holders of Rights under Section 11(a)(ii).

 

    	 	32	 

     

    

 

Section 25.Notices.

 

Notices or demands authorized by this Rights
Agreement to be given or made by the Rights Agent or by the holder of record of any Rights Certificate or Right to or on the Corporation
shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:

 

TSR, Inc.

400 Oser Avenue, Suite 150

Hauppauge, NY 11788

(631) 231-0333

Attention: Christopher Hughes

 

Subject to the provisions of Section 21, any notice or
demand authorized by this Rights Agreement to be given or made by the Corporation or by the holder of record of any Rights Certificate
or Right to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Corporation) as follows:

 

Continental Stock Transfer & Trust Company

1 State Street, 30th Floor

New York, NY 10004

(212) 845-3218

Attention: Erika Young, Vice President &
Account Administrator

 

Notices or demands authorized by this Rights Agreement to be
given or made by the Corporation or the Rights Agent to the holder of record of any Rights Certificate or Right shall be sufficiently
given or made if sent by first class mail, postage prepaid, addressed to such holder at the address of such holder as shown on
the registry books of the Corporation.

 

Section 26.Supplements and Amendments.

 

For as long as the Rights are then redeemable,
the Corporation may in its sole and absolute discretion, and the Rights Agent shall if the Corporation so directs, supplement or
amend any provision of this Agreement without the approval of any holders of the Rights. At any time when the Rights are not then
redeemable, the Corporation may, and the Rights Agent shall if the Corporation so directs, supplement or amend this Rights Agreement
without the approval of any holders of Rights Certificates (i) to cure any ambiguity, (ii) to correct or supplement any provision
contained, herein which may be defective or inconsistent with any other provisions herein or (iii) to change or supplement the
provisions hereunder in any manner which the Corporation may deem necessary or desirable, provided that no such supplement or amendment
pursuant to this clause (iv) shall materially adversely affect the interest of the holders of Rights Certificates. Upon the delivery
of a certificate from an appropriate officer of the Corporation which states that the proposed supplement or amendment is in compliance
with the terms of this Section 26, the Rights Agent shall execute such supplement or amendment.

 

    	 	33	 

     

    

 

Section 27.Exchange.

 

(a) The
Board of Directors of the Corporation may, at its option, at any time after any Person becomes an Acquiring Person, exchange all
or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions
of Section 11(a)(ii) hereof) for shares of Common Stock at an exchange ratio of one share per Right, appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter
referred to as the “Exchange Ratio”). Notwithstanding the foregoing, the Board of Directors shall not
be empowered to effect such exchange at any time after any Person (other than an Exempt Person), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the Corporation’s Common Stock then-outstanding.

 

(b) Immediately
upon the action of the Board of Directors of the Corporation ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 27 and without any further action and without any notice, the right to exercise such Rights shall terminate and
the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number
of such Rights held by such holder multiplied by the Exchange Ratio. The Corporation shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Corporation promptly shall mail a notice of any such exchange to all of the holders of such Rights at their
last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which
the exchange of the shares of Common Stock for Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights
which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.

 

(c) In
the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit
any exchange of Rights as contemplated in accordance with this Section 27, the Corporation shall take all such action as
may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights.

 

(d) The
Corporation shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional
shares. In lieu of such fractional shares, the Corporation shall pay to the registered holders of the Rights Certificates with
regard to which such fractional shares of Common Stock would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole share of Common Stock. For the purposes of this paragraph (d), the current market value
of a whole share of Common Stock shall be the closing price of a share of Common Stock for the Trading Day immediately prior to
the date of exchange pursuant to this Section 27.

 

    	 	34	 

     

    

 

Section 28.Successors.

 

All of the covenants and provisions of this
Rights Agreement by or for the benefit of the Corporation or the Rights Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.

 

Section 29.Benefits of this Rights
Agreement.

 

Nothing in this Rights Agreement shall be
construed to give to any Person or corporation other than the Corporation, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, the holders of Common Stock in their capacity as holders of the Rights) any
legal or equitable right, remedy or claim under this Rights Agreement; but this Rights Agreement shall be for the sole and exclusive
benefit of the Corporation, the Rights Agent and the holders of record of the Rights Certificates (and, prior to the Distribution
Date, the holders of Common Stock in their capacity as holders of the Rights).

 

Section 30.Delaware Contract.

 

This Rights Agreement and each Rights Certificate
issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed
by and construed and enforced in accordance with the laws of such state applicable to contracts to be made and performed entirely
within such state.

 

Section 31.Counterparts.

 

This Rights Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument.

 

Section 32.Descriptive Headings.

 

Descriptive headings of the several Sections
of this Rights Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of
the provisions hereof.

 

Section 33.Severability.

 

If any term, provision, covenant or restriction
of this Rights Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this Rights Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.

 

Section 34.Determinations and Actions
By the Board of Directors, Etc.

 

The Board of Directors of the Corporation
shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted
to the Board of Directors or to the Corporation, or as may be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this Rights Agreement and (ii) make all determinations
deemed necessary or advisable for the administration of this Rights Agreement (including a determination to redeem or not redeem
the Rights or to amend this Rights Agreement). All such actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board of Directors in
good faith shall (x) be final, conclusive and binding on the Corporation, the Rights Agent, the holders of the Rights and all other
parties, and (y) not subject the Board of Directors to any liability to the holders of the Rights.

 

    	 	35	 

     

    

 

IN WITNESS WHEREOF, the parties hereto
have caused this Rights Agreement to be duly executed, all as of the day and year first above written.

 

	 	TSR, INC.
	 	 
	 	By:	 
	 	Name:  	Christopher Hughes
	 	Title:  	Chief Executive Officer
	 	 	 
	 	CONTINENTAL STOCK TRANSFER & TRUST COMPANY
	 	 
	 	By:	 
	 	Name:  	Erika Young
	 	Title:  	Vice President & Account Administrator

 

    	 	36	 

     

    

 

EXHIBIT A

 

TO RIGHTS AGREEMENT

 

UNDER CERTAIN CIRCUMSTANCES
AS PROVIDED IN THE RIGHTS AGREEMENT (AS REFERRED TO BELOW), RIGHTS ISSUED TO OR BENEFICIALLY OWNED BY ACQUIRING PERSONS OR THEIR
AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS SHALL BE NULL
AND VOID AND MAY NOT BE TRANSFERRED TO ANY PERSON.

 

TSR, INC.

 

SUMMARY OF RIGHTS TO PURCHASE
CLASS A PREFERRED STOCK, SERIES ONE

 

On August
29, 2018, the Board of Directors of TSR, INC. (the “Corporation”) declared a dividend distribution
of one preferred stock purchase right for each outstanding share of Common Stock, par value $0.01 per share (the “Common
Stock”), of the Corporation held by stockholders of record on August
29, 2018 (the “Record Date”). Each Right entities the registered holder to purchase from the Corporation
one one-hundredth (1/100th) of a share of preferred stock of the Corporation, designated as Class A Preferred Stock, Series One
(the “Preferred Stock”) at a price of $24.78 per one one-hundredth (1/100th) of a share (the “Exercise
Price”). The description and terms of the Rights are set forth in a Rights Agreement (the “Rights Agreement”),
dated as of August 29, 2018, between the Corporation and Continental
Stock Transfer & Trust Company, as Rights Agent (the “Rights Agent”).

 

As discussed below, initially the Rights
will not be exercisable, certificates will not be sent to stockholders and the Rights will automatically trade with the Common
Stock.

 

The Rights, unless earlier redeemed by the
Board of Directors, become exercisable upon the close of business on the day (the “Distribution Date”)
which is the earlier of (i) the tenth day following the first date (the “Stock Acquisition Date”) on
which there is a public announcement that a person or group of affiliated or associated persons, with certain exceptions set forth
below, has acquired beneficial ownership of 5% or more of the Corporation’s outstanding Common Stock (an “Acquiring
Person”) or such earlier or later date (not beyond the thirtieth day after the Stock Acquisition Date) as the Board
of Directors may determine or (ii) the tenth business day (or such later date as may be determined by the Board of Directors prior
to such time as any person or group of affiliated or associated persons becomes an Acquiring Person) after the date of the commencement
or announcement of a person’s or group’s intention to commence a tender or exchange offer the consummation of which
would result in the ownership of 5% or more of the Corporation’s outstanding Common Stock (even if no shares are actually
purchased pursuant to such offer); prior thereto, the Rights will not be exercisable, will not be represented by a separate certificate,
and will not be transferable apart from the Common Stock, but will instead be evidenced, (i) with respect to any of the shares
of Common Stock held in uncertificated book-entry form (a “Book-Entry”) outstanding as of the Record
Date, by such Book-Entry and (ii) with respect to the shares of Common Stock evidenced by Common Stock certificates outstanding
as of the Record Date, by such Common Stock certificate, together with a copy of this Summary of Rights.

 

    	 	A - 1	 

     

    

 

An Acquiring Person does not include (A)
the Corporation, (B) any Subsidiary of the Corporation, (C) any employee benefit plan or employee stock plan of the Corporation
or any Subsidiary of the Corporation, or any trust or other entity organized, appointed, established or holding Common Stock for
or pursuant to the terms of any such plan, (D) any person or group whose ownership of 5% or more of the Corporation’s then-outstanding
shares of Common Stock results solely from (i) any action or transaction or transactions approved by the Corporation’s Board
of Directors before such person or group became an Acquiring Person or (ii) a reduction in the number of issued and outstanding
shares of the Corporation’s Common Stock pursuant to a transaction or transactions approved by the Corporation’s Board
of Directors (provided that any person or group that does not become an Acquiring Person by reason of clause (i) or (ii) above
shall become an Acquiring Person upon acquisition of any additional shares of the Corporation’s Common Stock unless such
acquisition of additional Common Stock will not result in such person or group becoming an Acquiring Person by reason of such clause
(i) or (ii)), (E) any Person that the Board of Directors determines is exempt from the Rights Agreement, which determination shall
be made in the sole and absolute discretion of the Board of Directors, or (F) any Person who or which, at the time of the first
public announcement of the Rights Agreement, is a Beneficial Owner of 5% or more of the Corporation’s Common Stock then outstanding
(a “Grandfathered Stockholder”); provided, however, that if a Grandfathered Stockholder
becomes, after such time, the Beneficial Owner of any additional shares of the Corporation’s Common Stock (regardless of
whether, thereafter or as a result thereof, there is an increase, decrease or no change in the percentage of shares of the Corporation’s
Common Stock then outstanding beneficially owned by such Grandfathered Stockholder) then such Grandfathered Stockholder shall be
deemed to be an Acquiring Person unless, upon such acquisition of Beneficial Ownership of additional shares of the Corporation’s
Common Stock, such Person is not the Beneficial Owner of 5% or more of the Corporation’s Common Stock then outstanding; provided,
further, that upon the first decrease of a Grandfathered Stockholder’s Beneficial Ownership below 5%, such Grandfathered
Stockholder shall cease to be a Grandfathered Stockholder and this clause (ii) shall have no further force or effect with
respect to such Person. For the avoidance of doubt, in the event that after the time of the first public announcement of this Rights
Agreement, any agreement, arrangement or understanding pursuant to which any Grandfathered Stockholder is deemed to be the Beneficial
Owner of shares of the Corporation’s Common Stock expires, terminates or no longer confers any benefit to or imposes any
obligation on the Grandfathered Stockholder, any direct or indirect replacement, extension or substitution of such agreement, arrangement
or understanding with respect to the same or different shares of the Corporation’s Common Stock that confers Beneficial Ownership
of shares of the Corporation’s Common Stock shall be considered the acquisition of Beneficial Ownership of additional shares
of the Corporation’s Common Stock by the Grandfathered Stockholder and render such Grandfathered Stockholder an Acquiring
Person for purposes of this Rights Agreement unless, upon such acquisition of Beneficial Ownership of additional shares of the
Corporation’s Common Stock, such Person is not the Beneficial Owner of 5% or more of the Corporation’s Common Stock
then outstanding.

 

    	 	A - 2	 

     

    

 

“Beneficial Ownership”
shall include any securities such Person or any of such Person’s Affiliates or Associates (a) beneficially owns, directly
or indirectly, within the meaning of Rules 13d-3 or 13d-5 promulgated under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), (b) has the right to acquire or vote pursuant to any agreement, arrangement or
understanding (except under limited circumstances), (c) which are directly or indirectly beneficially owned by any other Person
with which such Person has any agreement, arrangement or understanding for the purpose of acquiring, holding or voting such securities,
or obtaining, changing or influencing control of the Company, or with whom such Person is acting in concert or (d) in respect
of which such Person has a derivative position.

 

Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Stock certificates issued after August
29, 2018 will contain a legend incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), transfer on the Corporation’s direct registration system of any Common Stock represented
by a Book-Entry or a certificate outstanding as of August 29, 2018,
and, in each case, with or without a copy of this Summary of Rights attached thereto, will also constitute the transfer of the
Rights associated with the Common Stock represented by such Book-Entry or certificate. As soon as practicable following the Distribution
Date, separate certificates evidencing the Rights (“Rights Certificates”) will be mailed to holders of
record of the Common Stock as of the close of business on the Distribution Date and such separate Rights Certificates alone will
evidence the Rights from and after the Distribution Date.

 

The Rights are not exercisable until the
Distribution Date. Unless earlier redeemed by the Corporation as described below, the Rights will expire at the close of business
on August 29, 2021 (the “Expiration Date”) (or, if the Distribution Date shall have occurred before August 29, 2021,
at the close of business on the 90th day following the Distribution Date).

 

The Preferred Stock is non-redeemable and,
unless otherwise provided in connection with the creation of a subsequent series of preferred stock (i) subordinate to any other
series of the Corporation’s preferred stock and (ii) senior to the Common Stock. The Preferred Stock may not be issued except
upon exercise of Rights. Each outstanding share of Preferred Stock will be entitled to receive when, as and if declared, a quarterly
dividend in an amount equal to (i) 100 times the cash dividends declared on the Corporation’s Common Stock, and (ii) a preferential
cash dividend, if any, in preference to holders of Common Stock in an amount equal to $50.00 per share of Preferred Stock less
the per share amount of all cash dividends declared on the Preferred Stock pursuant to clause (i) since the immediately preceding
quarterly dividend payment date. In addition, Preferred Stock is entitled to 100 times any noncash dividends (other than dividends
payable in equity securities) declared on the Common Stock, in like kind. In the event of the liquidation of the Corporation, the
holders of Preferred Stock will be entitled to receive, for each share of Preferred Stock, a payment in an amount equal to the
greater of $1.00 per one one-hundredth of a share plus accrued and unpaid dividends and distributions thereon or 100 times the
payment made per share of Common Stock. Each share of Preferred Stock will have 100 votes, voting together with the Common Stock.
In the event of any merger, consolidation or other transaction in which Common Stock is exchanged, each share of Preferred Stock
will be entitled to receive 100 times the amount received per share of Common Stock. The rights of Preferred Stock as to dividends,
liquidation and voting are protected by anti-dilution provisions. If the dividends accrued on the Preferred Stock for four or more
quarterly dividend periods, whether consecutive or not, shall not have been declared and paid or irrevocably set aside for payment,
the holder of record of the Preferred Stock of the Corporation of all series (including the Preferred Stock) will have the right
to elect two members to the Corporation’s Board of Directors.

 

    	 	A - 3	 

     

    

 

The number of shares of Preferred Stock
issuable upon exercise of the Rights is subject to certain adjustments from time to time in the event of a stock dividend on, or
a subdivision or combination of, the Common Stock. The Exercise Price for the Rights is subject to adjustment in the event of extraordinary
distributions of cash or other property to holders of Common Stock.

 

Unless the Rights are earlier redeemed,
in the event that, after the time that a Person becomes an Acquiring Person, the Corporation were to be acquired in a merger or
other business combination (in which any shares of Common Stock are changed into or exchanged for other securities or assets) or
more than 50% of the assets or Earning Power (as defined in the Rights Agreement) of the Corporation and its subsidiaries (taken
as a whole) were to be sold or transferred in one or a series of related transactions, the Rights Agreement provides that proper
provision will be made so that each holder of record, other than the Acquiring Person, of a Right will from and after such date
have the right to receive, upon payment of the Exercise Price, that number of shares of common stock of the acquiring company having
a market value at the time of such transaction equal to two times the Exercise Price.

 

In addition, unless the Rights are earlier
redeemed, in the event that a person or group becomes an Acquiring Person, the Rights Agreement provides that proper provision
will be made so that each holder of record of a Right, other than the Acquiring Person (whose Rights will thereupon become null
and void), will thereafter have the right to receive, upon payment of the Exercise Price, that number of one one-hundredths of
a share of Preferred Stock having a market value at the time of the transaction equal to two times the Exercise Price (such market
value to be determined with reference to the market value of the Corporation’s Common Stock as provided in the Rights Agreement).

 

At any time after any person or group becomes
an Acquiring Person and prior to the acquisition by such person or group of 50% or more of the outstanding voting stock, the Board
of Directors of the Corporation may exchange the Rights (other than Rights owned by such person or group which will have become
void), in whole or in part, at an exchange ratio of one share of Common Stock per Right (subject to adjustment).

 

Fractions of shares of Preferred Stock (other
than fractions which are integral multiples of one one-hundredth of a share) may, at the election of the Corporation, be evidenced
by depositary receipts. The Corporation may also issue cash in lieu of fractional shares which are not integral multiples of one
one-hundredth of a share.

 

At any time on or prior to the close of
business on the earlier of (i) the tenth day after the Stock Acquisition Date (or such later date as a majority of the Board of
Directors may determine) or (ii) the Expiration Date, the Corporation may redeem the Rights in whole, but not in part, at a price
of $0.01 per Right (the “Redemption Price”). Immediately upon the effective time of the action of the
Board of Directors of the Corporation authorizing redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.

 

For as long as the Rights are then redeemable,
the Corporation may, amend the Rights in any manner, including an amendment to extend the time period in which the Rights may be
redeemed. At any time when the Rights are not then redeemable, the Corporation may amend the Rights in any manner that does not
materially adversely affect the interests of holders of the Rights as such.

 

Until a Right is exercised, the holder,
as such, will have no rights as a stockholder of the Corporation, including, without limitation, the right to vote or to receive
dividends.

 

A copy of the Rights Agreement will be filed
with the Securities and Exchange Commission as an exhibit to a current report on Form 8-K. A copy of the Rights Agreement is available
free of charge from the Corporation. This summary description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement which is incorporated in this summary description herein by reference.

 

    	 	A - 4	 

     

    

 

EXHIBIT B

 

TO RIGHTS AGREEMENT

 

[Form of Rights Certificate]

 

	Certificate No. W	_________Rights

 

NOT EXERCISABLE AFTER (I)
___________, 2021, OR (II) IF THE DISTRIBUTION DATE (AS DEFINED BELOW) SHALL HAVE OCCURRED BEFORE THE DATE SPECIFIED IN CLAUSE
(I), THE DATE WHICH IS NINETY (90) DAYS AFTER ______________, 2021, OR EARLIER IF REDEEMED. THE RIGHTS ARE SUBJECT TO REDEMPTION,
AT THE OPTION OF THE COMPANY AND UNDER CERTAIN OTHER CIRCUMSTANCES, AT $0.01 PER RIGHT (SUBJECT TO ADJUSTMENT), ON THE TERMS SET
FORTH OR REFERRED TO IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES AS PROVIDED IN THE RIGHTS AGREEMENT (AS REFERRED TO BELOW),
RIGHTS ISSUED TO OR BENEFICIALLY OWNED BY ACQUIRING PERSONS OR THEIR AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS SHALL BE NULL AND VOID AND MAY NOT BE TRANSFERRED TO ANY PERSON.

 

Rights Certificate

 

This certifies that _______________, or
registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof,
subject to the terms, provisions and conditions of the Rights Agreement dated as of August
29, 2018 (the “Rights Agreement”) between TSR, Inc. (the “Corporation”) and Continental Stock Transfer
& Trust Company, (the “Rights Agent”), to purchase from the Corporation at any time after the Distribution Date
(as such term is defined in the Rights Agreement) and prior to 5:00 p.m. (New York City time) on August 29, 2021 (or if the Distribution
Date shall have occurred before August 29, 2021, at the close of business on the 90th day following the Distribution Date) at the
office of the Rights Agent designated in the Rights Agreement for such purpose, or its successor as Rights Agent, in New York,
New York, one one-hundredth (1/100th) of a fully paid nonassessable share of Class A Preferred Stock, Series One, $1.00 par value
per share, of the Corporation (the “Preferred Stock”) at a purchase price of $24.78, as the same may from time to time
be adjusted in accordance with the Rights Agreement (the “Exercise Price”), upon presentation and surrender of this
Rights Certificate with the Form of Election to Purchase attached hereto duly executed.

 

As provided in the Rights Agreement, the
Exercise Price and the number of shares of Preferred Stock which may be purchased upon the exercise of the Rights evidenced by
this Rights Certificate are subject to modification and adjustment upon the happening of certain events and, upon the happening
of certain events, securities other than shares of Preferred Stock, or other property, may be acquired upon exercise of the Rights
evidenced by this Rights Certificate, as provided in the Rights Agreement.

 

    	 	B - 1	 

     

    

 

This Rights Certificate is subject to all
of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are incorporated herein
by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities of the Rights Agent, the Corporation and the holders of record of Rights
Certificates. Copies of the Rights Agreement are on file at the principal executive office of the Corporation.

 

This Rights Certificate, with or without
other Rights Certificates, upon surrender at the office of the Rights Agent designated in the Rights Agreement for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder
of record to purchase a like aggregate number of shares of Preferred Stock as the Rights evidenced by the Rights Certificate, or,
Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof, another Rights Certificate or Rights Certificates for the number
of whole Rights not exercised.

 

Subject to the provisions of the Rights
Agreement, the Rights evidenced by this Certificate may be redeemed by the Corporation at its option or under certain other circumstances
at a redemption price of $0.01 per Right. No fractional shares of Preferred Stock (other than fractions which are integral multiples
of one one-hundredth (1/100th) of a share) are required to be issued upon the exercise of any Right or Rights evidenced hereby,
and in lieu thereof the Corporation may cause depositary receipts to be issued and/or a cash payment may be made, as provided in
the Rights Agreement.

 

No holder of this Rights Certificate, as
such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Preferred Stock or of any other
securities of the Corporation which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Corporation
or any right to vote for the election of directors or upon any matter submitted to stockholders at a meeting thereof, or to give
or withhold consent to any corporate action or to receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced
by this Rights Certificate shall have been exercised as provided in the Rights Agreement. This Rights Certificate shall not be
valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.

 

    	 	B - 2	 

     

    

 

WITNESS the facsimile signature of the proper
officers of the Corporation and its corporate seal. Dated as of _____________________.

 

ATTEST:

 

	 	 	By:	 
	Secretary	 	Title:	 

 

Countersigned:

 

[RIGHTS AGENT]

 

	By:	 	 

 

    	 	B - 3	 

     

    

 

[Form of Reverse Side of Rights Certificate]

 

FORM OF ASSIGNMENT

 

(To be executed by the registered holder
if such holder desires to transfer the Rights Certificates.)

 

FOR VALUE RECEIVED ________________________________hereby
sells, assigns and transfers unto _________________________(Please print name and address of transferee) ___________________________________Rights
evidenced by this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute
and appoint ______________________________ Attorney to transfer the within Rights Certificate on the books of the within-named
Corporation, with full power of substitution.

 

Dated:________________________________

 

	 	 
	 	Signature

 

Signature Guaranteed:

 

    	 	B - 4	 

     

    

 

Certificate

 

The undersigned hereby certifies by checking
the appropriate boxes that:

 

(1) this
Rights Certificate [___] is [___] is not being sold, assigned or transferred by or on behalf of a Person who is or was an Acquiring
Person or an Associate or an Affiliate thereof (as such terms are defined in the Rights Agreement); and

 

(2) after
due inquiry and to the best knowledge of the undersigned, it [___] did [___] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement).

 

	Dated:___________________________	 	 
	 	 	Signature

 

NOTICE

 

The signature to the foregoing Assignment
and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration
or enlargement or any change whatsoever.

 

    	 	B - 5	 

     

    

 

FORM OF ELECTION TO PURCHASE

 

(To be executed if registered holder

desires to exercise the Rights Certificate.)

 

TO: ___________________

 

The undersigned hereby irrevocably elects
to exercise Rights represented by this Rights Certificate to purchase the shares of Preferred Stock issuable upon the exercise
of such Rights and requests that certificates for such share(s) be issued in the following name:

 

Please insert social security or other identifying
number: ________________________

____________________________________________________________________________

(Please print name and address)

 

If such number of Rights shall not be all
the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance remaining of such Rights shall be registered
in the name of and delivered to:

 

Please insert social security or other identifying
number: ________________________

____________________________________________________________________________

(Please print name and address)

 

Dated: _______________________

 

 

	 	 
	 	Signature
	 	(Signature must conform in all respects to name of holder as specified on the face of this Rights Certificate)

 

Signature Guaranteed

 

    	 	B - 6	 

     

    

 

EXHIBIT C

 

TO RIGHTS AGREEMENT

 

FORM OF CERTIFICATE OF DESIGNATIONS

OF

CLASS A PREFERRED STOCK, SERIES ONE

OF

TSR, INC.

 

I, Christopher Hughes, President and Chief
Executive Officer of TSR, Inc. (the “Corporation”), a corporation organized and existing under the General Corporation
Law of the State of Delaware (the “Act”), in accordance with provision 103 of the Act, DO HEREBY CERTIFY that: pursuant
to the authority conferred upon the Board of Directors by the Certificate of Incorporation of the Corporation, as amended, and
pursuant to the Act the Board of Directors on August 29, 2018 adopted
the following resolution which creates a series of thirty thousand (30,000) shares of Preferred Stock designated as Class A Preferred
Stock, Series One.

 

RESOLVED, that pursuant to the authority
vested in the Board of Directors of the Corporation in accordance with the provisions of its Certificate of Incorporation, as amended,
a series of Preferred Stock of the Corporation be, and hereby is, created and that the designation and amount thereof and the voting
powers, preferences and relative, participating, optional or other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:

 

Section 1. 
Designation and Amount. The shares of such series shall be designated as “Class A Preferred Stock, Series One”
(the “Series One Preferred Stock”) and the number of shares constituting such series shall be thirty thousand (30,000).

 

Section 2. 
Dividends and Distributions.

 

(A) Subject
to the provisions for adjustment hereinafter set forth, the holders of shares of Series One Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, (i) cash dividends
in an amount per share (rounded to the nearest cent) equal to 100 times the aggregate per share amount of all cash dividends declared
or paid on the Common Stock, $0.01 par value per share, of the Corporation (the “Common Stock”) and (ii) a preferential
cash dividend (the “Preferential Dividends”), if any, on the first day of March, June, September and December of each
year (each a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of Series One Preferred Stock, in an amount (except in the case of the first Quarterly
Dividend Payment Date if the date of the first issuance of Series One Preferred Stock is a date other than a Quarterly Dividend
Payment Date, in which case such payment shall be a prorated amount of such amount) equal to $50.00 per share of Series One Preferred
Stock less the per share amount of all cash dividends declared on the Series One Preferred Stock pursuant to clause (i) of this
sentence since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series One Preferred Stock. In the event the Corporation
shall, at any time after the issuance of any share or fraction of a share of Series One Preferred Stock, make any distribution
on the shares of Common Stock of the Corporation, whether by way of a dividend or a reclassification of stock, a recapitalization,
reorganization or partial liquidation of the Corporation or otherwise, which is payable in cash or any debt security, debt instrument,
real or personal property or any other property (other than cash dividends subject to the immediately preceding sentence, a distribution
of shares of Common Stock or other capital stock of the Corporation or a distribution of rights or warrants to acquire any such
share, including any debt security convertible into or exchangeable for any such share, at a price less than the Fair Market Value
(as hereinafter defined) of such share), then, and in each such event the Corporation shall simultaneously pay on each then outstanding
share of Series One Preferred Stock of the Corporation a distribution, in like kind, of 100 times such distribution paid on a share
of Common Stock (subject to the provisions for adjustment hereinafter set forth). The dividends and distributions on the Series
One Preferred Stock to which holders thereof are entitled pursuant to clause (i) of the first sentence of this paragraph and pursuant
to the second sentence of this paragraph are hereinafter referred to as “Participating Dividends” and the multiple
of such cash and noncash dividends on the Common Stock applicable to the determination of the Participating Dividends, which shall
be 100 initially but shall be adjusted from time to time as hereinafter provided, is hereinafter referred to as the “Dividend
Multiple.” In the event the Corporation shall at any time after August
29, 2018 (the “Effective Date”) declare or pay any dividend or make any distribution on Common Stock payable
in shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding
shares of Common Stock into a greater or lesser number of shares of Common Stock, or issue any of its capital stock in a reclassification
of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Corporation
is the continuing or surviving corporation), then in each such case the Dividend Multiple thereafter applicable to the determination
of the amount of Participating Dividends which holders of shares of Series One Preferred Stock shall be entitled to receive shall
be the Dividend Multiple applicable immediately prior to such event multiplied by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.

 

    	 	C - 1	 

     

    

 

(B) The
Corporation shall declare each Participating Dividend at the same time it declares any cash or non-cash dividend or distribution
on the Common Stock in respect of which a Participating Dividend is required to be paid. No cash or noncash dividend or distribution
on the Common Stock in respect of which a Participating Dividend is required to be paid shall be paid or set aside for payment
on the Common Stock unless a Participating Dividend in respect of such dividend or distribution on the Common Stock shall be simultaneously
paid, or set aside for payment, on the Series One Preferred Stock.

 

(C) Preferential
Dividends shall begin to accrue on outstanding shares of Series One Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issuance of any shares of Series One Preferred Stock. Accrued but unpaid Preferential Dividends shall cumulate
but shall not bear interest. Preferential Dividends paid on the shares of Series One Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.

 

Section 3. 
Voting Rights. The holders of shares of Series One Preferred Stock shall have the following voting rights:

 

(A) Subject
to the provisions for adjustment hereinafter set forth, each share of Series One Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. The number of votes which a holder of Series
One Preferred Stock is entitled to cast, as the same may be adjusted from time to time as hereinafter provided, is hereinafter
referred to as the “Vote Multiple.” In the event the Corporation shall at any time after the Effective Date declare
or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or split or a combination, consolidation
or reverse split of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, or issue
any of its capital stock in a reclassification of the Common Stock (including any such reclassification in connection with a consolidation
or merger in which the Corporation is the continuing or surviving corporation), then in each such case the Vote Multiple thereafter
applicable to the determination of the number of votes per share to which holders of shares of Series One Preferred Stock shall
be entitled after such event shall be the Vote Multiple immediately prior to such event multiplied by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number
of shares of Common Stock that were outstanding immediately prior to such event.

 

(B) Except
as otherwise provided herein, in the Certificate of Incorporation, as amended, or Amended and Restated By-Laws, as amended, the
holders of shares of Series One Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.

 

(C) In
the event that the Preferential Dividends accrued on the Series One Preferred Stock for four or more quarterly dividend periods,
whether consecutive or not, shall not have been declared and paid or set apart for payment, the holders of record of Preferred
Stock of the Corporation of all series (including the Series One Preferred Stock), other than any series in respect of which such
right is expressly withheld by the Certificate of Incorporation, as amended, or the authorizing resolutions included in the Certificate
of Designations therefor, shall have the right, at the next meeting of stockholders called for the election of directors, to elect
two members to the Board of Directors, which directors shall be in addition to the number required by the Amended and Restated
By-Laws prior to such event, to serve until the next Annual Meeting and until their successors are elected and qualified or their
earlier resignation, removal or incapacity or until such earlier time as all accrued and unpaid Preferential Dividends upon the
outstanding shares of Series One Preferred Stock shall have been paid (or irrevocably set aside for payment) in full. The holders
of shares of Series One Preferred Stock shall continue to have the right to elect directors as provided by the immediately preceding
sentence until all accrued and unpaid Preferential Dividends upon the outstanding shares of Series One Preferred Stock shall have
been paid (or set aside for payment) in full. Such directors may be removed and replaced by such stockholders, and vacancies in
such directorships may be filled only by such stockholders (or by the remaining directors elected by such stockholders, if there
be any) in the manner permitted by law; provided, however, that any such action by stockholders shall be taken at a meeting of
stockholders and shall not be taken by written consent thereto.

 

    	 	C - 2	 

     

    

 

(D) Except
as otherwise required by the Certificate of Incorporation, as amended, or the Amended and Restated By-laws, as amended, or set
forth herein, holders of Series One Preferred Stock shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for the taking of any corporate
action.

 

Section 4. Certain Restrictions.

 

(A) Whenever
Preferential Dividends or Participating Dividends are in arrears or the Corporation shall be in default of payment thereof, thereafter
and until all accrued and unpaid Preferential Dividends and Participating Dividends, whether or not declared, on shares of Series
One Preferred Stock outstanding shall have been paid or set aside for payment in full, and in addition to any and all other rights
which any holder of shares of Series One Preferred Stock may have in such circumstances, the Corporation shall not:

 

(i) declare
or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration, any shares
of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series One Preferred Stock;

 

(ii) declare
or pay dividends on or make any other distributions on any shares of stock ranking on a parity as to dividends with the Series
One Preferred Stock, unless dividends are paid ratably on the Series One Preferred Stock and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled if the full
dividends accrued thereon were to be paid;

 

(iii) except
as permitted by subparagraph (iv) of this paragraph 4(A), redeem or purchase or otherwise acquire for consideration shares of any
stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series One Preferred
Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange
for shares of any stock of the Corporation ranking junior (both as to dividends and upon liquidation, dissolution or winding up)
to the Series One Preferred Stock; or

 

(iv) purchase
or otherwise acquire for consideration any shares of Series One Preferred Stock, or any shares of stock ranking on a parity with
the Series One Preferred Stock (either as to dividends or upon liquidation, dissolution or winding up), except in accordance with
a purchase offer made to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith
will result in fair and equitable treatment among the respective series or classes.

 

(B) The
Corporation shall not permit any Subsidiary (as hereinafter defined) of the Corporation to purchase or otherwise acquire for consideration
any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise
acquire such shares at such time and in such manner. A “Subsidiary” of the Corporation shall mean any corporation or
other entity of which securities or other ownership interests having ordinary voting power sufficient to elect a majority of the
Board of Directors or other persons performing similar functions are Beneficially Owned, directly or indirectly, by the Corporation
or by any corporation or other entity that is otherwise controlled by the Corporation.

 

    	 	C - 3	 

     

    

 

(C) The
Corporation shall not issue any shares of Series One Preferred Stock except upon exercise of Rights issued pursuant to that certain
Rights Agreement dated as of August 29, 2018 between the Corporation
and Continental Stock Transfer & Trust Company, a copy of which is on file with the Secretary of the Corporation at its principal
executive office and shall be made available to stockholders of record without charge upon written request therefor addressed to
said Secretary. Notwithstanding the foregoing sentence, nothing contained in the provisions hereof shall prohibit or restrict the
Corporation from issuing for any purpose, any series of Preferred Stock with rights and privileges similar to, different from,
or greater than, those of the Series One Preferred Stock.

 

Section 5. 
Reacquired Shares. Any shares of Series One Preferred Stock purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares upon their retirement
and cancellation shall become authorized but unissued shares of Preferred Stock, without designation as to series, and such shares
may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors.

 

Section 6. 
Liquidation, Dissolution or Winding Up. Upon any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, no distribution shall be made (i) to the holders of shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series One Preferred Stock unless the holders of shares of Series One Preferred
Stock shall have received, subject to adjustment as hereinafter provided, (A) $100 ($1.00 per one one-hundredth of a share) plus
an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment,
or (B) if greater than the amount specified in clause (i)(A) of this sentence, an amount equal to 100 times the aggregate amount
to be distributed per share to holders of Common Stock, as the same may be adjusted as hereinafter provided, and (ii) to the holders
of stock ranking on a parity upon liquidation, dissolution or winding up with the Series One Preferred Stock, unless simultaneously
therewith distributions are made ratably on the Series One Preferred Stock and all other shares of such parity stock in proportion
to the total amounts to which the holders of shares of Series One Preferred Stock are entitled under clause (i)(A) of this sentence
and to which the holders of such parity shares are entitled, in each case upon such liquidation, dissolution or winding up. The
amount to which holders of Series One Preferred Stock may be entitled upon liquidation, dissolution or winding up of the Corporation
pursuant to clause (i)(B) of the foregoing sentence is hereinafter referred to as the “Participating Liquidation Amount”
and the multiple of the amount to be distributed to holders of shares of Common Stock upon the liquidation, dissolution or winding
up of the Corporation applicable pursuant to said clause to the determination of the Participating Liquidation Amount, as said
multiple may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the “Liquidation Multiple.”
In this event the Corporation shall at any time after the Effective Date declare or pay any dividend on Common Stock payable in
shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding shares
of Common Stock into a greater or lesser number of shares of Common Stock, or issue any of its capital stock in a reclassification
of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Corporation
is the continuing or surviving corporation, then in each such case the Liquidation Multiple thereafter applicable to the determination
of the Participating Liquidation Amount to which holders of Series One Preferred Stock shall be entitled after such event shall
be the Liquidation Multiple applicable immediately prior to such event multiplied by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.

 

    	 	C - 4	 

     

    

 

Section 7. 
Certain Reclassifications and Other Events.

 

(A) In
the event that holders of shares of Common Stock of the Corporation receive after the Effective Date, in respect of their shares
of Common Stock any share of capital stock of the Corporation (other than any share of Common Stock of the Corporation), whether
by way of reclassification, recapitalization, reorganization, dividend or other distribution or otherwise (a “Transaction”),
then, and in each such event the dividend rights, voting rights and rights upon the liquidation, dissolution or winding up of the
Corporation of the shares of Series One Preferred Stock shall be adjusted so that after such event the holders of Series One Preferred
Stock shall be entitled, in respect of each share of Series One Preferred Stock held, in addition to such rights in respect thereof
to which such holder was entitled immediately prior to such adjustment, to (i) such additional dividends as equal the Dividend
Multiple in effect immediately prior to such Transaction multiplied by the additional dividends which the holder of a share of
Common Stock shall be entitled to receive by virtue of the receipt in the Transaction of such capital stock, (ii) such additional
voting rights as equal the Vote Multiple in effect immediately prior to such Transaction multiplied by the additional voting rights
which the holder of a share of Common Stock shall be entitled to receive by virtue of the receipt in the Transaction of such capital
stock and (iii) such additional distributions upon liquidation, dissolution or winding up of the Corporation as equal the Liquidation
Multiple in effect immediately prior to such Transaction multiplied by the additional amount which the holder of a share of Common
Stock shall be entitled to receive upon liquidation, dissolution or winding up of the Corporation by virtue of the receipt in the
Transaction of such capital stock, as the case may be, all as provided by the terms of such capital stock.

 

(B) In
the event that holders of shares of Common Stock of the Corporation receive after the Effective Date, in respect of their shares
of Common Stock any right or warrant to purchase Common Stock (including as such a right, for all purposes of this paragraph, any
security convertible into or exchangeable for Common Stock) at a purchase price per share less than the Fair Market Value (as hereinafter
defined) of a share of Common Stock on the date of issuance of such right or warrant, then and in each such event the dividend
rights, voting rights and rights upon the liquidation, dissolution or winding up of the Corporation of the shares of Series One
Preferred Stock shall each be adjusted so that after such event the Dividend Multiple, the Vote Multiple and the Liquidation Multiple
shall each be the product of the Dividend Multiple, the Vote Multiple and the Liquidation Multiple, as the case may be, in effect
immediately prior to such event multiplied by a fraction the numerator of which shall be the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the maximum number of shares of Common Stock which could be acquired
upon exercise in full of all such rights or warrants and the denominator of which shall be the number of shares of Common Stock
outstanding immediately before such issuance of rights or warrants plus the number of shares of Common Stock which could be purchased,
at the Fair Market Value of the Common Stock at the time of such issuance, by the maximum aggregate consideration payable upon
exercise in full of all such rights or warrants.

 

    	 	C - 5	 

     

    

 

(C) In
the event that holders of shares of Common Stock of the Corporation receive after the Effective Date in respect of their shares
of Common Stock any right or warrant to purchase capital stock of the Corporation (other than shares of Common Stock), including
as such a right, for all purposes of this paragraph, any security convertible into or exchangeable for capital stock of the Corporation,
(other than Common Stock), at a purchase price per share less than the Fair Market Value of such shares of capital stock on the
date of issuance of such right or warrant, then and in each such event the dividend rights, voting rights and rights upon liquidation,
dissolution or winding up of the Corporation of the shares of Series One Preferred Stock shall each be adjusted so that after such
event each holder of a share of Series One Preferred Stock shall be entitled, in respect of each share of Series One Preferred
Stock held, in addition to such rights in respect thereof to which such holder was entitled immediately prior to such event, to
receive (i) such additional dividends as equal the Dividend Multiple in effect immediately prior to such event multiplied, first,
by the additional dividends to which the holder of a share of Common Stock shall be entitled upon exercise of such right or warrant
by virtue of the capital stock which could be acquired upon such exercise and multiplied again by the Discount Fraction (as hereinafter
defined) and (ii) such additional voting rights as equal the Vote Multiple in effect immediately prior to such event multiplied,
first, by the additional voting rights to which the holder of a share of Common Stock shall be entitled upon exercise of such right
or warrant by virtue of the capital stock which could be acquired upon such exercise and multiplied again by the Discount Fraction
and (iii) such additional distribution upon liquidation, dissolution or winding up of the Corporation as equal the Liquidation
Multiple in effect immediately prior to such event multiplied, first, by the additional amount which the holder of a share of Common
Stock shall be entitled to receive upon liquidation, dissolution or winding up of the Corporation upon exercise of such right or
warrant by virtue of the capital stock which could be acquired upon such exercise and multiplied again by the Discount Fraction.
For purposes of this paragraph, the “Discount Fraction” shall be a fraction the numerator of which shall be the difference
between the Fair Market Value of a share of the capital stock subject to a right or wan-ant distributed to holders of shares of
Common Stock of the Corporation as contemplated by this paragraph immediately after the distribution thereof and the purchase price
per share for such share of capital stock pursuant to such right or warrant and the denominator of which shall be the Fair Market
Value of a share of such capital stock immediately after the distribution of such right or warrant.

 

(D) For
purposes of this Certificate of Designations, the “Fair Market Value” of a share of capital stock of the Corporation
(including a share of Common Stock) on any date shall be deemed to be the average of the daily closing price per share thereof
over the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that,
in the event that such Fair Market Value of any such share of capital stock is determined during a period which includes any date
that is within 30 Trading Days after (i) the ex-dividend date for a dividend or distribution on stock payable in shares of such
stock or securities convertible into shares of such stock, or (ii) the effective date of any subdivision, split, combination, consolidation,
reverse stock split or reclassification of such stock, then, and in each such case, the Fair Market Value shall be appropriately
adjusted by the Board of Directors of the Corporation to take into account ex-dividend or post-effective date trading. The closing
price for any day shall be the last sale price, regular way, or, in case, no such sale takes place on such day, the average of
the closing bid and asked prices, regular way as reported in the applicable transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares are listed or admitted to trading or, if the shares are
not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average
of the high bid and low asked prices in the., over-the counter market, as reported by the NASDAQ Capital Market or such other system
then in use, or if on any such date the shares are not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the shares selected by the Board of Directors of the Corporation.
The term “Trading Day” shall mean a day in which the principal national securities exchange on which the shares are
listed or admitted to trading is open for the transaction of business or, if the shares are not listed or admitted to trading on
any national securities exchange, on which the any such national securities exchange as may be selected by the Board of Directors
of the Corporation is open. If the shares are not publicly held or not so listed or traded on any day within the period of 30 Trading
Days applicable to the determination of Fair Market Value thereof as aforesaid, “Fair Market Value” shall mean the
fair market value thereof per share as determined in good faith by the Board of Directors of the Corporation. In either case referred
to in the foregoing sentence, the determination of Fair Market Value shall be described in a statement filed with the Secretary
of the Corporation.

 

    	 	C - 6	 

     

    

 

Section 8. 
Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case each outstanding share of Series One Preferred Stock shall at the same time be similarly exchanged
for or changed into the aggregate amount of stock, securities, cash and/or other property (payable in like kind), as the case may
be, for which or into which each share of Common Stock is changed or exchanged multiplied by the highest of the Vote Multiple,
the Dividend Multiple or the Liquidation Multiple in effect immediately prior to such event.

 

Section 9. 
Effective Time of Adjustments.

 

(A) Adjustments
to the Series One Preferred Stock required by the provisions hereof shall be effective as of the time at which the event requiring
such adjustments occurs.

 

(B) The
Corporation shall give prompt written notice to each holder of a share of Series One Preferred Stock of the effect of any adjustment
to the voting rights, dividend rights or rights upon liquidation, dissolution or winding up of the Corporation of such shares required
by the provisions hereof. Notwithstanding the foregoing sentence, the failure of the Corporation to give such notice shall not
affect the validity of or the force or effect of or the requirement for such adjustment.

 

Section 10. No Redemption. The
shares of Series One Preferred Stock shall not be redeemable at the option of the Corporation or any holder thereof.
Notwithstanding the foregoing sentence of this Section, the Corporation may acquire shares of Series One Preferred Stock in
any other manner permitted by law, the provisions hereof and the Certificate of Incorporation, as amended, of the
Corporation.

 

Section 11. Ranking. Unless otherwise
provided in the Certificate of Incorporation, as amended, of the Corporation or a Certificate of Designations relating to a series
of preferred stock of the Corporation established after the issuance of any share of Series One Preferred Stock or any right,
warrant, or option providing for the issuance thereof, the Series One Preferred Stock shall rank, as to the payment of dividends
and the distribution of assets on liquidation, dissolution or winding up, (i) junior to all other series of the Corporation’s
Preferred Stock and (iv) senior to the Common Stock.

 

Section 12. Amendment. The provisions
hereof and the Certificate of Incorporation, as amended, of the Corporation shall not be amended in any manner which would adversely
affect the rights, privileges or powers of the Series One Preferred Stock without, in addition to any other vote of stockholders
required by law, the affirmative vote of the holders of two-thirds or more of the outstanding shares of Series One Preferred Stock,
voting together as a single class.

 

Section 13. Fractional Shares. Series
One Preferred Stock may be issued in fractions of a share (in one one-hundredths (1/100th) of a share and integral multiples thereof)
that shall entitle the holder thereof, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders of shares of Series One Preferred Stock.

 

IN WITNESS WHEREOF, I have executed
and subscribed this Certificate of Designations and do affirm the foregoing as true under the penalties of perjury this 29th
day of August, 2018.

 

	 	 	 
	 	Name:	Christopher Hughes
	 	Title:	Chief Executive Officer

 

 

C -7EX-10.12

 CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
[********] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 

Exhibit 10.12 

EXECUTION VERSION 

LICENSE AND COLLABORATION AGREEMENT 

This LICENSE AND COLLABORATION
AGREEMENT (this “Agreement”) is made as of April 25, 2018 (the “Effective Date”), by and between ENTASIS
THERAPEUTICS HOLDINGS INC., a Delaware corporation, having a place of business at 35 Gatehouse Drive, Waltham, MA 02451, United States of America (“Entasis”),
and Zai Lab (Shanghai) Co., Ltd., a limited company organized under the laws of the PRC, having a place of business at 4560 Jinke Rd, Bldg. 1, 4/F, Pudong, Shanghai, China, 201210 (“Zai”). Entasis
and Zai are referred to in this Agreement individually as a “Party” and collectively as the “Parties.” 

RECITALS 

WHEREAS, Entasis is a clinical stage pharmaceutical company and owns or controls rights to Licensed
Products (as defined herein); 
 WHEREAS, Zai is a pharmaceutical company having experience in the
development, manufacture and commercialization of pharmaceutical products in the Territory; and 

WHEREAS, Zai wishes to obtain an exclusive license from Entasis to develop, import and commercialize
Licensed Products in the Territory, and Entasis is willing to grant such a license and to supply Licensed Products to Zai for the Territory, all in accordance with the terms and conditions set forth herein. 

AGREEMENT 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants
contained herein, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows: 
 ARTICLE 1 

DEFINITIONS 
 Unless
specifically set forth to the contrary herein, the following terms, whether used in the singular or plural, have the respective meanings set forth below: 

1.1 “Active Ingredient” means the clinically active material(s) that provide pharmacological activity in a
pharmaceutical product (excluding, for the avoidance of doubt, formulation components such as coatings, stabilizers, excipients or solvents, adjuvants or controlled release technologies). 

 CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
[********] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 

 

 1.2 “Adverse Event” means any unwanted or harmful medical
occurrence in a patient or subject who is administered a Licensed Product, including any undesirable sign (including abnormal laboratory findings of clinical concern), symptom or disease temporally associated with the use of Licensed Products. 

1.3 “Affiliate” means, with respect to a Party, any entity that directly or indirectly controls, is controlled by or
is under common control with such Party. As used in this Section 1.3, “control” (and, with correlative meanings, the terms “controlled by” and “under common control with”) means, in the case of a corporation, the
ownership of fifty percent (50%) or more of the outstanding voting securities thereof or, in the case of any other type of entity, an interest that results in the ability to direct or cause the direction of the management and policies of such party
or the power to appoint fifty percent (50%) or more of the members of the governing body of the party or, where ownership of fifty percent (50%) or more of such securities or interest is prohibited by law, ownership of the maximum amount legally
permitted. 
 1.4 “Agreement” has the meaning set forth in the preamble. 

1.5 “Alliance Managers” has the meaning set forth in Section 3.4. 

1.6 “Anti-Corruption Laws” has the meaning set forth on Section 11.5(a)(i). 

1.7 “Applicable Laws” means all statutes, ordinances, regulations, rules or orders of any kind whatsoever of
any Governmental Authority that may be in effect from time to time and applicable to the activities contemplated by this Agreement. 

1.8 [********] 

1.9 “Business Day” means a day other than Saturday, Sunday or any day on which banks located in the U.S. or the
PRC are authorized or obligated to close. Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. 

1.10 “Calendar Quarter” means the respective periods of three consecutive calendar months ending on
March 31, June 30, September 30 and December 31. 
 1.11 “Calendar Year” means each twelve
(12)-month period commencing on January 1. 
 1.12 “CFDA” means the China Food and Drug Administration, and
local counterparts thereto, and any successor agency or authority thereto having substantially the same function. 
 1.13
“cGMP” means all applicable current Good Manufacturing Practices including, as applicable, (a) the principles detailed in the U.S. Current Good Manufacturing Practices, 21 C.F.R. Parts 4, 210, 211, 601, 610 and 820, (b)
European Directive 2003/94/EC and Eudralex 4, (c) the principles detailed in the ICH Q7 guidelines, and (d) the equivalent Applicable Laws in any relevant country or region, each as may be amended and applicable from time to time. 

  
 2 

 CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
[********] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 

 

 1.14 “Change of Control” means, with respect to a Party: (a) the
sale of all or substantially all of its assets or all of its assets relating to the Licensed Products; (b) a merger, reorganization or consolidation involving such Party in which the holders of the voting securities of such Party outstanding
immediately prior thereto cease to beneficially own at least fifty percent (50%) of the combined voting power of the surviving entity, directly or indirectly, immediately after such merger, reorganization or consolidation; or (c) a transaction
in which an entity or individual, or group of entities and/or individuals acting in concert, acquires more than fifty percent (50%) of the voting equity securities of such Party, other than a bona fide financing of such Party. 

1.15 “Clinical Supply Agreement” has the meaning set forth in Section 7.1(e). 

1.16 “Clinical Trial” means any clinical testing of Licensed Products in human subjects in the Territory. 

1.17 “CMC” means Chemistry, Manufacturing and Controls. 

1.18 “Combination Product” has the meaning set forth in Section 1.78. 

1.19 “Commercialization” or “Commercialize” means all activities directed to marketing, distribution,
detailing or selling of pharmaceutical products (including importing and exporting activities in connection therewith). 
 1.20
“Commercialization Plan” means the written plan for the Commercialization of Licensed Products in the Field in the Territory. 

1.21 “Commercially Reasonable Efforts” means, with respect to a Party’s obligations or activities
under this Agreement, the carrying out of such obligations and activities in an active and ongoing program, which, for the avoidance of doubt, includes activities directed to addressing requirements of Regulatory Authorities (including clinical
holds), supply failures, or any other technical issues, using such efforts and resources as normally used by a similarly situated company for a product discovered or identified internally, which product is at a similar stage in its development or
product life and is of similar market potential and intellectual property protection, taking into account all relevant factors, including the competitiveness of the marketplace and the proprietary position, regulatory status, and relative safety and
efficacy of such product. 
 1.22 “Commercial Supply Agreement” has the meaning set forth in Section 7.1(e).

 1.23 “Competing Product” has the meaning set forth in Section 2.7. 

  
 3 

 CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
[********] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 

 

 1.24 “Compound” means, individually or collectively, each of ETX2514,
ETX2514SUL, and subject to the JSC’s approval of a Development Plan for an Imipenem Combination pursuant to the requirements set forth in Section 5.5, Imipenem. 

1.25 “Confidential Information” means all confidential information of the Disclosing Party or its Affiliates,
regardless of its form or medium as provided to the Receiving Party or its Affiliates in connection with this Agreement; provided that, Confidential Information shall not include any information that the Receiving Party can show by competent
evidence: (a) is already known to the Receiving Party at the time it is disclosed to the Receiving Party by the Disclosing Party without an obligation of confidentiality and not through a prior disclosure by the Disclosing Party, (b) is or
becomes generally known to the public through no act or omission of the Receiving Party in violation of the terms of this Agreement, (c) has been lawfully received by the Receiving Party from a Third Party without restriction on its disclosure
and without, to the knowledge of the Receiving Party, a breach by such Third Party of an obligation of confidentiality to the Disclosing Party, or (d) has been independently developed by the Receiving Party without use of or reference to the
Confidential Information of the Disclosing Party. 
 1.26 “Continuing Technology Transfer” has the
meaning set forth in Section 4.1. 
 1.27 “Controlled” or “Controls” means, with respect to
any Know-How, Patents or other intellectual property rights, that a Party has the legal authority or right (whether by ownership, license or otherwise) to grant to the other Party a license, sublicense, access
or right to use (as applicable) under such Know-How, Patents, or other intellectual property rights, on the terms and conditions set forth herein, in each case without breaching the terms of any agreement with
a Third Party. 
 1.28 “Cover” means, with respect to a claim of a Patent and a Licensed Product, that such claim
would be infringed, absent a license, by the use, offer for sale, sale or importation of such Licensed Product (considering claims of patent applications to be issued as then pending). 

1.29 “CTA” means a Clinical Trial Application submitted to the CFDA for approval to conduct Clinical Trials. 

1.30 “Delay Period” means [********]. 

1.31 “Develop” or “Development” or “Developing” means preclinical and clinical drug
or biological development activities, including test method development, stability testing, toxicology, formulation, statistical analysis, preclinical and clinical studies and regulatory affairs, making Regulatory Submissions and seeking and
obtaining Regulatory Approval. 
 1.32 “Development Plan” has the meaning set forth in Section 5.2. 

1.33 “Disclosing Party” has the meaning set forth in Section 10.1(a). 

  
 4 

 CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
[********] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 

 

 1.34 “Dispute” has the meaning set forth in Section 15.1. 

1.35 “Divestiture” has the meaning set forth in Section 2.7(b)(ii). 

1.36 “Dollars” means U.S. dollars, and “$” will be interpreted accordingly. 

1.37 “Effective Date” has the meaning set forth in the preamble. 

1.38 “Entasis” has the meaning set forth in the preamble. 

1.39 “Entasis Indemnitees” has the meaning set forth in Section 12.1. 

1.40 “ETX2514” means the compound designated on Exhibit 1.40 as ETX2514 and isomers, racemates, salts, solvates
and hydrates thereof. 
 1.41 “ETX2514SUL” means the compound designated on Exhibit 1.41 as ETX2514SUL and
isomers, racemates, salts, solvates and hydrates thereof. 
 1.42 “Executive Officers” has the meaning set
forth in Section 3.1(e). 
 1.43 “FDA” means the U.S. Food and Drug Administration and successor agency. 

1.44 “Field” means all human diagnostic, prophylactic and therapeutic uses. 

1.45 “First Commercial Sale” means, with respect to a Licensed Product, the first arm’s length sale
of such Licensed Product to a Third Party in a region of the Territory by Zai, its Affiliate(s) or Sublicensee(s) for use or consumption in such region following Regulatory Approval. Sales prior to receipt of Regulatory Approval, such as so-called “treatment IND sales,” “named patient sales” and “compassionate use sales” are not a First Commercial Sale in that region. 

1.46 “FTE” means the equivalent of the work of a full-time individual for a [********]. 

1.47 “FTE Rate” means a rate of [********] ([********]) per FTE per year, to be pro-rated on an hourly basis of [********] ([********]) per FTE per hour, assuming [********] ([********]) hours per year for an FTE. 

1.48 “Fully Burdened Manufacturing Costs” means, with respect to any Licensed Product supplied by or on behalf of
Entasis to Zai hereunder: 
 (a) if such Licensed Product (or any precursor or intermediate thereof) is manufactured by a Third Party
manufacturer, (i) the amount paid by Entasis to such Third Party to acquire such Licensed Product, plus (ii) any internal costs incurred by Entasis in association with such manufacturing, including for reasonable overhead, process
development, project management (at the FTE Rate), manufacturing oversight (including at the FTE Rate for any Entasis person-in-plant), and quality control and
assurance; or 

  
 5 

 CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
[********] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 

 

 (b) if such Licensed Product (or any precursor or intermediate thereof) is
manufactured by Entasis or its Affiliates, the actual, fully burdened cost of such manufacturing, including the cost of raw materials, direct labor and benefits, a proportionate share of indirect manufacturing costs, including intellectual property
acquisition and licensing costs (including royalties, upfront fees) paid by Entasis with respect to the manufacture of such Licensed Product, and all other reasonable and customary manufacturing-related costs for such Licensed Product, including
actual product inventory write-offs, factory, plant or equipment start-up or start-up amortization costs, scale-up expenses, and
freight in/out and sales and excise taxes imposed thereon, customs and duty and charges levied by government authorities, and all costs of packaging. Such fully burdened costs shall be calculated in accordance with GAAP. 

1.49 “GAAP” means U.S. generally accepted accounting principles, consistently applied. 

1.50 “GCP” means all applicable Good Clinical Practice standards for the design, conduct, performance, monitoring,
auditing, recording, analyses and reporting of clinical trials, including, as applicable (a) as set forth in the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use Harmonized
Tripartite Guideline for Good Clinical Practice (CPMP/ICH/135/95) and any other guidelines for good clinical practice for trials on medicinal products in the Territory, (b) the Declaration of Helsinki (2004) as last amended at the 52nd
World Medical Association in October 2000 and any further amendments or clarifications thereto, (c) U.S. Code of Federal Regulations Title 21, Parts 50 (Protection of Human Subjects), 56 (Institutional Review Boards) and 312 (Investigational
New Drug Application), as may be amended from time to time, and (d) the equivalent Applicable Laws in the region in the Territory, each as may be amended and applicable from time to time and in each case, that provide for, among other things,
assurance that the clinical data and reported results are credible and accurate and protect the rights, integrity, and confidentiality of trial subjects. 

1.51 “Generic Product” means, with respect to a Licensed Product in a particular regulatory jurisdiction, any
pharmaceutical product that (a) (i) contains the same active pharmaceutical ingredients as such Licensed Product and is approved by the Regulatory Authority in such country based on reference to data contained in an earlier regulatory filing;
or (ii) is A Rated (defined below) with respect to such Licensed Product or otherwise approved by the Regulatory Authority in such country as a substitutable generic for such Licensed Product; and (b) is sold in such jurisdiction by a
Third Party that is not a Sublicensee and did not purchase such product or its active pharmaceutical ingredients from Zai or its Affiliates or Sublicensees. For purposes of this definition, “A Rated” means
“therapeutically equivalent” as determined by the CFDA or the applicable Regulatory Authority. 

  
 6 

 CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
[********] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 

 

 1.52 “Global Brand Elements” has the meaning set forth
in Section 8.5. 
 1.53 “GLP” means all applicable Good Laboratory Practice standards, including, as
applicable, as set forth in the then current good laboratory practice standards promulgated or endorsed by the U.S. Food and Drug Administration as defined in 21 C.F.R. Part 58, or the equivalent Applicable Laws in the region in the Territory, each
as may be amended and applicable from time to time. 
 1.54 “Governmental Authority” means any court,
commission, authority, department, ministry, official or other instrumentality of, or being vested with public authority under any law of, any country, region, state or local authority or any political subdivision thereof, or any association of
countries. 
 1.55 “ICC” has the meaning set forth in Section 15.4(a). 

1.56 “Imipenem” means the compound with the structure described on Exhibit 1.56, an intravenous ß-lactam
antibiotic, and any modifications, derivatives or modifications of the foregoing. 
 1.57 “Imipenem
Combination” has the meaning set forth in Section 5.5(a). 
 1.58 “Indemnifying Party” has the
meaning set forth in Section 12.3. 
 1.59 “Indemnitee” has the meaning set forth in Section 12.3. 

1.60 “Initial Development Plan” has the meaning set forth in Section 5.2. 

1.61 “Initial FDA Approval” means, with respect to a Licensed Product, the first Regulatory Approval for such Licensed
Product by FDA. 
 1.62 “Initial Technology Transfer” has the meaning set forth in Section 4.1.

 1.63 “Invention” means any inventions, process, method, composition of matter, article of manufacture, discovery
or finding, patentable or otherwise, that is invented or generated as a result of a Party exercising its rights or carrying out its obligations under this Agreement, whether directly or via its Affiliates, Sublicensees, agents or contractors,
including all rights, title and interest in and to the intellectual property rights therein. 
 1.64 “JCC” has the
meaning set forth in Section 3.3(b). 
 1.65 “JDC” has the meaning set forth in Section 3.3(b). 

1.66 “Joint Inventions” has the meaning set forth in Section 13.1(a). 

1.67 “Joint Patents” has the meaning set forth in Section 13.1(a). 

  
 7 

 CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
[********] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 

 

 1.68 “JSC” has the meaning set forth in Section 3.1(a). 

1.69 “Know-How” means any proprietary scientific or technical information,
results and data of any type whatsoever, in any tangible or intangible form whatsoever, including databases, safety information, practices, methods, techniques, specifications, formulations, formulae, knowledge,
know-how, skill, experience, test data including pharmacological, medicinal chemistry, biological, chemical, biochemical, toxicological and clinical test data, analytical and quality control data, stability
data, studies and procedures, and manufacturing process and development information, results and data. 
 1.70 “Lead
Product” means the pharmaceutical preparation of ETX2514SUL with the composition set forth on Exhibit 1.70, in any presentation or formulation. 

1.71 “Licensed Know-How” means any and all Know-How that is Controlled by Entasis or its Affiliates as of the Effective Date or during the Term that is necessary or useful for the Development, Manufacture or Commercialization of Licensed Products in the
Field in the Territory. Notwithstanding the foregoing, if any Third Party becomes an Affiliate of Entasis after the Effective Date, Licensed Know-How will exclude any proprietary technology, Know-How and data Controlled by such Third Party before such Third Party became Entasis’s Affiliate. 

1.72 “Licensed Patents” means any and all Patents, including composition of matter and method of use patents,
that are Controlled by Entasis or its Affiliates as of the Effective Date or during the Term that are necessary or useful for the Development, Manufacture or Commercialization of Licensed Products in the Field in the Territory. Licensed Patents
existing as of the Effective Date are set forth in Exhibit 1.72. Notwithstanding the foregoing, if any Third Party becomes an Affiliate of Entasis after the Effective Date, Licensed Patents will exclude any Patents Controlled by such Third
Party before such Third Party became Entasis’s Affiliate. 
 1.73 “Licensed Product” means any
pharmaceutical product containing the Compound, either (a) as the sole Active Ingredient or (b) together with other Active Ingredients agreed in accordance with Section 5.5 of this Agreement or as otherwise approved by Entasis in
writing. 
 1.74 “Licensed Technology” means the Licensed Know-How
and Licensed Patents. 
 1.75 “Losses” has the meaning set forth in Section 12.1. 

1.76 “Manufacture” or “Manufacturing” means all activities related to the synthesis, making,
production, processing, purifying, formulating, filling, finishing, packaging, labeling, shipping, and holding of Compound, Licensed Product, or any intermediate thereof, including process and formulation development, process qualification and
validation, scale-up, pre-clinical, clinical and commercial production and analytic development, product characterization, stability testing, quality assurance and
quality control. 

  
 8 

 CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
[********] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 

 

 1.77 “Manufacturing Stage” has the meaning set forth in
Section 7.2(a). 
 1.78 “Net Sales” means the gross price billed or invoiced on sales of Licensed
Products by Zai, its Affiliates, or Sublicensees for sale of Licensed Products to a Third Party in the Territory, less: 
 (a)
freight expense (actual), including insurance, to the extent it is not charged to or reimbursed by the customer; 
 (b) cash, trade
or quantity discounts actually granted and deducted solely on account of sales of Licensed Products; 
 (c) rebates actually paid to
individual or group purchasers of Licensed Products that are solely on account of the purchase of Licensed Products; 
 (d) amounts
written off by reason of uncollectible debt if and when actually written off or allowed, after commercially reasonable debt collection efforts have been exhausted, provided that [********]; provided, further that
such amounts shall be added back to Net Sales if and when collected, 
 (e) credits issued for Licensed Products recalled or not
accepted by customers or other refunds, allowances and chargebacks related to Licensed Products; and 
 (f) Taxes (including sales,
value added, consumption and similar taxes; but excluding income taxes) actually incurred, paid or collected and remitted to the relevant tax authority for the sale of Licensed Products. 

Each of the amounts set forth above shall be determined from the books and records of Zai, its Affiliate or Sublicensee, maintained in
accordance with GAAP consistently applied. 
 The transfer of Licensed Products to an Affiliate, Sublicensee, or other Third Party
(i) in connection with the research, development or testing of Licensed Products (including the conduct of clinical studies), (ii) for purposes of distribution as promotional samples, (iii) for indigent or similar public support or
compassionate use programs, or (iv) by and between Zai and its Affiliates or Sublicensees shall not, in any case, be considered a Net Sale of Licensed Products under this Agreement. 

Net Sales include any Licensed Product used by Zai or any Affiliate for its own commercial purposes, or transferred to any Third Party for
less than the transferee is then charging in normal arms’-length sales transactions, and Net Sales in all such cases shall be deemed to have been made at the prices therefor at which Licensed Products are then being sold to the customers of
such user or transferor (or of Zai, if an Affiliate is a user but not a seller) in arms-length sales transactions. 

  
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 If a Licensed Product is sold in the form of a combination product containing both one or
more Compounds and one or more Active Ingredients (whether co-formulated or co-packaged) that is not a Compound (a “Combination Product”), the Net Sales
of such Licensed Product for the purpose of calculating royalties owed under this Agreement for sales of such Licensed Product, shall be determined as follows: first, Zai shall determine the actual Net Sales of such Combination Product (using the
above provisions), and: 
 (i) if both the Licensed Product and all other Active Ingredients in such Combination Product are sold separately
in such country, then such amount shall be multiplied by the fraction A/(A+B), where A is the invoice price in such country of such Licensed Product and B is the total aggregate invoice price in such country of all other Active Ingredients in such
Combination Product, in each case during the applicable Calendar Year. In each case, A and B shall be adjusted on a pro rata basis to account for dosing differences between the amounts of Active Ingredient(s) included in the Combination Product
relative to the amounts of Active Ingredient(s) included in the separately sold product. 
 (ii) if any Active Ingredient in such
Combination Product is not sold separately in such country, Net Sales shall be calculated by multiplying actual Net Sales of such Combination Product by a fraction A/C where A is the invoice price in such country of such Licensed Product if sold
separately in such country, and C is the invoice price in such country of such Combination Product. 
 (iii) if the Licensed Product in such
Combination Product is not sold separately in such country, Net Sales shall be calculated by multiplying actual Net Sales of such Combination Product by the fraction 1-B/C, where B is the (sum of the) invoice
price in such country of such other Active Ingredients and C is the invoice price in such country of the Combination Product. 
 (iv) if
neither such Licensed Product nor any other Active Ingredient in such Combination Product is sold separately in such country, the adjustment to Net Sales shall be determined by the Parties in good faith to reasonably reflect the fair market value of
the contribution of such Licensed Product in such Combination Product to the total fair market value of such Combination Product. 

1.79 “Out-of-Pocket Costs” means
amounts [********] by a Party, determined at the FTE Rate, or [********] for the [********] that are applicable [********], including [********], but excluding, for the avoidance
of doubt, any amounts [********]. 
 1.80 “Party” and “Parties” have the meaning set
forth in the preamble. 
 1.81 “Patent Challenge” has the meaning set forth in Section 14.2(e). 

1.82 “Patient-Related Costs” means the total Clinical Trial costs (including recruitment, enrollment, administration,
but excluding the cost of the Licensed Product) incurred by the Parties for such Clinical Trial, to the extent related to the conduct of such Clinical Trial in the PRC or the Territory, as applicable, but excluding any
Out-of-Pocket Costs. 

  
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 1.83 “Patents” means all national, regional and international patents
and patent applications, including divisions, continuations, continuations-in-part, additions, re-issues, renewals, extensions,
substitutions, re-examinations or restorations, registrations and revalidations, and supplementary protection certificates and equivalents to any of the foregoing. 

1.84 “Pivotal Study” has the meaning set forth in Section 5.3(b). 

1.85 “PRC” means the People’s Republic of China, which for the purposes of this Agreement shall exclude Hong
Kong, Macau, and Taiwan. 
 1.86 “Product Infringement” has the meaning set forth in Section 13.3(a).

 1.87 “Product Marks” has the meaning set forth in Section 8.7. 

1.88 “Receiving Party” has the meaning set forth in Section 10.1(a). 

1.89 “Reduction Amount” means the sum of following: (a) for the [********] Delay Period,
[********] ([********]), and (b) for each additional Delay Period, the Reduction Amount for the [********] plus an additional [********] ([********]). By way of example, for
a delay of [********] (i.e., [********] Delay Periods) results in a Reduction Amount of [********] ([********]) (i.e., [********] ([********]) for the
[********] Delay Period and [********] ([********]) for the [********] Delay Period), and a delay of [********] (i.e., [********] Delay Periods) results in a
Reduction Amount of [********] ([********]) (i.e., [********] ([********]) for the [********] Delay Period, [********] ([********]) for the
[********] Delay Period, and [********] ([********]) for the [********] Delay Period). 

1.90 “Registration Study” means a Clinical Trial that is intended (as of the time the Clinical Trial is
initiated) to obtain sufficient data and results to support the filing of an application for Regulatory Approval (but may not include the data that may be necessary to support the pricing and/or reimbursement approvals). 

1.91 “Regulatory Approval” means, with respect to Licensed Products in a region in the Territory, all approvals
from the Regulatory Authorities necessary to market and sell Licensed Products in such region in the Territory (excluding pricing and reimbursement approvals). 

1.92 “Regulatory Authority” means any applicable Governmental Authority responsible for granting Regulatory
Approvals for Licensed Product, including the CFDA, and any corresponding national or regional regulatory authorities. 

  
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 1.93 “Regulatory Exclusivity” means any exclusive marketing rights or
data exclusivity rights conferred by any Regulatory Authority with respect to a Licensed Product other than Patents, including rights conferred under the Regulations for the Implementation of Drug Administration Law of the People’s Republic of
China, under national implementations of Article 10 of Directive 2001/83/EC, or rights similar thereto in any other jurisdiction. 

1.94 “Regulatory Submissions” means any filing, application, or submission with any Regulatory Authority,
including authorizations, approvals or clearances arising from the foregoing, including Regulatory Approvals, and all correspondence or communication with or from the relevant Regulatory Authority, as well as minutes of any material meetings,
telephone conferences or discussions with the relevant Regulatory Authority, in each case, with respect to Licensed Products. 
 1.95
“Regulatory Submission Target Date” means the anticipated date that Zai will make a Regulatory Submission for the Lead Product in the PRC, as set forth in the Development Plan as of the Effective Date. 

1.96 “Remedial Action” has the meaning set forth in Section 6.8. 

1.97 “Royalty Term” has the meaning set forth in Section 9.5. 

1.98 “Safety Agreement” has the meaning set forth in Section 6.5(a). 

1.99 “Sole Inventions” has the meaning set forth in Section 13.1(a). 

1.100 “Sublicensee” means a person or entity that is granted a sublicense by Zai under the grants in Section 2.1
of this Agreement. 
 1.101 “Supply Agreement” means each of the Clinical Supply Agreement and the Commercial Supply
Agreement. 
 1.102 “Tax” or “Taxes” means any present or future taxes, levies, imposts, duties,
charges, assessments or fees of any nature (including any interest thereon). For the avoidance of doubt, Taxes includes VAT. 
 1.103
“Technology Transfer Plan” has the meaning set forth in Section 4.1. 
 1.104
“Term” has the meaning set forth in Section 14.1. 
 1.105 “Territory” means the PRC, Hong
Kong, Macau, Taiwan, Korea, Vietnam, Thailand, Cambodia, Laos, Malaysia, Indonesia, the Philippines, Singapore, Australia, New Zealand and Japan (each of the foregoing being referred to herein as a “country” or “region”, as
applicable). 

  
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 1.106 “Third Party” means an entity other than (a) Zai
and its Affiliates or (b) Entasis and its Affiliates. 
 1.107 “Third Party IP” has the meaning set forth in
Section 9.13(b). 
 1.108 “U.S.” means United States of America, including all possession and
territories thereof. 
 1.109 “Valid Claim” means (a) a claim of an issued, unexpired patent within the
Licensed Patents that has not been revoked, disclaimed, abandoned or held invalid or unenforceable by a court or other body of competent jurisdiction in an unappealed or unappealable decision and (b) a claim of any patent application within a
Licensed Patent that has been pending [********] or less from the date of filing of such patent application, and that has not been abandoned or finally disallowed without the possibility of appeal or
re-filing of the application. 
 1.110 “VAT” means value-added taxes or
other similar taxes. 
 1.111 “VAT Credit” has the meaning set forth in Section 9.11(c). 

1.112 “VAT Withholding” has the meaning set forth in Section 9.11(c). 

1.113 “Zai” has the meaning set forth in the preamble. 

1.114 “Zai Indemnitees” has the meaning set forth in Section 12.2. 

1.115 “Zai Technology” means all Know-How, Patents and other
intellectual property rights that are Controlled by Zai and that arise out of activities conducted by or on behalf of, or actually used by, Zai, its Affiliates, or Sublicensees in the Development or Commercialization of Licensed Products under this
Agreement. 
 ARTICLE 2 

LICENSES; EXCLUSIVITY 

2.1 License Grant to Zai. Subject to the terms and conditions of this Agreement, Entasis hereby grants to
Zai (a) an exclusive (subject to Entasis’s retained rights as set forth in Section 2.4), royalty-bearing license, with the right to grant sublicenses solely in accordance with Section 2.3, under the Licensed Technology to
Develop, use, Manufacture (subject to Section 7.1(e)), sell, offer for sale, import and otherwise Commercialize such Licensed Product in the Field and in the Territory during the Term of this Agreement, and (b) a non-exclusive license, with the right to grant sublicenses solely in accordance with Section 2.3, under the Licensed Technology to perform Development activities outside of the Territory solely for purposes of
seeking and obtaining Regulatory Approval for and Commercializing Licensed Products in the Territory during the Term of this Agreement. For clarity, except as set forth in 

  
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Section 7.1(e), the foregoing licenses do not include any right for Zai to Manufacture the Compound or Licensed Products, except to label and package Licensed Products supplied by Entasis.

 2.2 Product Limitations. Unless otherwise agreed to by the Parties, Zai covenants that its activities and rights
under this Agreement are limited to the Lead Product until such time as the Lead Product receives Initial FDA Approval. Zai covenants not to undertake any activities outside the scope of the license and the foregoing restriction of this
Section 2.2. Following the Initial FDA Approval for the Lead Product, Zai may practice the license granted under Section 2.1 for Licensed Products other than the Lead Product. 

2.3 Right to Sublicense. 

(a) Subject to the terms and conditions of this Agreement, Zai may grant sublicenses of the license granted to it under
Section 2.1: (i) to its Affiliates, provided that such sublicense automatically terminates if such Sublicensee ceases to be an Affiliate of Zai; (ii) to a Third Party subcontractor for the sole purpose of performing a portion of
Zai’s obligations with respect to the Development and Commercialization of Licensed Products, including distributors; and (iii) to a Third Party, provided that Zai shall obtain Entasis’s prior written consent (not to be
unreasonably withheld, conditioned, or delayed) prior to sublicensing all or substantially all of Zai’s rights or obligations under this Agreement for the PRC. 

(b) Each sublicense under the Licensed Technology shall be subject to written agreement containing at least the following terms and
conditions: (i) requiring each such Sublicensee to protect and keep confidential any Confidential Information of the Parties in accordance with Article 10 of this Agreement; (ii) providing that Entasis may audit the books and records of
each such Sublicensee in accordance with this Agreement; (iii) that does not impose any payment obligations or liability on Entasis; and (iv) that is otherwise consistent with the terms of this Agreement, including the governance
requirement of this Agreement as to Development and Commercialization activities. Zai shall provide a complete copy of each sublicense agreement to Entasis within [********] after the grant of a sublicense, subject to Zai’s right
to redact any confidential or proprietary information contained therein that is not necessary for Entasis to determine compliance with this Agreement. Zai shall remain directly responsible for all of its obligations under this Agreement that have
been delegated or sublicensed to any Sublicensee, and any Sublicensee conduct that would have constituted a breach of this Agreement shall be deemed a breach of this Agreement as if it had been engaged in by Zai. Zai shall not grant a sublicense to
any Sublicensee that has been debarred or disqualified by a Regulatory Authority. 
 2.4 Entasis Retained
Rights. Notwithstanding the exclusive license granted to Zai under Section 2.1, Entasis hereby expressly retains the rights to use the Licensed Technology in the Field in the Territory to perform its obligations under this Agreement,
whether directly or through its Affiliates, Zai or contractors. For clarity, Entasis retains the exclusive right to practice, license, and otherwise exploit the Licensed Technology outside the scope of the license granted to Zai under
Section 2.1. 

  
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 2.5 License Grant to Entasis. Zai hereby grants to Entasis
an exclusive, fully paid, royalty free, perpetual, irrevocable and sublicenseable license (through multiple tiers) under the Zai Technology to research, develop, make, have made, use, sell, offer for sale, import and otherwise commercialize
Compounds and Licensed Products outside the Territory. 
 2.6 No Implied Licenses; Negative
Covenant. Except as set forth herein, neither Party shall acquire any license or other intellectual property interest, by implication or otherwise, under any trademarks, patents or patent applications of the other Party. Zai shall not, and
shall not permit any of its Affiliates or Sublicensees to, practice any Licensed Technology outside the scope of the license granted by Entasis to Zai under Section 2.1 of this Agreement. 

2.7 Exclusivity. 

(a) Competing Products. During the Term, each Party shall not, and shall use reasonable efforts to cause its Affiliates and
Sublicensees to not, engage in, directly or indirectly (independently or for or with any Third Party), any development or commercialization of any pharmaceutical product for the [********] in the Territory (a “Competing
Product”). Notwithstanding the foregoing, “Competing Product” shall not include a Licensed Product or any other product that is intended for use in combination with Licensed Products and is sold in connection with or to promote
the sale of a Licensed Product in the Territory. If the JSC approves a Development Plan for Imipenem pursuant to the requirements set forth in Section 5.5, then the definition of Competing Product will also include any [********]
(other than the Licensed Product) for the [********]. 
 (b) Acquisition of Competing Program. If a Third Party
becomes an Affiliate of a Party after the Effective Date through merger, acquisition, consolidation or other similar transactions, then: 

(i) if such transaction results in a Change of Control of such Party, then such new Affiliate and any Affiliates of such new Affiliate
that existed prior to such Change of Control may engage in the research, development, manufacture or commercialization of a Competing Product (a “Competing Program”) and such activity will not constitute a breach of such
Party’s exclusivity obligations set forth above; provided that such new Affiliate (or its then existing Affiliates) conducts such Competing Program independently of the activities of this Agreement and does not use or access any
of Entasis’s intellectual property rights or Confidential Information in the conduct of such Competing Program; 
 (ii) if such
transaction does not result in a Change of Control of Zai and, as of the date of the closing of such transaction, such Affiliate was engaged in a Competing Program and Zai elects not to terminate this Agreement in accordance with
Section 14.2(a), then Zai and its new Affiliate will have [********] from the closing date of such transaction to wind 

  
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down or complete the Divestiture of such Competing Program, and Zai’s new Affiliate’s conduct of such Competing Program during such [********] period will not be deemed a
breach of Zai’s exclusivity obligations set forth above; provided that such new Affiliate conducts such Competing Program during such [********] period independently of the activities of this Agreement and does not
use or access any of Entasis’s intellectual property rights or Confidential Information in the conduct of such Competing Program. “Divestiture” means the sale or transfer or exclusive license of rights to the Competing Program
to a Third Party without receiving a continuing share of profit, royalty payment or other economic interest in the success of such Competing Program; and 

(iii) if such transaction does not result in a Change of Control of Entasis and, as of the date of the closing of such transaction,
such Affiliate was engaged in a Competing Program, then such new Affiliate and any Affiliates of such new Affiliate that existed prior to such Change of Control may continue such Competing Program and such activity will not constitute a breach of
Entasis’s exclusivity obligations set forth above; provided that such new Affiliate (or its then existing Affiliates) conducts such Competing Program independently of the activities of this Agreement and does not use or access any
of Entasis’s intellectual property rights or Confidential Information in the conduct of such Competing Program. 
 2.8
Negative Covenant. During the Term, Entasis shall not, and shall use reasonable efforts to cause its Affiliates and Sublicensees not to, engage in, directly or indirectly (or independently or for or with any Third Party), any
development or commercialization of any pharmaceutical product containing, alone or in combination, ETX2514 or ETX2514SUL in the Territory except as otherwise set forth in this Agreement; provided, however, that if Zai notifies Entasis
of its decision not to pursue an Imipenem Combination under Section 5.5(b) and has not notified Entasis of its desire to pursue an Imipenem Combination under Section 5.5(a), the Parties shall discuss, at Entasis’s request, Entasis
developing and commercializing an Imipenem Combination in the Territory. 
 ARTICLE 3 

GOVERNANCE 
 3.1
Joint Steering Committee. 
 (a) Formation. Within [********] after the Effective Date, the
Parties shall establish a joint steering committee (the “JSC”) to oversee the Development and Commercialization of Licensed Products in the Field in the Territory under this Agreement. Each Party shall appoint
[********] representatives to the JSC, each of whom is an officer or employee of the applicable Party having sufficient seniority within such Party to make decisions arising within the scope of the JSC’s responsibilities. Each
Party may replace its JSC representatives upon written notice to the other Party. Each Party shall appoint one of its JSC representatives to act as a co-chairperson of the JSC. 

  
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 (b) Role. The JSC shall (i) provide a forum for the discussion of the
Parties’ activities under this Agreement; (ii) review, discuss and approve the overall strategy for the Development and Commercialization of Licensed Products in the Field in the Territory; (iii) review, discuss and approve the
Development Plan and amendments thereto; (iv) review and discuss the Commercialization Plan and amendments thereto; (v) discuss any significant developments with respect to the Development of the Compounds or Licensed Products outside the
Territory, (vi) establish joint subcommittees (including Development subcommittee and Commercialization subcommittee) as necessary or advisable to further the purpose of this Agreement; and (vii) perform such other functions as expressly
set forth in this Agreement or allocated to it by the Parties’ written agreement. 
 (c) Meetings. The JSC shall hold
meetings at such times as it elects to do so, but in no event shall such meetings be held less frequently than [********] until the First Commercial Sale of Licensed Products in the Territory. Thereafter, the JSC shall hold meeting no
less frequently than once every [********]. Each Party may call additional ad hoc JSC meetings as the needs arise with reasonable advance notice to the other Party. Meetings of the JSC may be held in person, by audio or video
teleconference; provided that unless the Parties otherwise agree, at least one meeting of the JSC per Calendar Year shall be held in person. In-person JSC meetings shall be held at locations selected
alternatively by the Parties. The co-chairpersons of the JSC shall jointly prepare the agenda and minutes for each JSC meeting. [********]. No action taken at any JSC meeting shall be effective
unless at least one representative of each Party is participating in such JSC meeting. 
 (d)
Non-Member Attendance. Each Party may from time to time invite a reasonable number of participants, in addition to its representatives, to attend the JSC meetings in a non-voting capacity; provided that if either Party intends to have any Third Party (including any consultant) attend such a meeting, such Party shall provide prior written notice to the other Party. Such
Party shall also ensure that such Third Party is bound by confidentiality and non-use obligations consistent with the terms of this Agreement. 

(e) Decision Making. All decisions of the JSC shall be made by unanimous vote, with each Party’s representatives having one
vote. If after reasonable discussion and good faith consideration of each Party’s view on a particular matter before the JSC, the JSC cannot reach a decision as to such matter within [********] after such matter was brought to the
JSC for resolution, such matter shall be referred to the [********] of Entasis and the [********] of Zai (the “Executive Officers”) for resolution. If the Executive Officers cannot resolve such
matter within [********] after such matter has been referred to them, then the following shall apply: (i) prior to [********], [********] has final decision-making authority over the
[********], including [********]; provided, that [********] shall have final decision-making authority (after good faith consideration to [********] views) with respect to the
[********]; (ii) following [********],[********] has final decision-making authority over matters that pertain solely to the [********]; (iii) [********] has final
decision-making authority over [********] of such product or combination by or on behalf of [********] outside the Territory, 

  
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and after such [********],[********] has final decision making authority over such [********] in the Territory; (iv) [********] has
final decision making over any material [********] activity for the Territory that it believes in good faith, based solely on scientific or patient safety concerns, would reasonably be expected to materially and adversely affect the
[********] (e.g., [********]); and (v) [********] has final decision making over any decision to the extent applicable to [********]. Notwithstanding the foregoing, Entasis shall not
make any decision that would materially increase Zai’s obligations or expenses above those set forth in the then-current Development Plan without Zai’s written consent. By way of illustration and not limitation, with respect to the final
decision-making of the Parties set forth in Section 3.1(e), if the [********], but the [********], then the parties would discuss the [********] in good faith, with [********] having final
decision-making authority with respect thereto. 
 (f) Limitation of Authority. The JSC has only the powers
expressly assigned to it in this Article 3 and elsewhere in this Agreement and does not have the authority to: (i) modify or amend the terms and conditions of this Agreement; (ii) waive either Party’s compliance with the terms and
conditions of this Agreement; or (iii) determine any such issue in a manner that would conflict with the express terms and conditions of this Agreement. 

3.2 Discontinuation of JSC. The activities to be performed by the JSC shall solely relate to governance under this
Agreement, and are not intended to be or involve the delivery of services. JSC shall continue to exist until the first to occur of: (a) the Parties mutually agreeing to disband the JSC; or (b) Entasis providing written notice to Zai of its
intention to disband and no longer participate in the JSC. Once the Parties mutually agree or Entasis has provided written notice to disband the JSC, the JSC will have no further obligations under this Agreement and, thereafter, each Party shall
designate an individual to be its contact person for the exchange of information under this Agreement and decisions of the JSC shall be decisions as between the Parties, subject to the other terms and conditions of this Agreement. 

3.3 Subcommittees. 

(a) General. The JSC has the authority to establish subcommittees. Each subcommittee will be composed of an equal number of
representatives from each Party. Each Party may replace its subcommittee representatives upon written notice to the other Party. All decisions of a subcommittee will be made by unanimous vote, with each Party’s representatives having one vote.
If the Parties are unable to reach a unanimous vote with respect to a matter, such matter will be referred to the JSC for resolution. 

(b) Joint Development Committee and Joint Commercialization Committee. Within
[********] of the Effective Date, the Parties shall establish a joint development committee (the “JDC”) to review and discuss (i) the Development of Licensed Products in the Territory and (ii) the progress of
the Regulatory Approvals and Regulatory Submissions for Licensed Products in the Territory, including discussing relevant CMC information. Each Party shall appoint two (2) representatives to the JDC, each of whom is an

  
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officer or employee of the applicable Party having sufficient knowledge regarding Development of Licensed Products for the Territory. Not later than [********] prior to the
anticipated First Commercial Sale in the Territory of the Lead Product in the Territory, the Parties shall establish a joint commercialization committee (the “JCC”) to review and discuss (1) the establishment of the
Commercialization Plan; (2) the progress of the Commercialization of Licensed Products in the Territory; and (3) commercial issues relevant to the Territory and Entasis’s commercialization in other territories and global
harmonization. Each Party shall appoint two (2) representatives to each of the JDC and the JCC, each of whom is an officer or employee of the applicable Party having sufficient knowledge regarding the relevant subject matter. The JDC and JCC
will meet with the frequency of the JSC or such other frequency as the Parties may mutually agree. 
 3.4 Alliance
Managers. Within [********] after the Effective Date, each Party shall appoint (and notify the other Party of the identity of) a representative having the appropriate qualifications (including a general understanding of
pharmaceutical Development and Commercialization issues) to act as its alliance manager under this Agreement (“Alliance Manager”). The Alliance Managers will serve as the primary contact points between the Parties regarding
the activities contemplated by this Agreement. The Alliance Managers will facilitate the flow of information and otherwise promote communication, coordination, and collaboration between the Parties, providing a single point of communication for
seeking consensus both internally within each Party’s respective organization, including facilitating review of external corporate communications, and raising cross-Party and cross-functional disputes in a timely manner. Each Party may replace
its Alliance Manager by written notice to the other Party. 
 ARTICLE 4 

TRANSITION ACTIVITIES 

4.1 Technology Transfer. Within [********] of the Effective Date, the Parties shall coordinate and agree to a
technology transfer plan for Entasis to provide and transfer to Zai the Licensed Know-How (including clinical data) that exists on the Effective Date for the Licensed Products and a timeline for such
technology transfer, which may be updated or amended by mutual agreement of the Parties (such schedule and timeline, the “Technology Transfer Plan”). Entasis shall transfer such Licensed
Know-How to Zai in accordance with the Technology Transfer Plan, and Zai shall cooperate to facilitate the receipt of such transfer of Licensed Know-How (the
“Initial Technology Transfer”). Thereafter, the Parties shall establish a process, upon Zai’s reasonable request, so that Entasis shall provide Zai with ongoing access to Licensed
Know-How Controlled by Entasis that arises after the Effective Date for the Licensed Products (the “Continuing Technology Transfer,” and together with the Initial Technology
Transfer, the “Technology Transfer”). Entasis shall provide Zai with reasonable access to Entasis personnel involved in the Development of the applicable Licensed Product, either in-person at
Entasis’s facility or by teleconference. 

  
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 4.2 Technology Transfer Costs. Zai shall [********] in connection
with the Technology Transfer. In addition, [********] to assist Zai in connection with the Technology Transfer. For the avoidance of doubt, Entasis shall [********] to assist Zai in connection with the Technology
Transfer. [********]. 
 ARTICLE 5 

DEVELOPMENT PROGRAM 

5.1 General. Zai shall be responsible, at its expense, for the conduct of the Development of the Lead Product and other Licensed
Products for submission of Regulatory Approval in the Territory and Field, except for any matters expressly allocated to Entasis in the Development Plan. Zai shall initially conduct Development of the Lead Product and, subject to the terms of this
Article 5, may Develop other Licensed Products for the Territory and the Field. In particular, Zai shall (i) lead and conduct the Phase 1 Clinical Trial activities of the Lead Product in the Territory, (ii) lead all NDA-enabling studies (other than the Pivotal Study) required by the CFDA for Regulatory Approval in the Territory, and (iii) provide to Entasis or its contract research organization clinical support solely to
the extent set forth in the Development Plan or as otherwise agreed for Clinical Trials conducted by or on behalf of Entasis. 
 5.2
Development Plan. All Development of Licensed Products in the Territory under this Agreement shall be conducted pursuant to a written development plan (the “Development Plan”), as such Development Plan may be
revised from time to time in accordance with this Section 5.2. The Development Plan shall contain [********]. As of the Effective Date, the Parties have agreed to the initial Development Plan, which is attached hereto as
Exhibit 5.2 (the “Initial Development Plan”). From time to time, but at least every [********], Zai shall propose updates or amendments to the Development Plan in consultation
with Entasis and submit such proposed updated or amended plan to the JSC for review, discussion, and approval. The Development Plan shall be focused on the most efficient path to Regulatory Approval in the Territory. Once approved by the JSC, the
updated or amended Development Plan shall become effective. 
 5.3 Entasis Development Activities and
Other Clinical Studies. 
 (a) Entasis Development Activities for the
Territory. Entasis shall, at its expense, use Commercially Reasonable Efforts to perform all Development activities allocated to it under the Development Plan. Entasis shall provide to Zai reasonably detailed information with respect to
Development activities for the Lead Product (or other Licensed Products, as applicable) conducted by Entasis outside the Territory, including the conduct of any Clinical Trials for Lead Products (or other Licensed Products, as applicable) that are
reasonably expected to be included in a Regulatory Submission to the CFDA or a Regulatory Authority in the Territory. 

  
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 (b) Pivotal Study. Entasis shall use Commercially Reasonable Efforts (either
itself or through a Third Party contract research organization), at its expense, to conduct those activities associated with the global pivotal Phase III Clinical Trial for the Lead Product, as allocated to Entasis under and described in the Initial
Development Plan (the “Pivotal Study”). The Initial Development Plan shall specify the responsible Party or contract research organization for all such activities. Pursuant to Section 5.6, Zai shall use Commercially
Reasonable Efforts to conduct those activities for the Pivotal Study that take place in the Territory in accordance with the Development Plan. Zai shall be responsible for (i) [********] of Patient-Related Costs in the PRC for the
Pivotal Study and (ii) [********] of Out-of-Pocket Costs incurred in connection with the Pivotal Study. 

(c) Other Development Activities. In the event that any additional studies are necessary in the Territory to support Regulatory
Approval of the Lead Product by either the FDA or the CFDA, the Parties shall amend the Development Plan to reflect such additional studies (subject to Section 3.1(e)). For any such additional studies, Zai shall be responsible for
[********] of Patient-Related Costs in the PRC; provided, that [********]. 
 5.4 Certain
Additional Development and R&D Support. 
 (a) Multi-Region Trials. 

(i) If Entasis directly conducts a Clinical Trial outside of the Territory for any Licensed Product other than the Lead Product that
could reasonably be expected to generate data that will be used in and out of the Territory, Entasis shall notify Zai and provide Zai with an estimate of all costs associated with such Clinical Trial. In the event that Zai elects to receive a right
of reference to the data resulting from such Clinical Trial, Zai shall notify Entasis of such election and shall thereafter reimburse Entasis for [********] of the
out-of-pocket costs and any internal costs allocated in accordance with GAAP associated with such Clinical Trial up to the amount set forth in the estimate provided to
Zai pursuant to this Section 5.4(a)(i) upon delivery of an invoice therefore in accordance with the payment terms of Article 9. For the avoidance of doubt, unless and until Zai notifies Entasis of its election to access data associated with
such Clinical Trial, Zai shall have no payment obligations to Entasis with respect to such Clinical Trial and no right of reference to the data resulting from such Clinical Trial. 

(ii) If Entasis desires to conduct a Clinical Trial (other than the Pivotal Study) both inside and outside of the Territory for any
Licensed Product that could reasonably be expected to generate data that will be used in and out of the Territory, the Parties shall discuss the conduct of such Clinical Trial in good faith. Entasis shall notify Zai and provide Zai with an estimate
of costs associated with such Clinical Trial allocated to the PRC [********]. If Zai desires to participate in the conduct of such Clinical Trial in the PRC, then Zai shall be responsible for the costs associated with such Clinical
Trial allocated to the PRC, up to the amount set forth in the estimate provided to Zai pursuant to this Section 5.4(a)(ii). If Zai does not desire to participate in the conduct of such Clinical Trial in the PRC, (A) Entasis may conduct

  
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such Clinical Trial in the countries in the Territory other than the PRC, (B) Zai shall have no payment obligations with respect to such Clinical Trial, and (C) Zai shall have no right
of reference to the data resulting from any such Clinical Trial that relates to the applicable Licensed Product, unless such Licensed Product is the Lead Product. 

(b) Research Support Payments. In each of Calendar Year 2018 and Calendar Year 2019, Zai shall pay to Entasis
[********] for research and development support for the Lead Product. 
 5.5 Imipenem Combination. 

(a) Zai-Proposed Imipenem Combination. At any time during the Term, Zai may propose to
conduct Development of the combination of Licensed Products with Imipenem (an “Imipenem Combination”). Zai shall provide any such proposal in writing to Entasis with a draft outline of an initial Development Plan for such Imipenem
Combination, together with any data and information generated by Zai to date in the conduct of its Development activities for the Licensed Products. If such notice is delivered prior to Initial FDA Approval, then following such notice, the Parties
shall negotiate for a period of up to [********] on a Development Plan for such Imipenem Combination. For clarity, Zai may not Develop an Imipenem Combination without Entasis’s prior written consent prior to Initial FDA Approval
of the Licensed Product. If Zai delivers such notice after Initial FDA Approval, then Zai may Develop an Imipenem Combination; provided, that such Development does not have, in the reasonable opinion of Entasis, a material adverse
effect of the Development or Commercialization of a Licensed Product. For clarity, Zai may not conduct any development of any other ß-lactam antibiotics in combination with any Licensed Product during the Term without Entasis’s prior
written consent. 
 (b) Entasis-Proposed Imipenem Combination. Entasis shall notify Zai reasonably in advance of any clinical
Development of any Imipenem Combination for the U.S, and shall provide with such notice any data and information generated by Entasis to date in the conduct of its Development activities for the Licensed Products. Within [********]
following such notice, Zai shall notify Entasis whether Zai desires to proceed with the Development of such Imipenem Combination for the Territory. If Zai does not timely deliver such notice or notifies Entasis that it does not wish to develop such
Imipenem Combination for the Territory using data and information generated by Entasis in the conduct of its Development activities for the Licensed Products, then Zai shall retain the right to proceed with the Development of an Imipenem Combination
in the Territory at its own cost and expense following such [********] period; provided that, Zai shall not have a right of reference to any data or information generated by Entasis in its Development of an Imipenem
Combination for the U.S. If Zai notifies Entasis that it wishes to develop such Imipenem Combination for the Territory, then the Parties shall negotiate for a period of up to [********] on a Development Plan for the Imipenem
Combination for the Territory. If the Parties agree on a Development Plan for the Imipenem Combination for the Territory, then the Parties shall use Commercially Reasonable Efforts to implement such Development Plan in accordance with the terms and
conditions of this 

  
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Agreement. If the Parties are unable to agree on a Development Plan for the Imipenem Combination for the Territory, then the Parties shall resolve such matter in accordance with
Section 15.4. 
 (c) Financial Support. If the Parties jointly develop an Imipenem Combination under Section 5.5(a)
or Section 5.5(b), then Zai shall pay to Entasis [********] (i) [********], and (ii) [********], in each case ((i) and (ii)) for purposes of research and development support for such Imipenem
Combination. For the avoidance of doubt, Zai’s financial support obligations set forth in this Section 5.5(c) shall be limited to [********], regardless of the number of years in which research and development activities are
ongoing for such Imipenem Combination. 
 5.6 Diligence. Zai shall use Commercially Reasonable Efforts to Develop the Lead
Product in the Field in the Territory. Without limiting the foregoing, Zai shall use Commercially Reasonable Efforts to (a) promptly conduct all clinical activities as described in the Development Plan, including the Pivotal Study in the
Territory or a Registration Study in the Territory, following approval of a CTA from the CDFA to conduct such Clinical Trial and (b) seek Regulatory Approval for a Licensed Product in the Field in the Territory in at least
[********] ([********]) countries or regions [********] within [********] after Regulatory Approval by the CFDA. Zai shall perform such obligations under the Development Plan in a professional
manner, and in compliance in all material respects with the Development Plan and the requirements of Applicable Law, GCP, and cGMP. Changes in the scope or direction of the Development work under this Agreement that would require a material
deviation from the Development Plan must be approved by the JSC. 
 5.7 Development Records. Each Party shall maintain,
and shall require that its Affiliates and Sublicensees maintain, complete, current and accurate records in either tangible or electronic form of (a) all Development activities conducted by or on behalf of such Party and its Affiliates and
Sublicensees related to Licensed Products; and (b) all significant information generated by or on behalf of such Party, its Affiliates and Sublicensees in connection with Development of Licensed Products under this Agreement. Each Party shall
maintain such records in sufficient detail to properly reflect, in a good scientific manner, all significant work done and the results of studies and Clinical Trials undertaken and, further, at a level of detail appropriate for patent and regulatory
purposes. Each Party shall document all non-clinical studies and Clinical Trials in formal written study reports according to Applicable Laws and national and international guidelines. Upon either Party’s
request, the other Party shall, and shall cause its Affiliates and Sublicensees to, (i) provide to such Party copies of such records, and (ii) allow such Party to access, review and copy such records (including access to relevant
databases). The receiving Party may use the data and results generated by or on behalf of the other Party, its Affiliates and Sublicensees for Licensed Products to Develop, Manufacture and Commercialize Licensed Products in its respective territory.

  
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 5.8 Development Reports. Zai shall keep Entasis reasonably informed as
to the progress and results of its and its Affiliates’ and Sublicensees’ Development activities under this Agreement. Without limiting the foregoing, the JSC will discuss at meetings the status, progress and results of the Development of
Licensed Products in the Territory. At least [********] before each regularly scheduled JSC meeting, Zai shall provide the JSC with a written report summarizing its Development activities and the results thereof, covering subject
matter at a level of detail reasonably required by Entasis and sufficient to enable Entasis to determine Zai’s compliance with its Development obligations hereunder. In addition, Zai shall make available to Entasis such additional information
about its Development activities as may be reasonably requested by Entasis from time to time. Entasis shall keep Zai reasonably informed through the JSC as to any significant developments with respect to the Development of the Compounds or Licensed
Products outside the Territory. 
 ARTICLE 6 

REGULATORY 
 6.1
Holder of Regulatory Approvals and Regulatory Submissions. Entasis shall initially be the holder of Regulatory Approvals and Regulatory Submission for Licensed Products in the Territory. As soon as is practicable during the Term, the Parties
shall cooperate in good faith to (a) enable the transfer of Manufacturing responsibilities for Licensed Products to Zai pursuant to Section 7.2, and (b) enable Zai to hold all Regulatory Approvals and Regulatory Submissions, whether
by transfer to Zai of such Regulatory Approvals and Regulatory Submissions or through the submission of a new application for Regulatory Approval in the Territory submitted by Zai, in each case ((a) and (b)), to the extent permitted by Applicable
Law and in accordance therewith. For clarity, Entasis shall reasonably cooperate with Zai, at Zai’s expense, to enable Zai to hold all such Regulatory Approvals and Regulatory Submissions. 

6.2 Zai Responsibilities. 

(a) During such time that Entasis is the holder of Regulatory Approvals and Regulatory Submissions for Licensed Products in the
Territory, Zai shall conduct all regulatory activities delegated to Zai in this Agreement or by Entasis during the Term in connection with the Development and Commercialization of Licensed Products in the Territory at Zai’s sole cost and
expense and as the express and authorized regulatory agent of record for Entasis in the Territory. Promptly after the Effective Date, the Parties shall execute such documents as are required for Zai to act as Entasis’s express and authorized
regulatory agent of record in the Territory. Zai shall, and shall ensure that its Affiliates and Sublicensees, comply with all Applicable Law in its conduct of regulatory activities under this Agreement, and Zai shall use reasonable efforts, in its
capacity as a regulatory agent of record for Entasis in the Territory, to comply with guidelines in the United States applicable to regulatory agents of record, to the extent that equivalent guidelines do not exist in the Territory, and only to the
extent that such guidelines do not conflict with Applicable Law in the Territory. Subject to Section 6.1(a), Zai shall use Commercially Reasonable Efforts to obtain all Regulatory Approvals and Regulatory

  
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Submissions necessary to Manufacture Licensed Products in the Territory as soon as practicable during the Term and to the extent permitted by Applicable Law and in accordance therewith. After
Regulatory Approvals and Regulatory Submissions necessary for the Development and Commercialization of Licensed Products in the Territory are held by Zai, Zai shall be solely responsible for all regulatory activities, including making additional
Regulatory Submissions and obtaining additional Regulatory Approvals, for Licensed Products from the Regulatory Authorities in the Territory, at its sole cost and expense; provided that, Zai undertakes any such activities in compliance with
this Agreement to the same extent as if Zai were acting as Entasis’s authorized regulatory agent under this Agreement. 
 (b)
Zai, either itself or on behalf of Entasis in accordance with the foregoing Section 6.1(a), shall apply for Regulatory Approval of Licensed Products in the PRC, provided that Zai has obtained, or has been provided with access by Entasis
to, data sufficient for such Regulatory Submission. 
 (c) Zai shall keep Entasis informed of all material regulatory developments
related to Licensed Products in the Territory and shall promptly notify Entasis in writing of any decision by any Regulatory Authority in the Territory regarding Licensed Products. Zai shall provide Entasis with drafts of all Regulatory Submissions
within a reasonable time period prior to submission for review and comment, and shall consider in good faith any comments received from Entasis. In addition, Zai shall notify Entasis of any Regulatory Submissions received from any Regulatory
Authority in the Territory and shall provide Entasis with copies thereof within [********] after receipt. If any such Regulatory Submission is not in the English language, Zai shall also provide Entasis with an English translation
thereof as soon as practicable. 
 (d) Each Party shall provide the other Party with at least [********] prior written
notice (or, to the extent such meeting or discussion is scheduled in less than [********], notice as quickly as practicable) of any meeting or discussion with any Regulatory Authority in the Territory related to Licensed Products. Zai
shall lead any such meeting or discussion, provided, however, that Entasis or its designee shall have the right, but not the obligation, to attend such meeting or discussion. If Entasis elects not to attend such meeting or discussion,
Zai shall provide Entasis with a written summary thereof in English promptly following such meeting or discussion. 
 6.3
Entasis Responsibilities. Entasis shall reasonably cooperate with Zai, at Entasis’s cost and expense, in obtaining any Regulatory Approvals for Licensed Products in the Territory by providing, to the extent Controlled by Entasis,
access to Regulatory Approvals, Regulatory Submissions, clinical data, and other data, information, and documentation for Licensed Products outside of the Territory. 

6.4 Right of Reference. Except as set forth in Section 5.4(a) or Section 5.5(b), each Party hereby
grants to the other Party the right of reference to all Regulatory Submissions pertaining to Licensed Products in the Field submitted by or on behalf of such Party. Zai may use 

  
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such right of reference to Entasis’s Regulatory Submissions in the Field solely for the purpose of seeking, obtaining and maintaining Regulatory Approval of Licensed Products in Field in the
Territory. Entasis may use the right of reference to Zai’s Regulatory Submissions in the Field solely for the purpose of seeking, obtaining and maintaining Regulatory Approval of Licensed Products outside the Territory. 

6.5 Adverse Events Reporting. 

(a) Promptly following the Effective Date, but in no event later than [********] thereafter, Zai and Entasis shall
develop and agree to the worldwide safety and pharmacovigilance procedures for the Parties with respect to Licensed Products, such as safety data sharing and exchange, Adverse Events reporting and prescription events monitoring in a written
agreement (the “Safety Agreement”). Such agreement shall describe the coordination of collection, investigation, reporting, and exchange of information concerning Adverse Events or any other safety problem of any
significance, and product quality and product complaints involving Adverse Events, sufficient to permit each Party, its Affiliates, or Sublicensees to comply with its legal obligations. The Safety Agreement shall be promptly updated if required by
changes in legal requirements. Each Party hereby agrees to comply with its respective obligations under the Safety Agreement and to cause its Affiliates and Sublicensees to comply with such obligations. 

(b) Zai shall maintain an Adverse Event database for Licensed Products in the Territory, at its sole cost and expense, and, to the
extent required by Applicable Laws, shall report quality complaints, Adverse Events and safety data related to Licensed Products to the applicable Regulatory Authorities in the Territory, as well as responding to safety issues and to all requests of
Regulatory Authorities related to Licensed Products in the Territory. Zai shall provide to Entasis access to Zai’s Adverse Event database for the Territory. Entasis shall maintain a global Adverse Event database at its sole cost and expense,
and shall provide Zai with information contained in such global Adverse Event database at JDC meetings, provided, that Entasis shall promptly provide Zai with any material Adverse Event information that arises between any such JDC meetings.

 (c) Each Party shall comply with all Applicable Laws governing Adverse Events in its respective territory, and shall notify the
other Party on a timely basis of any Adverse Events occurring in its respective territory. Each Party shall submit copies of reports of Adverse Events to the other Party simultaneously with submission to the applicable Regulatory Authorities. Each
Party shall notify the other in a timely manner and in any event within twenty-four (24) hours of receiving any serious Adverse Event reports from Clinical Trials that each Party is monitoring, notice from a Regulatory Authority, independent
review committee, data safety monitoring board or another similar Clinical Trial or post-marketing monitoring body alleging significant concern regarding a patient safety issue or other material information relevant to the safety or efficacy of
Licensed Products. 

  
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 6.6 Regulatory Audits and Inspection. Upon reasonable
notification, Entasis may conduct an audit of safety and regulatory systems, procedures and practices of Zai, including on-site evaluations. Further details including notification, timing, response and scope
of such audits shall be included in the Safety Agreement. In addition, Zai shall promptly notify Entasis of any inspections relating to the Development and/or Commercialization of Licensed Products by any Regulatory Authority in the Territory,
including the CFDA, of which it becomes aware. Unless prohibited by Applicable Laws, Zai shall permit Entasis’s representative to observe such inspection. Zai shall also provide Entasis with copies of all correspondences submitted to or
received from the Regulatory Authority relating to such inspection. 
 6.7 No Harmful Actions. If either Party
believes that the other Party is taking or intends to take any action with respect to Licensed Products that could have a material adverse impact upon the regulatory status of Licensed Products in such Party’s respective territory, then such
Party may bring the matter to the attention of the JSC and the Parties shall attempt in good faith to resolve such concern. Without limiting the foregoing, unless the Parties otherwise agree: (a) neither Party shall communicate with any
Regulatory Authority having jurisdiction in the other Party’s territory, unless so ordered by such Regulatory Authority, in which case such ordered Party shall immediately notify the other Party of such order; and (b) neither Party shall
submit any Regulatory Submissions or seek Regulatory Approval for Licensed Products outside of its territory. 
 6.8 Remedial
Actions. Each Party shall notify the other immediately, and promptly confirm such notice in writing, if it obtains information indicating that any Licensed Product may be subject to any recall, corrective action or other regulatory action by
any Governmental Authority or Regulatory Authority (a “Remedial Action”). The Parties shall assist each other in gathering and evaluating such information as is necessary to determine the necessity of conducting a Remedial
Action. Zai has sole discretion with respect to any matters relating to any Remedial Action in the Territory, including the decision to commence such Remedial Action and the control over such Remedial Action. The cost and expenses of any Remedial
Action in the Territory shall be borne solely by Zai. Zai shall, and shall ensure that its Affiliates and Sublicensees will, maintain adequate records to permit the Parties to trace the distribution, sale and use of Licensed Products in the
Territory. Notwithstanding the foregoing, any Remedial Action that relates to the manufacture and supply of Licensed Products by Entasis to Zai shall be governed by the terms and conditions of the applicable Supply Agreement. 

ARTICLE 7 
 MANUFACTURE
AND SUPPLY 
 7.1 Entasis Manufacture and Supply. 

(a) Entasis shall, either by itself or through its Affiliates or Third Party contractors, Manufacture and supply to Zai, and Zai shall
purchase from Entasis all of Zai’s and its Affiliates’ and Sublicensee’s requirements for Licensed Products (i) for use in the 

  
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Development of Licensed Products in the Field in the Territory, and (ii) subject to Section 7.2, for Commercialization of the Licensed Products in the Field in the Territory, in each
case ((i) and (ii)) in accordance with Section 7.1(b) and the terms of the applicable Supply Agreement. 
 (b) Under the Supply
Agreements, Entasis shall supply Licensed Products as bulk unlabeled finished dosage form, or as otherwise agreed by the Parties. Zai shall be responsible for the packaging and labeling of Licensed Products for use in the Development and
Commercialization in the Field in the Territory, at Zai’s own cost and expense. Zai shall package and label Licensed Products with labels, product inserts and other labeling conforming to all Applicable Laws, including cGMPs, Regulatory
Approval, approved labeling, and all other requirements of applicable Regulatory Authorities in the Territory. 
 (c) Under the
Commercial Supply Agreement, Zai shall pay Entasis for Licensed Products supplied by Entasis for commercial use (and for Development purposes other than use in the Pivotal Study) at a transfer price equal to [********] of
Entasis’s Fully Burdened Manufacturing Costs, as determined in accordance with GAAP. For the avoidance of doubt, Entasis shall provide Licensed Products to Zai for use in the Pivotal Study free of charge. The Fully Burdened Manufacturing Cost
excludes sales, use, excise, value added, transfer or any other Taxes or duties levied or assessed by any Governmental Authority with respect to the transfer and sale of Licensed Products to Zai, all of which shall be paid by Zai. Entasis shall
invoice Zai for the Fully Burdened Manufacturing Costs upon delivery of Licensed Products under the Supply Agreement, and, subject to the terms of the Supply Agreement (including terms regarding acceptance and rejection), Zai shall pay the invoiced
Fully Burdened Manufacturing Costs within [********] after the date of the invoice. 
 (d) The Development Plan will
include those Manufacturing activities to be performed by Entasis for the Territory, such as testing, readiness, validation and other activities, and Entasis shall use Commercially Reasonable Efforts to perform such activities. Zai shall reimburse
Entasis for such activities upon invoice according to the budget set forth in the Development Plan. Further, until such time as Entasis has successfully completed the transfer of all Manufacturing Stages pursuant to
Section 7.2 such that Zai has been fully enabled to Manufacture the Licensed Product in the Territory, Entasis shall maintain at least one (1) qualified third party contract manufacturing organization for the supply of
Licensed Product. 
 (e) The Parties shall negotiate in good faith within [********] after the Effective Date a
clinical supply agreement (the “Clinical Supply Agreement”) on substantially the same terms set forth in Exhibit 7.1(e) and such other terms and conditions that are included in supply agreements between
Entasis and Third Party contract manufacturing organizations for clinical supply of Licensed Product for the Territory. If a technology transfer pursuant to Section 7.2 has not yet occurred [********] prior to the anticipated
submission of an application for Regulatory Approval for a Licensed Product in the Territory, the Parties shall negotiate in good faith a commercial manufacturing and supply agreement (the “Commercial Supply Agreement”). The
Commercial Supply Agreement shall have a mutually agreed duration, 

  
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include the price terms for Licensed Product set forth in this Agreement and contain such other terms and conditions that are consistent with Entasis’s supply agreements with Third Party
contract manufacturing organizations. 
 7.2 Transfer of Manufacturing Responsibility. 

(a) Upon written notice from Zai made any time after [********] after the Effective Date, Zai may request a technology
transfer for any or all stages of the Manufacturing process of Licensed Product for which Entasis has completed Manufacturing process development (each such stage, a “Manufacturing Stage”). After receipt of any such request from
Zai, Entasis shall promptly provide all assistance reasonably necessary to enable transfer of such Manufacturing Stage(s) to Zai or its designee, including (i) providing all available information relevant to such transfer, including available
CMC documentation in Entasis’s control, pursuant to a written technology transfer plan as initially proposed by Entasis and mutually agreed upon by the Parties, and (ii) upon Zai’s request and at Zai’s expense, providing
regulatory support to coordinate FDA inspection of Zai’s drug substance and drug product manufacturing facilities for Licensed Product by or on behalf of Zai. Zai shall reimburse Entasis’s good faith estimate of internal expenses and costs
at the FTE Rate for FTEs engaged to assist Zai in connection with a Manufacturing Stage transfer initiated by Zai pursuant to this Section 7.2(a). In addition, Zai shall reimburse Entasis for all out-of-pocket expenses and costs incurred by Entasis to assist Zai in connection with such Manufacturing Stage transfer. Entasis shall invoice Zai on a [********] basis for the foregoing costs
incurred by Entasis, and Zai shall pay the amount invoiced within [********] after the date of any such invoice. 
 (b)
Upon written notice from Entasis made at any time after [********], Entasis may transfer, at Entasis’s expense, to Zai or its designee any or all Manufacturing Stages for Licensed Products, provided that Zai shall have the
right to decline the transfer of any such Manufacturing Stage if Zai intends to internally develop such Manufacturing Stage. Following such notice, Entasis shall promptly provide all assistance reasonably necessary to enable transfer of such
Manufacturing Stage(s) to Zai or its designee, including (i) providing all available information relevant to such transfer, including available CMC documentation in Entasis’s control, pursuant to a written technology transfer plan as
initially proposed by Entasis and mutually agreed upon by the Parties, and (ii) upon Zai’s request and at Zai’s expense, providing regulatory support to coordinate FDA inspection of Zai’s drug substance and drug product
manufacturing facilities for Licensed Product by or on behalf of Zai. 
 (c) Promptly following the successful completion of the
transfer of all Manufacturing Stages that the Parties have agreed to transfer in accordance with Section 7.2(a) or Section 7.2(b) above (and in no event later than [********] after successful completion of the transfer of all
such Manufacturing Stages), Zai shall initiate the Manufacture of the Licensed Products for commercial use, to the extent of the transferred Manufacturing Stages and to the extent authorized in accordance with all Applicable Laws and any
requirements of applicable Regulatory Authorities (including any applicable Manufacturing licenses); provided, that Entasis 

  
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shall remain responsible for the continued supply of Licensed Products to Zai, its Affiliates, and its Sublicensees for commercial use in accordance with the terms and conditions set forth in
Section 7.1 and the Commercial Supply Agreement (A) during the Manufacturing Stage transfer period and (B) for up to [********] after successful completion of transfer of all Manufacturing Stages and obtaining all
Regulatory Approvals, in each case, that are necessary for Zai to fully Manufacture Licensed Products for commercial use; provided further that, if Zai is unable to Manufacture (or have Manufactured) the Licensed Products due to
reasons outside of the reasonable control of the Parties, then Entasis shall agree to continued supply of Licensed Products to Zai for up to two additional [********] periods in the Territory under the applicable Supply Agreement.
Notwithstanding the foregoing, if Zai is unable to Manufacture (or have Manufactured) the Licensed Products for commercial use by the conclusion of the [********] ([********]) additional [********] periods
set forth in the immediately preceding sentence due to reasons outside of the reasonable control of the Parties, then the Parties shall [********], subject to [********]. For the avoidance of doubt, Entasis shall remain
responsible for the supply of Licensed Products to Zai, its Affiliates, and its Sublicensees for clinical use in accordance with the terms and conditions set forth in Section 7.1 and the Clinical Supply Agreement notwithstanding any transfer of
Manufacturing Stages hereunder. 
 ARTICLE 8 

COMMERCIALIZATION 

8.1 General. Zai shall be responsible, at its expense, for the Commercialization of Licensed Products in the Territory and in
the Field in accordance with and subject to the terms of this Agreement. These commercial activities include: (a) developing and executing a commercial launch and pre-launch plan; (b) negotiating
with applicable Governmental Authorities regarding the price and reimbursement status of Licensed Products; (c) marketing and promotion; (d) booking sales and distribution and performance of related services; (e) handling all aspects
of order processing, invoicing and collection, inventory and receivables; (f) providing customer support, including handling medical queries, and performing other related functions; and (g) conforming its practices and procedures to
Applicable Laws relating to the marketing, detailing and promotion of Licensed Products in the Territory. 
 8.2
Commercialization Plan. The Commercialization Plan shall contain in reasonable detail the major Commercialization activities planned for Licensed Products in the Territory and the anticipated timelines for achieving such activities.
Zai shall deliver an initial Commercialization Plan to the JSC for review and discussion no later than [********] prior to the anticipated date of the first Regulatory Approval by CFDA for Licensed Products in the Territory.
Thereafter, from time to time, but at least every [********], Zai shall propose updates or amendments to the Commercialization Plan in consultation with Entasis to reflect changes in such plans, including those in response to changes
in the marketplace, relative success of Licensed Products, and other relevant factors influencing such plan and activities, and submit such proposed updated or amended plan to the JSC for review and discussion before adopting such update or
amendment. Zai may conduct any of its activities under the Commercialization Plan through subcontractors or distributors. 

  
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 8.3 Diligence. Zai shall be responsible for Commercializing, and shall use
Commercially Reasonable Efforts to Commercialize, Licensed Products in the Field in the Territory where Regulatory Approval has been received for such Licensed Products, and to conduct those activities set forth in the Commercialization Plan, at its
sole cost and expense. 
 8.4 Commercialization Reports. Zai shall keep Entasis reasonably informed of its, its
Affiliates’ and Sublicensees’ Commercialization activities with respect to Licensed Products in the Territory. Without limiting the foregoing, Zai shall update the JSC at each regularly scheduled JSC meeting regarding the Commercialization
activities with respect to Licensed Products in the Territory. Each such update shall contain information sufficient to enable Entasis to determine Zai’s compliance with its diligence obligations. In addition, Zai shall cooperate with Entasis
to respond any reasonable questions Entasis may have with respect to such commercialization reports provided pursuant to this Section 8.4. 

8.5 Coordination of Commercialization Activities. The Parties recognize that they may benefit from the
coordination of certain activities in support of the Commercialization of Licensed Products in and outside the Territory. As such, the Parties shall coordinate such activities where appropriate, which may include scientific and medical communication
and product positioning. Each Party shall keep the JCC timely informed on the progress and results of its Commercialization of Licensed Products in its territory. Each Party may determine the price of Licensed Products sold in its territory and
neither Party may direct, control, or approve the pricing of Licensed Products in the other Party’s territory. The Parties, through their respective representatives on the JSC, may develop and adopt the key distinctive colors, logos, images,
symbols, and trademarks to be used in connection with the Commercialization of Licensed Products both in and outside the Territory (such branding elements, collectively, the “Global Brand Elements”). Entasis shall own
all rights in such Global Brand Elements, and shall grant Zai the exclusive right to use such Global Brand Elements in connection with the Commercialization of Licensed Products in the Territory. Zai shall Commercialize Licensed Products in the
Territory in a manner consistent with the Global Brand Elements, if any such Global Brand Elements are agreed to by the Parties. 

8.6 Diversion. Each Party hereby covenants and agrees that it shall not, and shall ensure that its Affiliates and Sublicensees
shall not, either directly or indirectly, promote, market, distribute, import, sell or have sold any Licensed Product, including via the Internet or mail order, to any Third Party or to any address or Internet Protocol address or the like in the
other Party’s territory. Neither Party shall engage, nor permit its Affiliates and Sublicensees to engage, in any advertising or promotional activities relating to any Licensed Product for use directed primarily to customers or other buyers or
users of Licensed Products located in any country or jurisdiction in the other Party’s territory, or solicit orders from any prospective purchaser located in any country or jurisdiction in the other Party’s territory. If a Party or its
Affiliates or 

  
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Sublicensees receive any order for Licensed Products for use from a prospective purchaser located in a country or jurisdiction in the other Party’s territory, such Party shall immediately
refer that order to such other Party and shall not accept any such orders. Neither Party shall, nor permit its Affiliates and Sublicensees to, deliver or tender (or cause to be delivered or tendered) any Licensed Product for use in the other
Party’s territory. 
 8.7 Product Trademarks. Subject to Section 8.5, Zai may brand Licensed Products in the
Territory using trademarks, logos, and trade names it determines appropriate for Licensed Products, which may vary by region or within a region (the “Product Marks”). Zai shall own all rights in the Product Marks in the
Territory and shall register and maintain the Product Marks in the Territory that it determines reasonably necessary, at Zai’s cost and expense. Zai shall consult with Entasis and consider Entasis’s comments in good faith in the selection
and design of the Product Marks. 
 8.8 Patent Marking. Zai shall mark all Licensed Product in accordance with the
applicable patent marking laws, and shall require all of its Affiliates and Sublicensees to do the same. To the extent permitted by Applicable Law, Zai shall indicate on the product packaging, advertisement and promotional materials that Licensed
Products is in-licensed from Entasis. 
 ARTICLE 9 

PAYMENTS AND MILESTONES 

9.1 Upfront Payment. In partial consideration of the rights granted by Entasis to Zai hereunder, Zai shall pay to Entasis
a non-creditable, non-refundable payment in the amount of Five Million Dollars ($5,000,000) within [********] of the Effective Date. 

9.2 Development Milestones Payments. In partial consideration of the rights granted herein, and subject to the
remainder of this Section 9.2, Zai shall pay to Entasis the following milestone payments within [********] of the first achievement (whether by Entasis, Zai, its/their Affiliates or Sublicensees) of the corresponding milestone
events set forth below. 
  

			
	 Milestone Event
	  	Milestone Payment
	1.     [********] in the [********]	  	[********]
	2.     [********] in a [********] for the [********] in the [********]	  	[********]
	3.     [********] of [********] in [********]	  	[********]
	4.     [********] of [********] in [********]	  	[********]
	5.     [********] of [********] in [********]	  	[********]
	6.     [********] in the [********] for a [********]	  	[********]
	7.     [********] for a [********] in [********] for [********]	  	[********]
	8.     [********] for a [********] in [********] in [********]	  	[********]

  
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 For clarity, if any of Milestone Events1–4 or 6–7 with respect to the applicable Licensed Product
is skipped, then the achievement of a subsequent milestone triggers the payment of all preceding unpaid milestones. Further, if the Parties do not intend to [********] for the [********] in [********] other
than [********] (i.e., [********]), then Zai shall pay Entasis [********] upon achievement of [********]. 

Notwithstanding anything to the contrary, if within [********] after Regulatory Approval in the PRC, Zai has not achieved
[********], then Zai shall pay Entasis [********] and [********]; provided, that [********]. 

9.3 Sales Milestone Payments. 

(a) General. In partial consideration of the rights granted herein, and subject to the remainder of this Section 9.3, Zai
shall pay to Entasis the following milestone payments within [********] of the first achievement (whether by Zai, its Affiliates or Sublicensees) of the corresponding milestone events set forth below. 

 

			
	 Milestone Event
	  	Milestone Payment
	1.     First Calendar Year that annual Net Sales of Licensed Products in the Territory Exceeds [********]	  	[********]
	2.     First Calendar Year that annual Net Sales of Licensed Products in the Territory Exceeds [********]	  	[********]
	3.     First Calendar Year annual Net Sales of Licensed Products in the Territory Exceeds [********]	  	[********]
	4.     First Calendar Year that annual Net Sales of Licensed Products in the Territory Exceeds [********]	  	[********]

 (b) Achievement of Multiple Thresholds. For clarity, if annual Net Sales in a given Calendar
Year exceed more than one applicable threshold, then all corresponding milestone payments are payable. 
 (c) Regulatory
Submission Delay. In the event that (i) the CFDA requires a modification or supplement to the protocol (e.g., additional data, studies or patients) for the Pivotal Study in the PRC, (ii) such modification or supplement is
necessary for a Regulatory Submission of the Lead Product in the PRC, (iii) Entasis elects not to address the additional information required by the CFDA through a modification or supplement to the global protocol

  
 33 

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for the Pivotal Study, and (iv) the foregoing delays, from the Regulatory Submission date set forth in the Development Plan, Zai’s Regulatory Submission for the Lead Product in the PRC
(notwithstanding Zai’s use of Commercially Reasonable Efforts to do so), then the sales milestone payments set forth in Section 9.3(a) above shall be reduced sequentially by the Reduction Amount. By way of example, if all of the conditions
set forth in this Section 9.3(c)(i)–(iv) are met and Zai makes a Regulatory Submission for the Lead Product in the PRC [********] after Regulatory Submission of the Lead Product in the U.S. (resulting in a total Reduction
Amount of [********]), then [********] of the Reduction Amount shall first be applied to Milestone Payment 1 above, and the remaining [********] of the Reduction Amount shall then be applied to Milestone
Payment 2 above. 
 9.4 Royalty Payments. During the Royalty Term for an applicable Licensed Product, Zai shall make
quarterly non-refundable, non-creditable royalty payments to Entasis on the Net Sales of all such Licensed Product sold in the Territory, as calculated by multiplying
the applicable royalty rate set forth below by the corresponding amount of incremental, aggregated Net Sales of all such Licensed Products sold in the Territory in the applicable Calendar Year. 

 

			
	
For that portion of annual Net Sale of all 
Licensed Product 
in the Territory
	  	 Royalty Rate

	1. Less than or equal to [********]	  	[********]%
	2. Greater than [********] but less than or equal to [********]	  	[********]%
	3. Greater than [********]	  	[********]%

 9.5 Royalty Term. Zai shall pay royalties under Section 9.4, on a country-by-country and Licensed Product-by-Licensed Product basis, on Net Sales during the
period of time beginning on the First Commercial Sale of such Licensed Product in such country and continuing until the later of: (i) ten (10) years after the First Commercial Sale of such Licensed Product in such country, (ii) the
expiration or abandonment of the last-to-expire Valid Claim in such country that Covers such Licensed Product, and (iii) the expiration of Regulatory Exclusivity
for the Licensed Product in such country (the “Royalty Term”). 
 9.6 Reductions. 

(a) No Valid Claim. In each Calendar Quarter during the Royalty Term for a particular Licensed Product and country
in which there is no Valid Claim, Zai shall pay royalties to Entasis for such Licensed Product and country at a rate that is reduced by [********] (in each Net Sales tier) of the royalty rates set forth in Section 9.4. 

(b) Generic Reduction. If, in any country in the Territory during the Royalty Term for a Licensed Product, sales of all
Generic Products to such Licensed Product in such 

  
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country in a Calendar Quarter exceed [********] of the unit volume of all sales of such Licensed Product plus the unit volume of all sales of such Generic Products to such Licensed
Product in such country, then the then-applicable royalty rates (i.e., as set forth in Section 9.4) for such Calendar Quarter for Licensed Product sold in such country will be reduced by [********] of the royalty rates then
applicable. All such determinations of the unit volume of sales shall be based upon a mutually acceptable calculation method using market share data provided by a reputable and mutually agreed upon provider, such as IMS Health. 

(c) Anti-Stacking. If Zai is required to obtain a license to any Third Party Patent with respect to the Licensed Product that is
reasonably necessary to avoid infringement of a Third Party Patent by the Licensed Product in the Territory, then, during the Royalty Term, Zai may deduct from any royalty payments to Entasis under Section 9.4 [********] of any
payments made by Zai or its Affiliates or Sublicensees to Third Parties for any such license in the Field in the Territory. Zai may carry forward to subsequent Calendar Quarters any deductions under this Section 9.6(c)that it was not able to
deduct as a result of Section 9.6(d). 
 (d) Cumulative Deductions. In no circumstances will the royalties payable
to Entasis under Section 9.4 in any Calendar Year be reduced, as a result of Section 9.6(a)–(c) below [********] of the royalties otherwise payable under Section 9.4. Zai may carry forward to subsequent Calendar
Quarters any deductions that it was not able to deduct as a result of the foregoing proviso. 
 9.7 Royalty Report
and Payment. After the First Commercial Sale of any Licensed Product in the Territory, within [********] after each Calendar Quarter (except with respect to countries in the Territory where Zai has granted sublicenses, in
which case, within [********] after each Calendar Quarter), Zai shall provide Entasis with a report that contains the following information for the applicable Calendar Quarter, on a product-by-product and country-by-country basis: (i) the amount of gross sales of Licensed Products, (ii) an itemized
calculation of Net Sales showing separately each type of reductions provided for in the definition of “Net Sales,” (iii) a calculation of the royalty payment due on such sales in Dollars, including the exchange rate. Promptly following the
delivery of the applicable quarterly report, Entasis shall invoice Zai for the royalties due to Entasis with respect to Net Sales by Zai, its Affiliates and their respective sublicensees for such Calendar Quarter, and Zai shall pay such amounts to
Entasis in Dollars within [********] following Zai’s receipt of such invoice, provided that, if a government or regulatory action (or inaction) prevents Zai from making such payment to Entasis within such
[********] period, then Zai shall have up to [********] following its receipt of such invoice from Entasis to remit such payment to Entasis. 

9.8 Currency; Exchange Rate. All payments to be made by Zai to Entasis under this Agreement shall be made in
Dollars by bank wire transfer in immediately available funds to a bank account designated by written notice from Entasis. The rate of exchange to be used in computing the amount of currency equivalent in Dollars shall be made at the average of the
closing exchange rates reported in The Wall Street Journal (U.S., Eastern Edition) for the first, middle and last Business Days of the applicable reporting period for the payment due. 

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

9.10 Financial Records and Audits. Zai shall (and shall ensure that its Affiliates and Sublicensees will)
maintain complete and accurate records in accordance with GAAP and in sufficient detail to permit Entasis to confirm the accuracy of Net Sales and royalty payments due under this Agreement. Upon no less than [********] prior notice,
such records shall be open for examination, during regular business hours, for a period of [********] from the creation of individual records, and not more often than [********], by an independent certified public
accountant selected by Entasis and reasonably acceptable to Zai, for the sole purpose of verifying for Entasis the accuracy of the Net Sales and royalty reports provided by Zai under this Agreement. Such auditor shall enter into a reasonable non-disclosure agreement, and shall not disclose Zai’s Confidential Information to Entasis or to any Third Party, except to the extent such disclosure is necessary to verify the accuracy of the financial
reports furnished by Zai or the amount of payments by Zai under this Agreement. Entasis shall bear the cost of such audit unless such audit reveals an underpayment by Zai of more than [********] of the amount actually due for the time
period being audited, in which case Zai shall reimburse Entasis for the costs of such audit. Zai shall pay to Entasis any underpayment discovered by such audit within [********] after the accountant’s report, plus interest from
the original due date. In the event that such audit reveals an overpayment by Zai for the time period being audited, then Zai may offset such overpayment against any future amounts owed to Entasis under this Article 9. Zai shall include in each
relevant sublicense granted by it a provision requiring the Sublicensee to maintain records of sales of Licensed Products made pursuant to such sublicense and to grant access to such records to the same extent and under the same obligations as
required of Zai under this Agreement. 
 9.11 Taxes. 

(a) Taxes on Income. Each Party shall be solely responsible for the payment of any and all Taxes levied on account of all
payments it receives under this Agreement. 
 (b) Tax Responsibility. Except as otherwise set forth in this Section 9.11,
Entasis shall bear any Taxes required to be deducted or withheld by Zai under Applicable Law on any payments by Zai to Entasis under this Agreement. If Zai is required to deduct or withhold Taxes on any payments payable to Entasis under this
Agreement, Zai shall (i) pay the amount of such Taxes to the proper Governmental Authority in a timely manner; and (ii) promptly transmit to Entasis an official tax certificate or other evidence of such payment sufficient to enable

  
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Entasis to claim such payment of Taxes on Entasis’s applicable tax returns. Zai shall provide Entasis with advance notice prior to withholding any Taxes from payments payable to Entasis and
shall provide Entasis with a commercially reasonable period of time to claim an exemption or reduction in otherwise applicable Taxes. Entasis shall provide Zai with any tax forms that may be reasonably necessary in order for Zai to not withhold Tax
or to withhold Tax at a reduced rate under an applicable bilateral income tax treaty, to the extent Zai is legally able to do so. Entasis shall use reasonable efforts to provide any such tax forms to Zai in advance of the due date. Each Party shall
provide the other with reasonable assistance to enable the recovery, as permitted by Applicable Laws, of withholding Taxes or similar obligations resulting from payments made under this Agreement, such recovery to be for the benefit of Zai if Zai is
the Party bearing such withholding Tax under this Section 9.11. In addition, the Parties shall cooperate in accordance with Applicable Laws to minimize indirect Taxes (such as value added tax, sales tax, consumption tax and other similar Taxes)
in connection with this Agreement. 
 (c) VAT Tax; Gross-Up. The Parties acknowledge
and agree that Zai is permitted under this Agreement to withhold VAT from amounts payable to Entasis. Notwithstanding the foregoing, if Zai withholds VAT from any amounts otherwise payable to Entasis under Section 9.2, Section 9.3 or
Section 9.4 (any such withheld amount, a “VAT Withholding”), and is later able to recover some or all of such VAT Withholding from any Governmental Authority in the Territory (either as a credit or a return) (a
“VAT Credit”), then Zai shall pay to Entasis within [********] of receipt of such VAT Credit [********] of such VAT Credit; provided that in no event shall Zai be required to make any such
payment until all accumulated input VAT has been offset by Zai’s output VAT. 
 9.12 Blocked Currency. If by Applicable
Laws in a country or region in the Territory, conversion into Dollars or transfer of funds of a convertible currency to the United States becomes restricted, forbidden or substantially delayed, then Zai shall promptly notify Entasis and, thereafter,
amounts accrued in such country or region under this Article 9 shall be paid to Entasis (or its designee) in such country or region in local currency by deposit in a local bank designated by Entasis and to the credit of Entasis, unless the Parties
otherwise agree. 
 9.13 Third Party Payments. 

(a) Prior to Effective Date. For the avoidance of doubt, Entasis shall be responsible for any and all payments due to Third
Parties under agreements entered into prior to the Effective Date, including [********], in connection with the grant of any rights to any intellectual property included in the Licensed Technology to Zai. 

(b) After the Effective Date. If Entasis Controls any Patent, Know-How or other
intellectual property right after the Effective Date through a license from a Third Party (“Third Party IP”) that would be included in the definition of Licensed Technology, then Entasis shall promptly inform Zai of the terms of
such license and such Third Party IP, and Zai shall inform Entasis within [********] after receipt of such notice whether Zai wishes to include 

  
 37 

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such Third Party IP in the Licensed Technology. If Zai so elects, then such Third Party IP will be included in the Licensed Technology, and (i) if such Third Party IP
[********], then Zai shall reimburse Entasis for [********] of the [********] payable by Entasis to such Third Party directly as a result of the Development, Manufacture, and Commercialization of Licensed
Products by or on behalf of Zai in the Territory and (ii) for all other Third Party IP, then Zai shall reimburse Entasis for [********] of the [********] payable by Entasis to such Third Party directly as a result of
the Development, Manufacture, and Commercialization of Licensed Products by or on behalf of Zai in the Territory; provided that, [********]. For any payment that is due to such Third Party partially due to the Development,
Manufacture, and Commercialization of Licensed Products by or on behalf of Zai in the Territory (e.g., sales-based milestones), the Parties shall negotiate and agree in good faith on an allocation for which Zai shall reimburse Entasis. 

ARTICLE 10 

CONFIDENTIALITY 

10.1 Nondisclosure Obligation. 

(a) For the Term of this Agreement and [********] thereafter, the Party receiving the Confidential Information of the
other Party (such receiving Party, the “Receiving Party”) shall keep confidential and not publish, make available or otherwise disclose any Confidential Information to any Third Party, without the express prior written
consent of the Party that disclosed such Confidential Information (the “Disclosing Party”); provided however, the Receiving Party may disclose the Confidential Information to its Affiliates, officers, directors,
employees, agents, consultants and/or independent contractors (including Sublicensees) of such Receiving Party who need to know the Confidential Information in connection with the exercise of rights and performance of obligations under this
Agreement, and who are bound by confidentiality obligations with respect to such Confidential Information. The Receiving Party shall exercise at a minimum the same degree of care it would exercise to protect its own confidential information (and in
no event less than a reasonable standard of care) to keep confidential the Confidential Information. The Receiving Party shall use the Confidential Information solely in connection with the purposes of this Agreement. 

(b) It shall not be considered a breach of this Agreement if the Receiving Party discloses Confidential Information to comply with a
lawfully issued court or governmental order or with a requirement of Applicable Law or the rules of any internationally recognized stock exchange; provided that: (i) the Receiving Party gives prompt written notice of such
disclosure requirement to the Disclosing Party and cooperates with the Disclosing Party’s efforts to oppose such disclosure or obtain a protective order for such Confidential Information, and (ii) if such disclosure requirement is not
quashed or a protective order is not obtained, the Receiving Party shall only disclose those portions of the Confidential Information that it is legally required to disclose and shall make a reasonable effort to obtain confidential treatment for the
disclosed Confidential Information. 

  
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 10.2 Scientific Publication. The JSC shall discuss the publication
strategy for the publication of scientific papers, abstracts, meeting presentations and other disclosure of the results of the studies carried out under this Agreement, taking into consideration the Parties’ interest in publishing the results
of the Development work to obtain recognition within the scientific community and to advance the state of scientific knowledge, and the need to protect Confidential Information, intellectual property rights and other business interests of the
Parties. Zai shall provide Entasis with the opportunity to review and comment on any proposed publication that pertains to Licensed Products at least [********] prior to its intended submission for publication. Entasis shall provide
Zai with its comments, if any, within [********] after the receipt of such proposed publication. Zai shall consider in good faith the comments provided by Entasis and shall comply with Entasis’s request to: (a) remove any and
all Confidential Information of Entasis from such proposed publication; and (b) delay the proposed submission for a period up to [********] as may be reasonably necessary to seek patent protection for the information disclosed in
the proposed publication. Entasis shall notify Zai of any proposed publication that is related to a Licensed Product and provide a copy of such publication to Zai within [********] after such proposed publication is accepted for
publication. Each Party agrees to acknowledge the contribution of the other Party and its employees in all publications as scientifically appropriate. 

10.3 Publicity; Use of Names. 

(a) Each of the Parties agrees not to disclose to any Third Party the terms and conditions of this Agreement without the prior approval
of the other Party, except to advisors (including consultants, financial advisors, attorneys and accountants), potential and existing investors, acquirers or sublicensees, in each case on a need-to-know basis and under obligations of confidentiality consistent with industry standards, provided that, with respect to disclosures to potential and existing investors, acquirers or
sublicensees, the Parties mutually agree upon a redacted version of this Agreement for purposes of such disclosure to protect the Confidential Information of each Party. 

(b) The Parties have agreed upon the initial press release to announce the execution of this Agreement in the form attached hereto as
Exhibit 10.3; thereafter, Entasis and Zai may each disclose to Third Parties the information contained in such press release(s) without the need for further approval by the other. 

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

  
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 (d) The Parties acknowledge the importance of supporting each other’s efforts to
publicly disclose results and significant developments regarding Licensed Products for use in the Field in the Territory and other activities in connection with this Agreement, beyond what may be strictly required by Applicable Laws and the rules of
a recognized stock exchange, and Entasis may make such disclosures from time to time with respect to Licensed Products with the approval of Zai, which approval shall not be unreasonably withheld, conditioned or delayed. Such disclosures may include
achievement of significant events in the Development (including regulatory process) or Commercialization of Licensed Products for use in the Field in the Territory. Unless otherwise requested by the applicable Party, each Party shall indicate that
Entasis is the licensor of Licensed Products, Licensed Patents, and Licensed Know-How, as applicable, in each public disclosure issued by such Party regarding Licensed Products. 

ARTICLE 11 

REPRESENTATIONS, WARRANTIES, AND COVENANTS 

11.1 Representations, Warranties, and Covenants of Each Party. Each Party represents
and warrants, and covenants to the other Party as of the Effective Date that: 
 (a) it is a company or corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction in which it is incorporated, and has full corporate power and authority and the legal right to own and operate its property and assets and to carry on its business as it is
now being conducted and as contemplated in this Agreement, including the right to grant the licenses granted by it hereunder; and 

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

(c) it is not a party to any agreement that would prevent it from granting the rights granted to the other Party under this Agreement
or performing its obligations under this Agreement; 
 (d) in the course of performing its obligations or exercising its rights under
this Agreement, it shall comply with all Applicable Laws, including as applicable, cGMP, GCP, and GLP standards, and shall not employ or engage any party who has been debarred by any Regulatory Authority, or, to such Party’s knowledge, is the
subject of debarment proceedings by a Regulatory Authority. 

  
 40 

 CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
[********] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 

 

 11.2 Representations and Warranties of Entasis. Entasis represents and
warrants to Zai that, as of the Effective Date: 
 (a) it has the right under the Licensed Technology to grant the licenses to Zai as
purported to be granted under Section 2.1 of this Agreement, and it has not granted any license or other right under the Licensed Technology that is inconsistent with the license granted to Zai under Section 2.1. 

(b) it has not received any written notice from any Third Party asserting or alleging that the Development of Licensed Products prior
to the Effective Date infringed or misappropriated the intellectual property rights of such Third Party; 
 (c) there are no pending,
and to Entasis’s knowledge, no threatened, adverse actions, suits or proceedings (including interferences, reissues, reexaminations, cancellations, oppositions, nullity actions, invalidation actions or post-grant reviews) against Entasis
involving the Licensed Technology or Licensed Products; 
 (d) it has not received any communications from any Regulatory Authority
describing any matters specific to a Licensed Product, or to any class of drugs to which a Licensed Product belongs, that may be necessary to be overcome to obtain Regulatory Approval of any Licensed Product; 

(e) the Licensed Technology includes all Know-How and Patents owned or otherwise Controlled by
Entasis or its Affiliates that is necessary or useful to Develop, Manufacture or Commercialize Compounds or Licensed Products in the Field in the Territory as such Development, Manufacture and Commercialization is contemplated to be conducted by the
Parties hereunder; 
 (f) neither Entasis nor its Affiliates has licensed to a Third Party any
Know-How or Patents that are necessary or useful to Develop, Manufacture or Commercialize Compounds or Licensed Products in the Field in the Territory; 

(g) Entasis owns or Controls all Patents and Know-How conceived, reduced to practice or created
by [********] (including by inventors obligated to assign their rights in applicable intellectual property to [********]) that are necessary or useful to Develop, Manufacture or Commercialize Compounds or Licensed
Products in the Field in the Territory; 
 (h) Entasis, or its Affiliates, is the registered applicant of the Licensed Patents in the
countries in the Territory set forth on Exhibit 1.72; 
 (i) Entasis has complied with all Applicable Laws applicable to
(i) the prosecution and maintenance of the Licensed Patents and (ii) its Development and Manufacture of Compounds and Licensed Products; 

  
 41 

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 (j) (i) Entasis has obtained, or caused its Affiliates to obtain, assignments from the
inventors of all rights and embodiments in and to the Licensed Technology that is solely owned by Entasis or its Affiliates, (ii) all such assignments are valid and enforceable, and (iii) the inventorship of the Licensed Patents that are
solely owned by Entasis or its Affiliates is properly identified on each issued patent or patent application in such Licensed Patents; and 

(k) Entasis and its Affiliates have taken Commercially Reasonable Efforts consistent with industry practices to protect the secrecy,
confidentiality and value of all Licensed Know-How that constitutes trade secrets under Applicable Law. 

11.3 Representations, Warranties, and Covenants of Zai. Zai represents, warrants, and
covenants to Entasis that as of the Effective Date: 
 (a) there are no legal claims, judgments or settlements against or owed by
Zai, or pending or, to Zai’s actual knowledge, threatened, legal claims or litigation, in each case, relating to antitrust, anti-competition, anti-bribery or corruption violations; 

(b) Zai and its Affiliates is not, and has not been, debarred or disqualified by any Regulatory Authority; and 

(c) Zai has, or shall obtain, sufficient technical, clinical, and regulatory expertise to perform all of its obligations pursuant to
this Agreement, including its obligations relating to Development, Commercialization, and obtaining Regulatory Approvals for Licensed Products in the Territory. 

11.4 NO OTHER WARRANTIES. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NO REPRESENTATIONS OR WARRANTIES
WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR NON-MISAPPROPRIATION OF THIRD
PARTY INTELLECTUAL PROPERTY RIGHTS, ARE MADE OR GIVEN BY OR ON BEHALF OF A PARTY. ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY EXPRESSLY EXCLUDED. Zai acknowledges and agrees that Licensed Products
is the subject of ongoing clinical research and development and that Entasis cannot assure the safety or usefulness of Licensed Products. 

11.5 Compliance with Anti-Corruption Laws. 

(a) Notwithstanding anything to the contrary in this Agreement, Zai hereby agrees that: 

(i) it shall not, and shall ensure that its Affiliates will not, in the performance of this Agreement, perform any actions that are
prohibited by local and other anti-corruption laws (including the provisions of the U.S. Foreign Corrupt Practices Act, collectively “Anti-Corruption Laws”) that may be applicable to one or both Parties to this Agreement;

  
 42 

 CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
[********] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 

 

 (ii) it shall not, and shall ensure that its Affiliates will not, in the performance
of this Agreement, directly or indirectly, make any payment, or offer or transfer anything of value, or agree or promise to make any payment or offer or transfer anything of value, to a government official or government employee, to any political
party or any candidate for political office or to any other Third Party with the purpose of influencing decisions related to either Party and/or its business in a manner that would violate Anti-Corruption Laws; 

(iii) it shall, and shall ensure that its Affiliates will, on an annual basis upon request by Entasis, verify in writing that to the
best of Zai’s knowledge, there have been no violations of Anti-Corruption Laws by Zai or persons employed by or subcontractors used by Zai in the performance of this Agreement, or shall provide details of any exception to the foregoing; and

 (iv) it shall, and shall ensure that its Affiliates will, maintain records (financial and otherwise) and supporting documentation
related to the subject matter of this Agreement to document or verify compliance with the provisions of this Section 11.5, and upon request of Entasis, up to [********] and upon reasonable advance notice, shall provide Entasis or
its representative with access to such records for purposes of verifying compliance with the provisions of this Section 11.5. 

(b) Zai represents and warrants that, to its knowledge, neither Zai nor any of its Affiliates, directors, officers, employees,
distributors, agents, representatives, sales intermediaries or other Third Parties acting on behalf of Zai or any of its Affiliates: 

(i) has taken any action in violation of any applicable anticorruption law, including the U.S. Foreign Corrupt Practices Act
(15 U.S.C. § 78 dd-1 et seq.); or 
 (ii) has corruptly, offered,
paid, given, promised to pay or give, or authorized the payment or gift of anything of value, directly or indirectly, to any Public Official (as defined in Section 11.5(d) below), for the purposes of: 

(1) influencing any act or decision of any Public Official in his official capacity; 

(2) inducing such Public Official to do or omit to do any act in violation of his lawful duty; 

(3) securing any improper advantage; or 

(4) inducing such Public Official to use his or her influence with a government, governmental entity, or commercial enterprise owned
or controlled by any government (including state-owned or controlled veterinary or medical facilities) in obtaining or retaining any business whatsoever. 

  
 43 

 CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
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 (c) Zai further represents and warrants that, as of the Effective Date, none of the
officers, directors, employees, of Zai or of any of its Affiliates or agents acting on behalf of Zai or any of its Affiliates, in each case that are employed or reside outside the United States, are themselves Public Officials. 

(d) For purposes of this Section 11.5, “Public Official” means (i) any officer, employee or
representative of any regional, federal, state, provincial, county or municipal government or government department, agency or other division; (ii) any officer, employee or representative of any commercial enterprise that is owned or controlled
by a government, including any state-owned or controlled veterinary or medical facility; (iii) any officer, employee or representative of any public international organization, such as the African Union, the International Monetary Fund, the
United Nations or the World Bank; and (iv) any person acting in an official capacity for any government or government entity, enterprise or organization identified above. 

ARTICLE 12 

INDEMNIFICATION 

12.1 By Zai. Zai shall indemnify and hold harmless Entasis, its Affiliates, and their directors, officers, employees and
agents (individually and collectively, the “Entasis Indemnitees”) from and against all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs) incurred in connection with any claims,
demands, actions or other proceedings by any Third Party (individually and collectively, “Losses”) first arising after the Effective Date to the extent arising from (a) the Development and Commercialization of the Compounds or
Licensed Products in the Territory by Zai or any of its Affiliates or Sublicensee, including product liability claims but excluding claims resulting from Entasis’s Manufacture of the Licensed Products, (b) actions taken by Zai as
Entasis’s regulatory agent under Section 6.2, (c) the negligence, illegal conduct or willful misconduct of Zai, or (d) Zai’s breach of any of its representations or warranties made in or pursuant to this Agreement or any
covenants or obligations set forth in or entered into pursuant to this Agreement, in each case of clauses (a) through (d) above except to the extent such Losses arise out of a claim for which Entasis has an obligation to indemnify under
Section 12.2. 
 12.2 By Entasis. Entasis shall indemnify and hold harmless Zai, its Affiliates, and their
directors, officers, employees and agents (individually and collectively, the “Zai Indemnitees”) from and against all Losses to the extent arising from (a) the negligence, illegal conduct or willful misconduct of
Entasis, (b) Entasis’s breach of any of its representations or warranties made in or pursuant to this Agreement or any covenants or obligations set forth in or entered into pursuant to this Agreement, or (c) the Development,
Manufacture or Commercialization of the Compounds or Licensed Products outside of the Territory, or inside the 

  
 44 

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Territory as set forth in this Agreement, by or on behalf of Entasis or any of its Affiliates or sublicensees, including product liability claims, in each case of clauses (a) through (c)
above, except to the extent such Losses arise out of any of a arise out of a claim for which Zai has an obligation to indemnify under Section 12.1. 

12.3 Defined Indemnification Terms. Either of the Zai Indemnitees or the Entasis Indemnitees is an
“Indemnitee” for the purpose of this Article 12, and the Party that is obligated to indemnify the Indemnitee under Section 12.1 or Section 12.2 shall be the “Indemnifying Party.” 

12.4 Defense. If any such claims or actions are made, the Indemnifying Party shall defend the Indemnitee at the Indemnifying
Party’s sole expense using counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnitee, provided that the Indemnitee may, at its own expense, also be represented by counsel of its own choosing. The
Indemnifying Party has the sole right to control the defense of any such claim or action, subject to the terms of this Article 12. 

12.5 Settlement. The Indemnifying Party may settle any such claim, demand, action or other proceeding or otherwise consent to an
adverse judgment (a) with prior written notice to the Indemnitee but without the consent of the Indemnitee where the only liability to the Indemnitee is the payment of money and the Indemnifying Party makes such payment, or (b) in all
other cases, only with the prior written consent of the Indemnitee, such consent not to be unreasonably withheld or delayed. 
 12.6
Notice. The Indemnitee shall notify the Indemnifying Party promptly of any claim, demand, action or other proceeding under Sections 12.1 or 12.2 and shall reasonably cooperate with all reasonable requests of the Indemnifying Party with
respect thereto. 
 12.7 Permission by Indemnifying Party. The Indemnitee may not settle any such claim,
demand, action or other proceeding or otherwise consent to an adverse judgment in any such action or other proceeding or make any admission as to liability or fault without the express written permission of the Indemnifying Party. 

12.8 LIMITATION OF LIABILITY. EXCEPT FOR DAMAGES AVAILABLE FOR A PARTY’S BREACH OF THE CONFIDENTIALITY
OBLIGATIONS SET FORTH HEREIN, AND SUBJECT TO AND WITHOUT LIMITING THE INDEMNIFICATION OBLIGATIONS OF EACH PARTY WITH RESPECT TO THIRD PARTY CLAIMS UNDER SECTION 12.1 OR 12.2, NO PARTY OR ANY OF ITS AFFILIATES SHALL BE LIABLE TO THE OTHER PARTY UNDER
ANY CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, MULTIPLIED OR CONSEQUENTIAL DAMAGES OR FOR LOST PROFITS (EVEN IF DEEMED DIRECT DAMAGES) ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT. 

  
 45 

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 ARTICLE 13 

INTELLECTUAL PROPERTY 

13.1 Ownership of Inventions. 

(a) Subject to Section 13.1(b), ownership of all Inventions will be assigned based on inventorship, as determined in accordance
with the rules of inventorship under United States patent laws. Each Party owns all Inventions that are made solely by its and its Affiliates’ employees, agents, and independent contractors during the performance of activities under this
Agreement (“Sole Inventions”). The Parties shall jointly own all Inventions that are made jointly by the employees, agents, and independent contractors of one Party and its Affiliates together with the employees, agents, and
independent contractors of the other Party and its Affiliates (“Joint Inventions”). Patents claiming the Joint Inventions are “Joint Patents”. Each Party owns an undivided half interest in the Joint
Inventions, without a duty of accounting or an obligation to seek consent from the other Party, for the exploitation or license of the Joint Inventions (subject to the licenses granted to the other Party under this Agreement). 

(b) Notwithstanding Section 13.1(a), Entasis shall solely own all right, title, and interest in and to all sole or joint
patentable Inventions arising under this Agreement that relate to the composition of matter or the method of use of a Compound or Licensed Product (including all Patents claiming such Inventions) (“Entasis-Owned Inventions”). Zai
shall and hereby does assign to Entasis all of Zai’s right, title, and interest in and to all Entasis-Owned Inventions. Zai shall take (and cause its employees, agents, contractors and Sublicensees to take) such further actions reasonably
requested by Entasis to evidence such assignment and to obtain patent and other intellectual property rights protection for such Inventions outside of the Territory. Zai shall obligate its Affiliates, Sublicensees and contractors to assign all
Entasis-Owned Inventions to Zai so that Zai can comply with its obligations under this Section 13.1. 
 (c) Each Party shall
promptly disclose to the other Party all Inventions, including all invention disclosure or other similar documents submitted to a Party by its or its Affiliates’ employees, agents, Sublicensees or contractors relating to such Inventions, and
shall also promptly respond to reasonable requests from the other Party for additional information relating to such Inventions. 

13.2 Patent Prosecution. 

(a) As between the Parties, Entasis has the first right to file, prosecute and maintain all Licensed Patents throughout the world,
provided that, Entasis shall be responsible for the cost and expenses of filing, prosecuting and maintaining such Licensed Patents outside the Territory, and Zai shall be responsible for and shall reimburse Entasis for
[********] of the costs and expenses of filing, prosecuting and maintaining the Licensed Patents in the Territory, to the extent incurred by Entasis after the Effective Date. 

  
 46 

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 (b) Entasis shall consult with Zai and keep Zai reasonably informed of the status of
the Licensed Patents in the Territory and shall promptly provide Zai with all material correspondence received from any patent authority in the Territory in connection therewith. In addition, Entasis shall promptly provide Zai with drafts of all
proposed material filings and correspondence to any patent authority in the Territory with respect to the Licensed Patents for Zai’s review and comment prior to the submission of such proposed filings and correspondences, and Entasis shall
consider Zai’s reasonable comments in good faith. 
 (c) Entasis shall notify Zai of any decision to cease prosecution and/or
maintenance of any Licensed Patents in the Territory. Entasis shall provide such notice at least [********] prior to any filing or payment due date, or any other due date that requires action, in connection with such Licensed Patent in
the Territory. In such event, Entasis shall permit Zai, at its discretion and at its sole expense, to continue prosecution or maintenance of such Licensed Patent in the Territory. Zai’s prosecution or maintenance of such Licensed Patent shall
not change the Parties’ respective rights and obligations under this Agreement with respect to such Licensed Patent other than those expressly set forth in this Section 13.2(c). 

(d) Each Party shall provide the other Party all reasonable assistance and cooperation in the patent prosecution efforts under this
Section 13.2, including providing any necessary powers of attorney and executing any other required documents or instruments for such prosecution. 

13.3 Patent Enforcement. 

(a) Each Party shall notify the other within [********] of becoming aware of any alleged or threatened infringement by a
Third Party of any of the Licensed Patents, which infringement adversely affects or is expected to adversely affect any Licensed Product in the Field in the Territory, and any related declaratory judgment, opposition, or similar action alleging the
invalidity, unenforceability or non-infringement of any of the Licensed Patents in the Territory (collectively “Product Infringement”). 

(b) As between the Parties, Zai has the first right to bring and control any legal action in connection with such Product Infringement
in the Territory at its own expense as it reasonably determines appropriate. If Zai does not bring such legal action within [********] after the notice provided pursuant to Section 13.3(a), Entasis may bring and control any legal
action in connection with such Product Infringement in the Territory at its own expense as it reasonably determines appropriate. 

(c) At the request and expense of the Party bringing an action under Section 13.3(b) above, the other Party shall provide
reasonable assistance in connection therewith, including by executing reasonably appropriate documents, cooperating in discovery and joining as a party to the action if required by Applicable Law to pursue such action. In connection with any such
enforcement action, the Party bringing the action shall not enter into any settlement admitting the invalidity or non-infringement of, or otherwise impairing the other Party’s rights in the Licensed
Patents without the prior written consent of the other Party. 

  
 47 

 CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
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 (d) Any recoveries resulting from enforcement action relating to a claim of Product
Infringement in the Territory shall be first applied against payment of each Party’s costs and expenses in connection therewith. Any such recoveries in excess of such costs and expenses shall be retained by the enforcing Party, provided
that if Zai is the enforcing Party, then such excess recoveries shall be deemed Net Sales of Licensed Products and subject to royalty payment in Article 9. 

(e) Entasis has the exclusive right to bring and control any legal action to enforce the Licensed Patents against any infringement that
is not a Product Infringement or is outside the Territory, in each case at its own expense and as it reasonably determines appropriate, and may retain all recoveries. 

13.4 Defense. 

(a) Each Party shall notify the other in writing of any allegations it receives from a Third Party that the Development or
Commercialization of any Licensed Product or any embodiment of any technology or intellectual property licensed by a Party under this Agreement infringes the intellectual property rights of such Third Party. Such notice shall be provided promptly,
but in no event after more than [********] following receipt of such allegations. Such written notice shall include a copy of any summons or complaint (or the equivalent thereof) received regarding the foregoing. Each Party shall
assert and not waive the joint defense privilege with respect to all communications between the Parties. 
 (b) Subject to Section
Article 12, the Parties shall agree how best to mitigate or control the defense of any such legal proceeding, agree whether to enter into a joint defense agreement to, among other reasons, preserve the confidentiality of communications or
cooperation between the Parties in relation to such defense, and determine which Party is best suited to assume the primary responsibility for the conduct of the defense of any such claim at their expense. The other Party may participate and be
separately represented in any such suit at its sole option and at its own expense. Each Party shall reasonably cooperate with the Party conducting the defense of the claim. If a Party or any of its Affiliates have been individually named as a
defendant in a legal proceeding relating to the alleged infringement of a Third Party’s Patents or other intellectual property right as a result of such Party’s Development or Commercialization of Licensed Products, then that Party shall
conduct the defense and the other Party shall be allowed to join in such action, at its own expense. 
 (c) The Parties shall keep
each other informed of the status of and of their respective activities regarding any infringement litigation initiated by a Third Party concerning a Party’s Development or Commercialization of Licensed Products or settlement thereof;
provided, however, that no settlement or consent judgment or other voluntary final disposition of a suit under this Section 13.4 may be undertaken by a Party without the consent of the other Party which consent shall not be unreasonably
withheld or delayed. 

  
 48 

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 ARTICLE 14 

TERM AND TERMINATION 

14.1 Term. This Agreement is effective as of the Effective Date, and will continue, on a country-by-country basis, in effect until the expiration of and payment by Zai of all Zai’s payment obligations set forth in Section 9.4 applicable to such country (the “Term”). On
a country-by-country basis, upon the natural expiration of this Agreement as contemplated in this Section 14.1, the licenses granted by Entasis to Zai under this
Agreement in such country will become a fully paid-up, non-exclusive, perpetual, and irrevocable license. 

14.2 Termination. 

(a) Termination by Zai for Convenience. At any time, Zai may terminate this Agreement by providing
written notice of termination to Entasis, which notice includes an effective date of termination at least [********] prior notice if such termination notice is delivered prior to First Commercial Sale in the Territory, or
[********] prior notice thereafter. 
 (b) Termination for Material Breach. This Agreement
may be terminated in its entirety, or on a country-by-country basis as set forth below, at any time during the Term upon written notice by either Party if the other
Party materially breaches this Agreement and such breach has not been cured within [********] (or [********] for failure to make payment) after notice requesting cure of such breach; provided that, if the
material breach in question relates to a particular country(ies), but not to the entire Territory, then the Agreement may only be terminated with respect to such country(ies) and not in its entirety; and provided further, that if such breach
(other than failure to make a payment) is not reasonably capable of cure within such [********], but is capable of cure within [********] from such notice, the breaching Party may submit, within [********]
of such notice, a reasonable cure plan to remedy such breach as soon as possible and in any event prior to the end of such [********] period, and, upon such submission, the [********] cure period shall be automatically
extended for so long as the breaching Party continues to use diligent efforts to cure such breach in accordance with the cure plan, but for no more than [********] additional [********]. For the avoidance of doubt, the
Parties agree that each of (a) the non-compete obligation pursuant to Section 2.7, (b) Zai’s diligence obligations pursuant to Sections 5.6, 6.1 and 8.3, and (c) the obligations related to
Anti-Corruption Laws pursuant to Section 11.5 shall be deemed material terms of this Agreement. If the allegedly breaching Party in good faith disputes such material breach and provides written notice of that dispute to the other Party within
the applicable period set forth above, the matter shall be addressed under the dispute resolution provisions in Article 15, and the termination shall not become effective unless and until it has been determined under Article 15 that the allegedly
breaching Party is in material breach of this Agreement. It is understood and acknowledged that during the pendency of such a dispute, all of the terms and conditions of this Agreement shall remain in effect and the Parties shall continue to perform
all of their respective obligations hereunder. 

  
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 (c) Termination for Cessation of Commercialization.
If after the First Commercial Sale of a Licensed Product in a particular country in the Territory, should Zai, its Affiliates, and its Sublicensees cease for a consecutive period of [********] to Commercialize Licensed Products in such
country, then Entasis may terminate this Agreement with respect to such country upon written notice by Entasis to Zai; provided that, such right of termination shall not apply in the event that such cessation is the result of a
requirement of a Regulatory Authority in the Territory, a supply failure, or any other event beyond the reasonable control of Zai, its Affiliates or Sublicensees, or in the event that such determination by Zai to cease Commercialization is deemed by
the JSC to be commercially reasonable. 
 (d) Termination for Insolvency. Each Party may terminate this
Agreement upon delivery of written notice to the other Party if (i) such other Party files in any court or agency pursuant to any statute or regulation of any jurisdiction a petition in bankruptcy or insolvency or for reorganization or similar
arrangement for the benefit of creditors or for the appointment of a receiver or trustee of such other Party or its assets, (ii) such other Party is served with an involuntary petition against it in any insolvency proceeding and such
involuntary petition has not been stayed or dismissed within [********] of its filing, or (iii) such other Party makes an assignment of substantially all of its assets for the benefit of its creditors. 

(e) Termination for Patent Challenge. Except to the extent the following is unenforceable under
the laws of a particular jurisdiction, Entasis may terminate this Agreement in its entirety, immediately if Zai or its Affiliates or Sublicensees, individually or in association with any other person or entity, commences a legal action challenging
the validity, enforceability or scope of any Patents owned or Controlled by Entasis anywhere in the world (a “Patent Challenge”). For the avoidance of doubt, the foregoing right of termination shall not apply with respect to any
Patent Challenge where the Patent Challenge is (i) based solely on the scope of a Licensed Patent or whether a claim therein qualifies as a Valid Claim and made in defense of a breach claim first brought by Entasis against Zai pursuant to this
Agreement or (ii) brought by a Sublicensee of Zai and Zai has terminated the applicable sublicense agreement following notice thereof. 

14.3 Effect of Termination. Upon the termination of this Agreement: 

(a) License. All licenses and other rights granted by Entasis to Zai under the Licensed Technology shall terminate and all
sublicenses granted by Zai shall also terminate. Zai hereby grants to Entasis, effective upon the termination of this Agreement, an exclusive, fully paid, royalty free, perpetual, irrevocable, and sublicenseable (through multiple tiers) license
under the Zai Technology to make, have made, use, import, offer for sale and sell Licensed Products in the Territory. 

  
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 (b) Regulatory Submissions; Data. Zai shall, and shall cause its
Affiliates and Sublicensees to, promptly assign and transfer to Entasis, at no cost to Entasis (except in the event of a termination by Zai pursuant to Section 14.2(b), in which case Entasis shall bear all such costs), all Regulatory
Submissions and Regulatory Approvals of Licensed Product, data from all non-clinical and clinical studies conducted by or on behalf of Zai, its Affiliates or Sublicensees on Licensed Products, and all
pharmacovigilance data (including all Adverse Event database) of Licensed Products. 
 (c) Trademarks. Zai shall, and shall
cause its Affiliates and Sublicensees to, promptly transfer and assign to Entasis, at no cost to Entasis (except in the event of a termination by Zai pursuant to Section 14.2(b), in which case Entasis shall bear all such costs), all Product
Marks (excluding any such mark that include, in whole or in part, any corporate name or logos of Zai or its Affiliates or Sublicensees). 

(d) Inventory. Entasis may purchase from Zai any or all of the inventory of Licensed Products held by Zai or its Affiliates as
of the date of termination at a price equal to the Fully Burdened Manufacturing Costs paid by Zai for such inventory, provided that such inventory complies with specifications and has greater than [********] of remaining
shelf life at the time of delivery to Entasis. Entasis shall notify Zai within [********] after the date of termination whether Entasis elects to exercise such right. 

(e) Transition Assistance. Zai shall, and shall cause its Affiliates and Sublicensees, to reasonably cooperate with
Entasis to facilitate orderly transition of the Development and Commercialization of Licensed Products to Entasis, including (i) assigning or amending as appropriate, upon request of Entasis, any agreements or arrangements with Third Party
vendors (including distributors) to Develop, promote, distribute, sell or otherwise Commercialize Licensed Products or, to the extent any such Third Party agreement or arrangement is not assignable to Entasis, reasonably cooperating with Entasis to
arrange to continue to provide such services for a reasonable time after termination; and (ii) to the extent that Zai or its Affiliate is performing any activities described above in (i), reasonably cooperating with Zai to transfer such
activities to Zai and continuing to perform such activities on Zai’s behalf for a reasonable time after termination until such transfer is completed. 

(f) Ongoing Clinical Trial. If at the time of such termination, any Clinical Trials for Licensed Products are
being conducted by or on behalf of Zai, its Affiliates or Sublicensees, then, at Entasis’s election on a Clinical Trial-by-Clinical Trial basis: (i) Zai shall,
and shall cause its Affiliates and Sublicensees to, fully cooperate with Entasis to transfer the conduct of all such Clinical Trials to Entasis, and Entasis shall assume any and all liability and costs for such Clinical Trials after the effective
date of such termination, provided that Zai shall continue to bear all costs and expenses incurred in connection with the conduct of such Clinical Trials until (x) the effective date of such termination, if terminated by Zai pursuant to
Section 14.2(b) or (y) the earlier of the completion of such Clinical Trial and [********] after the effective date of such termination, if terminated for any other reason; or (ii) Zai shall, and

  
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shall cause its Affiliates and Sublicensees to, at its own cost and expense (except in the event of a termination by Zai pursuant to Section 14.2(b), in which case Entasis shall bear all
such costs), orderly wind down the conduct of any such Clinical Trial which is not assumed by Entasis under clause (i). 
 14.4
Alternative Remedy for Termination. If Zai has the right to terminate this Agreement pursuant to Section 14.2(b) on account of Entasis’s uncured material breach as finally determined by an arbitrator pursuant to Section 15.4,
then Zai may elect by written notice to Entasis within [********] following such final determination to exercise its rights under this Section 14.4 in lieu of exercising its right under Section 14.2(b). Upon Zai’s
election to exercise its rights under this Section 14.4, this Agreement will remain in full force and effect and Entasis shall pay Zai an amount equal to [********] of its damages for such uncured material breach as finally
determined by an arbitrator pursuant to Section 15.4 in accordance with the payment terms of the award. 
 14.5 Survival.
Termination of this Agreement for any reason shall not release either Party of any obligation or liability which, at the time of such termination, has already accrued to the other Party or which is attributable to a period prior to such termination.
Notwithstanding anything herein to the contrary, termination of this Agreement by a Party shall be without prejudice to other remedies such Party may have at law or equity. Without limiting the foregoing, the following provisions shall survive the
termination or expiration of this Agreement for any reason: [********]. 
 ARTICLE 15 

DISPUTE RESOLUTION 

15.1 General. The Parties recognize that a dispute may arise relating to this Agreement (a “Dispute”). Any
Dispute, including Disputes that may involve the Affiliates of any Party, shall be resolved in accordance with this Article 15. 

15.2 Continuance of Rights and Obligations During Pendency of Dispute
Resolution. If there are any Disputes in connection with this Agreement, including Disputes related to termination of this Agreement under Article 14, all rights and obligations of the Parties shall continue until such time as any Dispute has
been resolved in accordance with the provisions of this Article 15. 
 15.3 Escalation. Any claim, Dispute, or controversy as
to the breach, enforcement, interpretation or validity of this Agreement shall be referred to the Executive Officers set forth in Section 3.1(e) for attempted resolution. If the Executive Officers are unable to resolve such Dispute within
[********] of such Dispute being referred to them, then, upon the written request of either Party to the other Party, the Dispute shall be subject to arbitration in accordance with Section 15.4. 

  
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 15.4 Arbitration. 

(a) If the Parties fail to resolve the Dispute through escalation to the Executive Officers under Section 15.3, and a Party
desires to pursue resolution of the Dispute, the Dispute shall be submitted by either Party for resolution in arbitration administered by [********] pursuant to its arbitration rules and procedures then in effect. 

(b) The arbitration shall be conducted by a panel of three arbitrators experienced in the pharmaceutical business: within
[********] after initiation of arbitration, each Party shall select one person to act as arbitrator and the two Party-selected arbitrators shall select a third arbitrator (who shall be the chairperson of the arbitration panel) within
[********] of their appointment. If the arbitrators selected by the Parties are unable or fail to agree upon the third arbitrator, the third arbitrator shall be appointed by [********]. If, however, the aggregate award
sought by the Parties is less than [********] and equitable relief is not sought, the arbitration shall be conducted by a single arbitrator agreed by the Parties (or appointed by [********] if the Parties cannot agree).

 (c) The seat of arbitration shall be New York City, New York and the language of the proceedings shall be English. 

(d) The Parties agree that any award or decision made by the arbitral tribunal shall be final and binding upon them and may be enforced
in the same manner as a judgment or order of a court of competent jurisdiction. The arbitral tribunal shall render its final award within [********] from the date on which the request for arbitration by one of the Parties wishing to
have recourse to arbitration is received by the [********]. The [********] may extend this time limit pursuant to a reasoned request from the arbitral tribunal or on its own initiative if it decides it is necessary to do
so. The arbitral tribunal shall determine the dispute by applying the provisions of this Agreement and the governing law set forth in Section 16.5. 

(e) By agreeing to arbitration, the Parties do not intend to deprive any court of its jurisdiction to issue, at the request of a Party,
a pre-arbitral injunction, pre-arbitral attachment or other order to avoid irreparable harm, maintain the status quo, preserve the subject matter of the Dispute, or aid
the arbitration proceedings and the enforcement of any award. Without prejudice to such provisional or interim remedies in aid of arbitration as may be available under the jurisdiction of a competent court, the arbitral tribunal has full authority
to grant provisional or interim remedies and to award damages for the failure of any Party to the dispute to respect the arbitral tribunal’s order to that effect. 

(f) EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL BY JURY OF ANY ISSUE RELATING TO ANY DISPUTE ARISING HEREUNDER. 

(g) Each Party shall bear its own attorney’s fees, costs, and disbursements arising out of the arbitration, and shall pay an equal
share of the fees and costs of the administrator and the arbitrator; provided, however, the arbitrator shall be authorized to determine whether a Party is the prevailing party, and if so, to award to that prevailing party

  
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reimbursement for any or all of its reasonable attorneys’ fees, costs and disbursements (including, for example, expert witness fees and expenses, photocopy charges, travel expenses, etc.),
and/or the fees and costs of the administrator and the arbitrator. 
 (h) Notwithstanding anything in this Section 15.4, if a
Dispute with respect to the validity, scope, enforceability or ownership of any Patent or other intellectual property rights, and such Dispute is not resolved in accordance with Section 15.3, such Dispute shall not be submitted to an
arbitration proceeding in accordance with this Section 15.4, unless otherwise agreed by the Parties in writing, and instead, either Party may initiate litigation in a court of competent jurisdiction in any country in which such rights apply.

 ARTICLE 16 

MISCELLANEOUS 
 16.1
Force Majeure. Neither Party shall be held liable to the other Party nor be deemed to have defaulted under or breached this Agreement for failure or delay in performing any obligation under this Agreement to the extent such failure or
delay is caused by or results from causes beyond the reasonable control of the affected Party, including embargoes, war, acts of war (whether war be declared or not), insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, fire, floods, or other acts of God or any other deity, or acts, omissions or delays in acting by any Governmental Authority. The affected Party shall notify the other Party of such force majeure circumstances as soon as reasonably
practical, and shall promptly undertake all reasonable efforts necessary to cure such force majeure circumstances. 
 16.2
Assignment. Neither Party may assign this Agreement to a Third Party without the other Party’s prior written consent (such consent not to be unreasonably withheld); except that either Party may make such an assignment without the other
Party’s consent to (i) a successor to substantially all of the business of the Party to which this Agreement relates (whether by merger, sale of stock, sale of assets or other transaction) and (ii) to an Affiliate for so long as such
Affiliate remains and Affiliate. In connection with any assignment to an Affiliate, the assigning Party shall guarantee and remain fully liable for the performance of the Affiliate. This Agreement shall inure to the benefit of and be binding on the
Parties’ successors and permitted assigns. Any assignment or transfer in violation of this Section 16.2 shall be null and void and wholly invalid, the assignee or transferee in any such assignment or transfer shall acquire no rights
whatsoever, and the non-assigning non-transferring Party shall not recognize, nor shall it be required to recognize, such assignment or transfer. Notwithstanding
anything in this Agreement to the contrary, following the closing of a Change of Control of Entasis, the Parties agree that Zai shall not obtain rights or access to the Patents or Know-How controlled by the
acquiror or any of such acquiror’s Affiliates (other than Entasis and its Affiliates that exist immediately prior to the closing of such Change of Control) and such intellectual property rights shall be excluded from the definitions of Licensed
Technology. 

  
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 16.3 Severability. If any one or more of the provisions contained in this
Agreement is held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless the absence of the invalidated
provision(s) adversely affects the substantive rights of the Parties. The Parties shall in such an instance use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which,
insofar as practical, implement the purposes of this Agreement. 
 16.4 Notices. All notices which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by nationally-recognized overnight courier or sent by
registered or certified mail, postage prepaid, return receipt requested, addressed as follows: 
 If to Entasis: 

Entasis Therapeutics Holdings Inc. 

35 Gatehouse Drive 
 Waltham, MA
02451 
 United States of America 

Attn:   [********] 

Email: [********] 

with a copy to: 
 Cooley LLP 

One Freedom Square 
 Reston Town
Center 
 11951 Freedom Drive 

Reston, VA 20190-5656 
 United
States of America 
 Attn:   [********] 

Fax:    [********] 

If to Zai: 
 Zai Lab (Shanghai)
Co., Ltd. 
 4560 Jinke Rd, Bldg. 1, 4/F 

Pudong, Shanghai, China, 201210 

Attn:   [********] 

Fax:    [********] 

  
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 with a copy to: 

Ropes & Gray LLP 
 800
Boylston Street 
 Boston, MA 02199-3600 

Attn:   [********] 

Fax:    [********] 
 or to
such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such notice shall be deemed to have been given: (a) when delivered if personally delivered or sent by
facsimile on a Business Day; (b) on the Business Day after dispatch if sent by nationally-recognized overnight courier; or (c) on the fifth Business Day following the date of mailing if sent by mail. 

16.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of
Delaware, U.S., without reference to any rules of conflict of laws.  
 16.6 Entire Agreement;
Amendments. This Agreement contains the entire understanding of the Parties with respect to the subject matter hereof. All express or implied agreements and understandings, either oral or written, with regard to the subject matter hereof
(including the licenses granted hereunder) are superseded by the terms of this Agreement. Neither Party is relying on any representation, promise, nor warranty not expressly set forth in this Agreement. This Agreement may be amended, or any term
hereof modified, only by a written instrument duly executed by authorized representatives of both Parties hereto. 
 16.7
Headings. The captions to the several Sections hereof are not a part of this Agreement, but are merely for convenience to assist in locating and reading the Sections of this Agreement. 

16.8 Independent Contractors. It is expressly agreed that Entasis and Zai shall be independent contractors and that the
relationship between the two Parties shall not constitute a partnership, joint venture or agency. Neither Entasis nor Zai has the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be
binding on the other Party, without the prior written consent of the other Party. 
 16.9 Waiver. The waiver by either Party
of any right hereunder, or the failure of the other Party to perform, or a breach by the other Party, shall not be deemed a waiver of any other right hereunder or of any other breach or failure by such other Party whether of a similar nature or
otherwise. 
 16.10 Waiver of Rule of Construction. Each Party has had the opportunity to consult
with counsel in connection with the review, drafting and negotiation of this Agreement. Accordingly, the rule of construction that any ambiguity in this Agreement shall be construed against the drafting Party shall not apply. 

  
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 16.11 Construction. Except where the context expressly requires otherwise,
(a) the use of any gender herein shall be deemed to encompass references to either or both genders, and the use of the singular shall be deemed to include the plural (and vice versa), (b) the words “include”, “includes”
and “including” shall be deemed to be followed by the phrase “without limitation”, (c) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (d) any reference herein to any person shall be
construed to include the person’s successors and assigns, (e) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (f) all references herein to Sections or Exhibits shall be construed to refer to Sections or Exhibits of this Agreement, and references to this Agreement include all Exhibits hereto, (g) the word
“notice” means notice in writing (whether or not specifically stated) and shall include notices, consents, approvals and other written communications contemplated under this Agreement, (h) provisions that require that a Party, the
Parties or any committee hereunder “agree”, “consent” or “approve” or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter, approved minutes or
otherwise (but excluding e-mail and instant messaging), (i) references to any specific law, rule or regulation, or Section, section or other division thereof, shall be deemed to include the then-current
amendments thereto or any replacement or successor law, rule or regulation thereof, and (j) the word “or” is disjunctive but not necessarily exclusive. 

16.12 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. Each Party may rely on the delivery of executed facsimile copies of counterpart execution pages of this Agreement and such facsimile copies shall be legally effective to create a
valid and binding agreement among the Parties. 
 16.13 Language. This Agreement is in the English language only, which
language shall be controlling in all respects, and all versions hereof in any other language shall be for accommodation only and shall not be binding upon the Parties. All communications and notices to be made or given pursuant to this Agreement,
and any dispute proceeding related to or arising hereunder, shall be in the English language. If there is a discrepancy between any translation of this Agreement and this Agreement, this Agreement shall prevail. 

{Signature Page Follows} 

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

 

									
	 ENTASIS THERAPEUTICS HOLDINGS INC.

 
	 		 	 Zai Lab (Shanghai) Co., Ltd.
  

	By:	 	 /s/ Manoussos Perros
	 		 	By:	 	 /s/ Samantha Du

			
	Name: Manoussos Perros, Ph.D.	 		 	Name: Samantha Du, Ph.D.
	Title: President and Chief Executive Officer	 		 	Title: Chief Executive Officer

  
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 Exhibit 1.40 

ETX2514 
 [********]

  
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 Exhibit 1.41 

ETX2514SUL 
 [********]

  
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 Exhibit 1.56 

Imipenem 
 [********]

  
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 Exhibit 1.72 

Existing Licensed Patents 

[********] 

  
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 Exhibit 5.2 

Initial Development Plan 

[********] 

  
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 Exhibit 7.1(e) 

Clinical Supply Agreement Key Terms 

[********] 

  
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 Exhibit 10.3 

Press Release 

Entasis Therapeutics and Zai Lab Announce Exclusive License Agreement in Asia-Pacific and Global Strategic Development Collaboration for
ETX2514 
 Collaboration will facilitate enrollment of pivotal global Phase 3 trial of ETX2514 in combination with sulbactam for the
treatment of carbapenem-resistant Acinetobacter baumannii infections 
 WALTHAM, Mass. and SHANGHAI, April 25, 2018 –
Entasis Therapeutics Holdings Inc., a clinical-stage biopharmaceutical company focused on the discovery and development of novel antibacterial products, and Zai Lab Limited (NASDAQ: ZLAB), a Shanghai-based innovative biopharmaceutical company, today
announced an exclusive license agreement for ETX2514 in the Asia-Pacific region and a global strategic development collaboration. Entasis’ ETX2514 is a novel broad-spectrum intravenous inhibitor of ß-lactamases, which are a major cause of
antibiotic resistance. Entasis is developing ETX2514SUL, a fixed-dose combination of ETX2514 and sulbactam, for the treatment of a variety of serious multidrug-resistant infections caused by Acinetobacter baumannii, representing a healthcare
challenge of global importance with over 200,000 occurrences estimated in China each year. ETX2514SUL is currently in Phase 2 development with plans to move into global Phase 3 clinical trials in the first quarter of 2019. Zai Lab will manage the
portion of the Phase 3 trial conducted in China. 
 “Entasis remains committed to building a pipeline of life-saving treatments for patients
affected by drug-resistant bacterial infections around the world. We are thrilled to partner with Zai Lab on the further development and potential commercialization of ETX2514SUL in the Asia-Pacific region, most notably in Greater China, where the
rate of A. baumannii infections rank among the highest in the world,” said Manos Perros, Chief Executive Officer of Entasis. “With their experienced leadership team, focus on innovation and established expertise and network within
the infectious diseases arena, Zai Lab is the ideal partner to help bring ETX2514SUL to the numerous patients in the region who need a new effective treatment option. The collaboration will offset costs and enable enrollment of patients from China
into our global Phase 3 clinical trial, further supporting our plans to rapidly progress ETX2514SUL to market.” 
 “Infectious diseases are a key
focus area for Zai Lab due to the serious problem of multidrug-resistant infections both in China and globally. We are excited to collaborate with Entasis, a company that has extensive expertise and know-how
in developing anti-infective products that address multidrug-resistant infections, and we look forward to working together to accelerate the global development of this potential life-saving therapy. We expect ETX2514SUL will be a positive addition
to Zai Lab ’s anti-infective portfolio, and we remain committed to developing a 

  
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drug to combat multidrug-resistance, which currently poses a serious global threat to our society,” stated Samantha Du, Ph.D., Chairman and Chief Executive Officer of Zai Lab. “This
collaboration reinforces the strength of the Zai Lab team both in China and globally, and we believe will help us further progress on our mission to establish Zai Lab as an innovative, fully integrated, global pharmaceutical company.” 

Under the terms of the agreement, Entasis has granted Zai Lab an exclusive license to develop and commercialize ETX2514SUL in specified countries in the
Asia-Pacific region, including Japan. Entasis and Zai Lab will cooperate in conducting a pivotal Phase 3 trial in China, with Zai Lab taking the lead by conducting the screening, enrollment and treatment of patients, and coordinating development,
registration and commercialization of ETX2514SUL in the territory. In addition, Entasis and Zai Lab have an option to collaborate on the development and commercialization of ETX2514 in combination with other active ingredients. A joint steering
committee will be formed between the companies to oversee development, regulatory and commercialization activities in the Asia-Pacific territory. In addition to financial support for the portion of the Phase 3 trial conducted in China, Entasis will
receive a $5 million upfront payment and is eligible to receive up to an aggregate of $7.6 million in near-term development milestones and up to an aggregate of $91.0 million in additional development, regulatory and sales milestone
payments related to ETX2514SUL and other combinations, plus royalties.  
 About Acinetobacter baumannii Infections 

A. baumannii is a Gram-negative bacterium causing severe infections associated with high mortality and has emerged as a cause of numerous global
outbreaks, displaying ever-increasing rates of antibiotic resistance, which greatly limits treatment options. Consequently, the World Health Organization (WHO) has placed carbapenem-resistant A. baumannii at the top of its list of
“Critical” priority pathogens for new antibiotics. The U.S. Centers for Disease Control (CDC) also recognizes A. baumannii as a serious public health threat and estimates that 63%
of A. baumannii are multidrug-resistant. 
 In China, A. baumannii accounts for approximately 11% of total Gram-negative infections.
Based on a national surveillance of over 1,300 hospitals in China, there are over 200,000 A. baumannii infections per year, although the actual incidence is estimated to be much larger. The resistance of A. baumannii to the carbapenem
class of antibiotics has increased significantly, estimated at 60% in 2016, with some provinces as high as 70-80%. In other Asia-Pacific countries, such as Japan and Korea, it has also become an increasingly
significant challenge for physicians. Due to the high rates of multidrug-resistant infections, the Chinese government has identified the goal of developing one to two innovative anti-infective drugs by 2020. 

  
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 About ETX2514 

ETX2514 is a novel broad-spectrum intravenous inhibitor of class A, C and D beta-lactamases. ETX2514 restores the in vitro activity of multiple
ß-lactams against Gram-negative, multidrug-resistant pathogens. Entasis is initially developing ETX2514SUL, a fixed-dose combination of ETX2514 and sulbactam, for the treatment of a variety of serious multidrug-resistant infections caused by
A. baumannii. Sulbactam is a generic ß-lactam that has intrinsic activity against A. baumannii but suffers from widespread ß-lactamase-mediated resistance. In preclinical studies, ETX2514 restored sulbactam antibacterial
activity against A. baumannii. ETX2514 has completed single- and multi-ascending dose Phase 1 trials. The U.S. Food and Drug Administration has granted Qualified Infectious Disease Product (QIDP) designation and Fast Track designation to
ETX2514SUL for the treatment of hospital-acquired and ventilator-acquired bacterial pneumonia and bloodstream infections due to A. baumannii. 

About Entasis 
 Entasis is a clinical-stage
biopharmaceutical company focused on the discovery, development and commercialization of novel antibacterial products to treat serious infections caused by multidrug-resistant Gram-negative bacteria. Entasis’ targeted-design platform has
produced a pipeline of product candidates, including ETX2514SUL (targeting A. baumannii infections), ETX0282CPDP (targeting Enterobacteriaceae infections), and zoliflodacin (targeting Neisseria gonorrhoeae). Entasis is also
using its platform to develop a novel class of antibiotics, non-ß-lactam inhibitors of the penicillin-binding proteins (NBPs) (targeting Gram-negative infections). For more information, visit www.entasistx.com. 

About Zai Lab 
 Zai Lab (NASDAQ:ZLAB) is
a Shanghai-based innovative biopharmaceutical company focused on bringing transformative medicines for cancer, autoimmune and infectious diseases to patients in China and around the world. The company’s experienced team has
secured partnerships with leading global biopharma companies, generating a broad pipeline of innovative drug candidates targeting the fast-growing segments of China’s pharmaceutical market and global unmet medical needs. Zai Lab’s vision
is to become a fully integrated biopharmaceutical company, discovering, developing, manufacturing and commercializing its partners’ and its own products in order to impact human health worldwide. 

Entasis Forward-looking StatementsThis press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995. Words such as “may,” “will,” “expect,” “plan,” “anticipate,” “estimate,” “intend” and similar expressions (as well as other words or expressions referencing future
events, conditions or circumstances) are intended to identify forward-looking statements. These forward-looking statements are based on Entasis’ expectations and 

  
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[********] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 

 

 
assumptions as of the date of this press release. Each of these forward-looking statements involves risks and uncertainties. Actual results may differ materially from these forward-looking
statements. Forward-looking statements contained in this press release include statements about (i) the timing of the initiation, progress and scope of the Phase 3 clinical trial of ETX2514SUL; (ii) potential regulatory approval and
commercialization of ETX2514SUL; (iii) the potential use of ETX2514SUL to treat a variety of serious multi-drug resistant infections caused by Acinetobacter baumannii; and (iv) Entasis’ potential receipt of milestone payments
and royalties. Many factors may cause differences between current expectations and actual results, including unexpected safety or efficacy data observed during non-clinical or clinical studies, clinical site
activation rates or clinical trial enrollment rates that are lower than expected and changes in expected or existing competition. Except as required by law, Entasis assumes no obligation to update any forward-looking statements contained herein to
reflect any change in expectations, even as new information becomes available. 
 Zai Lab Forward-Looking Statements 

This press release includes certain disclosures which contain “forward-looking statements,” including, without limitation, statements regarding the
timing of the initiation, progress and scope of the Phase 3 clinical trial of ETX2514SUL, the potential use of ETX2514SUL to treat a variety of serious multidrug-resistant infections caused by Acinetobacter baumannii, Entasis’ potential
receipt of milestone payments and royalties from Zai Lab. You can identify forward-looking statements because they contain words such as “believes” and “expects.” Forward-looking statements are based on Zai Lab’s current
expectations and assumptions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that may differ materially from those contemplated by the forward-looking
statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in Zai
Lab’s filings with the Securities and Exchange Commission. Zai Lab undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be
required by law. 
 Entasis Company Contact 
 Kyle Dow

 Entasis Therapeutics 
 (781)
810-0114 
 kyle.dow@entasistx.com 

Entasis Media Contact 
 Kari Watson or Stefanie Tuck 

MacDougall Biomedical Communications 
 (781) 235-3060 
 kwatson@macbiocom.com or stuck@macbiocom.com 

  
 68 

 CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
[********] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 

 

 ZAI LAB CONTACTS: 

Zai Lab 
 Billy Cho 

+86 21 6163 7322 
 billy.cho@zailaboratory.com 

Solebury Trout 
 John Graziano 

+1 646 378 2942 
 jgraziano@troutgroup.com 

  
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