Document:

Document

Exhibit 10.7

Certain confidential information contained in this exhibit have been omitted by means of redacting a portion of the text and replacing it with [***], pursuant to Regulation S-K Item 601(b) of the Securities Act of 1933, as amended. Certain confidential information has been excluded from this exhibit because it is: (i) not material; and (ii) the registrant treats such information as private or confidential.

CONFIDENTIAL
EXECUTION VERSION

ASSIGNMENT AND LICENSE AGREEMENT

THIS ASSIGNMENT AND LICENSE AGREEMENT (the “Agreement”) is made effective as of August 3, 2009 (the “Effective Date”), by and between VICEPT THERAPEUTICS, INC., a Delaware corporation, having an address of 585 E. Swedesford Road, Suite 200 Wayne, PA 19087 (“Vicept”), and ASPECT PHARMACEUTICALS, LLC, a Delaware limited liability company, having an address of 4351 East Lohman Ave., Suite 208, Las Cruces, NM 88001 (“Aspect”).

BACKGROUND

1.    Aspect has developed and tested certain formulations of compounds that act [***], that it believes are useful to treat rosacea and other dermatological conditions, as well as certain related intellectual property, data and know-how;

2.    Vicept is interested in acquiring such intellectual property, data and know-how, and in developing a product for a dermatological condition based on such a compound; and

3.    Aspect is willing to assign to Vicept, and Vicept is willing to purchase from Aspect, such intellectual property, data and know-how, all of the terms and editions more particularly set forth below;

AGREEMENT

    NOW, THEREFORE, in consideration of the foregoing premises and the covenants and obligations set forth in this Agreement, the Parties (defined below) hereby agree as follows:

ARTICLE 1

DEFINITIONS

As used herein, the following terms have the following meanings (with derivative forms being interpreted accordingly) and the words “include,” “including” and derivative forms of them shall be deemed followed by the phrase “without limitation”:

1.1    “$” and “Dollars” means United States dollars.
    
1.2    “[***] Compounds” means [***].

1.3    “Affiliate” means, with respect to a given legal entity, any other entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such first legal entity. For this purpose, “control” shall mean the ownership of fifty percent (50%) or more of the voting securities entitled to elect the directors or management of the entity, or the actual power to elect or direct the management or policies of the entity by law, contract, or otherwise.
    
1.4    “Aspect Group” means (a) Aspect and its Affiliates; (b) the Aspect People; and
(c) any entity under the “control” (as defined in the definition of Affiliate and in the last sentence of this definition of Aspect Group) of any Aspect Person, or of any entity controlled (as so defined above) by one (1) or more of the Aspect People (or any combination of the foregoing non-natural legal entities referred to in (a) and (c) and any of the Aspect People). In addition, if any of the legal entities (including the natural people) listed in the first sentence of this Section own (either alone or in combination) more than twenty percent (20%) of the voting securities entitled to elect the directors or management of an entity, or of any class of shares of an entity, then that entity is a member of the Aspect Group.

    
1.5    “Aspect People” means [***].    
    
1.6    “Assigned Current Families” means [***].

1.7    “Assigned Know-How” means all Know-How related to or constituting Technology and known to Aspect or any member of Aspect Group on or before three (3) years after the Effective Date, including: (a) all preclinical and clinical data generated relating to Technology before the Effective Date by or on behalf of Aspect or any member of Aspect Group; (b) all manufacturing information regarding the processes for Technology and/or Formulations that Aspect or any member of Aspect Group has made or tested on or before the Effective Date (including the formula and master batch records for each one); (c) such Formulations; and (d) all information as to clinical investigators Aspect or any member of Aspect Group knows to be currently (as of the Effective Date) exploring Technology or to have done so in the three (3) years prior to the Effective Date.

1.8    “Assigned Patents” means (a) the Assigned Current Families; (b) all Patents that meet all of the following criteria: (i) they claim inventions conceived on or before five (5) years after the Effective Date; (ii) they name as an inventor any of the inventor(s) named in any of the Assigned Current Families; (iii) they Claim Technology; and (iv) they were not invented under any separate (outside of this Agreement) duty to assign to Vicept; (c) all other Patents owned by Aspect or any member of the Aspect Group during the term of this Agreement that are necessary or useful for the manufacture, sale, use, import or commercialization of Product(s); and (d) all Patents claiming Assigned Know-How (and explicitly excluding those that disclose but do not claim Assigned Know How).

1.9    “Business Day” means any Monday, Tuesday, Wednesday, Thursday or Friday that is not a national, statutory holiday in the United States.

1.10    “Claims” means, with respect to a particular item or product and a particular patent, that such patent claims (whether directly or via the doctrine of equivalents) the composition of such item or product or any of its ingredients or formulations; a method of making or using it or them; or an item used or present in the manufacture of such item or product (including chemical intermediates).

1.11     “Confidential Information” means, subject to the limitations set forth in Section 8.1, all information received by Aspect or any of the Aspect People pursuant to the Prior CDA or pursuant to this Agreement from Vicept or any of its investors or prospective investors; the Assigned Know-How; and the existence and terms of this Agreement and nature of the Products and of intellectual property assigned and licensed under this Agreement.

1.12     “Control” means, with respect to a particular item of know-how, patent application or patent, that the applicable Party has a license to and has the ability to grant to the other Party access to and a sublicense under such item or rights as provided for in this Agreement. 

1.13     “Dermatology Indication” means any dermatologic disease or condition, including erythema, rosacea, and purpura.

1.14     “FDA” means the United States Food and Drug Administration, and any successor thereto.

1.15     “Fair Market Value” means the fair market value of Vicept capital stock, which shall be determined as follows: 

(a)    if the Vicept capital stock to be issued is traded on a public securities exchange or through the Nasdaq National Market, the fair market value thereof shall be deemed to be the average of the closing prices of such security on such exchange over the 30-day period ending three (3) business days prior to the date the liability that Vicept capital stock is being disgorged to cover was found;

(b)    if the Vicept capital stock to be issued is actively traded over-the-counter, the fair market value thereof shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the 30-day period ending three (3) business days prior to the date the liability that Vicept capital stock is being disgorged to cover was found; or

(c)    If there is no active public market for any Vicept capital stock, the fair market value thereof shall be as determined in good faith by Vicept’s Board of Directors based on a reasonable consideration of all relevant factors.

1.16     “Formulation” means any formulation (including topical and non-topical formulations) of any [***] Compound.

1.17     “IND” means an Investigational New Drug Application as defined in the United States Food, Drug and Cosmetic Act and applicable regulations promulgated thereunder by the FDA or the equivalent application to the equivalent agency in any other country or group of countries, the filing of which is necessary to commence clinical testing of Product in humans in a particular jurisdiction.

1.18     “Know-How” means any and all data, instructions, processes, methods, formulae, materials, expert opinions, inventions (whether or not patentable), biological materials (including cell lines, vectors and their progeny and derivatives), know-how, and information (including biological, chemical, pharmacological, toxicological, pharmaceutical, physical, analytical, clinical, safety, manufacturing and quality control data). Know-How does not include what is set forth in any published and/or issued Patents.

1.19     “Licensed Patents” means all Patents Controlled by Aspect or any member of the Aspect Group is Agreement that claim an invention that is necessary or useful to for the manufacture, sale, use, import or commercialization of the Products, but excluding the Assigned Patents. 

1.20     “Licensee” means any entity to which Vicept or an Affiliate of Vicept grants a license under the Assigned Patent and/or Assigned Know-How and/or Licensed Patents to make, have made, use, sell, offer for sale, import and/or export Product. The term “Licensee” also include the sublicensees of those whom Vicept or its Affiliate has directly licensed under the Assigned Patents or Licensed Patents. The term “Licensee” also includes assignees of the Assigned Patents (or any subset thereof) and their licensees and sublicensees of the Assigned Patents (or any subset thereof).

1.21     “NDA” means a New Drug Application, which is an application for Regulatory Approval in the United States.

1.22     “Net Sales” means [***].

1.23     “Party” means Vicept or Aspect.

1.24     “Patent” means any patent application or patent, including all of the following kinds and their equivalents outside the United States (as applicable): provisional, converted provisional (or regular), divisional, continuation, continuation-in-part, and substitution applications; and regular utility, re-issue, re-examination, renewal and extended patents (including Supplementary Protection Certificates).

1.25     “Phase III Trial” means a clinical trial in humans that is denominated a phase III trial in accordance with Federal Regulation 21 C.F.R. §312.21(c).

1.26    “Prior CDA” means that certain Mutual Confidential Disclosure Agreement between Aspect and Vivo Ventures dated March 28, 2008.

1.27    “Products” means all compositions that constitute or the use of which constitutes Technology or whose manufacture, sale or use is covered by a Valid Claim in the Assigned Patents (other, to avoid definitional circularity, than solely such a Valid Claim contained solely in a Patent mentioned in clause (c) of the definition of Assigned Patents.

1.28     “Regulatory Agency” means a supranational, regional, federal, state, provincial or other local regulatory agency, department, bureau or other governmental authority with jurisdiction over Regulatory Approvals, including the FDA.

1.29     “Regulatory Approval” means, collectively with respect to a particular jurisdiction, all governmental approvals, product and/or establishment licenses, registrations or authorizations necessary for the manufacture, use, storage, import, export, transport, marketing and sale of a composition as a prescription or over-the-counter pharmaceutical product in such jurisdiction.

1.30     “Regulatory Exclusivity” means, with respect to a Product and a given time period, that the Regulatory Agency with responsibility for Regulatory Approvals of such Product, during such time period, either (a) is not legally entitled to grant Regulatory Approval of another product containing the same active ingredient(s) as such Product for any (i.e. can legally provide Regulatory Approval for none) of the same indication(s) (with each including its subindications) for which Product is Regulatorily Approved (and thus can only legally grant Regulatory Approval of such other product for other indications not overlapping any for which the Product is approved); or (b) is not legally entitled to grant Regulatory Approval of another product that shows bioequivalence to such Product, in reliance on the safety and efficacy data on the Product submitted by or on behalf of Vicept, its Affiliate or Licensee. For the avoidance of doubt, Regulatory Exclusivity shall include new chemical entity (NCE), clinical investigation (CI) exclusivity, orphan drug exclusivity (ODE), pediatric exclusivity and 180 day generic product exclusivity by the FDA, each of the foregoing in the U.S. as currently defined in U.S. federal regulations, or any equivalent exclusivities in any other jurisdiction. To avoid doubt, the “clinical investigation (CI) exclusivity” referred to in the foregoing sentence refers to the 3-year exclusivity that is provided under 21 C.F.R. §314.108 for an applicant who has conducted new clinical investigations as described in such C.F.R. section; as used in such sentence, “clinical investigation (CI) exclusivity” does not have other definition than that, and in particular no colloquial meaning shall be imported.

1.31     “Technology” means (a) [***] Compounds having utility to treat any Dermatology Indication(s) (including all [***] Compounds mentioned or covered in the Assigned Current Family); (b) all Formulations of the foregoing Compounds; (c) all methods of use and delivery (and devices used in such use or delivery) of the [***] Compounds of clause (a) and/or Formulations to treat Dermatology Indication(s); and (c) all methods of making any of the foregoing. To avoid doubt, the Technology includes the Formulations described in the Assigned Current Family Patents on file as of the Effective Date of the Agreement, which Formulations hay previously been tested by or for Aspect.

1.32    “Third Party” means any entity or person other than Vicept, Aspect, an Affiliate of either of them or any other member of the Aspect Group. 

1.33     “Trademarks” means all Technology-related trademarks and tradenames owned, use or conceived of by Aspect or any member of Aspect Group on our before the Effective Date, including the trademark identified in Exhibit B.

1.34     “Valid Claim” means with respect to any country, (i) a claim of any pending patent application within the Assigned Patents that is being prosecuted in good faith and has not lapsed or been disclaimed, abandoned or finally disallowed (or finally rejected) without the possibility of appeal or refiling and has not been pending more than three (3) years from the Effective Date or (ii) a claim of any issued, unexpired patent within the Assigned Patents that has not been held permanently revoked, unenforceable or invalid by a decision of a court or governmental authority of competent jurisdiction, which decision is unappealable or unappealed or will not be appealed within the time allowed for appeal, 

and has not lapsed or been abandoned, disclaimed, denied or admitted to be invalid or unenforceable through reissue or disclaimer or otherwise.

1.35     “Vicept Original Entity” means Vicept Therapeutics, Inc., a Delaware corporation, regardless of any assignment of this Agreement that may occur and result in another entity being a party to this Agreement.

ARTICLE 2

GRANTS OF RIGHTS

2.1    Assignment. Subject to Section 9.4, Aspect hereby irrevocably, perpetually and forever assigns and conveys to Vicept the entire right, title and interest in and to the Assigned Patents, and Assigned Know-How, together with all powers, privileges, benefits, causes of action, remedies, and other rights relating, appertaining to and/or associated with the Assigned Patents and Assigned Know-How. Such assignment is effective as of the Effective Date. Vicept hereby accepts such assignment.

2.2    Specific Rights and Privileges. Without limiting the generality of the assignment in Section 2.1, but subject to Article 4, as owner of the Assigned Patents, Vicept shall have, and the assignment and conveyance pursuant to Section 2.1 includes, the following specific rights and privileges:

(a)    Vicept shall have the sole’ and exclusive right, but not the duty, to file and prosecute pending and future applications within the Assigned Patents worldwide, except as and to the extent explicitly provided in Article 5;

(b)     Vicept shall have the sole and exclusive right, but not the duty, to maintain and enforce the Assigned Patents worldwide, except as and to the extent explicitly provided in Article 5; 

(c)    Vicept shall have the sole and exclusive right, but not the duty, to grant license (which licenses may include the right to grant sublicenses) under the Assigned Patents and to collect and retain royalty and/or other payment for such licenses; provided, however, that such license shall require the licensee to comply with the applicable terms and conditions of this Agreement (it being understood and agreed that this refers to respecting the back-up prosecution and enforcement rights of Article 5, and that as regards payments due under this Agreement it shall suffice for Vicept to make the payments required under this Agreement (Vicept shall not be required to contract for the licensee to pay directly));

(d)    Vicept shall have the sole and exclusive right, but not the duty, to sue on the Assigned Patents, and to collect all damages and profits for any past, present and/or future infringements thereof, except as and to the extent explicitly provided in Article 5; and

(e)    Vicept shall have the sole and exclusive right to sell, assign or otherwise transfer to any other entity or entities any or all of the rights assigned and transferred to Vicept under this Agreement; provided, however, that (1) such entity or entities must comply with the applicable terms and conditions of this Agreement (it being understood and agreed that this refers to respecting the back-up prosecution and enforcement rights of Article 5, and that as regards payments due under this. Agreement it shall suffice for Vicept to obtain such information from the licensee as is needed to enable Vicept to make the payments required under this Agreement (Vicept shall not be required, for purposes of this clause (1), to contract for the licensee to pay directly)) and (2) Vicept must either make such payments as are required under this Agreement based on the assignee’s practice of Assigned Patent or require the assignee to do so.

Except as expressly provided in Article 4, Vicept shall not currently or in the future owe any further consideration to Aspect for or in respect of Vicept’s exercise of the rights assigned to Vicept hereunder, including any amounts Vicept may collect on licenses it grants under the Assigned Patents; 

recover by enforcing the Assigned Patents against infringement; and/or receive for the sale or transfer of any of the rights assigned Vicept hereunder.

2.3    Further Documentation to Perfect and Record. Aspect shall sign the short-form patent assignment document attached hereto as Exhibit A upon execution of this Agreement. Aspect shall further execute and deliver to Vicept and/or its representatives all other documents and instruments, to be prepared by Vicept, as Vicept reasonably requests, in order for Vicept to prosecute, perfect, record and/or enforce any of the rights that are granted to it under this Agreement, promptly after requested by Vicept. If Vicept is unable, after making reasonable inquiry, to obtain Aspect’s signature on any such documents, then if and only if such documents are reasonably necessary due to Aspect having previously been the assignee of record on the Assigned Patents, Aspect hereby appoints Vicept as Aspect’s attorney-in-fact for the sole purpose of executing and delivering such documents, which appointment is coupled with an interest. Aspect shall also cause employees, ex-employees and consultants who are named inventors on any of the Assigned Patents to do the same and to make the same appointment (and each inventor who signs an acknowledgement of this Agreement by so signing is hereby specifically agreeing to this Section and making such appointment).

2.4    Further Assurances. Aspect and such inventors shall take reasonable further actions to execute and deliver all further documents that Vicept may reasonably require to further documents that Vicept may reasonable require to further the purpose and intent of this Agreement.

2.5    License Grant. Aspect hereby grants to Vicept and its Affiliates a worldwide, exclusive (even as to Aspect, its Affiliates and the other members of the Aspect Group) license under the Licensed Patents to use, research, develop, make, have made, use, offer to sell, sell, import, export and otherwise commercialize [***] Compounds and Products throughout the world. Such license shall be freely sublicenseable, through one (1) or more tiers or layers of sublicensees, without the need to obtain consent from Aspect. Vicept shall be responsible for all payments due to Aspect based on the Product milestone achievements and Net Sales by the sublicensees, as if those activities were performed by Vicept.

2.6    Assigned Know-How Confidentiality Protection. Aspect acknowledges that the Assigned Know-How is, as a result of the assignment of this Agreement, the commercially valuable confidential information of Vicept. Accordingly, Aspect and the other members of the Aspect Group shall treat such Know-How as the Confidential Information of Vicept. Aspect acknowledges that as between Aspect and Vicept, Vicept shall have the sole right to file, prosecute, maintain and enforce Patents Claiming Assigned Know-How.

2.7    Disclosure of Know-How. Commencing within fifteen (15) days after the Effective Date, (a) Aspect shall begin providing to Vicept true, complete and correct copies and/or originals of all Assigned Know-How in existence as of the Effective Date (including all relevant clinical data, to the extent not already provided to Vicept prior to the Effective Date), and (b) make appropriate personnel reasonably available to Vicept to transfer and discuss such Assigned Know-How. Aspect shall complete the disclosure required in clause (a) of the foregoing sentence within thirty (30) days after the Effective Date.

2.8    Assignment of Trademarks. Subject to Section 9.4, Aspect hereby irrevocably, perpetually and forever assigns and conveys to Vicept all of Aspect's right, title and interest throughout the world in and to: (a) the Trademarks; (b) all renewals and extensions for registrations included in the Trademarks; and (c) all benefits, privileges, causes of action and remedies relating to or conferred by any of the foregoing, whether accrued before or after the Effective Date. Such benefits, privileges, causes of action and remedies include the exclusive rights to apply for and maintain all such registrations, renewals and/or extensions; to sue for all past, present or future infringements or other violations of any rights in the Trademark; and to settle and retain proceeds from any such actions. Neither Aspect nor any other member of the Aspect Group retains any rights to use or to display the Trademarks. Aspect and the other members of the Aspect Group shall not challenge the validity of Vicept's ownership in the Trademarks. Aspect and all members of the Aspect Group each hereby further agrees to execute and deliver all 

documents and instruments required to evidence or record such assignment or to enforce the assigned rights (and hereby appoints Vicept as Aspect's attorney-in-fact to execute and deliver such documents if unable after making reasonable inquiry to obtain Aspect's signatures on any of them).

2.9    Rights of Reference. To the extent relevant, necessary or useful to support Vicept’s (and its Affiliates’ and the Licensees’) Product activities, Vicept (and its Affiliates and Licensees) shall have the right to reference and the right to access all INDs of Aspect relating to Technology and in existence as of the Effective Date. 

ARTICLE 3

DEVELOPMENT/COMMERCIALIZATION 

3.1    Allocation of Rights for Development and Commercialization. As between the Parties, Vicept shall have the right to conduct all additional preclinical and clinical studies of Products, in order to be able to seek Regulatory Approval of and commercialize Products. As between the Parties, Vicept will be responsible for the costs of these activities. Vicept shall also have the exclusive right to commercialize Products. Vicept shall be fully and freely entitled to engage Licensees, contractors and distributors in Product development and commercialization. Subject to the provisos of Sections 2.2(c) and 2.2(e), Vicept shall have full and sole discretion over licensing, intellectual property transactions and use of contractors and distributors. Vicept will still owe the milestones and royalties set forth in this Agreement, even if it is a Vicept Affiliate or a Licensee who achieves the relevant milestone events or sold the relevant Net Sales. As between the Parties, Vicept shall have the sole right and sole discretion to select (and use and own) the trademarks and tradenames for Products.

3.2    Vicept Responsibilities in Further Development and Commercialization; Diligence. Vicept shall devote Commercially Reasonable Efforts (defined below in this Section) to develop and commercialize at least one (1) Product for at least one (1) Dermatology Indication for the United States market. To avoid doubt, the foregoing sentence shall not be read to require Commercially Reasonable Efforts towards development and commercialization of more than one (1) Product, nor towards development and commercialization of that Product for more than one (1) Dermatology Indication, nor development and commercialization for any market other than the U.S. market. All development and commercialization activities performed by any Vicept Affiliate(s) and any Licensee(s), contractors and distributors shall inure to the benefit of Vicept for purposes of determining Vicept’s compliance with such obligation. [***]. No diligence obligations other than the ones set forth in this Section 3.2 shall be implied under or in connection with this Agreement or at law, and Vicept’s diligence obligations in relation to its rights under this Agreement shall be solely as set forth in this Section 3.2.

“Commercially Reasonable Efforts” means a reasonable level of efforts, commensurate with the efforts that a company similarly situated to the Vicept Original Entity would devote to a product of similar potential and having similar commercial advantages and disadvantages as the Product, taking into account all relevant commercial factors, such as, but not limited to: (1) the intellectual property landscape and level of intellectual property exclusivity available for the product, (2) technical, scientific and clinical results and developments, (3) the competitive landscape and maturity of the marketplace, (4) the regulatory framework and hurdles, (5) pricing, (6) cost of goods, and (7) all other similarly relevant commercial factors.

If Vicept Original Entity is acquired (whether through merger, reverse merger, sale of assets or other form of transaction) (“M&A Transaction”), or any successor entity under this Agreement undergoes such an event, this Section 3.2 shall survive such acquisition. However, under no circumstances shall the surviving entity or Vicept Original Entity’s successor under this Agreement be required, in order to be in compliance with this Agreement, to put forth a greater level of effort or conduct more activities or conduct activities on any faster timeline than set forth in Vicept Original Entity’s development plan for the lead Product as such plan is in effect and approved by Vicept Original Entity’s Board of Directors immediately prior to the closing of the M&A Transaction.

3.3    Authorization of and Non-Interference with Consulting and/or Advisory Relationships. It is understood and agreed that Vicept may wish to engage one (1) or more of the inventors on the Assigned Patents in a consulting, advisory, or other contract relationship. Both Parties recognize this may be beneficial for Product progress. Aspect -- to the extent its permission, waiver or other act would be required -- hereby agrees that Vicept and any of the inventors may enter into such a relationship, and hereby provides all permissions and waivers and agrees to perform such other acts as may be required to permit this.

3.4    Non-Competition for Protection of Licensed Trade Secrets and Confidential Information. Recognizing that such activities would necessarily entail use of the Assigned Know-How and/or Confidential Information of Vicept reported to Aspect in connection with this Agreement, Aspect hereby covenants that it shall not during the term of this Agreement research, develop, make, have made, offer to sell, sell, import or export any Products. Aspect hereby acknowledges on behalf of itself that the foregoing covenant is legally enforceable and is reasonable, necessary and appropriate to protect Vicept’s Confidential Information.

3.5    Assistance With Patent Activities. In accordance with Article 2, Vicept has the sole right to file, prosecute, conduct interferences of and enforce the Assigned Patents and all Patents on Assigned Know-How. Aspect shall assist, and shall cause the inventors named in the Assigned Patents to reasonably assist, Vicept in all of the foregoing, standard patent activities, promptly upon each reasonable request by Vicept, and at Vicept’s expense. As regards this assistance being at Vicept’s expense, to avoid doubt, Vicept is entitled to elect to require the inventors on the Assigned Patents, to the extent that either personally has a direct relationship with Vicept (such as an employment or consulting relationship), to include the patent support activities referred to in this Section within the scope of and fully compensated by the compensation provided for in such separate, direct relationship with the particular individual. 

3.6     Improvements. Vicept shall as between the Parties have the right to own all improvements, modifications, derivatives and amendments (including Know-How and published patentable or patented inventions to that Technology that is in existence as of the Effective Date, which improvements, modifications, derivatives and amendment are made, conceived, developed, reduced to practice or acquired by or for Vicept (including under any consulting or employment agreement between Vicept or its Affiliate and any inventor on any Assigned Current Family) (“Improvements”) and all Patents on the Improvements. Such Patents, to avoid doubt, are not considered Assigned Patents.

ARTICLE 4

FINANCIAL TERMS
    
4.1    Signing Fee. Vicept shall pay Aspect a signing fee equal to [***], within [***] days after the Effective Date.
    
4.2    Milestone Payments.

(a)    Development Milestones.

(i)    Dermatology Indication Other Than Purpura. Subject to Sections 4.2(a)(iii) and (iv), Vicept shall pay to Aspect the following one-time milestones, each within [***] after achievement of the corresponding event in the following table, for the first time, with the first Product being developed for any Dermatology Indication -- other than the treatment or prevention of purpura -- that achieves such event through activities by or on behalf of Vicept:

									
	Non-Purpura Milestone Event
	Milestone Payment

		
	1. [***]	1. [***]

	2. [***]	2. [***]

	3. [***]	3. [***]

	4. [***]	4. [***]

(ii)    Purpura. Subject to Section 4.2(a)(iii), Vicept shall pay to Aspect the following one-time milestones, each within [***] after first achievement of the corresponding event in the following table, for the first time, with the first Product for the treatment or prevention of purpura to achieve such event by activities by or on behalf of Vicept:

						
	Purpura Milestone Event
	Milestone Payment
		
	1. [***]	1. [***]

	2. [***]	2. [***]

(iii)    [***].

(iv)     [***].

(b)    Sales Milestone. Vicept shall pay to Aspect the following sales milestone within [***] after first achievement of the following sales event with any Product:

						
	Calendar Year Net Sales in countries with issued Valid Claim or Regulatory Exclusivity coverage	Royalty Rate
	

1.Achievement of [***] in Net Sales in a calendar year, all of which Net Sales occur in country(ies) in which the Product sold is Claimed at the time of sale by a Valid Claim (whether pending or issued) of the Assigned Patents, or is Covered by Regulatory Exclusivity at the time of sale. 
	

1.[***]

(c)    One-Time Only Milestones. Each milestone payment specified above in Sections 4.2(a) and 4.2(b) shall be payable a maximum of one (1) time only, over the life of this Agreement, regardless of how many additional times (more than once) the particular milestone may be achieved with one (1) or more Products. Accordingly, the total maximum amount of milestones potentially payable under this Agreement equals [***]. 

4.3    Royalty Payments. 

(a)    Base Rates. Vicept stall pay Aspect royalties on annual Net Sales of Products sold to Third Parties in countries where the Product sold is (1) Claimed by an issued Valid Claim, or (2) covered by Regulatory Exclusivity, at the following tiered (or incremental) rates:

						
	Calendar Year Net Sales in countries with Issued Valid Claim or Regulatory Exclusivity coverage	Royalty Rate
	Portion from $0 – $[***]	[***]
	Portion from $[***] - $[***]	[***]
	Portion greater than $[***]	[***]

These tiers apply on a worldwide and Product-by-Product basis; provided that for the purpose of determining the applicable royalty rate tier under this Section 4.3, (X) the Net Sales of any Products will be aggregated if such Products were subject to the same Regulatory Approval or one was approved through a supplement to the other’s existing Regulatory Approval, and (Y) the Net Sales of any Products will not be aggregated if such Products were not subject to the same Regulatory Approval and one was not approved as a supplement to an existing Regulatory Approval of the other (as non-limiting examples, (Y) applies where the second Product was approved through a stand-alone NDA, an abbreviated New Drug Application or 505(b)(2) application, or like separate application). It is also understood that the worldwide Net Sales of a given Product will be aggregated even though the Regulatory Approval for such Product in one country is different from the Regulatory Approval for such Product in another country). Where the approval route is different in different countries, the decision as to whether or not to aggregate 2 Products’ Net Sales (the choice between (X) and (Y) of the proviso above in this paragraph) shall be made based on the approval route in the U.S.

Example 1: [***].

Example 2: [***].

(b)    Adjustments Based on Nature of Protection for the Product. The full royalty rates of subsection (a) shall apply to sales in any country in which the Product is Claimed by an issued Valid Claim. The royalty rates shall be decreased by [***] for sales in any country in which the Product is not Claimed by an issued Valid Claim but is covered by Regulatory Exclusivity. No royalties shall be due 

on Net Sales neither Claimed in the country of sale by a Valid Claim nor covered by Regulatory Exclusivity. Without limiting the generality of the foregoing, no royalties are due on the basis solely of the Product being Claimed in the country of sale by a pending Valid Claim.

(c)    Offset for Third-Party Patent Royalties. If Vicept or its Affiliate or a Licensee were to make payments to a Third Party under a Patent license encompassing a Product that is royalty-bearing to Aspect, then Vicept would be entitled to deduct up to [***] of the Third-Party payments from the royalty owed by Vicept to Aspect, but could not reduce the royalty owed to Aspect to below [***] of the royalties that would otherwise have been due to Aspect in any calendar quarter. Any amounts that Vicept is unable to credit due to the foregoing [***] limitation on the reduction in Aspect’s royalties as applied in any calendar quarter shall carry forward to future calendar quarters, subject always to such [***] limitation on the reduction in Aspect’s royalties as applied in such future calendar quarters; provided, however, that under no circumstances shall Aspect be responsible for more than [***] of the total Third-Party payments made by Vicept or its Affiliate or a Licensee to a Third Party under such Patent license.

(d)    Generic Competition Adjustment.

(i)    Prior to Launch by or on behalf of Vicept. If a Formulation other than the one marketed by or on behalf of Vicept -- but containing the same active ingredient as Vicept’s Product, and labeled for a Dermatology Indication that is described or disclosed in the Assigned Patents as of the Effective Date (or a Dermatology Indication that is encompassed within such a described or disclosed indication) (to avoid doubt, unaffected by whether claims issue on the particular such indication) (all of the foregoing Dermatology Indications, “Disclosed Dermatology Indications”) -- were approved and launched in the particular country prior to the first commercial sale (after Product Regulatory Approval is obtained in the country) of Product by or on behalf of Vicept in that country, then going forward from the time that such Formulation other than the one marketed by or on behalf of Vicept is first approved, no royalties would be due on Net Sales sold thereafter in that country.

(ii)    Adjustment. If a Formulation other than the one marketed by or on behalf of Vicept -- but containing the same active ingredient as Vicept’s Product, and labeled for any Disclosed Dermatology Indications – were approved and marketed in the particular country only after (and none were approved before) first commercial sale (after Product Regulatory Approval is obtained in that country, and captured at least [***] of the market share (based on units) in that country in any calendar quarter, then going forward the royalties to Aspect would be reduced to [***] of the royalties that would otherwise have been due in that country.

(iii)    Reinstatement. The royalty reduction of Sections 4.3(d)(i) and (ii) shall cease to apply in a given country if and with respect to Net Sales after both of the following occur: (1) as the result of settlement (including agreements to refrain from patent assertion or settling a patent assertion) or judgment on an infringement suit under the Assigned Patents the seller of the competing Formulation ceases all sales of such product or seller continues sales of such product pursuant to a binding legal agreement with Vicept with a royalty or other consideration due to Vicept, and (2) in the case solely of Section 4.3(d)(ii), Vicept achieves in four consecutive calendar quarters a level of Net Sales covered by an issued Valid Claim or Regulatory Exclusivity in such country equal to at least fifty percent (50%) of the level of Net Sales covered by an issued Valid Claim or Regulatory Exclusivity in such country in the 12 months leading up to the time the competing product was first sold in such country (or such lesser period as the Product by or on behalf of Vicept was being sold).

(iv)    Clarification. To avoid doubt, the competing Formulation may be either a prescription or an over-the-counter product, as long as it contains the same active ingredient as Vicept’s Product and is labeled for a Disclosed Dermatology Indication. To avoid doubt, the adjustments of this Section 4.3(d) apply on a country-by-country basis. To avoid doubt, in each country, all Third-Party Formulations other than the one marketed by or on behalf of Vicept -- but containing the same active ingredient as Vicept’s Product, and labeled for a Disclosed Dermatology Indication -- that were approved 

and launched in the country shall be taken into account in determining whether at least [***] of the market share (based on units) has been taken and in determining whether the sales level of Section 4.3(d)(iii)(B) has been reached. To avoid doubt, “Product marketed by or on behalf of Vicept” and “Vicept's Product” as used in this Section 4.3(d) each encompasses Products marketed by Vicept Affiliates and Licensees. 

(e)    Royalty Floor. Notwithstanding anything to the contrary other than the royalty reduction of Section 4.3(d)(i) (which shall apply, fully, in the circumstances it describes, and be unaffected by this Section 4.3(e)), in no other event shall the royalties due under this Section 4.3 with respect to any Product for any calendar quarter be less than [***] of the Net Sales of such Product for such calendar quarter [***].

4.4.     Recoveries on Infringement of Assigned Patents. In accordance with Section 2.1 and 2.2, Vicept has the sole right to enforce the Assigned Patents against infringement. Any recoveries on such infringement suits in excess of Vicept’s (or its Affiliate’s or Licensee’s) costs in connection with such infringement suits (including all outside counsel costs and a reasonable allocation of the costs of internal counsel) shall be deemed Net Sales under this Agreement, and shall be deemed sold in a country in which the Product’s active ingredient is Claimed by an issued Valid Claim, in the calendar quarter in which the recovery over costs is actually received, and shall bear a royalty under Section 4.3. 

4.5     Quarterly Payment Timings. All royalties due under Section 4.3 shall be paid quarterly, on a country-by-country basis, within [***] after the end of the relevant calendar quarter for which royalties are due. The same applies to payments due under Section 4.4. 

4.6    Royalty Payment Reports. With respect to each calendar quarter, within [***] after the end of the calendar quarter, Vicept shall provide to Aspect a written report stating the number and description of all Products sold during the relevant calendar quarter; the gross sales associated with such sales; and the calculation of Net Sales on such sales, including the amount of any deduction provided for in the definition of Net Sales in Article 1. The report shall provide all such information on a country-by-country and Product-by-Product basis.

4.7    Payment Method. All payments due under this Agreement to Aspect shall be made by bank wire transfer in immediately available funds to an account designated by Aspect. All payments hereunder shall be made in the legal currency of the United States of America.

4.8    Taxes. Vicept shall be responsible to withhold from payments otherwise to be made to Aspect under this Agreement any taxes required to be withheld by Vicept under applicable law. If any such taxes are levied on such payments due hereunder (“Withholding Taxes”), Vicept shall (i) deduct the Withholding Taxes from the payment amount, (ii) pay all applicable Withholding Taxes to the proper taxing authority, and (iii) send evidence of the obligation together with proof of tax payment to Aspect with the next royalty report under Section 4.6.

4.9    Foreign Exchange. If any currency conversion shall be required in connection with the calculation of amounts payable hereunder, such conversion shall be made using the average of the exchange rates for the purchase and sale of U.S. dollars, as reported by Bank of America in San Francisco, California (or its successor entity) on the last business day of the calendar quarter to which such payment pertains. With any payment in relation to which a currency conversion is performed to calculate the amount of payment due, Vicept shall provide to Aspect a true, accurate and complete copy of the exchange rates used in the calculation.

4.10     Late Payments. Any payment due under this Article 4 that is not paid on or before the date such payment is due shall bear interest at a rate equal to the lesser of: the Prime Rate during the period of late payment plus two percent (2%) interest compounded annually; or the maximum rate permitted by law, calculated based on the number of days that payment is delinquent until full payment has been made. “Prime Rate” means the prime or equivalent rate quoted by The Wall Street Journal (or 

similarly reputable source, if The Wall Street Journal no longer exists) with respect to the time period in which payment was delinquent.

4.11     Records and Audit. Vicept shall keep (or cause to be kept) complete and accurate records pertaining to Net Sales of Products and the payments due under this Agreement, in sufficient detail to permit Aspect to confirm the accuracy of all payments due under this Agreement. Aspect shall have the right, at its expense, to cause an independent, certified public accountant to audit such records as necessary to confirm Vicept’s payments for the preceding year. Such independent, certified public accountant shall be legally bound by written confidentiality and non-use obligations running directly to Vicept. It shall be nationally recognized in the United States. Such audit rights may be exercised no more often than [***], upon reasonable advance notice to Vicept and during normal business hours. The terms of this Section shall survive any termination or expiration or termination of this Agreement for a period of [***].

In the case of records held by Vicept’s Licensees, Vicept will request a direct audit right for Aspect, but it shall suffice if Vicept obtains a similar audit right for itself and the right to share the results of its own audits with Aspect.

ARTICLE 5

PATENT PROSECUTION, MAINTENANCE AND ENFORCEMENT

5.1    Patent Prosecution and Maintenance. Vicept shall have the right to prosecute (including, but not limited to, by conducting interferences, oppositions and reexaminations or other similar proceedings) and maintain (including, but not limited to, the timely payment of all maintenance fees, renewal fees and other applicable fees) and extensions of the Assigned Patents. If Vicept elects not to prosecute or maintain or extend any such Assigned Patents, Vicept shall provide written notice thereof to Aspect at least [***] prior to abandonment of any such Assigned Patents. In response to such a notice, Aspect may, in its sole discretion and, at its sole expense, request to assume responsibility for prosecuting and maintaining such Assigned Patent. Vicept shall reasonably consider and shall not unreasonably withhold its consent to any such request by Aspect. If Vicept (on such standard) approves for Aspect to assume such responsibility, then Aspect shall prosecute in Vicept’s name, and Vicept’s other rights with respect to the Assigned Patent(s) concerned shall continue, as shall the requirement to pay royalties based on such Assigned Patent(s). Vicept may exercise its rights under this Section 5.1 via an Affiliate or Licensee or extend its rights under this Section 5.1 to an Affiliate or Licensee.

5.2    Patent Enforcement.

(a)    Right to Bring Suit. Vicept shall have the first right to enforce or otherwise sue on the Assigned Patents against a Third Party. Each Party shall provide the other Party with written notice of any alleged infringement of the Assigned Patents. If Vicept elects not to enforce or otherwise sue on any such Assigned Patents within [***] after such a notice between the Parties, Vicept shall provide written notice thereof to Aspect, and Aspect may, in its sole discretion and at its sole expense, elect to enforce or sue on such Assigned Patent in Aspect’s name.

(b)    Cooperation. Each Party will reasonably cooperate in the other’s suits under this Section 5.2, at the expense of such other Party (on a pass-through basis at reasonable rates).

(c)    Recoveries.  All recoveries shall go first to reimburse litigation expenses (including internal and external costs and including reimbursing the prosecuting Party for expenses it has previously reimbursed to the other Party). For remaining recoveries where it was Vicept who brought suit, then Vicept shall be entitled to retain [***]% of the remaining recovery, and shall pay over to Aspect [***]% of the remaining recovery. For remaining recoveries where it was Aspect who brought suit, Aspect shall be entitled to retain [***]% of the remaining recovery, and shall pay over to Vicept [***]% of the remaining recovery.

(d)    No Licenses by Aspect. Aspect shall not be entitled to grant licenses or any forward-looking rights under the Assigned Patents (or any subset thereof), including in connection with infringement suits that Aspect has the right to bring in accordance with this Section. Nothing in this Article 5 shall be construed so as to imply any right to grant licenses or any forward-looking rights under the Assigned Patents (or any subset thereof).

(e)    Extension of Rights to Vicept Affiliates and Licensees. To avoid doubt, Vicept may exercise its rights under this Article 5, or extend its rights under this Article 5, to its Affiliates and to Licensees.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

6.1    Reciprocal Representations and Warranties. Each Party hereby represents and
warrants to the other Party that as of the Effective Date the representing and warranting Party has the full legal right, power and authority to enter into and perform this Agreement; that this Agreement has been authorized by all requisite action within such representing and warranting Party (in the case of a corporate entity); and that this Agreement is legally binding upon such representing and warranting Party.

6.2    Aspect Representations and Warranties. Aspect represents and warrants to Vicept as follows:

(a)    Sole Owner. Immediately prior to the assignment hereunder becoming effective, Aspect was the sole and lawful owner of the entire right, title, and interest in and to the Assigned Current Families and Assigned Know-How.

(b)    No Liens. There are as of the Effective Date no outstanding liens, security interests, pledges, charges, mortgages, restrictions, interests and/or encumbrances burdening any of the Assigned Patents nor the Assigned Know-How.

(c)    No Licenses or Encumbrances. Aspect has not granted, expressly or otherwise, any assignment, license or other    extension of rights, covenant not to sue or other similar interest or benefit, exclusive or otherwise, to, under or in the Assigned Patents or the Assigned Know-How.

(d)     No Inconsistent Agreements. Aspect and the Aspect Group have not executed, and Aspect further covenants that it and they shall not execute, any agreements inconsistent with this Agreement or to the detriment of the Assigned Patents or the Assigned Know-How.

(e)    Non-infringement of Third Party Rights. As of the Effective Date and to Aspect's and the other members of the Aspect Group's actual knowledge, after making a reasonable inquiry, no published Patents or trade secret rights owned or controlled by a Third Party, dominate or would be infringed or misappropriated by the manufacture, use, sale, offer for sale or importation of any Products in topical applications for Dermatology Indications, and Aspect and the other members of the Aspect Group have received no written claims relating to any claims of such domination, infringement or misappropriation.

(f)    Claims. There are no claims, actions, suits or proceedings commenced or pending, or to Aspect's knowledge threatened, against it or any other member of the Aspect Group as of the Effective Date that could affect the rights and benefits granted to Vicept under this Agreement. As of the Effective Date, Aspect has not received verbal or written notice that any third party is challenging or intends to challenge the patentability, validity or ownership of the Assigned Current Families. As of the Effective Date, Aspect and the other members of the Aspect Group have no knowledge of prior art 

relevant to the Assigned Patents not cited in the file wrappers of the Assigned Current Families [***] and believes claims covering the use of oxymetazoline to treat rosacea will issue in the United States.

(g)    Aspect Group Bound. Aspect has the legal right to bind the other members of the Aspect Group in the manner required to require Aspect to comply with and perform its obligations under this Agreement. Aspect and the other members of the Aspect Group that are not natural people (i.e., excluding the people who are the inventors of the Assigned Patents) are the “Responsible Aspect Group Members.” The Responsible Aspect Group Members shall be jointly and severally liable for performance hereunder. Vicept, in case of breach of this Agreement by Aspect or any other member of the Aspect Group, shall be entitled to proceed against any of the Responsible Aspect Group Members or any combination of them that it chooses to enforce Vicept’s rights hereunder, without any obligation to first exhaust remedies with respect to any other(s) of them. To avoid doubt or concern, this Section explicitly does not make the Aspect People jointly and severally liable for Aspect’s performance under this Agreement.

(h)    Third-Party Activities; Grounds. As of the Effective Date and to Aspect’s actual knowledge without any special enquiry, there are no (i) activities by Third Parties that would constitute infringement or misappropriation of the Assigned Current Families (in the case of pending claims, evaluating them as if issued), nor (ii) grounds currently existing on which any claims, actions, suits or proceedings might be commenced against Aspect or Vicept with respect to the practice of the Assigned Current Families within the scope of the license set forth in Section 2.5.

(i)    Patents. The Assigned Current Families are the only Patents that Aspect or any other member of the Aspect Group owns or Controls, as of the Effective Date, that Claim Technology.

(j)    Trademarks.  Exhibit B contains a complete list of all trademarks that Aspect or any other member of the Aspect Group owns or Controls, as of the Effective Date, that are associated with Technology or have been registered for use with Technology.

(k)    Data. Aspect has disclosed to Vicept all data and information (including preclinical and clinical data and information) disclosed in regulatory filings (including adverse  event and serious adverse event reports to Regulatory Agencies and all other safety-related data and information) prior to the Effective Date (including toxicology, carcinogenicity and mutagenicity data and information) generated by, disclosed to and/or known to Aspect or any other member of the Aspect Group regarding Technology and any information required to fairly and accurately interpret such data and information and make Aspect’s disclosures thereof to Vicept complete, accurate and not misleading.

(l)     No Debarment. In the course of developing Technology and any products based on it, Aspect has not engaged any person who has been debarred by the FDA or to Aspect’s knowledge is the subject of debarment proceedings by the FDA.

(m)    Affiliates of Aspect. As of the Effective Date, Aspect has no Affiliates and there are not members of the Aspect Group other than Aspect and the Aspect People.

6.3    Aspect Covenants. Aspect hereby covenants that, without limiting Vicept’s right set forth elsewhere in this Agreement (including in Section 6.2(d)), Aspect and the other members of the Aspect Group shall not purpose to convey to any Third Party any Assigned Patent.

6.4    Disclaimer of Warranties. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPLICITLY SET FORTH IN SECTIONS 6.1 AND 6.2 EACH OF VICEPT AND ASPECT HEREBY EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.

ARTICLE 7

INDEMNIFICATION

7.1    Indemnification by Vicept. Vicept shall indemnify, hold harmless and defend Aspect, the other members of the Aspect Group, and their respective officers, directors, members, employees and agents (the “Aspect Indemnitees”) from and against any and all losses, damages, liabilities, judgments, fines, amounts paid in settlement, expenses and costs of defense (including reasonable attorneys’ fees and witness fees) (collectively “Losses”) resulting from any demand, claim, action or proceeding brought or initiated by a Third Party (each a “Third-Party Claim”) against any Aspect Indemnitees(s) to the extent that such Third-Party Claim arises out of (i) the breach or alleged by Vicept in this Agreement; (ii) the negligence or willful misconduct of any Vicept Indemnitee (defined in Section 7.2); or (iii) the development, manufacture, storage, handling, use, sale, offer, import, export or distribution of Products by or for Vicept and its Affiliates and Licensees; provided that (a) the Aspect Indemnitees comply with the procedure set forth in Section 7.3; and (b) such indemnity shall not apply to the extent Aspect has an indemnification obligation pursuant to Section 7.2 for such Loss. 

7.2    Indemnification by Aspect. Aspect shall indemnify, hold harmless and defend Vicept, its Affiliates, the Licensees, the investors in Vicept and the respective officers, directors, employees and agents of each of the foregoing (the “Vicept Indemnitees”) from and against any and all Losses resulting from any Third-Party Claim(s) arises out of (i) the breach of alleged breach of any representation, warranty or covenant by Aspect in this Agreement; or (ii) the negligence or willful misconduct of any Aspect Indemnitee; provided that (a) the Vicept Indemnitees comply with the procedure set forth in Section 7.3; and (b) such indemnity shall not apply to the extent Vicept has an indemnification obligation pursuant to Section 7.1 for such Loss.

7.3    Mechanics. A Party whose Vicept Indemnitee or Aspect Indemnitee is entitled to
be indemnified pursuant to this Article 6 (the “Indemnified Party”) shall give prompt notice of the Third Party Claim to the other Party (the “Indemnifying Party”) and the Indemnifying Party shall defend against such Third Party Claim with the reasonable cooperation of the Indemnified Party; provided that the Indemnifying Party shall not settle any such Third-Party Claim for anything other than money damages without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld, conditioned or delayed. The Indemnified Party’s Indemnitees must tender defense of the applicable Third-Party Claim and provide all reasonable cooperation and assistance in such defense, in order to remain eligible to be indemnified and held harmless; provided, however, that where Vicept is the Indemnified Party, unless Aspect has adequate insurance to cover the alleged potential Losses and is tendering defense to such insurer who has indicated in writing that they will fully assume the defense and cover any resulting Losses, the Vicept Indemnitees shall not be required to tender defense in order to remain eligible to be indemnified and held harmless and instead notwithstanding anything express or implied in this Section 7.3 Vicept and/or the Vicept Indemnitees may do so and be indemnified under this Agreement. The Indemnified Party shall have the right to be present in person or through counsel at substantive legal proceedings relating to the Third-Party Claim giving rise to the Indemnified Party’s right to indemnification hereunder. If the Parties cannot agree as to the application of Sections 7.1 and 7.2 to any Loss or Third-Party Claim, the Parties may conduct separate defenses of such Third-Party Claim. In such case, each Party further reserves the right to claim indemnity from the other upon resolution of such underlying Third-Party Claim.

7.4     Limitation of Aspect’s Liability. IN NO EVENT SHALL ASPECT BE REQUIRED TO PAY COMPENSATION (I.E., DISGORGE FUNDS OR RETURN EQUITY) TO COVER DAMAGES FOR ITS BREACH OF THIS AGREEMENT OR IN SATISFACTION OF ITS INDEMNIFICATION OBLIGATIONS UNDER THIS AGREEMENT IN AN AMOUNT THAT EXCEEDS THE TOTAL AMOUNT (INCLUDING BOTH CASH AND EQUITY) RECEIVE VICEPT AS OF THE DATE THE LIABILITY WAS INCURRED. IN THE EVENT ASPECT IS LIABLE TO VICEPT UNDER THIS AGREEMENT, ASPECT SHALL TENDER FIRST IN CASH OR FIRST IN RETURN OF VICEPT EQUITY PURPOSES OF THIS SECTION 7.4, THE VALUE OF THE VICEPT EQUITY IS ITS FAIR MARKET VALUE. IF ASPECT’S LIABILITY OR INDEMNIFICATION 

OBLIGATION TO VICEPT EXCEEDS THE AMOUNT ASPECT CAN BE REQUIRED TO PAY PER THE FOREGOING IN THIS SECTION 7.4, THEN VICEPT SHALL BE ENTITLED TO A CREDIT FOR ALL ADDITIONAL, CREDITABLE AGAINST ALL FUTURE PAYMENTS DUE UNDER THIS AGREEMENT UNTIL FULLY SATISFIED.
 

THE FOREGOING PARAGRAPH SHALL NOT APPLY TO LIMIT COMPENSATION WITH RESPECT TO DAMAGES OR INDEMNIFICATION LIABILITIES ARISING FROM FRAUD.

NOTHING IN THIS SECTION 7.4 SHALL PRECLUDE NON-MONETARY REMEDIES THAT MAY BE AVAILABLE WITH RESPECT TO ANY BREACH BY ASPECT OF THIS AGREEMENT, INCLUDING PROPER ASSIGNMENT OF INTELLECTUAL PROPERTY TO REMEDY ANY BREACH OF THE INTELLECTUAL PROPERTY ASSIGNMENT PROVISIONS OF THIS AGREEMENT.

7.5    Limitation of Liability. IN NO EVENT SHALL EITHER PARTY OR ITS RESPECTIVE AFFILIATES (OR IN THE CASE OF ASPECT, ANY RESPONSIBLE ASPECT GROUP MEMBERS) BE LIABLE FOR SPECIAL, EXEMPLARY, CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, STRICT LIABILITY OR OTHERWISE, EXCEPT TO THE EXTENT SUCH PARTY MAY BE REQUIRED TO INDEMNIFY THE OTHER PARTY FROM SUCH DAMAGES CLAIMED BY THIRD PARTIES UNDER THIS ARTICLE 7 AND EXCEPT TO THE EXTENT THAT SUCH DAMAGES ARISE FROM BREACH OF THE OBLIGATIONS SET FORTH IN ARTICLE 8 (REGARDING CONFIDENTIALITY).

ARTICLE 8

CONFIDENTIALITY

8.1    Confidential Information; Exceptions.    The Parties shall maintain all Confidential Information in trust and confidence and shall not disclose any Confidential Information to any Third Party (except as expressly provided below) or use any Confidential Information for any purposes other than for performance under or determining compliance with and administering this Agreement. The Parties shall not disclose Confidential Information to any employee, agent, consultant, or Affiliate who does not have a reasonable need for such information for the foregoing purposes. Disclosures to such persons with a reasonable need for the information are only permitted to the extent the person is subject to binding obligations of confidentiality and limited use at least as restrictive in scope and as long in duration as those of this Article 8. The Parties shall use at least the same standard of care as it uses to protect its own confidential information of a similar nature to prevent unauthorized disclosures or uses of the Confidential Information, but no less than reasonable care. Each Party shall promptly notify the other Party upon discovery of any unauthorized use or disclosure of the Confidential Information. Confidential Information of Aspect does not include the Assigned Know-How, rather, Assigned Know-How is the Confidential Information of Vicept.

Confidential Information shall not include any information which, as shown by competent proof: 

(a)     is now, or hereafter becomes, through no act or failure to act on the part of the receiving Party in breach hereof, generally known or available;

(b)     is known by the receiving Party at the time of receiving such information, as shown by contemporaneous written records; 

(c)    is independently developed by the Receiving Party without the aid, application or use of Confidential Information, as shown by written records;

(d)    is hereafter furnished to the receiving Party by a Third Party, as a matter of right, without breach of any confidentiality agreement, and without restriction on disclosure; or

(e)    is the subject of a prior, express, written permission to disclose provided by the disclosing Party.

8.2    Authorized Disclosure. Notwithstanding any other provision of this Agreement, either Party may disclose Confidential Information to the extent and to the persons and entities required by an applicable governmental law, rule, regulation or order; provided, however, that a Party shall first have given prompt notice to the other Party to enable the first Party to seek any available exemptions from or limitations on such disclosure requirement and shall reasonably cooperate in any such efforts by the first Party.

8.3    Return of Confidential Information. If this Agreement is terminated for breach according to the provisions of Section 9.2, the Parties shall use diligent efforts to return all Confidential Information. Each Party will be allowed to keep one archival copy of any Confidential Information for record-keeping purposes only.

8.4    Use of Names. A Party shall not use any of the other Party's names, trademarks, logos, employee names, investor names or symbols in any publicity, promotion or similar public disclosure, without the advance written withholdable consent of such other Party, except as may be required by law or stock exchange requirement.

ARTICLE 9

TERM AND TERMINATION

9.1    Term. The term of this Agreement shall commence upon the Effective Date and, unless sooner terminated as provided in this Article 9, shall expire upon the expiration of the last-to-expire Valid Claim, but in any event no sooner than ten (10) years after the Effective Date.

9.2    Termination for Breach. 

(a)Terminable Breaches. 

(i)     Termination by Aspect.  Aspect may terminate this Agreement if Vicept materially breaches Section 3.2 of this Agreement, by ninety (90) days written notice to Vicept specifying in detail what the material breach of Section 3.2 is an stating explicitly that the notice is a breach and potential termination notice under this Section 9.2(a), provided that Vicept fails to cure such material breach that is incapable that is incapable of cure within ninety (90) days, but is capable of cure in a longer reasonable period, fails to provide within such ninety (90) day notice period a reasonable written plan to cure the breach as soon as practicable. 

(ii)    Termination by Vicept. Vicept may terminate this Agreement if Aspect materially breaches this Agreement in a way that (x) results in Vicept (or its Affiliate or Licensee) owning less than all of the Assigned Patents and Assigned Know-How, (y) detracts from the strength or value of the Assigned Patents or Assigned Know-How, or (z) is a breach of Section 3.4 (“IP Breaches”), by ninety (90) days written notice to Aspect specifying in detail what the IP Breach is and stating explicitly that the notice is a breach and potential termination notice under this Section 9.2(a), provided that Aspect fails to cure such material breach within such ninety (90) day notice period, or in the case of such a material breach that is incapable of cure within ninety (90) days, but is capable of cure in a longer reasonable period, fails to provide within such ninety (90) day notice period a reasonable written plan to cure the breach as soon as practicable

(b)    Mechanics. If a Party gives notice of termination under Section 9.2(a)(i) or (ii) and the other Party disputes whether such notice was proper (i.e., whether the Party having received such notice had actually materially breached this Agreement through the type of breach specified in the applicable such Section), then the issue of whether this Agreement has been terminated shall be resolved in accordance with Section 10.1. If as a result of such dispute resolution process it is finally determined that the notice of termination was proper, then such termination shall become effective as of the date of such final determination; provided, however, that the breaching Party fails thereafter to cure the underlying breach in accordance with the determination made in the resolution process under Section 10.1 within the time period set forth in this Section 9.2 for the applicable breach following such determination (meaning it must either cure within ninety (90) days after such final determination or provide within such time period a reasonable written plan for cure). If, however, as a result of such dispute resolution process it is determined that the notice of termination was improper, then no termination shall have occurred and this Agreement shall remain in effect.

9.3    Elective Termination by Vicept. Vicept shall have the right to terminate this Agreement at any time, with or without cause, upon written notice to Aspect.

9.4    Effects of Termination.

(a)    After Aspect Terminates for Vicept Breach. If Aspect terminates this Agreement pursuant to Section 9.2(a) following Vicept’s uncured material breach of Section 3.2, then all licenses to Vicept under this Agreement shall terminate, Vicept and its Affiliates shall cease all development and commercialization of any Products and Vicept shall assign and convey to Aspect its entire right, title and interest in and to the Assigned Patents, the Assigned Know-How and the Assigned Trademarks, together with all powers, privileges, benefits, causes of action, remedies, and other rights relating, appertaining to and/or associated with the Assigned Patents, the Assigned Know-How and the Assigned Trademarks. Notwithstanding any provision to the contrary, no termination of this Agreement by either Party shall be construed as a termination of any valid grant of rights to a Licensee with respect to the rights granted under this Agreement. Upon termination of this Agreement by Aspect, each grant of rights to a Licensee shall, to the extent not imposing obligations on Aspect in excess of those contained herein, be assigned to Aspect if requested in writing by the Licensee or be automatically assigned to Aspect if requested in writing by the Licensee or be automatically assigned to Aspect but reformed to provide for the payment to Aspect of solely those payments required by this Agreement if requested in writing by the Licensee.

(b)    After Vicept Effectively Terminates. If Vicept terminates this Agreement under Section 9.3, then the foregoing effects in Section 9.4(a) shall apply.

(c)    After Vicept Terminates for Aspect’s Breach. If Vicept terminates this Agreement pursuant to Section 9.2 following Aspect’s uncured material breach of this Agreement, then Vicept shall as between the Parties be entitled to retain full ownership of the Assigned Patents and the Assigned Know-How; the license granted Vicept pursuant to Section 2.5 (and such Section) shall survive such termination; and, in addition to those provisions that survive any expiration or termination of this Agreement as set forth in Section 9.4(d), the following shall survive and apply: Articles 2; Sections 4.1-4.4 shall survive but all payment obligations thereunder shall be reduced by fifty percent (50%) of the payment that would otherwise be due for all payments becoming due after the termination; and Sections 3.4, 3.5 and 3.6. Article 5 shall not survive such a termination. Section 3.2 shall not survive such a termination (nor shall Vicept have any diligence obligation under this Agreement, express or implied, after such a termination).

(d)    General. Expiration or termination of this Agreement for any reason shall not affect any accrued rights or obligations of the Parties, and the following Articles shall survive any expiration or termination of this Agreement: Articles l and 7-10. Also, Article 2 shall survive expiration of this Agreement (but shall not survive termination except as described above in sub-section (c)).

ARTICLE 10

MISCELLANEOUS

10.1    Dispute Resolution.

(a)    Initial Dispute Resolution. The Parties recognize that disputes may from time to time arise between the Parties during the term of this Agreement. It is the objective of the Parties to establish procedures to facilitate the resolution of disputes arising under this Agreement in an expedient manner by mutual cooperation and without resort to litigation. To accomplish this objective, the Parties agree to follow the procedures set forth in this Section 10.1 to resolve any dispute arising under this Agreement. If such a dispute between the Parties arises, then either Party, by written notice to the other Party, may have such dispute referred to the Parties’ respective executive officers designated below or their successors, for attempted resolution by good faith negotiations within [***] after such notice is received. Said designated officers are as follows: 

Vicept:     President and CEO
Aspect:    President and CEO

(b)    Preliminary Relief. A Party is entitled to seek interlocutory relief and/or a preliminary injunction without first following the procedure of this Section 10.1; provided that it also invokes the procedure of this Section 10.1 in parallel. Each Party hereby irrevocably waives its right to jury trial of any and all disputes arising under this Agreement, and consents to have such disputes decided instead by a judge or justice.

(c)    Arbitration. Except as otherwise set out in this Section 10.1, any dispute that cannot be settled amicably by agreement of the Parties pursuant to Section 10.1(a) shall be finally settled by an arbitration administered by JAMS applying its most applicable procedural rules (and the substantive laws of the State of California) provided that the appointed arbitrator(s) shall have appropriate experience in the pharmaceutical industry (or if no such person is available then in the biopharmaceutical industry or the closest industry possible). The place of arbitration shall be Delaware, U.S.A. The language to be used in the arbitration proceedings shall be English. The award rendered in any arbitration shall be final and binding upon both Parties. The judgment rendered by the arbitrator(s) may include costs of arbitration, reasonable legal fees and reasonable costs for any expert and other witnesses. Nothing in this Agreement shall be deemed as preventing either Party from seeking injunctive relief (or any other provisional remedy) from any court having jurisdiction over the Parties and the subject matter of the dispute as necessary to protect either Party’s name, Confidential Information (in the case of Vicept) or intellectual property. Judgment upon the award may be entered in any court having jurisdiction, or application may be made to such court for judicial acceptance of the award and/or an order of enforcement as the case may be. Notwithstanding the foregoing, either Party shall be free to submit any dispute relating to the scope, validity, enforceability or other like matter regarding intellectual property to any court having jurisdiction over the Parties and the subject matter of the dispute and to seek such relief and remedies as are available in that court.

10.2     Jurisdiction. Both Parties consent to the exclusive personal jurisdiction of all courts sitting within Delaware, U.S.A., for resolving all disputes arising out of or in connection with this Agreement. Each Party hereby waives any and all defenses it may have to the jurisdiction and venue of such courts, including a defense that such a court may not assert personal jurisdiction over such Party, or of forum non conveniens.

10.3     Governing Law. This Agreement is made in accordance with and shall be governed and construed under the laws of the State of California excluding its choice of law principles.

10.4     No Agency, Joint Venture or Partnership. Neither Party is, nor will be deemed to be an employee, agent or legal representative of the other Party for any purpose. Neither Party will be entitled 

to enter into any contracts in the name of, or on behalf of the other Party, nor will a Party be entitled to pledge the credit of the other Party in any way or hold itself out as having authority to do so. The parties are independent contractors, this Agreement is for an arm’s-length transaction, and the relationship that it governs shall not be construed to be or create any agency, joint venture or partnership.

10.5     Assignment.  Except as explicitly provided for in this Agreement, neither Party shall have the right or power to assign any rights or obligations under this Agreement without the consent of the other Party, except that Vicept may assign one or more times to an Affiliate or to a successor to substantially all of the business or assets of Vicept to which this Agreement relates (whether through merger, sale of stock, sale of assets or other transaction). This Agreement shall be binding upon and inure to the benefit of the successors and explicitly permitted assigns of the Parties. Any assignment of this Agreement not made in accordance with this Agreement is prohibited hereunder and shall be null and void. Any assignee must certify in writing to the non-assigning Party, within [***] after the requested in writing by the non-assigning Party, that such assignee agrees to the terms and conditions of this Agreement going forward from the date of assignment.

10.6     Amendment. No amendment or modification hereof shall be valid or binding upon the Parties unless made in writing and signed by authorized officers of both Parties.

10.7     Notices. Any notice or other communication required or permitted to be given to either Party hereto shall be in writing unless otherwise specified and shall be deemed to have been properly given and to be effective (a) on the date of delivery if delivered in person; (b) the date of electronically confirmed facsimile transmission if during the recipient’s normal business hours, or otherwise on the next Business Day; and (c) two (2) Business Days after sending for next Business Day delivery by internationally recognized expedited courier service for no later than next-possible-business-day delivery:

In the case of Vicept:  [***]
         
With a required copy to: [***]
     
In the case of Aspect Pharmaceuticals: [***]

With a required copy to: [***]

In the case of (c) (expedited courier service), the Party providing the notice shall as a courtesy additionally provide the notice by a facsimile in accordance with (b). Either Party may change its address for communications by a notice to the other Party in accordance with this Section 10.7.

10.8     Bankruptcy; Intellectual Property. All rights and licenses granted under or pursuant to this Agreement by a bankrupt Party to the other Party are, and shall be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code and any similar law or regulation in any other country, licenses of rights to “intellectual property” as defined under Section 101(35A) of the Bankruptcy Code. The Parties agree that all intellectual property rights licensed hereunder, are part of the “intellectual property” as defined under Section 101(35A) of the Bankruptcy Code subject to the protections afforded the non-terminating Party under Section 365(n) of the Bankruptcy Code, and any similar law or regulation in any other country. Aspect and Vicept shall be entitled to all similar protections as licensee under bankruptcy laws of other countries.

10.9     No Implied Licenses. Except as otherwise expressly set forth in this Agreement, nothing in this Agreement shall give either Party any right, title or interest in or to any Patents or other intellectual property owned by or licensed to the other Party.

10.10     Force Majeure. Any delay in or failure of performance by any Party under this Agreement shall not be considered a breach of this Agreement if and to the extent caused by occurrences beyond the reasonable control of the Party affected, including acts of God, embargoes, governmental 

restrictions, strikes or other acts of workers, fire, flood, earthquake, explosion, riots, wars, acts of terrorism, civil disorder, rebellion or sabotage; provided, however, the payment of any value due and owing hereunder shall not be delayed by the payor because of a force majeure affecting the payer, unless such force majeure specifically precludes the payment process. The Party suffering such occurrence shall notify the other Party and any time for performance hereunder shall be extended by the actual time of delay caused by the occurrence.

10.11     Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute a single instrument.

10.12     Captions.  All section titles or captions contained in this Agreement, in any Exhibit referred to herein and the table of contents, if any, to this Agreement are for convenience only, shall not be deemed a part of this Agreement and shall not affect the meaning or interpretation of this Agreement.

10.13     Draftsmanship.  Each Party acknowledges that it has participated in, and has been represented by counsel in the drafting of this Agreement. Any applicable rule of construction to the effect that ambiguities are to be resolved against the drafting party will not be applied in connection with the construction or interpretation of this Agreement.

10.14     No Third Party Rights or Obligations.  Except as expressly provided in Article 9, no provision of this Agreement shall be deemed or construed in any way to result in the creation of any rights or obligation in any Third Party.

10.15     Severability. If any term, condition or provision of this Agreement is held to be invalid or unenforceable for any reason by any court of competent jurisdiction form which no appeal can be or is taken, or in arbitration proceedings between the Parties as set forth in Article 10 of this Agreement, it shall, if possible, be narrowed, shortened, or interpreted to achieve the intent of the Parties to this Agreement to the extent legally possible rather than voided or if not to any extent legally possible be deemed severed from this Agreement. In any event, all other terms, conditions and provision of this Agreement shall be deemed valid and enforceable to the full extent.

10.16     Compliance with Laws. Each Party shall carry out its activities pursuant to this Agreement in compliance with all applicable supranational, national, state, provincial and other local laws, rules, regulations and guidelines.

10.17     Cumulative Rights. The rights, powers and remedies hereunder shall be in addition to, and not in limitation of, all rights, powers and remedies provided at law or in equity, or under any other agreement between the Parties. All of such rights, powers and remedies shall be cumulative, and may be exercised successively or cumulatively.

10.18     Right of Offset; Recoupment. Notwithstanding any other provision of this Agreement, every liability of Vicept to Aspect is subject to and conditioned upon the recoupment of any and all liabilities owing from Aspect to Vicept, so as to establish a net liability. Vicept is entitled to credit against or net out against amounts due under this Agreement, any and all liabilities of Aspects to Vicept, including any damages for breach of contract if applicable.

10.19     Waiver. No failure or delay on the part of either Party to exercise any power, right, privilege or remedy under this Agreement will operate as a waiver thereof. No single or partial exercise of any such power, right, privilege or remedy will preclude any other or further exercise thereof or of any other power; right, privilege or remedy. Waivers of powers, rights, privileges and remedies under this Agreement may only be waived in a writing executed by a duly authorized officer of the waiving Party.

10.20     Costs. Each Party shall bear its own legal costs of and incidental to the preparation, negotiation and execution of this Agreement.

10.21     Entire Agreement. This Agreement embodies the entire understanding of the Parties with respect to the subject matter hereof and shall supersede all previous communications, representations or understandings, either oral or written, between the Parties relating to the subject matter of this Agreement. To be clear, this Agreement supersedes the Prior CDA with respect to Confidential Information and the Parties’ rights and obligations with respect thereto.

[remainder of page intentionally blank]

    IN WITNESS WHEREOF, both Vicept and Aspect Pharmaceuticals have executed this Agreement by their respective officers hereunder duly authorized.

																		
	VICEPT THERAPEUTICS, INC.		ASPECT PHARMACEUTICALS, LLC
						
	By:	/s/ Neal Walker			By:	/s/ Stuart Daniel Shandler
	Name:	Neal Walker			Name:	Stuart Daniel Shandler
	Title:	CEO			Title:	President & CEO Aspect Pharmaceuticals
	Date:	8/3/09			Date:	8/3/09Document

Exhibit 10.8

Certain confidential information contained in this exhibit have been omitted by means of redacting a portion of the text and replacing it with [***], pursuant to Regulation S-K Item 601(b) of the Securities Act of 1933, as amended. Certain confidential information has been excluded from this exhibit because it is: (i) not material; and (ii) the registrant treats such information as private or confidential.
AMENDED, RESTATED AND CONSOLIDATED LICENSE AGREEMENT
This AMENDED, RESTATED AND CONSOLIDATED LICENSE AGREEMENT (this “LICENSE AGREEMENT”) is entered into this 27th day of June, 2012 (the “EFFECTIVE DATE’’) between The University of North Carolina at Chapel Hill having an address at Campus Box 4105, 308 Bynum Hall, Chapel Hill, North Carolina, 27599-4105 (“UNIVERSITY”) and Novan, Inc., a corporation organized and existing under the laws of the State of Delaware (“LICENSEE”).
WITNESSETH
WHEREAS, UNIVERSITY entered into a first license agreement with LICENSEE effective July 18, 2007, a FIRST AMENDMENT thereto effective September 30, 2008 and a SECOND AMENDMENT thereto effective October 29, 2010 (such license agreement, as amended by the FIRST AMENDMENT and the SECOND AMENDMENT thereto, the “FIRST AGREEMENT”); and
WHEREAS, UNIVERSITY entered into a second license agreement with LICENSEE effective October 1, 2009 and a FIRST AMENDMENT thereto effective October 29, 2010 (such license agreement, as amended by the FIRST AMENDMENT thereto, the “SECOND AGREEMENT”); and
WHEREAS, UNIVERSITY and LICENSEE wish to amend, restate and consolidate the FIRST AGREEMENT and the SECOND AGREEMENT into a single agreement as provided herein.
NOW, THEREFORE, in consideration of the premises and mutual promises and covenants contained in this LICENSE AGREEMENT and for good and valuable consideration, it is agreed by and between UNIVERSITY and LICENSEE as follows:
ARTICLE 1: DEFINITIONS
In addition to such terms defined elsewhere in this LICENSE AGREEMENT, the following terms shall have the meanings described below.
1.1 “AFFILIATE” means (a) any person or entity which owns or controls at least fifty percent (50%) of the equity or voting stock of the LICENSEE, or (b) any person or entity fifty percent (50%) of whose equity or voting stock is owned or controlled by LICENSEE or (c) any person or entity of which at least fifty percent (50%) of the equity or voting stock is owned or controlled by the same person or entity owning or controlling at least fifty percent (50%) of LICENSEE.
1.2 “EXISTING PATENT RIGHTS” means all PATENT RIGHTS claiming INVENTIONS or otherwise existing as of the EFFECTIVE DATE.
 
1.3 “FIRST COMMERCIAL SALE” means the first sale of commercial quantities of any LICENSED PRODUCT (as defined below) for human therapeutic use under an approved NDA or BLA (or foreign equivalent thereof) by LICENSEE, an AFFILIATE, or any SUBLICENSEE of either of the foregoing for which the proceeds of such sale qualify as NET SALES (as defined below).
1.4 “IMPROVEMENT” means any (i) modification, enhancement, or improvement of an INVENTION or any other invention described in the EXISTING PATENT RIGHTS or (ii) other invention, the manufacture, use, or sale of which modification, enhancement, or improvement would, but for the licenses granted hereunder, infringe one or more claims of the EXISTING PATENT RIGHTS.
1.5 “INVENTIONS” means the subject matter of any invention disclosures, patent applications or patents identified in Appendix A. “UNIVERSITY INVENTIONS” refers to INVENTIONS that have only inventors, as determined under the Patent Laws of the United States of America, that are obligated to assign their rights in any INVENTIONS to the UNIVERSITY. “JOINT INVENTIONS” refers to INVENTIONS that have inventors, as 

determined under the Patent Laws of the United States of America, that are obligated to assign their rights in any INVENTIONS to the UNIVERSITY and inventors that are obligated to assign their rights in any INVENTIONS to LICENSEE or an AFFILIATE.
1.6 “LICENSED FIELD” means all uses and applications.
1.7 “LICENSED PRODUCTS” means any method or process, composition, product, or component part thereof claimed in whole or in part by an issued, unexpired, or pending claim contained in the PATENT RIGHTS whose manufacture, intended use, or sale would, but for the license(s) granted in this LICENSE AGREEMENT, infringe on the PATENT RIGHTS in the country of sale.
1.8 “LICENSED TERRITORY” means the entire world.
1.9 “NET SALES” means the total invoiced sales price received for LICENSED PRODUCTS sold by LICENSEE, its AFFILIATES, and their SUBLICENSEES less (a) sales taxes or other taxes, (b) shipping and insurance charges, (c) actual allowances, rebates, credits, or refunds for returned or defective LICENSED PRODUCTS, (d) trade discounts and quantity discounts, retroactive price reductions, or other allowances actually allowed or granted from the billed amount and taken, (e) rebates, credits, and chargeback payments (or the equivalent thereof) granted to managed health care organizations, wholesalers, or to federal, state/provincial, local and other governments, including their agencies, purchasers, and/or reimbursers, or to trade customers, and (f) any import or export duties, tariffs, or similar charges incurred with respect to the import or export of LICENSED PRODUCTS into or out of any country in the LICENSED TERRITORY. LICENSED PRODUCTS will be considered sold when paid for. Notwithstanding the foregoing, NET SALES shall not include, and shall be deemed zero with respect to, (1) the distribution of reasonable quantities of promotional samples of LICENSED PRODUCTS, (2) LICENSED PRODUCTS provided for clinical trials or research purposes, or charitable or compassionate use purposes, or (3) LICENSED PRODUCTS provided to any AFFILIATE, SUBLICENSEE or other strategic partner under an agreement in which NET SALES by such AFFILIATE, SUBLICENSEE or other strategic partner shall be subject to royalties under Section 3.5 or 3.6.
 
Notwithstanding the foregoing, in the event that LICENSED PRODUCTS are sold by LICENSEE, an AFFILIATE, or a SUBLICENSEE as part of a combination product or bundled product, or in conjunction with a delivery system, the NET SALES of such product, for the purposes of determining royalty payments due under this LICENSE AGREEMENT, shall be determined by multiplying the NET SALES (as originally defined above) of the combination product by the fraction A/(A+B), where A is the average sale price of the LICENSED PRODUCT when sold separately in finished form and B is the average sale price of the other product(s) or system sold separately in finished form, so that A+B is the average sale price of all of the product(s) and, if applicable, the delivery system together, as the case may be. In the event that such average sale price cannot be determined for both the LICENSED PRODUCT and such other product(s) or system(s) in combination, NET SALES for the purposes of determining royalty payments with respect to such combination or bundled product shall be commercially reasonable and determined by good faith negotiation between UNIVERSITY and LICENSEE.
1.10 “PATENT RIGHTS” means any United States, foreign or international patents and/or patent applications claiming the INVENTIONS or any IMPROVEMENTS owned or controlled by UNIVERSITY prior to or during the term of this LICENSE AGREEMENT, which shall include but not be limited to those patents and patent applications listed on Appendix A, attached hereto, as well as any continuations, continuations-in-part (to the extent they are directed to subject matter described in, claimed by, or enabled by the patents or patent applications set forth on Appendix A, any INVENTIONS, or any IMPROVEMENT), divisionals, provisionals, continued prosecution applications, reexaminations, renewals, extensions, request for continued examinations, or reissues thereof, and any foreign counterpart of any of the foregoing.
1.11 “PHASE I CLINICAL TRIAL” means any human clinical trial, conducted by or on behalf of LICENSEE, an AFFILIATE, or a SUBLICENSEE with respect to a LICENSED PRODUCT, including typically the first phase of clinical trials conducted in relatively small numbers of healthy volunteers or patients with the targeted condition to obtain information on a LICENSED PRODUCT’s safety, tolerability, pharmacological activity, pharmacokinetics, drug metabolism and mechanism of action, as more fully defined in 21 C.F.R. § 312.21(a), as may be amended, and, with respect to any other country or jurisdiction, the equivalent of such a clinical trial in such other country or jurisdiction.
1.12 “PHASE II CLINICAL TRIAL” means any well-controlled clinical trial, conducted by or on behalf of LICENSEE, an AFFILIATE, or a SUBLICENSEE with respect to a LICENSED PRODUCT, in human subjects, including clinical trials conducted in patients with the targeted condition, and designed to evaluate clinical activity (including but not limited to, pertinent pharmacodynamic effects or biomarker responses) and safety for a LICENSED PRODUCT for one or more indications, as well as to obtain an indication of the dosage regimen 

required, as more fully defined in 21 C.F.R. § 312.21(b), as may be amended, and, with respect to any other country or jurisdiction, the material equivalent of such a clinical trial in such other country or jurisdiction.
1.13 “SUBLICENSEE” means any third party to whom LICENSEE or any AFFILIATE licenses any of the rights granted under this LICENSE AGREEMENT pursuant to Article 6.
 
1.14 “SUBLICENSING REVENUE” means sublicense payments to the extent received by LICENSEE directly and solely, as reasonably determined by LICENSEE, as consideration for the grant of rights to PATENT RIGHTS, including upfront fees or milestone payments but excluding sales-based royalties, sales-based milestone fees, or other payments calculated on the basis of SUBLICENSEES’ sales of LICENSED PRODUCTS, purchases of equity or debt of LICENSEE, payments made in connection with research and development agreements or collaborations, or other payments made by a SUBLICENSEE where LICENSEE is obligated to perform services or to provide goods in connection with such payment shall not be considered sublicense payments for purposes of this LICENSE AGREEMENT.
1.15 “UNIVERSITY TECHNOLOGY” means any unpublished research and development information, know-how, and technical data in the possession of UNIVERSITY prior to or following the EFFECTIVE DATE of this LICENSE AGREEMENT which relates to and is necessary for the practice of the INVENTIONS or IMPROVEMENTS and which UNIVERSITY has the right to provide to LICENSEE.
ARTICLE 2: GRANT OF LICENSE
2.1 UNIVERSITY hereby grants to LICENSEE and its AFFILIATES to the extent of the LICENSED TERRITORY a non-exclusive right and license to use UNIVERSITY TECHNOLOGY in the LICENSED FIELD, with the right to sublicense, subject to all the terms and conditions of this LICENSE AGREEMENT. Nothing herein shall constitute a sale of the UNIVERSITY TECHNOLOGY.
2.2 UNIVERSITY hereby grants to LICENSEE and its AFFILIATES to the extent of the LICENSED TERRITORY an exclusive right and license under the PATENT RIGHTS to make, have made, use, offer for sale, sell and import LICENSED PRODUCTS in the LICENSED FIELD, with the right to sublicense, subject to all the terms and conditions of this LICENSE AGREEMENT.
2.3 UNIVERSITY reserves the right to practice under the PATENT RIGHTS, to use UNIVERSITY TECHNOLOGY, and to make, use and provide LICENSED PRODUCTS for, in each and every case, its own internal, not-for-profit research, public service, teaching and educational purposes, without payment of royalties, provided that the exercise of such reserved rights by UNIVERSITY shall not (i) be on behalf of, sponsored with funding received from, or subject to any intellectual property rights granted to any commercial third party nor (ii) include any human use or clinical administration without prior written approval from LICENSEE. Furthermore, UNIVERSITY shall be free to publish UNIVERSITY TECHNOLOGY as it sees fit, provided that (i) UNIVERSITY shall provide LICENSEE with a manuscript of any proposed paper or an abstract of any proposed presentation describing any INVENTIONS, IMPROVEMENTS, or technology claimed or described in the patents and patent applications included in the PATENT RIGHTS at least [***] ([***]) days prior to its submission for publication or presentation and (ii) as reasonably requested by LICENSEE, UNIVERSITY shall instruct its patent counsel to make such patent filings or conduct the prosecution of the patents and patent applications included in the PATENT RIGHTS as appropriate prior to publication or presentation of such material to prevent the loss of any rights granted under this LICENSE AGREEMENT.
2.4 UNIVERSITY may transfer (i) any materials incorporating UNIVERSITY TECHNOLOGY or any of the INVENTIONS or (ii) any materials whose manufacture, use, or practice would infringe any of the PATENT RIGHTS to nonprofit, academic research institutions for their own internal, not-for-profit, research, teaching, and educational purposes upon such institution’s execution of a Material Transfer Agreement with UNIVERSITY in a form substantially similar to that attached hereto as Appendix B (any such material transfer agreement entered into, a “Material Transfer Agreement”), provided that (1) any such third party’s use of, or research concerning, such materials shall not (a) be on behalf of, sponsored with funding received from, or subject to any intellectual property rights granted to any commercial third party nor (b) include any human use or clinical administration without prior written approval of UNIVERSITY and LICENSEE and (2) the UNIVERSITY shall provide written notification to LICENSEE of any such transfer of materials identifying the party to whom such materials were transferred and the materials transferred.
UNIVERSITY shall promptly notify LICENSEE in writing in the event they receive (i) disclosure of any INVENTION (as defined in the Material Transfer Agreement) or (ii) a copy of any proposed manuscript describing, referencing, or including the results of any use of materials transferred under any Material Transfer Agreement from 

any third party research institution pursuant to any Material Transfer Agreement, and shall include with such notice to LICENSEE a copy of such disclosure or manuscript.
2.5 Notwithstanding the foregoing, any and all licenses and other rights granted hereunder are limited by and subject to the rights and requirements of the United States Government which arise out of its sponsorship (if any) of the research which led to the conception or reduction to practice’ of the INVENTIONS covered by PATENT RIGHTS. To the extent applicable due to any such sponsorship, the United States Government is entitled, as a right, under the provisions of 35 U.S.C. §§ 200-212 and applicable regulations of Title 37 of the Code of Federal Regulations, to a non-exclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on the behalf of the United States Government any of the PATENT RIGHTS throughout the world and LICENSEE agrees to comply and require compliance therewith.
2.6 Nothing herein grants to UNIVERSITY from LICENSEE any right or interest in any JOINT INVENTIONS or any related patent rights owned by LICENSEE, or in any other intellectual property conceived or made by or on behalf of LICENSEE unless set forth in a separate agreement between the Parties. To the extent that a JOINT INVENTION no longer includes any inventors with an obligation to assign their rights to the UNIVERSITY, such JOINT INVENTION and any related PATENT RIGHTS shall no longer be considered owned by the UNIVERSITY but shall be and hereby are automatically and without further action on the part of any inventors, the UNIVERSITY or LICENSEE assigned to and owned exclusively by LICENSEE and no longer shall be subject to the terms of this AGREEMENT. The Parties agree to amend the Patent Rights to reflect such change in ownership.
ARTICLE 3: CONSIDERATION
3.1 As partial consideration for the licenses granted LICENSEE under the FIRST AGREEMENT, LICENSEE has issued directly to The University of North Carolina at Chapel Hill Foundation, Inc. (“the Foundation”) on behalf of UNIVERSITY two-hundred twenty nine thousand two hundred and sixty three shares (229,263) of common stock of LICENSEE. LICENSEE’S common stock was issued pursuant to a Stock Purchase Agreement in a form acceptable to UNIVERSITY.
3.2 As partial consideration for the licenses granted LICENSEE under the SECOND AGREEMENT, LICENSEE has paid UNIVERSITY a license issue fee of five thousand dollars ($5,000).
3.3 At all times, the LICENSEE common stock held by Foundation shall be subject to a shareholders agreement in the form set forth in Appendix C. The Foundation agrees to enter into reasonable or customary agreements required by any future equity investors regarding subjecting their shares of LICENSEE common stock to rights of first refusal and co-sale, such rights to terminate on an initial public offering of Company stock pursuant to a registration statement filed pursuant to the Securities Act of 1933, as amended.
3.4 LICENSEE shall reimburse UNIVERSITY for reasonable, documented costs ([***]) arising out of the patenting of the UNIVERSITY INVENTIONS pursuant to Article 8 of this LICENSE AGREEMENT (“PATENT COSTS”) as described in this Section 3.4. The reimbursement of patenting costs shall be non-refundable and shall not be a credit against any other amounts due hereunder except as may be provided for elsewhere in this LICENSE AGREEMENT. Reimbursement of patenting costs under this LICENSE AGREEMENT shall commence and be due within [***] ([***]) days of billing.
3.5 Beginning on the EFFECTIVE DATE and continuing for the term of this LICENSE AGREEMENT, on a country-by-country and LICENSED PRODUCT-by-LICENSED PRODUCT basis, LICENSEE will pay UNIVERSITY a running royalty of [***] percent ([***]%) of all NET SALES of LICENSED PRODUCTS sold by LICENSEE, its AFFILIATES and SUBLICENSEES of the foregoing. For clarity, the obligation to pay royalties under this Section 3.5 shall be imposed only once (i) with respect to any sale of any LICENSED PRODUCT, and (ii) with respect to any LICENSED PRODUCT, in each case regardless of whether such LICENSED PRODUCT, or the manufacture, use or sale thereof, is covered by more than one claim contained in the PATENT RIGHTS. LICENSEE shall pay to UNIVERSITY said royalties on the NET SALES of LICENSED PRODUCTS concurrently with the making of [***] written reports as provided in Section 4.2 below.
3.6 In respect to sublicenses granted by LICENSEE under Article 6 below, LICENSEE shall pay to UNIVERSITY an amount equal to [***] percent ([***]%) of SUBLICENSING REVENUE received by LICENSEE as consideration for the grant of rights to PATENT RIGHTS. All payments based on SUBLICENSING REVENUE shall be made within [***] days of receipt of the SUBLICENSING REVENUE.
3.7 Should a compulsory license be granted, or be the subject of a possible grant, to a third party under the applicable laws of any country in the LICENSED TERRITORY under the PATENT RIGHTS licensed hereunder, 

LICENSEE shall notify UNIVERSITY, including any material information concerning such compulsory license, and the running royalty rates payable under Section 3.5 for sales of LICENSED PRODUCTS in such country will be adjusted to equal any lower royalty rate granted to such third party for such country with respect to the sales of such LICENSED PRODUCTS therein (the “COMPULSORY ROYALTY”), provided that during such periods such third parties sell or offer for sale under the compulsory license articles that compete with the LICENSED PRODUCTS then marketed and sold by LICENSEE or its AFFILIATES or SUBLICENSEES in that country.
3.8 LICENSEE shall pay UNIVERSITY the following payments within [***] ([***]) days of LICENSEE, an AFFILIATE, or any SUBLICENSEE of either of the foregoing achieving the indicated milestone for each LICENSED PRODUCT covered by PATENT RIGHTS corresponding to UNIVERSITY INVENTIONS:
																					
							
		 	Milestone	  	Payment Due	  	
		 	[***]
	  	

Notwithstanding the conduct of clinical trials, submission of applications for regulatory approval, regulatory approval, sale, or marketing of a particular LICENSED PRODUCT for multiple indications, in multiple dosage or delivery forms, or in multiple bundled or combination products, the milestone fees described above shall only be due and paid once with respect to each LICENSED PRODUCT. Amounts paid UNIVERSITY under Section 3.6 with respect to SUBLICENSE REVENUE paid to LICENSEE by a SUBLICENSEE for the achievement of a milestone substantially similar to any of those established above shall be creditable against, and deducted from, the corresponding payment due UNIVERSITY under this Section 3.8.
 
3.9 All fees, royalties, and other payments due to UNIVERSITY under this LICENSE AGREEMENT shall be made in United States Dollars. All royalties owing with respect to NET SALES or sublicensing revenue stated in currencies other than U.S. dollars shall be converted at an exchange rate which is the arithmetic mean of the opening telegraphic transfer selling and buying rate published by the American East Coast edition of the Wall Street Journal on the day preceding the payment.
3.10 In the event royalty payments or fees are not received by UNIVERSITY when due, LICENSEE shall pay to UNIVERSITY interest and charges at the lower of (a) the then-current prime lending rate as published by the American East Coast edition of the Wall Street Journal or (b) the maximum rate of interest allowed by law on the total royalties or fees overdue.
ARTICLE 4: REPORTS AND RECORDS
4.1 UNIVERSITY shall promptly notify LICENSEE in writing of any IMPROVEMENT.
4.2 Following the FIRST COMMERCIAL SALE of a LICENSED PRODUCT or receipt of SUBLICENSE REVENUE, LICENSEE agrees to make [***] written reports to UNIVERSITY within [***] ([***]) days following the end of each [***] during the term of this LICENSE AGREEMENT, stating in each such report, if and as applicable, (i) the number, description, and aggregate selling prices of LICENSED PRODUCTS sold or otherwise disposed of and deductions taken during the such [***] and upon which royalty is payable as provided in Section 3.5 hereof and (ii) the amount of SUBLICENSE REVENUE received. The first such report shall include all such LICENSED PRODUCTS so sold or otherwise disposed of, and all such sublicensing revenue received, prior to the date of such report. Until the FIRST COMMERCIAL SALE of a LICENSED PRODUCT, a report shall be submitted by LICENSEE at the end of each July after the EFFECTIVE DATE of this LICENSE AGREEMENT and will include a written report summarizing LICENSEE’S technical and other efforts made towards such first commercial sale for all LICENSED PRODUCTS under development.
4.3 LICENSEE will keep complete, true and accurate books of account and records, and require AFFILIATES and SUBLICENSEES to do the same, for the purpose of showing the derivation of all amounts payable to UNIVERSITY under this LICENSE AGREEMENT. Such books and records will be kept at LICENSEE’s, AFFILIATE’s or SUBLICENSEE’s principal place(s) of business for at least [***] ([***]) years following the end of the [***] to which they pertain, and will be open at all reasonable times for inspection by an independent certified public accountant reasonably acceptable to LICENSEE, AFFILIATE or SUBLICENSEE acting on behalf of UNIVERSITY for the purpose of verifying LICENSEE’s, AFFILIATES’ or SUBLICENSEE’s royalty statements or LICENSEE’s compliance in other respects with this LICENSE AGREEMENT. The representative will be obliged to treat as confidential all relevant matters but shall be free to disclose all conclusions of any such inspection(s) to UNIVERSITY and support such conclusions with underlying confidential information if challenged by LICENSEE, provided that all such disclosures shall be maintained as confidential by such representative and UNIVERSITY with respect to third parties.

4.4 Inspections made under Section 4.3 shall be at the expense of UNIVERSITY, unless an underpayment to UNIVERSITY exceeding [***]% of the amount properly due UNIVERSITY with respect to the audited period is discovered in the course of any such inspection, whereupon all [***] costs of such inspection shall be paid by LICENSEE. LICENSEE will promptly pay to UNIVERSITY the full amount of any underpayment, together with interest thereon at the lower of (a) the then-current prime lending rate as published by the American East Coast edition of the Wall Street Journal or (b) the maximum rate of interest allowed by law.
ARTICLE 5: DUE DILIGENCE
5.1 LICENSEE shall use its commercially reasonable efforts and due diligence to proceed with the research, development, and commercial exploitation of LICENSED PRODUCTS during the term of this LICENSE AGREEMENT. In making any determination regarding such efforts and diligence, UNIVERSITY shall take into account the normal course of such programs conducted with sound and reasonable business practices and judgment, the [***], and shall take into account [***].
5.2 In particular, LICENSEE will achieve the performance milestones set forth in Appendix D, which is attached hereto, on the time frames indicated. Notwithstanding the foregoing, the dates or timelines outlined or established for the achievement of such milestones assume that (i) LICENSEE obtains reasonably sufficient funding to achieve such milestones consistent with such dates or timelines and (ii) LICENSEE’s product candidates do not cause adverse events in clinical trials or encounter regulatory delays for reasons outside of LICENSEE’s reasonable control. LICENSEE and UNIVERSITY shall negotiate in good faith the extension of these dates in the event any matters adversely affect achievement of any stated milestones by the dates or timelines outlined or established therefor. UNIVERSITY’S sole and exclusive remedy with respect to LICENSEE’s breach of this Article 5 or failure to achieve the above-referenced milestones shall be its right to terminate this Agreement in accordance with Section 7.2.
ARTICLE 6: SUBLICENSING
6.1 LICENSEE may sublicense any or all of the rights licensed hereunder, provided that LICENSEE notifies UNIVERSITY in writing and provides UNIVERSITY with a copy of each sublicense agreement and each amendment thereto within [***] ([***]) days after their execution, provided that LICENSEE may redact any portions of such agreements disclosing SUBLICENSEES’ proprietary information, technology, or research and development plans as reasonably necessary to comply with any confidentiality provisions of such sublicense.
 
6.2 LICENSEE shall require that all sublicenses be materially consistent with the terms, conditions and limitations of this LICENSE AGREEMENT. UNIVERSITY agrees that all such sublicenses shall survive termination of this LICENSE AGREEMENT and will automatically be assigned to UNIVERSITY upon such termination in the event this LICENSE AGREEMENT is terminated, to the extent (i) provided for in each such sublicense and (ii) such agreement does not impose any obligations on UNIVERSITY in excess of those imposed on UNIVERSITY herein.
6.3 Upon execution of each sublicense agreement, LICENSEE agrees to be fully responsible for the performance of its SUBLICENSEES hereunder, provided that the activities of any SUBLICENSEE of LICENSEE shall be deemed the acts of LICENSEE for purposes of satisfying LICENSEE’s obligations under Article 5 above.
ARTICLE 7: TERM AND TERMINATION
7.1 The term of this LICENSE AGREEMENT shall begin on the EFFECTIVE DATE and continue until (i) this LICENSE AGREEMENT is terminated as provided herein or (ii) on a country-by-country and LICENSED PRODUCT-by-LICENSED PRODUCT basis, the expiration of the last to expire of the PATENT RIGHTS covering a particular LICENSED PRODUCT in each country in which a patent included in the PATENT RIGHTS and covering such LICENSED PRODUCT may have issued. Upon expiration of this LICENSE AGREEMENT due to the expiration of the last-to-expire of all patents included in the PATENT RIGHTS with respect to a particular country and LICENSED PRODUCT, LICENSEE shall have the perpetual, unrestricted, fully-paid, royalty-free right, with rights of sublicense, to make, use, and sell, lease, or otherwise dispose of such LICENSED PRODUCT in such country.
7.2 It is expressly agreed that, notwithstanding the provisions of any other paragraph of this LICENSE AGREEMENT, if LICENSEE should materially breach a material provision of this LICENSE AGREEMENT and fail to (i) cure any such breach within ninety (90) days of receipt of written notice from UNIVERSITY describing such breach (“BREACH NOTICE”) or (ii) provide written notification to UNIVERSITY that such breach is not curable within such ninety (90) day period, accompanied by a plan to cure such breach, and initiate commercially reasonable efforts to cure such breach consistent with such plan within ninety (90) days of receipt of BREACH 

NOTICE, then UNIVERSITY will have the right to terminate this LICENSE AGREEMENT or render it nonexclusive immediately upon further written notice to LICENSEE, provided that such further written notice must be given by UNIVERSITY within ten (10) days of the expiration of the ninety (90) period established above. A material breach is a violation of or failure to keep or perform any material covenant, condition, or undertaking of this LICENSE AGREEMENT, including, but not limited to, the failure to deliver to UNIVERSITY any royalty or other payment at the time or times that the same should be due to UNIVERSITY under this LICENSE AGREEMENT, failure to provide reports as specified in Section 4.2, failure to meet or achieve performance milestones in accordance with Section 5.2, and failure to possess and maintain insurance as set forth in Section 11.3. Notwithstanding the foregoing, UNIVERSITY’s right to terminate this LICENSE AGREEMENT or render it nonexclusive for failure to meet or achieve performance milestones in accordance with Section 5.2 shall apply only with respect to the particular PATENT RIGHTS to which such failure relates, and in such case this LICENSE AGREEMENT and the exclusivity of the license set forth herein will remain in full force and effect with respect to all other PATENT RIGHTS.
 
7.3 If LICENSEE becomes bankrupt, files a petition for or is the subject of a petition for bankruptcy, or is placed in the hands of a receiver, assignee, or trustee for the benefit of creditors, whether by the voluntary act of LICENSEE or otherwise, then this LICENSE AGREEMENT may be terminated or rendered non-exclusive by UNIVERSITY upon written notice to LICENSEE within thirty (30) days of the occurrence of such events.
7.4 LICENSEE may terminate this LICENSE AGREEMENT at any time upon giving written notice of not less than thirty (30) days to UNIVERSITY. In addition, LICENSEE may terminate this LICENSE AGREEMENT solely with respect to any particular PATENT RIGHTS upon similar written notice, and in such case this LICENSE AGREEMENT will remain in full force and effect with respect to all other PATENT RIGHTS.
7.5 Upon termination of this LICENSE AGREEMENT in whole or in part, LICENSEE shall provide UNIVERSITY with a written inventory of all LICENSED PRODUCTS subject to such termination that are in the process of manufacture by or on behalf of LICENSEE, in use by LICENSEE, or under LICENSEE’S exclusive control. LICENSEE shall have the privilege of completing the manufacture and disposing of any such LICENSED PRODUCTS within a period of [***] following such termination [***]. LICENSEE will also have the right to complete performance of all contracts (i) for the marketing, sale, or manufacture of such LICENSED PRODUCTS, (ii) requiring use of UNIVERSITY TECHNOLOGY, any technology claimed in any terminated PATENT RIGHTS, or such LICENSED PRODUCTS within such [***] period. All such LICENSED PRODUCTS which are not disposed of as provided above shall be delivered to UNIVERSITY or otherwise disposed of in a reasonable manner determined by UNIVERSITY in its sole reasonable discretion at LICENSEE’s sole expense.
7.6 Any termination or cancellation under any provision of this LICENSE AGREEMENT shall not relieve LICENSEE of its obligation to pay any royalty or other fees (including attorney’s fees pursuant to Section 3.4 hereof) due or owing at the time of such termination or cancellation.
ARTICLE 8: PATENT PROSECUTION AND MAINTENANCE
8.1 Subject to the remaining Sections of this Article 8, LICENSEE shall bear the cost of all reasonable, documented patent expenses, [***], associated with the preparation, filing, prosecuting, issuance and maintenance of U.S. Patent applications and U.S. Patents included within the PATENT RIGHTS. Such filings and prosecution corresponding to UNIVERSITY INVENTIONS shall be by counsel of UNIVERSITY’s choosing and shall be in the name of UNIVERSITY. UNIVERSITY shall keep LICENSEE advised as to the prosecution of such applications by forwarding, and directing UNIVERSITY’s patent counsel to forward, to LICENSEE copies of all official correspondence, (including, but not limited to, Applications, Office Actions, responses, etc.) relating thereto. LICENSEE shall have the right to comment and advise UNIVERSITY and its counsel as to the conduct of such prosecution and maintenance, provided, however, that UNIVERSITY shall have the right to make the final decisions for all matters associated with such prosecution and maintenance. Notwithstanding the foregoing, UNIVERSITY shall not abandon prosecution of any patent application or maintenance of any issued patent without first, to the extent reasonably possible, giving LICENSEE notice at least [***] ([***]) days prior to the date on which such patent application or patent will become abandoned, and shall allow LICENSEE to assume prosecution of any such patent application, or maintenance of any such patent, at LICENSEE’s own expense and with counsel of its choosing and with LICENSEE having the final decision for all matters associated with prosecution and maintenance. If LICENSEE assumes prosecution of any such patent application or maintenance of any such patent, LICENSEE’s obligations for payment under Article 3 based upon such patent application or patent shall terminate at the time that LICENSEE assumes prosecution or maintenance of such patent.
8.2 UNIVERSITY shall, [***], keep LICENSEE apprised in writing and in advance of incurring any costs with respect to the filing, prosecution, and or maintenance of any PATENT RIGHTS. By concurrent written notification to UNIVERSITY, LICENSEE may elect not to pay expenses associated with prosecuting or maintaining 

any U.S. PATENT RIGHTS corresponding to UNIVERSITY INVENTIONS, provided that LICENSEE pays for all reasonable, documented costs incurred up to UNIVERSITY’s receipt of such notification, to the extent LICENSEE was provided reasonable advance notice of such costs (or a reasonably detailed estimate of such costs). Upon such notice with respect to any such PATENT RIGHTS, UNIVERSITY may file, prosecute, and/or maintain such PATENT RIGHTS at its own expense and for its own benefit and any rights or license granted hereunder with respect to such PATENT RIGHTS shall terminate.
8.3 As regards prosecution and maintenance of foreign patent applications corresponding to the U.S. Patent applications corresponding to UNIVERSITY INVENTIONS, LICENSEE shall designate in writing that country or those countries, if any, in which LICENSEE desires such corresponding patent application(s) to be filed. LICENSEE shall pay all reasonable, documented costs [***] associated with the preparation, filing, prosecuting, issuance and maintenance of such designated foreign patent applications and foreign patents pursuant to Section 3.4. All such applications shall be in the UNIVERSITY’s name. UNIVERSITY shall keep LICENSEE advised as to the prosecution of such applications by forwarding, and directing UNIVERSITY’s patent counsel to forward, to LICENSEE copies of all official correspondence, (including, but not limited to, Applications, Office Actions, responses, etc.) relating thereto. LICENSEE shall have the right to comment and advise UNIVERSITY and its counsel as to the conduct of such prosecution and maintenance, provided, however, that UNIVERSITY shall have the right to make the final decisions for all matters associated with such prosecution and maintenance. Notwithstanding the foregoing, UNIVERSITY shall not abandon prosecution of any foreign patent application or maintenance of any issued foreign patent without first, to the extent reasonably possible, giving LICENSEE notice at least [***] ([***]) days prior to the date on which such patent application or patent will become abandoned, and shall allow LICENSEE to assume prosecution of any such patent application, or maintenance of any such patent, at LICENSEE’s own expense and with counsel of its choosing and with LICENSEE having the final decision for all matters associated with prosecution and maintenance. If LICENSEE assumes prosecution of any such foreign patent application or maintenance of any such foreign patent, LICENSEE’s obligations for payment under Article 3 based upon such patent application or patent shall terminate at the time that LICENSEE assumes prosecution or maintenance of such patent.
8.4 By concurrent written notification to UNIVERSITY at least [***] ([***]) days in advance of any filing or response deadline, or fee due date, LICENSEE may elect not to have a patent application filed in any particular foreign country or not to pay expenses associated with prosecuting or maintaining any patent application or patent in any particular foreign country, in each case corresponding to UNIVERSITY INVENTIONS, provided that LICENSEE pays for all reasonable, documented costs incurred up to UNIVERSITY’s receipt of such notification, to the extent LICENSEE was provided reasonable advance notice of such costs (or a reasonably detailed estimate of such costs). Failure to provide written confirmation of LICENSEE’s desire to file such a patent application in any particular country or to pay expenses associated with prosecuting or maintaining any such patent application or patent to UNIVERSITY at least [***] ([***]) days in advance of any filing or response deadline, or fee due date shall be considered by UNIVERSITY to be LICENSEE’s notice that it no longer wishes to support such particular patent(s) or patent application(s). Upon such notice (or failure to provide such confirmation) with respect to such PATENT RIGHTS in any foreign country, UNIVERSITY may file, prosecute, and/or maintain such patent applications or patents at its own expense and for its own benefit, and any rights or license granted hereunder with respect to such PATENT RIGHTS, shall terminate.
8.5 Filings and prosecution corresponding to JOINT INVENTIONS shall be by counsel of LICENSEE’s choosing and shall be in the name of UNIVERSITY and LICENSEE. LICENSEE shall keep UNIVERSITY advised as to the prosecution of such applications by forwarding, and directing LICENSEE’s patent counsel to forward, to UNIVERSITY copies of all official correspondence, (including, but not limited to, Applications, Office Actions, responses, etc.) relating thereto. UNIVERSITY shall provide reasonable assistance to LICENSEE related to the preparation, filing, prosecuting, issuance and maintenance of patent applications and patents corresponding to JOINT INVENTIONS, including, without limitation, providing necessary assignment documents, declarations, power of attorney documents, copies of any supporting data, analysis or reports, and reasonable access to the INVENTORS during normal working hours. UNIVERSITY shall have the right to comment and advise LICENSEE and its counsel as to the conduct of such prosecution and maintenance, provided, however, that LICENSEE shall have the right to make the final decisions for all matters associated with such prosecution and maintenance. Notwithstanding the foregoing, LICENSEE shall not abandon prosecution of any patent application or maintenance of any issued patent corresponding to JOINT INVENTIONS without first, to the extent reasonably possible, giving UNIVERSITY notice at least [***] ([***]) days prior to the date on which such patent application or patent will become abandoned, and shall allow UNIVERSITY to assume prosecution of any such patent application, or maintenance of any such patent, at UNIVERSITY’s own expense and with counsel of its choosing and with UNIVERSITY having the final decision for all matters associated with prosecution and maintenance.
ARTICLE 9: INFRINGEMENT

9.1 If the production, sale, import or use of LICENSED PRODUCTS under this LICENSE AGREEMENT results in any claim for patent infringement against LICENSEE, AFFILIATES, SUBLICENSEEs, or any customer(s) or sublicensee(s) of the foregoing, LICENSEE shall, upon becoming aware of such claim and subject to any applicable confidentiality obligations, promptly notify the UNIVERSITY thereof in writing, setting forth the facts of such claim in reasonable detail. As between the parties to this LICENSE AGREEMENT, LICENSEE shall have the first and primary right [***] at its own expense to defend and control the defense of any such claim, by counsel of its own choice. LICENSEE shall be free to enter into a settlement, consent judgment, or other voluntary disposition of any such actions, provided that any settlement, consent judgment or other voluntary disposition of such actions which (i) [***], (ii) [***], or (iii) [***] must be approved by UNIVERSITY, such approval not being unreasonably withheld. UNIVERSITY shall provide LICENSEE notice of such approval or denial of such approval within [***] ([***]) business days of any request for such approval by LICENSEE, provided that (i) in the event UNIVERSITY wishes to deny such approval, such notice shall include a detailed written description of UNIVERSITY’s reasonable objections to the proposed settlement, consent judgment, or other voluntary disposition, and (ii) UNIVERSITY shall be deemed to have approved of such proposed settlement, consent judgment, or other voluntary disposition in the event it fails to provide such notice within such [***] ([***]) day period in accordance herewith. UNIVERSITY agrees to cooperate with LICENSEE in any reasonable manner deemed by LICENSEE to be necessary in defending any such action. LICENSEE shall reimburse UNIVERSITY for [***] out of pocket expenses incurred in providing such assistance.
9.2 In the event that any PATENT RIGHTS licensed to LICENSEE are infringed by a third party, LICENSEE shall have the first, primary right, but not the obligation, to institute, prosecute and control any action or proceeding with respect to such infringement, by counsel of its choice, including any declaratory judgment action arising from such infringement. Subject to Section 9.5, UNIVERSITY shall reasonably cooperate in any such action or proceeding at LICENSEE’s sole expense, including joining in such action or proceeding. LICENSEE shall be free to enter into a settlement, consent judgment, or other voluntary disposition of such action, provided that any settlement, consent judgment or other voluntary disposition of such actions which (i) [***], (ii) [***], or (iii) [***] must be approved by UNIVERSITY, such approval not to be unreasonably withheld. UNIVERSITY shall provide LICENSEE notice of its approval or denial of such approval within [***] ([***]) business days of any request for such approval by LICENSEE, provided that (i) in the event UNIVERSITY wishes to deny such approval, such notice shall include a detailed written description of UNIVERSITY’s reasonable objections to the proposed settlement, consent judgment, or other voluntary disposition, and (ii) UNIVERSITY shall be deemed to have
approved of such proposed settlement, consent judgment, or other voluntary disposition in the event it fails to provide such notice within such [***] ([***]) day period in accordance herewith. If LICENSEE recovers monetary damages in the form of lost profits from a third party infringer as a remedy for the infringement of PATENT RIGHTS licensed hereunder, then LICENSEE shall first apply such recovery to the costs and expenses incurred in obtaining or negotiating for such recovery (including but not limited to attorneys’ fees), and pay to UNIVERSITY the [***] . If LICENSEE recovers monetary damages in the form of an ongoing reasonable royalty as a remedy for the infringement of PATENT RIGHTS and/or consideration for an ongoing license with respect to such PATENT RIGHTS, then, after applying such royalty to the recovery of the costs and expenses incurred in obtaining or negotiating for such royalty (including but not limited to attorneys’ fees), the remaining amount of any such royalty shall be [***].
9.3 If, within [***] ([***]) months after receiving notice of any alleged infringement of the PATENT RIGHTS by a third party, LICENSEE (i) shall have been unsuccessful in persuading the alleged infringer to desist, (ii) shall not have brought and shall not be diligently prosecuting an infringement action, and (iii) has not entered into settlement discussions with respect to such infringement, or if LICENSEE shall notify UNIVERSITY in writing, at any time prior thereto, of its intention not to undertake any of the foregoing actions with respect to the alleged infringer, then UNIVERSITY shall have the right, but not the obligation, to prosecute, at its own expense and utilizing counsel of its choice, any infringement of the PATENT RIGHTS, and UNIVERSITY may, at its own expense and control, take steps to defend or enforce any patent within the PATENT RIGHTS and recover, for its own account, any damages, awards or settlements resulting therefrom. LICENSEE and/or its AFFILIATES shall cooperate as reasonably requested by UNIVERSITY, including joining in such actions, at the expense of UNIVERSITY.
9.4 In any challenge to the PATENT RIGHTS brought or declaratory judgment action defended not already addressed by the provisions of this Section 9, LICENSEE shall have the first right, exercisable upon written notice to UNIVERSITY within [***] ([***]) days of receipt of notice of such action, but not the obligation, to defend such action at the sole expense of LICENSEE. UNIVERSITY shall reasonably cooperate in any such defense at LICENSEE’s sole expense, including joining in such actions. If LICENSEE does not so elect, UNIVERSITY may defend but has no obligation to do so.
9.5 Notwithstanding the foregoing, and without limiting LICENSEE’s rights under Section 9.1 or 9.2 above to enter into any settlement, consent judgment, or other voluntary disposition of any legal or equitable action, UNIVERSITY shall be entitled, in its sole discretion and at its own expense, to participate through counsel of its 

own choosing in any legal action involving INVENTIONS and PATENT RIGHTS. LICENSEE acknowledges that UNIVERSITY may not join in any litigation without the approval of authorized agencies of North Carolina, including the Board of Governors of the University of North Carolina. UNIVERSITY agrees to use its best efforts to obtain such approval promptly in the event that UNIVERSITY is required to be joined in any litigation under this Article 9 to establish standing. Nothing in the foregoing Sections shall be construed in any way which would limit the authority of the Attorney General of North Carolina.
ARTICLE 10: REPRESENTATIONS
 
10.1 UNIVERSITY makes no warranties that any patent will issue on UNIVERSITY TECHNOLOGY or INVENTIONS. UNIVERSITY does not warrant the validity or enforceability of any patent included in the PATENT RIGHTS or that practice under such patents shall be free of infringement.
10.2 UNIVERSITY represents and warrants that, to its actual knowledge and belief, as of EFFECTIVE DATE, (i) the entire right, title, and interest in the patent applications or patents comprising UNIVERSITY INVENTIONS included in the PATENT RIGHTS and the entire right, title, and interest of inventors with an obligation to assign to the UNIVERSITY the patent applications or patents comprising JOINT INVENTIONS included in the PATENT RIGHTS have been assigned to it free and clear of all liens, claims and encumbrances of any inventor or any nongovernmental third party, (ii) that UNIVERSITY has all requisite power and authority to grant the licenses contained in this LICENSE AGREEMENT under said PATENT RIGHTS and UNIVERSITY TECHNOLOGY, (iii) UNIVERSITY has not entered into any agreements other than grants from the U.S. Government which provide for the rights described in Section 2.5, with any third party with respect to the PATENT RIGHTS, the technology claimed therein, nor INVENTIONS, (iv) its execution and performance of this LICENSE AGREEMENT will not result in a breach of any other contract to which it is, or will become, a party, and (v) it has not received any notification that the PATENT RIGHTS are invalid or that the exercise by LICENSEE of the rights granted hereunder will infringe on any patent or other proprietary right of any third party.
10.3 EXCEPT AS PROVIDED IN SECTION 10.2, UNIVERSITY DISCLAIMS ALL WARRANTIES WITH REGARD TO INVENTIONS, PATENT RIGHTS, PRODUCT(S), AND SERVICE(S) LICENSED UNDER THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, ALL WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE.
10.4 EXCEPT WITH RESPECT TO BREACHES OF SECTIONS [***], AND 12.1, THE INDEMNIFICATION PROVIDED UNDER SECTION 11, AND CLAIMS FOR PATENT INFRINGEMENT, NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY INDIRECT, CONSEQUENTIAL, SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT.
ARTICLE 11: INDEMNIFICATION
11.1 In exercising its rights under this LICENSE AGREEMENT, LICENSEE shall materially comply with the requirements of any and all applicable laws, regulations, rules and orders of any governmental body having jurisdiction over the exercise of rights under this LICENSE AGREEMENT. LICENSEE further agrees to indemnify and hold UNIVERSITY harmless from and against any costs, expenses, attorney’s fees, citation, fine, penalty and liability of every kind and nature which might be imposed directly against UNIVERSITY by reason of any asserted or established violation of any such laws, order, rules and/or regulations by LICENSEE.
11.2 LICENSEE agrees to indemnify, hold harmless and defend UNIVERSITY, its officers, employees, and agents against any and all claims, suits, losses, damage, costs, fees, and expenses (“LOSSES”) asserted by third parties, both government and private, resulting from or arising out of the exercise of LICENSEE’s rights under this LICENSE AGREEMENT, provided such LOSSES do not result from the UNIVERSITY’S or its employees’, faculty’s, students’, or other agents or representatives’ gross negligence, intentional misconduct, breach of this Agreement, or failure to comply with any applicable laws, rules, or regulations.
11.3 LICENSEE is required to maintain in force at its sole cost and expense, with reputable insurance companies, insurance coverage in amounts and of types reasonably sufficient to protect against liability under Sections 11.1 and 11.2 above. The UNIVERSITY shall have the right to ascertain [***] that such coverage exists, such right to be exercised in a reasonable manner.
ARTICLE 12: MISCELLANEOUS
12.1 Confidentiality.

(a) LICENSEE shall keep confidential and not disclose any unpublished UNIVERSITY TECHNOLOGY or any patent applications furnished by UNIVERSITY pursuant to Sections 2.1 and 2.2 to third parties during the term of this LICENSE AGREEMENT or any time thereafter, provided that LICENSEE shall have the right to disclose such information under conditions of confidentiality to prospective investors, acquirors, sublicensees, strategic partners, and investment bankers in connection with its financing, acquisition, licensing, development, commercialization, and stockholder relations activities. Notwithstanding the foregoing, disclosure may be made to third parties of any such UNIVERSITY TECHNOLOGY or document related to or embodying PATENT RIGHTS at any time (a) with the prior written consent of UNIVERSITY, (b) after the same shall have become public through no unauthorized act or omission of LICENSEE, or (c) as required by governmental authority or applicable law or regulation.
(b) UNIVERSITY shall keep confidential and not disclose to any third party any information provided to it by LICENSEE (i) as a result of LICENSEE’s performance under this LICENSE AGREEMENT or (ii) that may relate to the LICENSEE’s research, development, technology(ies), or business. Notwithstanding the foregoing, disclosure may be made to third parties of any such research, development, or technology(ies) at any time (a) with the prior written consent of LICENSEE, (b) after the same shall have become public through no unauthorized act or
 omission of UNIVERSITY, or (c) as required by governmental authority or applicable law or regulation, provided that UNIVERSITY (1) provides LICENSEE, to the extent practicable, advance written notice of any such disclosure, (2) reasonably assists LICENSEE, as reasonably requested by LICENSEE, in obtaining protective or confidential treatment of such information, and (3) minimizes the extent of any such disclosure.
12.2 Assignability. This LICENSE AGREEMENT is binding upon and shall inure to the benefit of the parties hereto, their successors and assigns. However, this LICENSE AGREEMENT shall be personal to LICENSEE, and it is not assignable by LICENSEE to any other person or entity without the written consent of UNIVERSITY, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, (1) LICENSEE shall be free to assign this LICENSE AGREEMENT without such consent (i) to any AFFILIATE of LICENSEE or (ii) in connection with any sale of substantially all of its assets or business (or portion of its assets or business related to the subject matter hereof), merger, acquisition, consolidation, reorganization, or other similar transaction and (2) in the event lenders to the LICENSEE require a security interest in the LICENSE AGREEMENT as a term of any loans to LICENSEE, UNIVERSITY shall (a) consent to the assignment of this LICENSE AGREEMENT to such lenders or any assignee thereof in conjunction with the exercise of their rights under such security interest and (b) enter into any reasonable form of collateral assignment agreement requested by such lenders in conjunction with their exercise of such rights.
12.3 Waiver. It is agreed that no waiver by either party hereto of any breach or default of any of the covenants or agreements herein set forth shall be deemed a waiver as to any subsequent and/or similar breach or default.
12.4 Use of UNIVERSITY’s Name. The use of the name of UNIVERSITY, or any contraction thereof, in any manner in connection with the exercise of rights under this LICENSE AGREEMENT is expressly prohibited without the prior written consent of UNIVERSITY, provided that, notwithstanding the foregoing, LICENSEE shall have the right to identify UNIVERSITY as the licensor and, under conditions of confidentiality, to disclose the terms of this LICENSE AGREEMENT to prospective investors, acquirors, sublicensees, strategic partners, investment bankers, and regulatory authorities, in connection with its financing, regulatory, licensing, development, and stockholder relations activities or that it may deem to be required in any prospectus, offering memorandum, or other document or filing prepared in connection with its compliance obligations under applicable securities law or other applicable law or regulation.
12.5 Independent Contractor Status. Neither party hereto is an agent, joint venture or representative of the other for any purpose. Neither party shall have the right to obligate or bind the other in any manner.
12.6 Notice. Any notice required or permitted to be given to the parties hereto shall be in writing and deemed to have been properly given if delivered in person or mailed by first-class mail to the other party at the appropriate address as set forth below. Other addresses may be designated in writing by the parties during the term of this LICENSE AGREEMENT.
									
			
	UNIVERSITY	  	LICENSEE
	Cathy Innes	  	President
	Director	  	Novan, Inc.
	Office of Technology Development	  	4222 Emperor Boulevard
	[***]	  	

12.7 Governing Law and Venue. This LICENSE AGREEMENT shall be interpreted and construed in accordance with the laws of the State of North Carolina. The State and Federal Courts of North Carolina shall have exclusive jurisdiction to hear any legal action arising out of this LICENSE AGREEMENT.
12.8 Complete Agreement. It is understood and agreed between UNIVERSITY and LICENSEE that, from and after the EFFECTIVE DATE, this LICENSE AGREEMENT constitutes the entire agreement, both written and oral, between the parties with respect to the subject matter hereof and supersedes the FIRST AGREEMENT and the SECOND AGREEMENT and any amendments thereto. For clarity, all patent rights, inventions, modifications, enhancements, improvements, information, know-how and technical data that were subject to the FIRST AGREEMENT or the SECOND AGREEMENT prior to the EFFECTIVE DATE are subject to this LICENSE AGREEMENT. This LICENSE AGREEMENT shall not be amended or modified except by a written agreement signed by all parties.
12.9 Severability. In the event that a court of competent jurisdiction holds any provision of this LICENSE AGREEMENT to be invalid, such holding shall have no effect on the remaining provisions of this LICENSE AGREEMENT, and they shall continue in full force and effect.
12.10 Survival of Terms. The provisions of Sections 2.3, 2.4, 2.6, 3.3, 6.2, 7.1, 7.5, 7.6, 8.5, 12.1, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7, 12.8, 12.9, and 12.10 and Articles 1, 4, 9, 10 and 11 shall survive the expiration or termination of this LICENSE AGREEMENT.
12. 11 Export Controls. It is understood that UNIVERSITY is subject to United States laws and regulations controlling the export of technical data, computer software, laboratory prototypes, and other commodities that may require a license from the applicable agency of the United States Government and/or may require written assurances by LICENSEE that it will not export data or commodities to certain foreign countries without prior approval of such agency. UNIVERSITY neither represents that a license is required, nor that, if required, it will be issued.
[Signature page to follow.]
 

IN WITNESS WHEREOF, UNIVERSITY and LICENSEE have executed this LICENSE AGREEMENT on the EFFECTIVE DATE, in duplicate originals, by the duly authorized respective officers. INVENTORS have likewise indicated their acceptance of the terms hereof by signing below.
 
																											
									
	THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL	 		 	NOVAN, INC.
					
	Signature:	 	/s/ Catherine Innes	 		 	Signature:	 	/s/ Nathan Stasko
	(SEAL)	 		 	(SEAL)
			
	Catherine Innes	 		 	Nathan Stasko
	Director	 		 	President

																											
									
	Date:	 	6/29/12	 		 	Date:	 	7/9/12

Acknowledged and Agreed by:
 
			
	
	/s/ Mark Schoenfisch
	Mark Schoenfisch

 

APPENDIX A 
PATENT RIGHTS
UNIVERSITY INVENTIONS
[***]
 
JOINT INVENTIONS
[***]
 

APPENDIX B 
FORM OF MATERIAL TRANSFER AGREEMENT
Office of Technology Development
CB# 4105, 308 Bynum Hall
The University of North Carolina at Chapel Hill
Chapel Hill, NC 27599-4105
<<Recipient_Scientist>>
<<Recip_Scientist_Address>>
RE: MATERIALS TRANSFER AGREEMENT; OUR FILE NO. <<MTA_ID>>
 
Dear <<Recipient_Scientist>>:
The University of North Carolina at Chapel Hill (“UNC”) is engages in research relating to the Material (as defined below) which is considered proprietary to UNC. Furthermore, UNC has granted an exclusive license to commercial rights related to the Material to Novan, Inc. (The “Exclusive Commercial Licensee”), having an address at                 . UNC agrees to provide your Institution with the Material for the purpose of a scientific collaboration and for Institution’s internal research purposes subject to the following conditions:
1. The parties to this Agreement are: UNC and <<Univ>> (hereinafter “Institution”). You are also requested to countersign this Agreement signifying your acceptance of its terms. You will be referred to herein as “Scientist.”
2. The Material covered by this Agreement includes:
a. <<material description>>;
b. any related biological material or associated know-how and data received by Institution form UNC; and
c. any progeny or unmodified derivatives produced from any of the foregoing by Institution, its employees and/or agents.
3. Institution and Scientists acknowledge that UNC has informed Institution and Scientist that UNC owns certain rights in patent applications relating to the Material, which are licensed exclusively to the Exclusive Commercial Licensee.
4. The Material shall be used solely for research in Scientist’s laboratory at Institution, such research to be limited to the studies described in Attachment A hereto. UNC shall be free, in its sole discretion, to distribute the Material to others and to use it for its own purposes.
5. In return for the provision of the Material, Institution shall reimburse UNC $<<Fee Requested>> upon execution of this Agreement to cover costs of preparing the sample of the Material which is to be sent to Institution. Said reimbursement will be made payable to The University of North Carolina at Chapel Hill and will be sent to <<Provider Scientist>> at the address specified by said person.
6. Institution shall not distribute or release the Material to any person other than Institution laboratory personnel under Scientist’s direct supervision. Institution shall ensure that no one will be allowed to take or send the Material to any other location, unless written permission is obtained from <<Provider Scientist>> at UNC. This Material is made available for investigational use only in laboratory animals or in vitro experiments. Institution and Scientist agree that the Material will not be used for any other purpose. Neither the Material nor any biological materials treated therewith will be used in human beings.
7. This Agreement and the resulting transfer of Material constitute a license to use the Material solely for its internal not-for-profit academic research purposes. Institution agrees that nothing herein shall be deemed a grant under any UNC patents (either existing or future) or any rights to use the Material for any products or processes for profit-making or commercial purposes. The Material will not be used in research that is on behalf of, sponsored with funding received from, or subject to consulting, licensing, or option obligations or other intellectual property rights granted to any other institution, corporation or business entity unless written permission is obtained from UNC.

8. Institution shall have no rights in the Material other than as provided in this Agreement, and at the request of UNC, Institution and/or Scientist will return all unused Material.
9. Scientist will inform <<Provider Scientist>> of research results related to the Material by personal written communication. UNC and/or <<Provider Scientist>> shall be free to use such data and information for any purpose, but will make proper acknowledgment of the work done by Scientist. Institution and Scientist shall provide <<Provider Scientist>> with a manuscript of any proposed paper or an abstract of any proposed presentation describing any research results at least thirty (30) days prior to submission for publication. At the request of UNC, Institution and Scientist agree to delay the proposed disclosure for an additional ninety (90) days to allow for the filing of a patent application.

10. If the research involving the Material or any other use of the Material by Scientist or Institution results in an invention, discovery, or improvement (whether or not patentable) (an “INVENTION”), Scientist or Institution will promptly disclose the INVENTION, prior to any submission for publication thereof, to Institution’s patent administrator, technology transfer, technology commercialization, licensing, or technology development officer or reasonable equivalent thereof (“Technology Transfer Officer”) and notify the Technology Transfer Officer of UNC’s role as a supplier of Material used. Institution, in cooperation with Scientist, will promptly supply UNC with a copy of the disclosure, in confidence, for evaluation purposes only. Institution, to the extent it is legally able to do so, hereby grants UNC or, if Institution is willing to negotiate directly therewith, the Exclusive Commercial Licensee an option to obtain an exclusive license to INVENTIONS, under reasonable commercial terms, pursuant to good faith negotiations between the parties fairly reflecting the relative contributions of the parties, to commercially make, use, or sell the INVENTION. UNC or the Exclusive Commercial Licensee, as applicable shall have a period of ninety (90) days form the receipt of the disclosure above within which to exercise such option in writing with respect to each INVENTION (the “Option Period”). If the applicable party exercises its option with respect to a particular INVENTION, the applicable party and Institution shall have an additional twelve (12) month period following Institution’s and/or Scientist’s receipt of the applicable party’s exercise notice within which to negotiate in good faith the terms of the license (the “Negotiation Period”). The terms of every such license shall be reasonable and fairly reflect the relative contributions of each party. During the Option Period and Negotiation Period, neither Institution nor Scientist shall offer a license to any other party. If the part to which such option was offered declines its option with respect to such INVENTION, or the parties are unable to reach material agreement on the terms of a license agreement during the Negotiation Period, Institution shall be free to license its rights in such INVENTION to any third party.
11. If Institution desires to use or license the Material for commercial purposes, Institution agrees, in advance of such use, to negotiation in good faith with the Exclusive Commercial Licensee to establish the terms of a commercial license. It is understood by Institution that the Exclusive Commercial Licensee shall have no obligation to grant such a license to Institution or any other third party.
12. THE MATERIAL IS EXPERIMENTAL IN NATURE AND IT IS PROVIDED WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. UNC MAKES NO REPRESENTATION OR WARRANTY THAT THE USE OF THE MATERIAL WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT.
13. In no event shall UNC be liable for any use by institution, its employees and/or agents of the Material or any loss, claim, damage or liability, of whatsoever kind or nature, which may
arise from or in connection with this Agreement or the use, handling or storage of the Material. Furthermore, to the extent provided by applicable law, Institution agrees to indemnify UNC and any of its employees and hold it and them harmless from any action, claim, or liability for death, personal injury, or property damage, arising directly or indirectly from Institution’s possession, testing, screening, distribution or other use of the Material provided under the Agreement, and/or from Institution’s publication or distribution of the test reports, data, and other information relating to said Material.
14. Institution will use the Material in compliance with all law and governmental regulations and guidelines applicable to the Material, and when the Material is used in the United States, Institution and Scientist will comply with current NIH guidelines.
15. This Agreement is not assignable or otherwise transferable, whether by operation of law or otherwise, without the prior written consent of UNC.
16. This Agreement shall be interpreted and construed in accordance with the laws of the State of North Carolina.
 

 After the Original of this Agreement has been signed, in duplicate, by yourself and an authorized representative of Institution, please return them to me; the copy is for your records. The Material will be shipped as soon as possible upon receipt of this signed Agreement.
Sincerely,
Catherine Innes
Director
Office of Technology Development
cathy_inness@unc.edu
 
									
			
	ACCEPTED AND AGREED TO:
 
SCIENTIST

		
	By:	 	 
	 
<<Recipient_Scientist>>

 
									
			
	INSTITUTION
 

	(to be signed only by an authorized signatory
of the Institution)

		
	Title:	 	 
		
	Date:	 	 

 
 

APPENDIX C
SHAREHOLDER AGREEMENT
[Intentionally omitted as superseded by the Seventh Amended and Restated Stockholders
Agreement dated December 1, 2015]
 

APPENDIX D
MILESTONES
[***]
 

FIRST AMENDMENT TO AMENDED, RESTATED AND CONSOLIDATED LICENSE AGREEMENT
This FIRST AMENDMENT to the AMENDED, RESTATED AND CONSOLIDATED LICENSE AGREEMENT (this “FIRST AMENDMENT”) is entered into this 30th day of November, 2012 (the “EFFECTIVE DATE’’) between The University of North Carolina at Chapel Hill having an address at Campus Box 4105, 308 Bynum Hall, Chapel Hill, North Carolina, 27599-4105 (“UNIVERSITY”) and Novan, Inc., a corporation organized and existing under the laws of the State of Delaware and having an address at 4222 Emperor Blvd, Suite 470, Durham, NC 27703 (“LICENSEE”).
WITNESSETH
WHEREAS, UNIVERSITY entered into a first license agreement with LICENSEE effective July 18, 2007, a FIRST AMENDMENT thereto effective September 30, 2008 and a SECOND AMENDMENT thereto effective October 29, 2010 (such license agreement, as amended by the FIRST AMENDMENT and the SECOND AMENDMENT thereto, the “FIRST AGREEMENT”); and
WHEREAS, UNIVERSITY entered into a second license agreement with LICENSEE effective October 1, 2009 and a FIRST AMENDMENT thereto effective October 29, 2010 (such license agreement, as amended by the FIRST AMENDMENT thereto, the “SECOND AGREEMENT”); and
WHEREAS, UNIVERSITY entered into an AMENDED, RESTATED AND CONSOLIDATED LICENSE AGREEMENT effective June 27, 2012 (“THIRD AGREEMENT”) thereby amending, restating and consolidating the FIRST AGREEMENT and the SECOND AGREEMENT into a single agreement; and
WHEREAS, UNIVERSITY and LICENSEE wish to amend the INVENTIONS and PATENT RIGHTS covered by the THIRD AGREEMENT to include inventions owned by UNIVERSITY and closely related to the INVENTIONS currently included under the THIRD AGREEMENT, titled “[***]” UNIVERSITY File: [***] and “[***]”, UNIVERSITY File: [***] (the “ADDED INVENTIONS”); and
WHEREAS, the ADDED INVENTIONS were conceived of by Yuan Lu and Mark Schoenfisch. .
 
NOW, THEREFORE, in consideration of the premises and mutual promises and covenants contained in this FIRST AMENDMENT and for good and valuable consideration, it is agreed by and between UNIVERSITY and LICENSEE as follows:
2. The term “INVENTIONS” is deemed to include the ADDED INVENTIONS and the items set forth in the attached Appendix A.
3. The term “PATENT RIGHTS” is deemed to include the patent rights set forth in the attached Appendix A.
4. In consideration for amending the INVENTIONS and PATENT RIGHTS to include UNC files: [***] and [***], LICENSEE shall pay UNIVERSITY [***] dollars ($[***]) within [***] ([***]) days of the EFFECTIVE DATE of this FIRST AMENDMENT.
5. Except as expressly amended in this FIRST AMENDMENT, the THIRD AGREEMENT shall continue in full force and effect in accordance with the provisions thereof prior to the effectiveness of this FIRST AMENDMENT.
6. Capitalized terms used herein but not otherwise defined have the meanings assigned to them in the THIRD AGREEMENT.
7. This FIRST AMENDMENT shall be interpreted and construed in accordance with the laws of the State of North Carolina. The State and Federal Courts of North Carolina shall have exclusive jurisdiction to hear any legal action arising out of this FIRST AMENDMENT.
8. This FIRST AMENDMENT may be executed by one or more of the parties to this FIRST AMENDMENT on any number of separate counterparts (including by facsimile transmission or PDF signature), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
Signature Page to Follow

 

IN WITNESS WHEREOF, UNIVERSITY and LICENSEE have executed this FIRST AMENDMENT in duplicate originals, by their respective officers hereunto duly authorized, the day and year first above written. The inventors of the ADDED INVENTION have likewise indicated their acceptance of the terms hereof by signing below.
 
																											
									
	THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL	  		 	NOVAN, INC.
					
	By:	  	/s/ Jacqueline Quay	  		 	By:	 	/s/ Jeff Hunter
	Name:	  	Jacqueline Quay	  		 		 	Jeff Hunter
	Title:	  	Interim Director, OTD	  		 	Title:	 	VP of Operations
	Date:	  	12/14/12	  		 	Date:	 	12/28/12

Acknowledged and agreed:
 
			
	
	INVENTORS
	
	/s/ Yuan Lu            
	Yuan Lu
	
	/s/ Mark Schoenfisch            
	Mark Schoenfisch

 
 

APPENDIX A 
PATENT RIGHTS
UNIVERSITY INVENTIONS
[***]
 
JOINT INVENTIONS
[***]

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