Document:

Exhibit 10.12

 

*** CERTAIN MATERIAL (INDICATED BY THREE ASTERISKS IN BRACKETS) HAS BEEN OMITTED FROM THIS DOCUMENT BECAUSE IT IS BOTH (1) NOT MATERIAL AND (2) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED.

 

CONFIDENTIAL

 

LICENSE AGREEMENT

 

AMONG

 

ADC THERAPEUTICS SA

 

AND

 

ADAGENE Inc.

 

 

LICENSE AGREEMENT

 

THIS LICENSE AGREEMENT (“License Agreement”) is made and entered into as of April 11, 2019 (“Execution Date”), by and between ADC THERAPEUTICS SA, a company having an address at Route de la Corniche 3B, 1066 Epalinges, Switzerland (“ADCT”), ADAGENE Inc. a Cayman company having an address at Grand Pavilion, Hibiscus Way, 802 West Bay Road, P.O. Box 31119, KY1-1205, Cayman Islands (the “Adagene”), ADAGENE also acting on behalf and for the account of its affiliated companies, including in the USA and in PRC, as listed in Annex 6 (individually “ADAGENE Affiliate” and collectively “ADAGENE Affiliates”). ADCT and ADAGENE are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

 

RECITALS

 

WHEREAS, ADCT and ADAGENE have executed a certain Material Transfer and Collaboration Agreement on this even date under which the Parties agreed to execute this License Agreement in order to allow ADCT to develop and commercialize certain ADCs (as defined below) in accordance with the terms and conditions of this License Agreement;

 

NOW THEREFORE, in consideration of the mutual covenants contained herein, the Parties agree as follows:

 

ARTICLE 1

DEFINITIONS

 

Capitalized terms used in this License Agreement, whether used in the singular or plural, shall have the meanings set forth below, unless otherwise specifically indicated herein.

 

1.1          “ADAGENE Background IP” means Background IP owned or controlled, in whole or in part, by ADAGENE or any of its Affiliates on the Effective Date of this License Agreement, including in particular the SAFEbody Technology, the ADAGENE library of antibodies and the ADAGENE Platform Improvements (as defined in the MTCA) arising from the MTCA.

 

1.2          “ADAGENE Key IP” shall have the meaning given in Section 4.2.1.

 

1.3          “ADAGENE Know-How” means any and all Know-How owned or controlled by ADAGENE or any of its Affiliates at any time relating to the SAFEbody Technology and any improvements thereof.

 

1.4          “ADAGENE Patents” means any Patents and Patents Applications owned or controlled by ADAGENE or any of its Affiliates, necessary or useful to practice the SAFEbody Technology under this License Agreement, including but not limited to the Patents and Patent applications listed in Annex 1, which Annex shall be updated by ADAGENE on the Effective Date of this License Agreement.

 

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1.5          “ADAGENE New IP” means any improvements to the ADAGENE Background IP that are developed, conceived or generated under this License Agreement and that specifically relate to ADAGENE’s proprietary SAFEbody Technology.

 

1.6          “ADC” means an antibody drug conjugate in any form, as selected by ADCT in its sole discretion, containing (i) any cytotoxic pay load, such as a [***] or any other toxic molecule, linkers and/or other tangible material, and respectively (ii) either the [***] SAFEbody, in case ADCT exercised the [***] under the MTCA or the [***] SAFEbody in case ADCT exercised the [***] License Option under the MTCA, in each case as such SAFEbody may be modified by ADCT as needed to facilitate its conjugation to the material(s) identified in subsection (i).

 

1.7          “ADCT Background IP” means Background IP owned or controlled, in whole or in part, by ADCT on or after the Effective Date of this License Agreement, including (a) [***] or any other toxic molecules, linkers and/or other tangible materials, ADCs, (b) the [***] the [***] the [***] and the [***] if and when this License Agreement becomes effective with respect to [***] (c) the [***] Antiboby, the [***] SAFEbody, the [***] SAFEbody Panel and the [***] SAFEbody ADC if and when this License Agreement becomes effective with respect to [***] Target, (d) the ADCT Platform Improvements, including those IP Rights arising from the MTCA and owned by ADCT, and any IP related thereto and any other IP Rights conceived, reduced to practice, created or developed under the MTCA and owned by ADCT as per the terms of such MTCA.

 

1.8          “ADCT Intellectual Property” means (i) any ADCT Background IP and (ii) any ADCT New IP arising from this License Agreement; and (iii) any other IP Rights owned or controlled by ADCT at any time.

 

1.9          “ADCT New IP” means IP that is developed, conceived, or generated in exercise of ADCT’s rights under this License Agreement, including, without limitation, any improvements to the ADCT Background IP, but excluding the ADAGENE New IP.

 

1.10        “Affiliate” means any person that, directly or indirectly (through one or more intermediaries) controls, is controlled by, or is under common control with a Party. For purposes of this Article 1.2, “control” means (i) the direct or indirect ownership of greater than fifty percent (50%) of the voting stock or other voting interests or interest in the profits of the Party, or (ii) the ability to otherwise control or direct the decisions of board of directors or equivalent governing body thereof.

 

1.11        “Background IP” means any IP that is owned or controlled (including through a license, sublicense or other right to exploit) by a Party or its Affiliates and that (a) exists as of and/or was conceived prior to the Effective Date of this License Agreement, including IP Rights developed, generated or conceived under the MTCA and which relates to the subject matter of this License Agreement related to the Target for which this License Agreement has become effective; or (b) is generated, conceived, obtained or otherwise acquired by a Party after the Execution Date independently of this License Agreement without the use of the other Party’s Confidential Information or IP.

 

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1.12        “BLA” means biologics license application with the United States Food and Drug Administration as set forth in 21 CFR 600, et seq. or any successor application thereto or its foreign equivalent with a regulatory authority in any other country.

 

1.13        “BLA Approval” means the approval, registration, license, permit, or authorization issued by the appropriate competent authorities necessary or desirable to market and commercialize a pharmaceutical or biological product in a country or jurisdiction.

 

1.14        “Chinese Territory” means People’s Republic of China, Macao, Hong-Kong and Taiwan.

 

1.15        “Chinese Territory License” shall have the meaning given in Section 2.3.

 

1.16        “Commercially Reasonable Efforts” means, with respect to the performance of the Development Plan by a Party, the carrying out of such activities using efforts and resources that a biopharmaceutical company of similar size would typically devote to compounds or products of similar market potential at a similar stage in development or product life, taking into account all scientific, commercial and other factors that the Party would take into account, including issues of safety and efficacy, expected and actual cost and time to develop, expected and actual profitability (including payments required hereunder), expected and actual competitiveness of alternative Third Party products (including generic products) in the marketplace, the nature and extent of expected and actual market exclusivity (including Patent coverage and regulatory exclusivity), the expected likelihood of regulatory approval, the expected and actual labeling, the expected and actual reimbursability and pricing and the expected and actual amounts of marketing and promotional expenditures required.

 

1.17        “Confidential Information” means proprietary Know-How (of whatever kind and in whatever form or medium, including copies thereof), tangible materials or other deliverables (a) disclosed by or on behalf of a Party in connection with this License Agreement, whether prior to or during the Term and whether disclosed orally, electronically, by observation or in writing, or (b) created by, or on behalf of, either Party and provided to the other Party, or created jointly by the Parties, in the course of this License Agreement. For the avoidance of doubt, “Confidential Information” includes (i) Know-How regarding such Party’s research, development plans, clinical trial designs, preclinical and clinical data, technology, products, business information or objectives and other information of the type that is customarily considered to be confidential information by entities engaged in activities that are substantially similar to the activities being engaged in by the Parties pursuant to this License Agreement and (ii) any tangible materials or other deliverables provided by one Party to the other Party. For clarity, proprietary information corresponding to IP owned by a Party shall be deemed such Party’s Confidential Information, such Party shall be deemed the Disclosing Party and the other Party shall be deemed the Receiving Party, regardless of which Party actually disclosed or generated such information.

 

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1.18        “Control” or “Controlled By” means the rightful possession by a Party (whether through ownership or license, other than a license grant under this License Agreement), as of the Execution Date or during the Term, and the ability to grant a license, sublicense or other right to exploit, as provided herein, without violating the terms of any License Agreement with any Third Party.

 

1.19        “Commercial Sale” means the sale of a Licensed Product in an arms-length transaction with a Third Party.

 

1.20        “Effective Date” means the date on which ADCT notifies ADAGENE under Section 5.2 of the Material Transfer and Collaboration Agreement of its decision to exercise either the [***] Option or the [***] Option, whichever is earlier, provided that, the terms and conditions of this License Agreement with respect to and/or as applicable to the Target (and products, rights and obligations relating thereto) for which ADCT has not yet exercised its option under Section 5.2 of the Material Transfer and Collaboration Agreement as of the Effective Date shall only become effective if and when ADCT also exercises its option under Section 5.2 with respect to such Target

 

1.21        “Egregious Breach” shall have the meaning given in Section 3.7.

 

1.22        “Field” means ADCs for human therapeutics, prophylactics and related diagnostics.

 

1.23        “First Indication” means a first Indication of a Licensed Product.

 

1.24        “First Licensed Product” means an ADC which comprises a [***] SAFEbody.

 

1.25        “Indication” means each separate and distinct disease, disorder, illness, health condition, or interruption, cessation or disruption of a bodily function, system, tissue type or organ, for which a BLA Approval or BLA Approval variation is required.

 

1.26        “Intellectual Property” or “IP” means all proprietary algorithms, apparatus, assay components, biological materials, cell lines, chemical compositions or structures, clinical trial designs, plans for obtaining regulatory approval, concepts, Confidential Information, results, designs, diagrams, documentation, drawings, flow charts, formulae, ideas and inventions (whether or not patentable or reduced in practice), Patents, Know-How, trade secrets, marks (including brand names, trademarks, product names, logos, and slogans), methods, models, procedures, processes, protocols, specifications, techniques, tools, user interfaces, works of authorship, copyright, or other forms of IP.

 

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1.27        “Intellectual Property Rights” or “IP Rights” means all past, present and future rights, which may exist or be created under the laws of any jurisdiction in the world, in Intellectual Property of every kind and nature.

 

1.28        “IND Application” means investigational new drug application filed with the U.S. Food and Drug Administration or any successor application thereto and any foreign equivalent of any such application filed with the applicable regulatory authority.

 

1.29        “Know-How” means technical and other information which is not in the public domain including, ideas, concepts, inventions (whether or not patentable), discoveries, data, formulae, cell-line libraries, antibody libraries, algorithms, improvements, practices, trade secrets, techniques, methods, specifications, knowledge, clinical data, procedures for experiments and tests, results of experimentation and testing, results of research and development (including laboratory records and data analysis, pharmacological, toxicological, pharmacokinetic, pre-clinical and clinical study results, related reports, structure-activity relationship data and statistical analysis) regarding, without limitation, discovery, research, development, manufacturing, marketing, pricing, distribution, costs and sales relating to the SAFEbody Technology. Information in a compilation or a compilation of information may be Know-How notwithstanding that some or all of its individual elements are in the public domain. Know-How excludes any Patents and constitutes Confidential Information.

 

1.30        “Licensed Intellectual Property” means any and all IP Rights owned or controlled by ADAGENE or any of its Affiliates at any time before, on or after the Execution Date, relating to the SAFEbody Technology, including the ADAGENE Background IP, the ADAGENE Patents if any, the ADAGENE Know-How, the ADAGENE New IP, and any other ADAGENE IP Rights relating thereto, and any improvements thereof.

 

1.31        “Licensed Patent Rights” shall mean (a) the Patents and Patent applications in any country of the world listed in the Schedule of Licensed Patents (Annex 1) as updated; and (b) all divisions, continuations, continuations-in-part, that claim priority to, or common priority with, the Patent applications described in clause (a) above or the Patent applications that resulted in the Patents described in clause (a) above, and (c) all Patents that have issued or in the future issue from any of the foregoing Patent applications and that claim priority to, or common priority with, the Patent applications, including utility, model and design Patents and certificates of invention, together with any reissues, renewals, extensions or additions thereto.

 

1.32        “Licensed Product(s)” means any ADCT’s proprietary ADC that utilizes the SAFEbody Technology.

 

1.33        “Material Transfer and Collaboration Agreement” or “MTCA” means the Material Transfer and Collaboration Agreement executed between the Parties on this even Execution Date.

 

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1.34        “[***] Antiboby”  means [***]

 

1.35        “[***]  SAFEBOBY” means [***]

 

1.36        “[***]  SAFEbody Panel” [***]

 

1.37        “[***]  Target” means [***]

 

1.38        “[***]” [***]

 

1.39        “Net Sales” means the gross aggregate amounts actually received by ADCT (or its sublicensees hereunder) in a Commercial Sale, less [***] in each case as determined by generally accepted accounting principles.

 

1.40        “Patent(s)” means any patents and/or patent applications (including any patents issuing therefrom or claiming priority thereto) anywhere in the world, together with any extensions (including patent term extensions and supplementary protection certificates) and renewals thereof, reissues, reexaminations, substitutions, confirmation patents, registration patents, invention certificates, patents of addition, renewals, divisional, continuations, and continuations-in-part of any of the foregoing.

 

1.41        “Phase I Clinical Trial” means a clinical trial that provides for the first introduction of a Licensed Product into humans to determine safety, metabolism and pharmacokinetic properties and clinical pharmacology of the Licensed Product as further defined in 21 C.F.R. 312.21(a)(1) and (a)(2), as amended from time to time, or any equivalent regulations of a country other than the United-States of America.

 

1.41.1              “Phase la Clinical Trial” means the initial introduction of the Licensed Product into patients to determine metabolism and pharmacologic action as further defined in 21 C.F.R. 312.2 (a) (1) and (a)(2) and which denotes commencement of a dose escalation stage of a Phase I clinical trial.

 

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1.41.2              “Phase lb Clinical Trial” means the initial introduction of the Licensed Product into diseased human subjects to determine metabolism and pharmacologic action as further defined in 21 C.F.R. 312.21(a)(1) and (a) (2) and which denotes commencement of a dose expansion stage of a Phase I clinical trial based upon a dose that has been identified by the principal investigator by reference to data previously generated during the course of the dose escalation stage of a Phase la Clinical Trial.

 

1.42        “Phase II Clinical Trial” means a clinical trial of a Licensed Product on subjects (which may include pharmacokinetic studies) the principal purposes of which are to make a preliminary determination that such product is safe for its intended use and to obtain sufficient information about such product’s efficacy to permit the design of further clinical trials as defined in the United States in 21 C.F.R. §312.21(b), as amended from time to time, or in any equivalent regulations of a country other than the United States.

 

1.43        “Phase III Clinical Trial” means a human clinical trial, the principal purpose of which is designed to demonstrate clinically and statistically the efficacy and safety of a Licensed Product for one or more indications in order to support the BLA Approval of such Licensed Product for such indication as further described in 21 C.F.R. 312.21(c), as amended from time to time, or a similar clinical study in a country other than the United States.

 

1.44        “[***]  License Option” has the meaning given in the Material Transfer and Collaboration Agreement.

 

1.45        “[***]  SAFEbody” means the antibody sequence against the [***] Target provided by ADCT for the purpose of the [***], and comprising a masking peptide identified using the SAFEbody Technology under [***] under the Material Transfer and Collaboration Agreement.

 

1.46        “[***] SAFEbody Panel” has the meaning given in the Material Transfer and Collaboration Agreement.

 

1.47        “[***]  Target” has the meaning given in the Material Transfer and Collaboration Agreement.

 

1.48        “Representatives” means the directors, officers, employees, agents, advisors, contractors of a Party or of its Affiliates.

 

1.49        “Royalty Term” means, with respect to each Licensed Product on a Licensed Product-by-Licensed Product and country by country basis, the shorter of either (i) the tenth (10th) anniversary date of the first Commercial Sales of such Licensed Product; or (ii) the expiration date of the last to expire Valid Claim in the Licensed Patent Rights in a country which would be infringed but for the license granted by this License Agreement by the use, offer for sale, sale or import of such Licensed Product in such country.

 

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1.50        “SAFEbody Technology” means ADAGENE’s proprietary antibody engineering technology performed by ADAGENE which enables an antibody to bind its target specifically only after conditional activation of the antibody, including but not limited to cleavage of a protecting group in the vicinity of a cancer cell, including those covered by the ADAGENE Patents and other ADAGENE Know-How described in Annex 1. Such protecting group is referred to herein as a “masking peptide” (such masking peptide may also include a portion which is cleaved).

 

1.51        “Second Indication” means a second Indication of a Licensed Product that is distinct from a First Indication.

 

1.52        “Second Licensed Product” means an ADC which comprises a [***] SAFEbody.

 

1.53        “Successful Completion of GLP Toxicology Studies” means a final report stating, in ADCT’s sole discretion, that the available results from GLP toxicology studies confirm the adequate safety profile of the Licensed Product to support an IND filing.

 

1.54        “Target” means an antigen or protein described by a unique UniprotKB/Swiss Prot accession number (and all fragments, mutations, splice variants and isoforms thereof having the biological activity of such protein) against which ADCT will develop a [***] and a [***] SAFEbody.

 

1.55        “Territory” means the world.

 

1.56        “Third Indication” means a third clinical treatment indication of a Licensed Product that is distinct from a First Indication and from the Second Indication.

 

1.57        “Third Party” shall mean with respect to the Parties, an entity or person (including any tax authority or governmental agency) that is not an Affiliate of such Party.

 

1.58        “Valid Claim” means (a) a claim of an issued and unexpired Patent: (i) owned or licensed by ADAGENE or (ii) or owned or licensed by ADCT claiming any ADCT New IP, in each case that has not been disclaimed, permanently revoked, held unenforceable, unpatentable or invalid by decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and that has not been admitted to be invalid or unenforceable through re-examination, reissue, disclaimer or otherwise, or lost in an interference proceeding brought by a third party (without involvement by ADCT or its Affiliates); and (b) a novel claim of any pending application included in Patent rights included in the ADAGENE’s or ADCT’s Intellectual Property that would be included in subsection (a) above, properly claiming priority from a document which is less than five (5) years prior, to the extent the subject matter described in such claim has not been held invalid or abandoned without being re-filed in another application or finally rejected by an administrative agency action from which no appeal can be taken, which are included in or necessary for the ADC. For the avoidance of doubt, Valid Claim shall exclude any claim (a) of an issued and unexpired Patent right included in the ADC owned at least in part by ADCT prior to the Effective Date; or (b) of any pending application owned by ADCT at least in part prior to the Effective Date; or (c) any other Intellectual Property owned at least in part by ADCT that claims Intellectual Property other than ADCT New IP.

 

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ARTICLE 2

LICENSE; DEVELOPMENT

 

2.1          License Grants.

 

2.1.1       Subject to the terms and conditions of this License Agreement, ADAGENE hereby grants to ADCT from the exercise of the [***] under the Licensed Intellectual Property, an exclusive, worldwide, perpetual, irrevocable (subject only to Section 10.2) license, in the Field, with the right to sublicense, to research, develop, manufacture, make, use, sell, offer for sale, market, commercialize, distribute and import, and have researched, developed, manufactured, made, used, sold, offered for sale, marketed, commercialized, distributed, or imported the First Licensed Product.

 

2.1.2       Subject to the terms and conditions of this License Agreement, ADAGENE hereby grants to ADCT from the exercise of the [***] License Option, under the Licensed Intellectual Property, an exclusive, worldwide, perpetual, irrevocable (subject only to Section 10.2) license, in the Field, with the right to sublicense, to research, develop, manufacture, make, use, sell, offer for sale, market, commercialize, distribute and import, and have researched, developed, manufactured, made, used, sold, offered for sale, marketed, commercialized, distributed, or imported the Second Licensed Product.

 

2.2          Sublicenses. ADCT may sublicense the rights granted in Section 2.1 at its sole discretion pursuant to a written agreement that is substantially consistent with the terms and conditions of this License Agreement, and which terminates (except for confidentiality and other provisions that are intended to survive) automatically upon termination of the corresponding license hereunder. No later than thirty (30) days following execution of a sublicense to a Third Party in accordance with this Section, ADCT shall so notify ADAGENE and shall disclose the name of the sublicensee and provide ADAGENE with a summary of such sublicense (without the obligation to disclose any financial terms). In addition, ADCT shall be responsible for the performance of any of its sublicensees (including in respect of any breaches of this License Agreement caused by any such Sublicensee) that are exercising rights under a sublicense of the rights granted by ADAGENE to ADCT under this License Agreement, and the grant of any such sublicense shall not relieve ADCT of its obligations under this License Agreement, except to the extent they are satisfactorily performed by any such Sublicensee(s).

 

2.3          Chinese Territory License for the First Licensed Product and the Second License Product. The Parties mutually agree that should ADCT achieve Successful Completion of the GLP Toxicology Studies for the First Licensed Product and/or the Second Licensed product, except if the Second Licensed Product binds to the [***] Target, ADCT hereby grants ADAGENE for a period of [***] days starting from the applicable Successful Completion of the [***] Studies, the right to obtain an exclusive option to negotiate a license to develop, use, sell, offer for sale, market, commercialize, distribute and import, and have developed, used, sold, offered for sale, marketed, commercialized, distributed, or imported, the First Licensed Product or Second Licensed Product (except if the Second License Product binds to the [***] Target), as applicable, in the Field for sale in the Chinese Territory, in accordance with the terms and conditions contained in Annex 5 (“Chinese Territory License Terms”). For the sake of clarity, ADAGENE has no option to negotiate a license for the Second License Product in the Chinese Territory if such Second License Product binds to the [***] Target.

 

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2.4          Commercially Reasonable Efforts. ADCT shall use Commercially Reasonable Efforts to develop and commercialize a First Licensed Product in the United States of America, Japan, Germany, France, Italy, UK and Spain and, if ADCT exercised the [***] License Option, to develop and commercialize a Second Licensed Product in United States of America, Japan, Germany, France, Italy, UK and Spain. ADCT’s development plans for each Licensed Product will include both Phase la and Phase lb Clinical Trials.

 

2.5          Development Reports. From the Effective Date of this License Agreement, on January 31 of each calendar year, ADCT shall provide to ADAGENE a summary report regarding the status of development efforts for Licensed Products, activities performed with any Licensed Product(s) during the previous calendar year, and planned activities for the ongoing calendar year. Such report shall contain sufficient detail to enable ADAGENE to assess ADCT’s compliance with its development obligations in Section 2.4. Such reports shall be Confidential Information of ADCT pursuant to Article 12.

 

2.6          Exclusivity and non-compete obligations.

 

2.6.1       Effective from the Effective Date and until expiry of five (5) years from first Commercial Sale of the First Licensed Product, ADAGENE shall not (i) develop for itself or for or with any Third Party a (A) [***] SAFEbody, (B) any other SAFEbody antibody, or (C) antibody drug conjugate, in each case of (A) through (C) that binds to the [***] Target, regardless of whether (a) it uses the SAFEbody Technology or not; or (b) it is selected from the ADAGENE proprietary antibody library or not; and (ii) take any actions which would result in infringing any of ADCT’s IP Rights in the First Licensed Product, provided that, in the event ADCT is developing an antibody drug conjugate that binds to the [***] Target that is not the First Licensed Product (the “Competing [***] Product”), and makes the corporate decision to name such Competing [***] Product as the lead product in the [***] program and to prioritize the development of such Competing [***] Product over the development of the First Licensed Product, then ADAGENE’s exclusivity obligation with respect to (C) shall expire, and ADCT will provide written notice to ADAGENE if ADCT make such corporate decision.

 

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2.6.2       Effective from the Effective Date and until expiry of a five (5) years from first Commercial Sale of the Second Licensed Product, ADAGENE shall not (i) develop for itself or for or with any Third Party a (A) [***] SAFEbody (B) any other SAFEbody antibody or (C) antibody drug conjugate, in each case of (A) through (C) that binds to the [***] Target, regardless of whether (a) it uses the SAFEbody Technology or not; or (b) it is selected from the ADAGENE proprietary antibody library or not; and (ii) take any actions which would result in infringing any of ADCT’s IP Rights in the Second Licensed Product, provided that, in the event ADCT is developing an antibody drug conjugate that binds to the [***]Target that is not the Second Licensed Product (the “Competing  [***]  Product”), and makes the formal corporate decision to name such Competing [***] Product as the lead product in the [***] program and to prioritize the development of such Competing [***] Product over the development of the Second Licensed Product, then ADAGENE’s exclusivity obligation with respect to (C) shall expire.]

 

2.6.3       ADAGENE obligations under the above Sections 2.6.1 and 2.6.2 shall survive any change of control of ADAGENE, provided that the exclusivity obligations as described in Section 2.6.1(C) and Section 2.6.2(C) shall not apply to any program of the acquirer of ADAGENE. For the sake of clarity, neither ADAGENE nor such acquirer shall have the right incorporate the SAFEbody Technology in such program at any time before or after the closing of such change of control transaction.

 

ARTICLE 3

FINANCIAL TERMS

 

3.1          Milestones and Royalties. In consideration of the rights granted under Article 2 for the First Licensed Product, ADCT shall make the milestones and royalties payments detailed in Annex 2. In consideration of the rights granted under Article 2 for the Second Licensed Product, ADCT shall make the milestones and royalties Payments detailed in Annex 3, or in Annex 4 if the Second Licensed Product binds to the [***] Target.

 

3.2          Milestones payments. For the purpose of milestone payments, ADCT shall notify ADAGENE of the occurrence of any relevant milestone and shall pay ADAGENE within thirty (30) days of the milestone occurrence.

 

3.3          Royalty Reports and Payments. For the purpose of royalties payments, commencing with the first Commercial Sale of a Licensed Product by ADCT or its authorized sublicensee under this License Agreement, ADCT shall make written reports to ADAGENE within sixty (60) days after the end of each calendar quarter, stating in each such report the Net Sales in US Dollars of each Licensed Product sold, on a country by country basis, during the preceding calendar quarter by ADCT or its sublicensees and the calculation of royalty payments due to ADAGENE on such Net Sales for such year applying the relevant royalty rate as set forth in Annexes 2 and 3. Within ten (10) business days of delivery of the report required in this Section, ADCT shall pay to ADAGENE the royalties, if any, due for the period of such report. If no royalties are due, ADCT shall so report.

 

3.4          Payments. Any undisputed payments due pursuant to this License Agreement are exclusive of any withholding or other taxes and shall be made to ADAGENE in US dollars, within thirty (30) days of receipt of an invoice (unless otherwise stated herein), by wire transfer to ADAGENE’s following bank account:

 

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Account Name: 
    	
[***]
    
	
Bank Name: 
    	
[***]
    
	
Bank Address: 
    	
[***]
    
	
[***]
    	
 
    
	
Account Number: 
    	
[***]
    
	
SWIFT Number: 
    	
[***]
    

 

or as stated on the invoice, as may be changed from time to time by written notice to ADCT.

 

3.5          Royalty Reduction for Third Party Licenses.

 

3.5.1       ADCT shall be entitled to offset against any milestones and royalties owed on a country by country basis and product by product basis by ADCT to ADAGENE pursuant to this Section 3, an amount equal to [***] percent [***]%) of any and all payments actually paid by ADCT or any of its Affiliates to any Third Party as a consideration for a license under the Third Party Patents and other IP Rights and which license is necessary in order to research, develop make, use, or sell a Licensed Product, in the Field to the extent such license is required to obtain or maintain freedom to operate in order to exploit (i) the Licensed IP in accordance with this License Agreement or (ii) the [***] SAFEbody or the [***] SAFEbody developed by ADAGENE for ADCT under the MTCA, provided however that in no case shall the royalties due to ADAGENE be reduced under this Section below [***] percent ([***]%). For the avoidance of doubt, any license desired or needed by ADCT that relates to antibodies, other than the [***] SAFEbody and [***] SAFEbody, or payloads or site conjugation technology, manufacturing or formulation technology or any other components of the Licensed Products that is not specifically required for the exploitation of the Licensed IP as such, is not subject to royalty reduction under this Section 3.5.

 

3.6          Withholding Taxes. All milestone payments and royalties hereunder are excluding value added taxes. If ADCT is required by applicable laws to pay, withhold or deduct any taxes, levies or other duties on account of monies payable to ADAGENE under this License Agreement, then ADCT shall deduct or withhold such taxes, levies or other duties from amounts otherwise payable to ADAGENE and shall promptly pay such taxes, levies or other duties to the relevant tax authority. Any such taxes, levies or other duties so paid or required to be deducted or withheld shall be an expense of and born by ADAGENE. ADCT shall secure and send to ADAGENE within [***] days proof of any such taxes, levies or other duties paid or required to be deducted or withheld by ADCT for the benefit of ADAGENE. ADAGENE shall provide ADCT with any information necessary to determine such taxes, levies or other duties, and the Parties shall reasonably cooperate with each other to ensure that the amounts required to be paid, deducted or withheld by ADCT are reduced in an amount to the fullest extent permitted by applicable law. For the avoidance of doubt, there will be no gross-up in the event ADCT is required to deduct or withhold taxes of any type required by law upon making a payment to ADAGENE.

 

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3.7          Payment Adjustment for Egregious Breach. In the event of a good faith and documented belief there has been an Egregious Breach (as defined below) by either Party, the other Party shall notify the first Party of the alleged or evidenced Egregious Breach and (i) if ADCT alleges that ADAGENE has committed such Egregious Breach, ADCT shall be entitled to reduce its obligation to make any outstanding future payments due to ADAGENE under this License Agreement by [***] percent ([***]%); and (ii) if ADAGENE alleges that ADCT has committed such Egregious Breach, ADAGENE shall be entitled to collect [***] percent ([***]%) of the payments it would otherwise receive from ADCT under this License Agreement, in each case subject to the following (each, an “Automatic Breach Remedy”). Should the alleged breaching Party dispute the existence of an Egregious Breach, it shall show all necessary evidence to support its position. If the evidence shown is deemed insufficient by the Party alleging such breach, the issue may be escalated by the Party alleging such breach to the CEOs of both Parties, who shall strive to find an amicable resolution of the matter within ten (10) business days from the day the issue was escalated to them. If no amicable resolution can be found, the alleged breaching Party may use the arbitration process under Section 12.2 for determination of whether such Egregious Breach occurred. If the arbitration decision confirms an Egregious Breach by a Party under this License Agreement, the Automatic Breach Remedy shall continue for the term of this License Agreement and may seek additional damages from the alleged breaching Party in accordance with this License Agreement. If the arbitration decision confirms that the alleged breaching Party has not committed an Egregious Breach, then: (a) if ADCT is the Party alleging such breach, ADCT shall be responsible for all past and future payments due under this License Agreement and shall be liable for paying to ADAGENE within seven (7) days of the arbitration decision, all under-payments since the breach notice to ADAGENE with an annual interest rate of the Prime Rate (as quoted in the Wall Street Journal) plus [***] percent ([***]%), to be calculated from the day those payments became due until effective payment date; or (b) if ADAGENE is the Party alleging such breach, ADAGENE shall refund to ADCT within seven (7) days of the arbitration decision, all over-payments unduly collected from ADCT since the confidentiality breach notice to ADCT with an annual interest rate of the Prime Rate (as quoted in the Wall Street Journal) plus [***] percent [***]%), to be calculated from the day those payments became due until effective payment date. “Egregious Breach” shall mean any open, notorious, malicious material breach of a material obligation under this License Agreement (other than a Severe Confidentiality Breach, which is addressed in Section 5.7.2) that (a) has been repeated, persistent and ongoing; (b) materially adversely affect the other Party’s rights under this License Agreement; and (c) for which, despite written notification from the breach alleging Party, the alleged breach Party has not cured such breach or, with respect to breaches that are not capable of being cured, implemented a procedure that is aimed to cure such breach or minimize the likelihood of the occurrence of such type of breach in the future. In the event of a dispute of such alleged Egregious Breach, the Party for which the dispute is finally decided against will reimburse the other Party for all out-of-pocket costs and fees incurred by such other Party in connection with such dispute.

 

ARTICLE 4

INTELLECTUAL PROPERTY

 

4.1          Background IP. ADCT shall be and remain the sole owner or controller of the ADCT Background IP and ADAGENE shall be and remain the sole owner or controller of the ADAGENE Background IP. From the Effective Date of this License Agreement for a particular Target, ADCT shall be free to file any Patents on the ADCT New IP as defined in the [***] including in particular any Patents relating to the (a) [***] SAFEbody Panel, and/or [***] SAFEbody ADC after the applicable Effective Date, and (b) [***] SAFEbody Panel and/or [***] SAFEbody ADC after the applicable Effective Date.

 

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4.2          ADAGENE Patent prosecution and Maintenance of Licensed Patent Rights.

 

4.2.1       Subject to this Section 4.2, ADAGENE shall, at its sole cost, have the sole right to prosecute and maintain worldwide the ADAGENE Patents and Patent applications, ADAGENE shall not abandon any of the Adagene Key IP without notifying ADCT at least ninety (90) days in advance and ADCT may use its rights under Section 4.2.2 below. “ADAGENE Key IP” means all ADAGENE Patents that (a) claim composition(s) and/or method(s) used by ADAGENE to generate the [***] SAFEbody(ies) and/or [***] SAFEbody(ies) under the Material Transfer and Collaboration Agreement, (b) would reasonably be expected to provide exclusivity for ADCT’s exploitation of [***] SAFEbody(ies) and/or [***] SAFEbody(ies); and/or (c) would reasonably be expected to affect the ADCT New IP.

 

4.2.2       ADAGENE shall keep ADCT informed of the status of any prosecution of the ADAGENE Patents. In the event ADAGENE fails to take any action reasonably necessary for the filing, prosecution, and maintenance of the Adagene Key IP in any Key IP Country (as defined below), or if it informs ADCT that it does not wish to apply for or continue to prosecute patent protection for any of the Adagene Key IP in accordance with Section 4.2.1, ADAGENE shall consult with ADCT (and any other licensees under such Adagene Key IP), and appoint an independent reputable patent attorney firm to assume, at the cost and expense of all licensees of ADAGENE that wish to further prosecute such Adagene Key IP (but only as to official filing and renewal fees and not. for the avoidance of doubt, the costs of any actions or proceedings), to take over, in the name of the licensees that wish to continue such further prosecution and are willing to proportionally bear the costs thereof, the filing, prosecution, and maintenance of such Adagene Key IP. In the event that only ADCT (and not any other licensee of ADAGENE under the Licensed Patent Rights) wishes to continue the prosecution of such Adagene Key IP, ADTC shall have the right (but not the obligation) at its sole costs and its own name to assume the further prosecution of such Adagene Key IP, in which case ADCT shall be relieved from its milestones and royalty payment obligations under this License Agreement for that relevant country with respect to such abandoned Patent, which shall thus be excluded from the royalty calculation basis. “Key IP Country” means [***]

 

4.2.3       Upon the request of the Party seeking patent or other similar statutory protection for Licensed Patent Rights under this Section (the “Filing Party”), and at such Filing Party’s cost and expense, the other Party shall and shall procure that its personnel shall provide reasonable assistance to the Filing Party, in filing, prosecuting and maintaining such patent applications and shall execute and deliver any and all instruments or other documents necessary to make, file, prosecute and maintain all such Licensed Patent Rights.

 

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4.2.4       Each Party shall be responsible for all costs and expenses it incurs associated with its activities under this Section 4.2, to the extent not reimbursed through recoveries from a Third Party in connection with any litigation or other proceedings.

 

4.3          ADCT Intellectual Property; New IP - Improvements.

 

4.3.1       All ADCT Intellectual Property is and shall remain the sole and exclusive property of ADCT and no license to ADAGENE, except as stated in Section 2.3, to any such ADCT Intellectual Property is granted or implied in this License Agreement.

 

4.3.2       Any and all ADCT New IP shall be exclusively owned by ADCT or its designee, either alone or jointly with a Third Party. ADAGENE agrees to assign and does hereby assign to ADCT all right, title and interest in and to the ADCT New IP.

 

4.3.3       ADCT shall be free at all times to make any use, as it deems appropriate, of the ADCT Intellectual Property and to prosecute and maintain (or have prosecuted and maintained) worldwide Patents and Patent applications relating the ADCT Intellectual Property at its sole cost as it deems appropriate. ADCT shall be under no obligation to file Patents under its ADCT Intellectual Property and ADCT may chose at its sole discretion to maintain the ADCT Intellectual Property or not.

 

4.3.4       ADCT shall file, maintain and prosecute the ADCT Intellectual Property relating to the First Licensed Product and the [***] SAFEbody in the Chinese Territory and shall keep ADAGENE duly informed of the status of any prosecution thereof.

 

4.3.5       ADAGENE New IP shall be exclusively owned by ADAGENE or its designee, either alone or jointly with a Third Party. ADCT agrees to assign and does hereby assign to ADAGENE all right, title and interest in and to the ADAGENE New IP.

 

4.4          Infringement by Third Parties.

 

4.4.1       Notice. Each Party shall promptly notify, in writing, the other Party upon learning of any actual or suspected infringement of the Licensed Intellectual Property (an “Infringement”) or of any claim of invalidity, unenforceability, or non-infringement of an ADAGENE Patent.

 

4.4.2       Enforcement Actions. ADAGENE shall have the first right, but not the obligation, to enforce the Licensed Intellectual Property worldwide and defend against any charge that the Licensed Intellectual Property is invalid or unenforceable, provided that ADAGENE shall not have the right to enforce the Licensed Intellectual Property against any alleged infringer with respect to a SAFEbody product directed to [***] Target for which this License Agreement has become effective (a “Product Infringement”) without first obtaining ADCT’s prior written approval. ADCT agrees to join as a party, if necessary, at the expense of ADAGENE to any Product Infringement approved by ADCT. If ADCT approves such enforcement by ADAGENE and ADAGENE does not diligently and timely enforce the Licensed Intellectual Property against a Third Party infringer with respect to a Product Infringement, ADCT shall have the right to do so at ADCT’s sole expense and ADAGENE shall, if necessary, submit to being joined as a party in any lawsuit and to do all other things reasonably required or necessary to enable ADCT to enforce the Licensed Intellectual Property, at ADCT’s sole expense.

 

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4.4.3       Settlement.

 

a)             If ADAGENE brings suit pursuant to subsection 4.4.2, ADAGENE shall have the right and authority to settle any dispute involving the Licensed Intellectual Property; provided that if any such settlement would materially alter ADCT’s rights under this License Agreement, then ADCT’s written consent to the settlement shall be required, such consent not to be unreasonably withheld.

 

b)             If ADCT brings suit pursuant to subsection 4.4.2, ADCT shall have the right and authority to settle any dispute involving the Licensed Intellectual Property, provided that if any such settlement requires any payment by or admits or imparts any other liability to ADAGENE or admits the invalidity or unenforceability or limits the scope of any such Licensed Intellectual Property in such country, then ADAGENE’s written consent to the settlement shall be required, such consent not to be unreasonably withheld.

 

4.5          Damages.

 

4.5.1            If ADAGENE brings suit pursuant to subsection 4.4.2, all damages, amounts received in settlement, judgment or other monetary awards recovered in an action to enforce the Licensed Intellectual Property with respect to any Third Party shall be shared as follows:

 

a)    first, to reimburse ADAGENE for costs and expenses incurred under 4.4.2;

 

b)    second, to reimburse ADCT for any costs and expenses incurred by it under 4.4.2;

 

c)     third, if and to the extent lost profits or sales are specifically determined by the adjudicating authority, to ADCT in reimbursement for its lost profits or lost sales; and

 

d)    any remainder to ADAGENE.

 

4.5.2            If ADCT brings suit pursuant to subsection 4.4.2, all damages, amounts received in settlement, judgment or other monetary awards recovered in an action to enforce the Licensed Intellectual Property with respect to any Third Party shall be to ADCT in reimbursement for its lost profits or lost sales.

 

ARTICLE 5

CONFIDENTIALITY

 

5.1          Confidential Know-How. ADAGENE and ADCT shall each take all necessary measures to maintain confidential and to not disclose, and it shall cause its Representatives to maintain confidential and not disclose, any Confidential Information relating to the SAFEbody Technology and the ADAGENE Know-How and any IP Rights relating thereto to any Third Party not bound by any confidentiality obligation or otherwise in breach of ADCT’s rights under this License Agreement; provided, however, that ADAGENE shall be free to disclose its Confidential Information relating to the SAFEbody Technology and the ADAGENE Know-How and any IP Rights relating thereto as necessary, in the ordinary course of business to seek patent or other intellectual property protection on the SAFEbody Technology.

 

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5.2          Non-use and Non-disclosure of Confidential Information. During the Term, and for a period often (10) years thereafter, a Party shall (i) except to the extent permitted by this License Agreement or otherwise agreed to in writing, keep confidential and not disclose to any Third Party any Confidential Information of the other Party; (ii) except in connection with activities permitted by this License Agreement or otherwise agreed to in writing, not use for any purpose any Confidential Information of the other Party; and (iii) take all reasonable precautions to protect the Confidential Information of the other Party, including all precautions a Party employs with respect to its own confidential information of a similar nature and taking reasonable precautions to assure that no unauthorized use or disclosure is made by others to whom access to the Confidential Information of the Party is granted.

 

5.3          Exclusions Regarding Confidential Information. Notwithstanding anything set forth to the contrary in this Article 6, the obligations of Section 5.2 above shall not apply to the extent that the Party seeking the benefit of the exclusion can demonstrate that the Confidential Information of the other Party:

 

a)             was already known to the receiving Party, other than under an obligation of confidentiality, at the time of receipt by the receiving Party;

 

b)             was generally available to the public or otherwise part of the public domain at the time of its receipt by the receiving Party;

 

c)              became generally available to the public or otherwise part of the public domain after its receipt by the receiving Party other than through any act or omission of the receiving Party in breach of this License Agreement;

 

d)             was received by the receiving Party without an obligation of confidentiality from a Third Party having the right to disclose such information without restriction;

 

e)              was independently developed by or for the receiving Party without use of or reference to the Confidential Information of the other Party; or

 

f)               was released from the restrictions set forth in this License Agreement by express prior written consent of the Party.

 

5.4          Authorized Disclosures of Confidential Information. Notwithstanding the foregoing, a Party may use and disclose the Confidential Information of the other Party as follows:

 

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a)             if required by law or governmental regulation, provided that the Party seeking to disclose the Confidential Information of the other Party shall (i) use all reasonable efforts to inform the other Party prior to making any such disclosures and cooperate with the other Party in seeking a protective order or other appropriate remedy (including redaction) and (ii) whenever possible, request confidential treatment of such information;

 

b)             as reasonably necessary to obtain or maintain any regulatory approval, including to conduct preclinical studies and clinical trials and for pricing approvals, for any Licensed Product, provided, that, the disclosing Party shall take all reasonable steps to limit disclosure of the Confidential Information outside such regulatory agency and to otherwise maintain the confidentiality of the Confidential Information to the same extent to which it maintains its own confidential information; or

 

c)              to the extent necessary, to permitted sublicensees, licensees, collaborators, vendors, consultants, agents, attorneys, contractors and clinicians under written License Agreements of confidentiality at least as restrictive on those set forth in this License Agreement, who have a need to know such information in connection with such Party performing its obligations or exercising its rights under this License Agreement.

 

5.5          Terms of this License Agreement. The Parties agree that this License Agreement and the terms hereof will be considered Confidential Information of both Parties but can be shared with potential sublicensees, banks, investors or acquirers to the extent necessary to complete the subject transaction.

 

5.6          No License. As between the Parties, Confidential Information disclosed hereunder shall remain the property of the disclosing Party. Disclosure of Confidential Information to the other Party shall not constitute any grant, option or license to the other Party, beyond those licenses expressly granted hereunder, under any Patent, Know-How or other rights now or hereinafter held by the disclosing Party.

 

5.7          Confidentiality Breach Remedies.

 

5.7.1            The Receiving Party acknowledges that money damages may not be a sufficient remedy for any breach of this Section 5, and the Disclosing Party will be entitled to seek specific performance and injunctive relief as remedies for any such breach. Such remedies will not be deemed to be the exclusive remedies for breach of this Section 5 but will be in addition to all other remedies available at law or equity to the Disclosing Party.

 

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5.7.2            In addition, in the event of a Severe Confidentiality Breach (as defined below) by either Party, the other Party shall in good faith notify the first Party of the alleged and evidenced Severe Confidentiality Breach and (i) if ADCT alleges that ADAGENE has committed such Severe Confidentiality Breach, ADCT shall be entitled to suspend payment of [***] of any outstanding or future payments due to ADAGENE under this License Agreement; and (ii) if ADAGENE alleges that ADCT has committed such Severe Confidentiality Breach, ADAGENE shall be entitled to collect [***] of the future payments it would otherwise receive from ADCT under this License Agreement, in each case subject to the following (each, an “Automatic Remedy”). Should the alleged breaching Party dispute the existence of a Severe Confidentiality Breach, it shall show all necessary evidence to support its position. If the evidence shown is deemed insufficient by the Party alleging such breach, the issue may be escalated by the Party alleging such breach to the CEOs of both Parties, who shall strive to find an amicable resolution of the matter within ten (10) business days from the day the issue was escalated to them. If no amicable resolution can be found, the alleged breaching Party may use the arbitration process under Section 12.2 for settlement. If the arbitration decision confirms a Severe Confidentiality Breach by a Party under this License Agreement, the Automatic Remedy shall continue for the term of this License Agreement and the Party alleging breach may seek additional damages from the alleged breaching Party in accordance with this License Agreement. If the arbitration decision confirms that the alleged breaching Party has not committed a Severe Confidentiality Breach, then : (a) if ADCT is the Party alleging such breach, ADCT shall be responsible for all past and future payments due under this License Agreement and shall be liable for paying to ADAGENE within seven (7) days of the arbitration decision, all payments unduly suspended since the confidentiality breach notice to ADAGENE with an annual interest rate of the Prime Rate (as quoted in the Wall Street Journal) plus two percent (2%), to be calculated from the day those payments became due until effective payment date; or (b) if ADAGENE is the Party alleging such breach, ADAGENE shall refund to ADCT within seven (7) days of the arbitration decision, all over-payments unduly collected from ADCT since the confidentiality breach notice to ADCT with an annual interest rate of the Prime Rate (as quoted in the Wall Street Journal) plus two percent (2%), to be calculated from the day those payments became due until effective payment date. “Severe Confidentiality Breach” shall mean with respect to both Parties, any disclosure of the portion of SAFEbody Technology that is strictly confidential such that such disclosure has enabled a Third Party to perform the SAFEbody Technology in a manner substantially similar to ADAGENE and resulted in Adagene’s competitive advantage in SAFEbody Technology, in each case without regard to the existence, validity or enforceability of any Adagene Patents, committed either under this License Agreement or the MTCA, provided that if such Severe Confidentiality Breach was committed under the MTCA and was undisputed or finally decided by dispute resolution, then the Party alleging breach shall not be required to provide notice or be subject to dispute resolution under this License Agreement, and the Automatic Remedy shall be effective and shall apply without any need for such notice or dispute resolution; provided, however, that ADAGENE shall be free to disclose its SAFEbody Technology as necessary, in the ordinary course of business to seek patent protection on the SAFEbody Technology and to disclose the SAFEbody Technology to its actual and potential bona fide acquirers and licensees under an obligation of confidentiality at least as restrictive as those confidentiality obligations contained in this License Agreement, and provided always that ADAGENE shall be and remain solely and exclusively liable towards ADCT for any Severe Confidentiality Breach by any such acquirers or licensees. In the event of a dispute of such alleged Severe Confidentiality Breach, the Party for which the dispute is finally decided against will reimburse the other Party for all internal and out-of-pocket costs and fees incurred by such other Party in connection with such dispute. Neither Party shall disclose any of its Confidential Information to the other Party that, in the event of an unintended disclosure by the receiving Party, would cause the receiving Party to commit a Severe Confidentiality Breach, unless and until first obtaining the receiving Party’s express prior written consent, and any such Confidential Information disclosed by a Party to the receiving Party without such express prior written consent shall excuse the receiving Party from its compliance obligation of this Section.

 

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ARTICLE 6

PUBLICITY; PUBLICATIONS; USE OF NAMES

 

6.1          Publicity.

 

Neither Party will make any press release or other public disclosure regarding this License Agreement or the transactions contemplated hereby without the other Party’s express prior written consent, which shall not be unreasonably withheld or delayed. For the purpose of this Section 6.1, if a party elects to make a public announcement, and at least ten (10) business days in advance of such planed press release or public announcement it shall provide a draft to the other Party for review. The reviewing Party shall have the right to require changes, in particular to request deletion of its Confidential Information and financial terms under this License Agreement or the transactions contemplated hereunder, from the planned press release or announcement, and the other Party shall delete any Confidential Information and reasonably and in good faith consider and implement any other changes requested by the reviewing Party.

 

It is further agreed between the Parties that on the Effective Date of this License Agreement, the Parties shall issue a joint press-release, which timing and content shall be agreed upon in advance and in writing between the Parties in accordance with Section 6.1.

 

6.2          Publications. Neither Party shall make any publications about the Licensed Product without the other Party’s prior written consent. Prior to making any oral or written public presentation and/or submitting or presenting a manuscript, poster, abstract, publication, or other materials relating to the Materials or Results under this License Agreement to a publisher, reviewer, or other outside person (“Publication”), the publishing Party shall provide the other Party with a copy of all such Publication in English language, and the other Party shall have thirty (30) days from receipt to review and comment. Upon the receiving Party’s request, the publishing Party shall (i) remove any Confidential Information of the reviewing Party; and/or (ii) discuss with the reviewing Party and consider in good faith the reviewing Party’s suggestions and amendments proposed with respect to the Publication, and the timing of the disclosure; and/or (iii) delay the Publication for a period of up to sixty (60) days from the date the reviewing Party receives the proposed Publication, in order to allow the reviewing Party to protect its interests in any IP Rights described in any such Publication. Notwithstanding the foregoing, ADCT shall be free to publish the results of clinical studies of Licensed Products without being required to seek ADAGENE’s review and consent.

 

6.3          No Right to Use Names. Except as expressly provided herein, no right, express or implied, is granted by this License Agreement to use in any manner the other’s Party symbol, logo or trademark of the other Party in connection with this License Agreement unless authorized in writing by the other Party.

 

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ARTICLE 7

REPRESENTATIONS

 

7.1          Mutual Representations and Warranties. Each Party represents and warrants to the other Party that as of the Execution Date:

 

a)             it is validly organized and in good standing under the laws of its jurisdiction of incorporation; and

 

b)             it has obtained all necessary consents, approvals and authorizations of all governmental authorities and other persons or entities required to be obtained by it in connection with this License Agreement; and

 

c)              it has the legal right and power to enter into this License Agreement and to fully perform its obligations hereunder; and

 

d)             it will comply at all times with the Bribery Act 2010 of the United Kingdom (“Bribery Act”), the Foreign Corrupt Practices Act 1977 of the United States of America (“FCPA”), and any other applicable anti-bribery and anti-corruption laws and regulations.

 

7.2          Representations and Warranties of ADAGENE. ADAGENE hereby represents and warrants that:

 

(a)              Neither ADAGENE nor any of its Affiliates has entered, and shall not enter, into any license agreement with any Third Party that conflicts with the rights conveyed in this License Agreement to ADCT;

 

(b)              ADAGENE owns or Controls the ADAGENE Background IP, the Licensed Intellectual Property and all intellectual property rights conceived, reduced to practice or created at any time by its employees, agents and subcontractors;

 

(c)              Neither ADAGENE nor any of its Affiliates owns or Controls any Patents, beyond those set forth as Licensed Intellectual Property, that contain claims that ADAGENE believes would be infringed by the exercise of ADCT’s rights under this License Agreement;

 

(d)              ADAGENE Patents existing as of the Execution Date are (i) subsisting and are not invalid or unenforceable, in whole or in part, (ii) with regards to the pending applications included in such ADAGENE Patents being diligently prosecuted in the respective patent offices in accordance with applicable law and (iii) filed and maintained properly and correctly and all applicable fees have been, and will be, paid on or before the due date for payment;

 

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(e)              As of the Effective Date, to the knowledge of ADAGENE, the practice of the ADAGENE IP Rights, including the SAFEbody Technology, does not infringe or misappropriate any Third Party IP Rights, including those owned or controlled by the entity identified on the side letter between the Parties executed on the Execution Date;

 

(f)              As of the Execution Date, ADAGENE has no knowledge of any pending or threatened litigation concerning any subject matter of this License Agreement, including but not limited to, any allegation of infringement concerning the ADAGENE IP Rights and the Licensed Intellectual Property or the invalidity or unenforceability of the Licensed Intellectual Property. ADAGENE warrants that in the event that the Licensed Intellectual Property is alleged to infringe Third Party IP Rights, ADAGENE shall obtain at its sole cost a sublicensable license to such Third Party IP Rights and shall include such Third Party IP Rights in the Licensed Intellectual Property. In the event ADAGENE cannot obtain such a license within one hundred twenty (120) days but ADCT does manage to obtain a license to such Third Party IP Rights, ADCT shall be entitled to offset any amounts due under such Third Party license against any milestones and royalties owed under this License Agreement on a country by country basis and product by product basis, in accordance with the terms and conditions of Section 3.5.1.

 

(g)              ADAGENE represents and warrants that the ADAGENE Patents and Know-How listed on Annex 1 represent all Patents and Know-How owned or Controlled by ADAGENE that are necessary or useful for the development, manufacture or commercialization of the [***] SAFEbody, the [***] SAFEbody and of Licensed Products comprising the [***] SAFEbody and the [***] SAFEbody.

 

7.3          Representations and Warranties of ADCT. ADCT hereby represents and warrants that: 

 

ADCT has entered on the Execution Date, and shall not enter, into any license agreement with any Third Party that conflicts with the rights conveyed in this License Agreement to ADAGENE.

 

7.4          Disclaimers. EXCEPT AS OTHERWISE EXPRESSLY STATED IN THIS LICENSE AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT TO PATENTS, KNOW-HOW, MATERIALS OR CONFIDENTIAL INFORMATION SUPPLIED BY IT TO THE OTHER PARTY HEREUNDER, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT.

 

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ARTICLE 8

INDEMNIFICATION

 

8.1          Indemnification.

 

8.1.1       ADAGENE indemnity. ADAGENE will indemnify, hold harmless and defend ADCT, its Affiliates, and their respective directors, officers, employees and agents (each an “ADCT Indemnitee”) against any and all losses, damages, liabilities, judgments, fines, amounts paid in settlement, expenses and costs of defense (including, without limitation, reasonable attorneys’ fees and witness fees) (“Losses”) resulting from any claim, action or proceeding brought or initiated by a Third Party (“Third Party Claim”) against them to the extent that such Third Party Claim arises out of (a) the breach or alleged breach of any representation or warranty by ADAGENE under this License Agreement; or (b) the gross negligence or willful misconduct of ADAGENE, its Affiliates or their respective Representatives; or (c) the use, handling, or storage of ADAGENE Materials; or (d) from ADAGENE’s conduct and activities pursuant to the Development Plan; or (e) the practice of SAFEbody Technology or the exploitation of any product resulting from the practice of SAFEbody Technology that infringes any Third Party IP Rights or misappropriates any Third Party proprietary technology, solely with respect to any such product to the extent any such infringement or misappropriation would have arisen from the [***] SAFEbody or the [***] SAFEbody or the SAFEbody Technology alone or in combination with any other technologies or components, but not with resnect to any infringement that would have arisen from any antibody sequence in the [***] SAFEbody or [***] SAFEbody if not combined with the SAFEbody Technology; provided, that such indemnity shall not apply to the extent ADCT has an indemnification obligation pursuant to Section 8.1.2 hereof. For the sake of clarity, ADAGENE shall not provide any indemnity to ADCT for ADCT’s use of a [***] any linker to a [***] in a SAFEbody ADC or any conjugation methods or materials used in conjugating a [***]

 

8.1.2       ADCT indemnity. ADCT will indemnify, hold harmless and defend ADAGENE, its Affiliates, and their respective directors, officers, employees and agents (each, a “ADAGENE Indemnitee”) against any and all Losses resulting from any Third Party Claim against them to the extent that such Third Party Claim arises out of (a) the breach of any representation or warranty by ADCT under this License Agreement; or (b) the gross negligence or willful misconduct of ADCT, its Affiliates or their respective Representatives; or (c) the use, handling, or storage of ADAGENE Material or Conjugated Material by ADCT or from ADCT’s conduct and activities pursuant to the Development Plan; or (d) ADCT’s, its Affiliates, or their respective Representatives, and any licensee or sublicensee (other than ADAGENE as a licensee in the Chinese Territory or its sublicensees) gross negligence or willful misconduct in the development or commercialization of any Licensed Product, including, without limitation, any product liability claims; provided, that such indemnity shall not apply to the extent ADAGENE has an indemnification obligation pursuant to Section 8.1.1 hereof.

 

8.1.3       Subject to Article 9.2, each Party shall indemnify, defend and hold each of the other Party, its Affiliates and their respective directors, officers, and employees and the successors and assigns of any of the foregoing harmless from and against any and all liabilities, damages, settlements, penalties, fines, costs or expenses (including, without limitation, reasonable attorneys’ or accountants’ fees and other expenses of litigation) (collectively, “Loss” or “Losses”) arising, directly or indirectly out of or in connection with any Third Party claims, suits, actions, demands or judgments (“Third Party Claims”) resulting from (a) the negligence or willful misconduct of such Party under this License Agreement, or (b) breach by such Party of the representations and warranties made in this License Agreement or (c) violation by such Party of any applicable laws.

 

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8.2          Procedure. If a Party intends to claim indemnification under this License Agreement (the “Indemnitee”), it shall promptly notify the other Party (the “Indemnitor”) in writing of such alleged Loss. The Indemnitor shall have the right to control the defense thereof with counsel of its choice as long as such counsel is reasonably acceptable to Indemnitee. Any Indemnitee shall have the right to retain its own counsel at its own expense for any reason, provided, however, that if the Indemnitee shall have reasonably concluded, based upon a written opinion from outside legal counsel, that there is a conflict of interest between the Indemnitor and the Indemnitee in the defense of such action, in each of which cases the Indemnitor shall pay the fees and expenses of one law firm serving as counsel for the Indemnitee. The Indemnitee, its employees and agents, shall reasonably cooperate with the Indemnitor and its legal representatives in the investigation of any Third Party Claims covered by this License Agreement. The obligations of this Article 8 shall not apply to any settlement of any Third Party Claims if such settlement is effected without the consent of both Parties, which shall not be unreasonably withheld or delayed. The failure to deliver written notice to the Indemnitor within a reasonable time after the commencement of any such action, to the extent prejudicial to its ability to defend such action, shall relieve the Indemnitor of any obligation to the Indemnitee under this Article 8.2. It is understood that only ADCT and ADAGENE may claim indemnity under this License Agreement (on its own behalf or on behalf of its Indemnitees), and other Indemnitees may not claim indemnity hereunder.

 

8.3          Limitation of Damages. NEITHER PARTY HERETO WILL BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES, INCLUDING LOST PROFITS, ARISING FROM OR RELATING TO THIS LICENSE AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES, EXCEPT IN RESPECT OF ANY BREACH OF A PARTY’S OBLIGATIONS UNDER ARTICLES 4 AND 5 OR INDEMNIFICATION OBLIGATIONS UNDER THIS ARTICLE 8 FOR CLAIMS OF THIRD PARTIES.

 

ARTICLE 9

INSURANCE

 

9.1          Subject to Article 8.3, ADCT shall, at its sole expense, obtain and maintain the following insurance on its own behalf, with insurance companies having an A. M. Best Rating of “A-, VII” or better:

 

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(a)              From the initiation of the first human clinical trial for a Licensed Product until the date One (1) year after the last dosing of a human subject under the last such clinical trial, coverage for each such clinical trial in accordance with the national regulation of each country in which it runs a clinical trial and in a manner adequate to cover its obligations hereunder and consistent with normal business practices of prudent companies similarly situated;

 

(b)              During the Term, comprehensive or commercial general liability insurance in a manner adequate to cover its obligations hereunder and consistent with normal business practices of prudent companies similarly size and stage of development or commercialization.

 

9.2          Subject to Article 8.3, during the Term, ADAGENE shall, at its sole expense, obtain and maintain the following insurance on its own behalf, with insurance companies having an A. M. Best Rating of “A-, VII” or better:

 

(a)              comprehensive or commercial general liability insurance in a manner adequate to cover its obligations hereunder and consistent with normal business practices of prudent companies similarly size and stage of development or commercialization.

 

ARTICLE 10

TERM AND TERMINATION

 

10.1        Term. This License Agreement (the “Term”) is executed on the Execution Date but shall only come into force on the Effective Date. This License Agreement shall continue for the Royalty Term on a Licensed Product by Licensed Product basis and on a country by country basis, and thereafter this License Agreement shall become fully-paid up, perpetual and irrevocable, unless terminated earlier during the Royalty Term in accordance with this License Agreement.

 

10.2        Termination.

 

10.2.1       ADCT shall have the right for any or no reason to terminate this License Agreement on a Licensed Product by Licensed Product basis or in its entirety upon thirty (30) days’ prior written notice to ADAGENE. In addition, ADCT shall have the right to terminate this License Agreement on a Licensed Product by Licensed Product basis or in its entirety by written notice to ADAGENE if ADCT decides for any reason to discontinue the development or sale of the applicable Licensed Product worldwide.

 

10.2.2     Either Party may terminate this License Agreement sixty (60) days’ written notice to the other Party upon the other Party becoming bankrupt or making an assignment for the benefit of its creditors, upon appointment of a trustee or receiver for the other Party or all or substantially all of its property, or upon the filing of a voluntary or involuntary petition by or against the other Party under any bankruptcy or insolvency law, or any similar law, unless such other Party remedies such situation within such sixty (60) day period.

 

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10.3        Effects of termination.

 

10.3.1     Upon the termination of this License Agreement for any reason (unless otherwise stated hereafter), the following provisions shall apply. For clarity, these provisions shall not apply in any country or with respect to any particular Licensed Product if the license to ADCT in such country with respect to such Licensed Product has become fully paid up and perpetual as provided in Section 10.1:

 

(a)              payment of royalties and all other sums due to ADAGENE (on behalf of the Licensors) as of the effective date of termination shall be payable to ADAGENE (on behalf of the Licensors) immediately upon termination of this License Agreement;

 

(b)              ADCT shall cease to exploit the Licensed Intellectual Property rights in any way; provided however that ADCT and its Sub-Licensees shall have the right (at ADCT’s option) to, during a period not exceeding three (3) months following termination, fulfil any orders accepted prior to termination from any Licensed Product remaining in inventory, subject to all terms of this License Agreement (including applicable payment and reporting obligations with respect to such sales); and

 

(c)              In case ADCT terminates this License Agreement in whole or in part pursuant to Section 10.2.1 or due to its decision to discontinue the development of the Licensed Products, ADCT shall (i) assign to ADAGENE or its designee all IP, including patent applications, relating specifically to the [***] SAFEbody Panel and/or the [***] SAFEbody Panel as the case may be (depending on which of the Licensed Products is terminated under this License Agreement), with the express exclusion of any other ADCT IP, including in particular any ADCT IP in the Licensed Products and the ADCs, which shall remain at all times ADCT’s sole and joint IP with a Third Party; (ii) abandon any such IP that is not described in subsection (i) and is solely owned by ADCT; and (iii) attempt in good faith to seek abandonment of any such IP that is not described in subsection (a) and is jointly owned by ADCT and its Third Party Iicensor(s). ADCT will not assign any IP on the [***] SAFEbody or [***] SAFEbody to any Third Party, except to its Third Party licensor, as required by ADCT’s written agreement with such Third Party licensor, unless such Third Party (other than ADCT’s licensor) is under a written obligation to abandon any such IP upon termination of this License Agreement. Any assignment not in compliance with this Section 10.3.1 shall be null, void and of no effect.

 

10.3.2     For clarity, any termination of the Material Transfer and Collaboration Agreement shall not termination this License Agreement with respect to this License Agreement that is already effective as of the date of the termination of the Material Transfer and Collaboration Agreement.

 

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ARTICLE 11

MISCELLANEOUS

 

11.1        Applicable Law. This License Agreement shall be governed by and construed in accordance with the laws of the State New-York without regard to any choice of law principle that would dictate the application of the law of another jurisdiction and excluding of the United Nations Convention on Contracts for the International Sale of Goods. This License Agreement has been prepared in the English language and the English language shall control its interpretation.

 

11.2        Arbitration. The Parties agree to use their reasonable efforts to resolve any dispute arising out of this License Agreement by amicable negotiation. The Parties shall be obligated to provide each other written notice of a dispute arising out of this License Agreement. If any dispute arising out of this License Agreement, including validity, breach, or termination thereof, cannot be resolved within thirty (30) days after notice of such dispute, then such dispute shall be settled through binding arbitration conducted by the International Chamber of Commerce in accordance with the then prevailing Rules of Arbitration of the International Chamber of Commerce in force on the date when the notice of arbitration is submitted (for purposes of this Section, the “Rules”), except as modified in this License Agreement, applying the substantive law specified in this Section. The number of arbitrators shall be three (3), wherein each of the Parties select one of the arbitrators and the selected arbitrators shall select the third arbitrator. All arbitrators shall have expertise in the pharmaceutical industry. The arbitration shall take place in New-York, New-York and shall be conducted in English.

 

11.3        Notices. Except as otherwise expressly provided in the License Agreement, any notice required under this License Agreement shall be in writing and shall specifically refer to this License Agreement. Notices shall be sent via one of the following means and will be effective (a) on the date of delivery, if delivered in person; (b) on the date of receipt, if sent by email (with delivery confirmed); or (c) on the date of receipt, if sent by private express courier or by first class certified mail, return receipt requested. Any notice sent via email shall be followed by a copy of such notice by private express courier or by first class mail. Notices shall be sent to the other Party at the addresses set forth below. Either Party may change its addresses for purposes of this Article 11.3 by sending written notice to the other Party.

 

If to ADCT:

ADC Therapeutics SA

Route de la Corniche 3b

1066 Epalinges

Switzerland

Attn: General Counsel, Dominique Graz

Email: legal@,adctherapeutics.com

 

If to ADAGENE:

ADAGENE Inc.

Art.: Kristine She

VP of Operations

Adagene (Suzhou) Limited

3F, Building C14.218 Xinghu St.,

Suzhou Industrial Park,

China 215123

Email: Kristine_she@adagene.com

 

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11.4        Assignment. Neither Party may assign this License Agreement without the prior written consent of the non-assigning Party. Notwithstanding the foregoing, either Party may assign this License Agreement to (i) an Affiliate or (ii) any purchaser of all or substantially all of the assets of such Party or to which this License Agreement relates, or of all of its capital stock, or to any successor corporation or entity resulting from any merger or consolidation of such Party with or into such corporation or entity. Subject to the foregoing, this License Agreement will benefit and bind the Parties’ successors and assigns.

 

11.5        Independent Contractors. The Parties hereto are independent contractors and nothing contained in this License Agreement shall be deemed or construed to create a partnership, joint venture, employment, franchise, agency or fiduciary relationship between the Parties.

 

11.6        Entire License Agreement. This License Agreement and its Annexes constitute the entire License Agreement between the Parties relating to the subject matter of this License Agreement and supersedes all prior oral and written communications, negotiations, representations, License Agreements, between the Parties with respect to the subject matter of this License Agreement.

 

11.7        Amendment. Except as otherwise expressly provided herein, no amendment, change or modification to this License Agreement shall be effective unless made in writing and executed by an authorized representative of each Party.

 

11.8        Waiver. No course of dealing or failure of either Party to strictly enforce any term, right or condition of this License Agreement shall be construed as a general waiver or relinquishment of such term, right or condition. Any waiver of any provision of this License Agreement must be consented to by the non-waiving Party and shall not constitute a waiver of any other provision of this License Agreement by implication or estoppel.

 

11.9        Severability. The Parties do not intend to violate any public policy or statutory or common law. However, if any sentence, paragraph, clause or combination of this License Agreement is in violation of any law or is found to be otherwise unenforceable, such sentence, paragraph, clause or combination of the same shall be deleted and the remainder of this License Agreement shall remain binding, provided that such deletion does not alter the basic purpose and structure of this License Agreement.

 

11.10      No agency. The Parties hereto understand and agree that this License Agreement is limited to the activities, rights and obligations as expressly set forth herein. Nothing in this License Agreement shall be construed to establish any agency, employment, partnership, joint venture, franchise or similar or special relationship between the Parties. Neither Party shall have the right or authority to assume or create any obligations or to make any representations, warranties or commitments on behalf of the other Party, whether express or implied, or to bind the other Party in any respect whatsoever

 

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11.11      Headings. The captions and headings to this License Agreement are for convenience only, and are to be of no force or effect in construing or interpreting any of the provisions of this License Agreement.

 

11.12      Survival. In addition to any provisions that specify survival or non-survival in the event of expiration or termination of this License Agreement, the provisions of Articles 4, 5, 6, 7, 8,9, 10, and this Article 11 shall survive any termination of this License Agreement.

 

11.13      Affiliates. Each Party shall have the right to exercise its rights or perform its obligations through one (1) or more of its Affiliates, provided that such Party shall remain primarily responsible for the action or omission of such Affiliates, subject to Section 11.14.

 

11.14      Guarantee. ADAGENE hereby agrees to be primarily responsible for the actions and/or omissions of ADAGENE and ADAGENE Affiliates under this Agreement and shall guarantee ADAGENE’s and ADAGENE Affiliates’ performance under this Agreement. In the event ADAGENE or any of the ADAGENE Affiliates assigns directly or indirectly any ADAGENE Patents and/or the SAFEbody Technology to another person or entity, such assignment shall only be valid towards ADCT if such person or entity has validly agreed in writing to assume all obligations of its assignor under this Agreement, including, in particular, such primary responsibility and guarantee hereunder. Any assignment not in compliance with this Section 11.14 shall be null, void and of no effect.

 

11.15      Counterparts. This License Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. If any signature is delivered by e-mail delivery of a “pdf’ format, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such “pdf” signature page were an original thereof.

 

[Signature page follows — the rest of this page intentionally left blank.]

 

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IN WITNESS WHEREOF, ADCT and ADAGENE have executed this License Agreement by their respective officers hereunto duly authorized, on the day and year hereinafter written.

 

	
ADC Therapeutics SA
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ C J Martin
    	
 
    
	
Name:
    	
C J Martin
    	
 
    
	
Title:
    	
C.E.O.
    	
 
    
	
 
    	
 
    	
 
    
	
ADAGENE Inc.
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Peter Luo
    	
 
    
	
Name:
    	
Peter Luo
    	
 
    
	
Title:
    	
4/12/2019
    	
 
    

 

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ANNEX 1

 

LICENSED INTELLECTUAL PROPERTY

 

[***]

 

31

 

ANNEX 2

 

FINANCIAL TERM FOR THE FIRST LICENSED PRODUCT

 

[***]

 

32

 

ANNEX 3

 

FINANCIAL TERM FOR THE SECOND LICENSED PRODUCT

WHICH DOES NOT BIND TO [***] TARGET

 

[***]

 

33

 

ANNEX 4

 

FINANCIAL TERM FOR A SECOND LICENSED PRODUCT

WHICH BINDS TO  [***] TARGET

 

[***]

 

34

 

ANNEX 5

 

CHINESE TERRITORY LICENSE TERMS

(PROVIDED SEPARATELY)

 

35

 

ANNEX 6

 

List of ADAGENE Affiliates

with registered address and contact details

 

[***]

 

36Exhibit 10.13

 

ADAGENE INC.

 

2021 PERFORMANCE INCENTIVE PLAN

 

1.              PURPOSE OF PLAN

 

The purpose of this Adagene Inc. 2021 Performance Incentive Plan (this “Plan”) of Adagene Inc., an exempted company organized under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands (the “Company”), is to promote the success of the Company by providing an additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons and to enhance the alignment of the interests of the selected participants with the interests of the Company’s shareholders.

 

2.              ELIGIBILITY

 

The Administrator (as such term is defined in Section 3.1) may grant awards under this Plan only to those persons that the Administrator determines to be Eligible Persons.  An “Eligible Person” is any person who is either: (a) an officer (whether or not a director) or employee of the Company or one of its Subsidiaries; (b) a director of the Company or one of its Subsidiaries; or (c) an individual consultant or advisor who renders or has rendered bona fide services (other than services in connection with the offering or sale of securities of the Company or one of its Subsidiaries in a capital-raising transaction or as a market maker or promoter of securities of the Company or one of its Subsidiaries) to the Company or one of its Subsidiaries and who is selected to participate in this Plan by the Administrator; provided, however, that a person who is otherwise an Eligible Person under clause (c) above may participate in this Plan only if such participation would not adversely affect either the Company’s eligibility to use Form S-8 to register under the U.S. Securities Act of 1933, as amended (the “Securities Act”), the offering and sale of shares issuable under this Plan by the Company or the Company’s compliance with any other applicable laws.  An Eligible Person who has been granted an award (a “participant”) may, if otherwise eligible, be granted additional awards if the Administrator shall so determine.  As used herein, “Subsidiary” means any company or other entity a majority of whose outstanding voting shares or voting power is beneficially owned directly or indirectly by the Company; and “Board” means the Board of Directors of the Company.

 

3.              PLAN ADMINISTRATION

 

3.1                               The Administrator.  This Plan shall be administered by and all awards under this Plan shall be authorized by the Administrator.  The “Administrator” means the Board or one or more committees (or subcommittees, as the case may be) appointed by the Board or another committee (within its delegated authority) to administer all or certain aspects of this Plan.  Any such committee shall be comprised solely of one or more directors or such number of directors as may be required under applicable law.  A committee may delegate some or all of its authority to another committee so constituted.  The Board or a committee comprised solely of directors may also delegate, to the extent permitted by the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands and any other applicable law, to one or more officers of the Company, its authority under this Plan.  The Board or another committee (within its delegated authority) may delegate different levels of authority to different committees or persons with administrative and grant authority under this Plan.  Unless otherwise provided in the Memorandum and Articles of Association of the Company or the applicable charter of any Administrator: (a) a majority of the members of the acting Administrator shall constitute a quorum, and (b) the vote of a majority of the members present assuming the presence of a quorum or the unanimous written consent of the members of the Administrator shall constitute action by the acting Administrator.

 

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3.2                               Powers of the Administrator.  Subject to the express provisions of this Plan, the Administrator is authorized and empowered to do all things necessary or desirable in connection with the authorization of awards and the administration of this Plan (in the case of a committee or delegation to one or more officers, within any express limits on the authority delegated to that committee or person(s)), including, without limitation, the authority to:

 

(a)                                 determine eligibility and, from among those persons determined to be eligible, determine the particular Eligible Persons who will receive an award under this Plan;

 

(b)                                 grant awards to Eligible Persons, determine the price (if any) at which securities will be offered or awarded and the number of securities to be offered or awarded to any of such persons (in the case of securities-based awards), determine the other specific terms and conditions of awards consistent with the express limits of this Plan, establish the installment(s) (if any) in which such awards shall become exercisable or shall vest (which may include, without limitation, performance and/or time-based schedules), or determine that no delayed exercisability or vesting is required, establish any applicable performance-based exercisability or vesting requirements, determine the circumstances in which any performance-based goals (or the applicable measure of performance) will be adjusted and the nature and impact of any such adjustment, determine the extent (if any) to which any applicable exercise and vesting requirements have been satisfied, establish the events (if any) on which exercisability or vesting may accelerate (which may include, without limitation, retirement and other specified terminations of employment or services, or other circumstances), and establish the events (if any) of termination, expiration or reversion of such awards;

 

(c)                                  approve the forms of any award agreements (which need not be identical either as to type of award or among participants);

 

(d)                                 construe and interpret this Plan and any agreements defining the rights and obligations of the Company, its Subsidiaries, and participants under this Plan, make any and all determinations under this Plan and any such agreements, further define the terms used in this Plan, and prescribe, amend and rescind rules and regulations relating to the administration of this Plan or the awards granted under this Plan;

 

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(e)                                  cancel, modify, or waive the Company’s rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding awards, subject to any required consent under Section 8.6.5;

 

(f)                                   accelerate, waive or extend the vesting or exercisability, or modify or extend the term of, any or all such outstanding awards (in the case of options or share appreciation rights, within the maximum term of such awards) in such circumstances as the Administrator may deem appropriate (including, without limitation, in connection with a retirement or other termination of employment or services, or other circumstances) subject to any required consent under Section 8.6.5;

 

(g)                                  adjust the number of Ordinary Shares subject to any award, adjust the price of any or all outstanding awards (including the exercise or base price of any outstanding option or share appreciation right as contemplated by Section 3.6), or otherwise waive or change previously imposed terms and conditions, in such circumstances as the Administrator may deem appropriate, in each case subject to Sections 4 and 8.6;

 

(h)                                 determine the date of grant of an award, which may be a designated date after but not before the date of the Administrator’s action to approve the award (unless otherwise designated by the Administrator, the date of grant of an award shall be the date upon which the Administrator took the action approving the award);

 

(i)                                     determine whether, and the extent to which, adjustments are required pursuant to Section 7.1 hereof and take any other actions contemplated by Section 7 in connection with the occurrence of an event of the type described in Section 7;

 

(j)                                    acquire or settle (subject to Sections 7 and 8.6) rights under awards in cash, shares of equivalent value, or other consideration; and

 

(k)                                 determine the fair market value of the Ordinary Shares or awards under this Plan from time to time and/or the manner in which such value will be determined.

 

3.3                               Binding Determinations.  Any determination or other action taken by, or inaction of, the Company, any Subsidiary, or the Administrator relating or pursuant to this Plan (or any award made under this Plan) and within its authority hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons.  Neither the Board nor any other Administrator, nor any member thereof or person acting at the direction thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with this Plan (or any award made under this Plan), and all such persons shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors and officers liability insurance coverage that may be in effect from time to time.  Neither the Board nor any other Administrator, nor any member thereof or person acting at the direction thereof, nor the Company or any of its Subsidiaries, shall be liable for any damages of a participant should an option intended as an ISO (as defined below) fail to meet the requirements of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), applicable to ISOs, should any other award(s) fail to qualify for any intended tax treatment, should any award grant or other action with respect thereto not satisfy Rule 16b-3 promulgated under the U.S. Securities Exchange Act of 1934, as amended, or otherwise for any tax or other liability imposed on a participant with respect to an award.

 

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3.4                               Reliance on Experts.  In making any determination or in taking or not taking any action under this Plan, the Administrator may obtain and may rely upon the advice of experts, including employees and professional advisors to the Company.  No director, officer or agent of the Company or any of its Subsidiaries shall be liable for any such action or determination taken or made or omitted in good faith.

 

3.5                               Delegation.  The Administrator may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Company or any of its Subsidiaries or to third parties.

 

3.6                               Option and SAR Repricing.  Subject to Section 4 and Section 8.6.5, the Administrator, from time to time and in its sole discretion, may provide for (1) the amendment of any outstanding option or SAR to reduce the exercise price or base price of the award, (2) the cancellation, exchange, or surrender of an outstanding option or SAR in exchange for cash or other awards (for the purpose of repricing the award or otherwise), or (3) the cancellation, exchange, or surrender of an outstanding option or SAR in exchange for an option or SAR with an exercise or base price that is less than the exercise or base price of the original award.  For avoidance of doubt, the Administrator may take any or all of the foregoing actions under this Section 3.6 without shareholder approval.

 

4.              ORDINARY SHARES SUBJECT TO THE PLAN; SHARE LIMITS

 

4.1                               Shares Available.  Subject to the provisions of Section 7.1, the shares that may be delivered under this Plan shall be the Company’s authorized but unissued Ordinary Shares and any of its Ordinary Shares held as treasury shares.  For purposes of this Plan, “Ordinary Shares” shall mean the ordinary shares of the Company and such other securities or property as may become the subject of awards under this Plan, or may become subject to such awards, pursuant to an adjustment made under Section 7.1.

 

4.2                               Aggregate Share Limit.  The maximum number of Ordinary Shares that may be delivered pursuant to awards granted to Eligible Persons under this Plan (the “Share Limit”) is equal to the sum of the following:

 

(1)                                 2,994,000 Ordinary Shares, plus

 

(2)                                 the number of any shares subject to options granted under the Adagene Inc. Second Amended and Restated Share Incentive Plan (the “Share Incentive Plan”) and outstanding on the date of shareholder approval of this Plan (the “Shareholder Approval Date”) which expire, or for any reason are cancelled or terminated, after the Shareholder Approval Date without being exercised, plus

 

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(3)                                 the number of any shares subject to restricted share awards granted under the Share Incentive Plan that are outstanding and unvested on the Shareholder Approval Date (including, for the avoidance of doubt, any such shares acquired pursuant to the exercise of a stock option granted under such plan prior to the applicable vesting date) that are forfeited, terminated, cancelled or otherwise reacquired by the Company without having become vested.

 

In addition, the Share Limit shall automatically increase on the first trading day in January of each calendar year during the term of this Plan, commencing with January 2022, by an amount equal to (i) five percent (5%) of the total number of Ordinary Shares issued and outstanding on December 31 of the immediately preceding calendar year or (ii) such lesser number of Ordinary Shares as may be established by the Board.

 

4.3                               ISO Share Limit.  The maximum number of Ordinary Shares that may be delivered pursuant to options qualified as incentive stock options granted under this Plan is 2,994,000 shares.  This sub-limit is in addition to, not in lieu of, the aggregate Share Limit in Section 4.2.

 

4.4                               Share-Limit Counting Rules.  The Share Limit shall be subject to the following provisions of this Section 4.4:

 

(a)                                 Shares that are subject to or underlie awards granted under this Plan which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under this Plan shall not be counted against the Share Limit and shall be available for subsequent awards under this Plan.

 

(b)                                 Except as provided below, to the extent that Ordinary Shares are delivered pursuant to the exercise of a share appreciation right granted under this Plan, the number of underlying shares which are actually issued in payment of the award shall be counted against the Share Limit.  (For purposes of clarity, if a share appreciation right relates to 100,000 shares and is exercised in full at a time when the payment due to the participant is 15,000 shares, 15,000 shares shall be counted against the Share Limit with respect to such exercise and the 85,000 shares not issued shall not be counted against the Share Limit and shall be available for subsequent awards under this Plan.)

 

(c)                                  Shares that are exchanged by a participant or withheld by the Company as full or partial payment in connection with any award granted under this Plan, as well as any shares exchanged by a participant or withheld by the Company or one of its Subsidiaries to satisfy the tax withholding obligations related to any award granted under this Plan, shall not be counted against the Share Limit and shall be available for subsequent awards under this Plan.  In addition, shares that are exchanged by a participant or withheld by the Company after the Shareholder Approval Date as full or partial payment in connection with any award granted under the Share Incentive Plan, as well as any shares exchanged by a participant or withheld by the Company or one of its Subsidiaries after the Shareholder Approval Date to satisfy the tax withholding obligations related to any award granted under the Share Incentive Plan, shall be available for new awards under this Plan.

 

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(d)                                 To the extent that an award granted under this Plan is settled in cash or a form other than Ordinary Shares, the shares that would have been delivered had there been no such cash or other settlement shall not be counted against the Share Limit and shall be available for subsequent awards under this Plan.

 

(e)                                  In the event that Ordinary Shares are delivered in respect of a dividend equivalent right granted under this Plan, the number of shares delivered with respect to the award shall be counted against the Share Limit.  (For purposes of clarity, if 1,000 dividend equivalent rights are granted and outstanding when the Company pays a dividend, and 50 shares are delivered in payment of those rights with respect to that dividend, 50 shares shall be counted against the Share Limit).

 

(f)                                   The Company may not increase the Share Limit by repurchasing Ordinary Shares on the market (by using cash received through the exercise of options or otherwise).

 

Refer to Section 8.10 for application of the share limits of this Plan, including the limits in Sections 4.2 and 4.3, with respect to assumed awards.  Each of the numerical limits and references in Sections 4.2 and 4.3, and in this Section 4.4, is subject to adjustment as contemplated by Sections 7 and 8.10.

 

4.5                               No Fractional Shares; Minimum Issue.  Unless otherwise expressly provided by the Administrator, no fractional shares shall be delivered under this Plan.  The Administrator may pay cash in lieu of any fractional shares in settlements of awards under this Plan.  The Administrator may from time to time impose a limit (of not greater than 100 shares) on the minimum number of shares that may be purchased or exercised as to awards (or any particular award) granted under this Plan unless (as to any particular award) the total number purchased or exercised is the total number at the time available for purchase or exercise under the award.

 

5.              AWARDS

 

5.1                               Type and Form of Awards.  The Administrator shall determine the type or types of award(s) to be made to each selected Eligible Person.  Awards may be granted singly, in combination or in tandem.  Awards also may be made in combination or in tandem with, in replacement of, as alternatives to, or as the payment form for grants or rights under any other employee or compensation plan of the Company or one of its Subsidiaries.  The types of awards that may be granted under this Plan are:

 

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5.1.1                     Options.  An option is the grant of a right to purchase a specified number of Ordinary Shares during a specified period as determined by the Administrator.  An option may be intended as an incentive stock option within the meaning of Section 422 of the Code (an “ISO”) or a nonqualified stock option (an option not intended to be an ISO).  The agreement evidencing the grant of an option to a U.S. resident will indicate if the option is intended as an ISO; otherwise it will be deemed to be a nonqualified stock option.  The Administrator may designate any option granted under this Plan to a non-U.S. resident in accordance with the rules and regulations applicable to the options in the jurisdiction in which such person is a resident.  The maximum term of each option (ISO or nonqualified) shall be ten (10) years.  The per share exercise price for each option shall be not less than 100% of the fair market value of an Ordinary Share on the date of grant of the option; provided, however, that the Administrator may in its discretion establish a per share exercise price for any option granted to an Eligible Person who is not subject to U.S. taxes that is less than 100% of the fair market value of an Ordinary Share on the grant date.  When an option is exercised, the exercise price for the shares to be purchased shall be paid in full in cash or such other method permitted by the Administrator consistent with Section 5.4.

 

5.1.2                     Additional Rules Applicable to ISOs.  To the extent that the aggregate fair market value (determined at the time of grant of the applicable option) of shares with respect to which ISOs first become exercisable by a participant in any calendar year exceeds US$100,000, taking into account both Ordinary Shares subject to ISOs under this Plan and shares subject to ISOs under all other plans of the Company or one of its Subsidiaries (or any parent or predecessor corporation to the extent required by and within the meaning of Section 422 of the Code and the regulations promulgated thereunder), such options shall be treated as nonqualified stock options.  In reducing the number of options treated as ISOs to meet the US$100,000 limit, the most recently granted options shall be reduced first.  To the extent a reduction of simultaneously granted options is necessary to meet the US$100,000 limit, the Administrator may, in the manner and to the extent permitted by law, designate which Ordinary Shares are to be treated as shares acquired pursuant to the exercise of an ISO.  ISOs may only be granted to employees of the Company or one of its subsidiaries (for this purpose, the term “subsidiary” is used as defined in Section 424(f) of the Code, which generally requires an unbroken chain of ownership of at least 50% of the total combined voting power of all classes of shares of each subsidiary in the chain beginning with the Company and ending with the subsidiary in question).  No ISO may be granted to any person who, at the time the option is granted, owns (or is deemed to own under Section 424(d) of the Code) outstanding Ordinary Shares possessing more than 10% of the total combined voting power of all classes of shares of the Company, unless the exercise price of such option is at least 110% of the fair market value of the shares subject to the option and such option by its terms is not exercisable after the expiration of five years from the date such option is granted. If an otherwise-intended ISO fails to meet the applicable requirements of Section 422 of the Code, the option shall be a nonqualified stock option.

 

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5.1.3                     Share Appreciation Rights.  A share appreciation right or “SAR” is a right to receive a payment, in cash and/or Ordinary Shares, equal to the excess of the fair market value of a specified number of Ordinary Shares on the date the SAR is exercised over the “base price” of the award, which base price shall be set forth in the applicable award agreement and shall be not less than 100% of the fair market value of an Ordinary Share on the date of grant of the SAR; provided, however, that the Administrator may in its discretion establish a per share base price for any SAR granted to an Eligible Person who is not subject to U.S. taxes that is less than 100% of the fair market value of an Ordinary Share on the grant date.  The maximum term of a SAR shall be ten (10) years.

 

5.1.4                     Other Awards; Dividend Equivalent Rights.  The other types of awards that may be granted under this Plan include: (a) share bonuses, restricted shares, performance shares, share units, restricted share units, deferred shares, phantom shares or similar rights to purchase or acquire shares, whether at a fixed or variable price (or no price) or fixed or variable ratio related to the Ordinary Shares, and any of which may (but need not) be fully vested at grant or vest upon the passage of time, the occurrence of one or more events, the satisfaction of performance criteria or other conditions, or any combination thereof; or (b) cash awards.  The types of cash awards that may be granted under this Plan include the opportunity to receive a payment for the achievement of one or more goals established by the Administrator, on such terms as the Administrator may provide, as well as discretionary cash awards.  Dividend equivalent rights may be granted as a separate award or in connection with another award under this Plan; provided, however, that dividend equivalent rights may not be granted as to an option or SAR granted under this Plan.  In addition, any dividends and/or dividend equivalents as to the portion of an award that is subject to unsatisfied vesting requirements will be subject to termination and forfeiture to the same extent as the corresponding portion of the award to which they relate in the event the applicable vesting requirements are not satisfied.

 

5.2                               Award Agreements.  Each award shall be evidenced by a written or electronic award agreement or notice in a form approved by the Administrator (an “award agreement”), and, in each case and if required by the Administrator, executed or otherwise electronically accepted by the recipient of the award in such form and manner as the Administrator may require.

 

5.3                               Deferrals and Settlements.  Payment of awards may be in the form of cash, Ordinary Shares, other awards or combinations thereof as the Administrator shall determine, and with such restrictions (if any) as it may impose.  The Administrator may also require or permit participants to elect to defer the issuance of shares or the settlement of awards in cash under such rules and procedures as it may establish under this Plan.  The Administrator may also provide that deferred settlements include the payment or crediting of interest or other earnings on the deferral amounts, or the payment or crediting of dividend equivalents where the deferred amounts are denominated in shares.

 

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5.4                               Consideration for Ordinary Shares or Awards.  The purchase price (if any) for any award granted under this Plan or the Ordinary Shares to be delivered pursuant to an award, as applicable, may be paid by means of any lawful consideration as determined by the Administrator, including, without limitation, one or a combination of the following methods:

 

(a)                                 services rendered by the recipient of such award;

 

(b)                                 cash, check payable to the order of the Company, or electronic funds transfer;

 

(c)                                  notice and third party payment in such manner as may be authorized by the Administrator;

 

(d)                                 the delivery of previously owned Ordinary Shares;

 

(e)                                  by a reduction in the number of shares otherwise deliverable pursuant to the award; or

 

(f)                                   subject to such procedures as the Administrator may adopt, pursuant to a “cashless exercise” with a third party who provides financing for the purposes of (or who otherwise facilitates) the purchase or exercise of awards.

 

In no event shall any shares newly-issued by the Company be issued for less than the minimum lawful consideration for such shares or for consideration other than consideration permitted by applicable law.  Ordinary Shares used to satisfy the exercise price of an option shall be valued at their fair market value.  The Company will not be obligated to record in the Company’s register of members or deliver any shares unless and until it receives full payment of the exercise or purchase price therefor and any related withholding obligations under Section 8.5 and any other conditions to exercise or purchase have been satisfied, at which point the relevant shares shall be issued and noted in the Company’s register of members.  Unless otherwise expressly provided in the applicable award agreement, the Administrator may at any time eliminate or limit a participant’s ability to pay any purchase or exercise price of any award or shares by any method other than cash payment to the Company.  The Administrator may take all actions necessary to alter the method of option exercise and the exchange and transmittal of proceeds with respect to participants resident outside the U.S. in order to comply with applicable foreign exchange and tax regulations and any other applicable laws and regulations.

 

5.5                               Definition of Fair Market Value.  For purposes of this Plan, “fair market value” shall mean, unless otherwise determined or provided by the Administrator in the circumstances, the closing price (in regular trading) for an Ordinary Share on the Nasdaq Stock Market (the “Market”) for the date in question or, if no sales of Ordinary Shares were reported on the Market on that date, the closing price (in regular trading) for an Ordinary Share on the Market on the last day preceding the date in question on which sales of Ordinary Shares were reported on the Market.  The Administrator may, however, provide with respect to one or more awards that the fair market value shall equal the closing price (in regular trading) for an Ordinary Share on the Market on the last trading day preceding the date in question or the average of the high and low trading prices of an Ordinary Share on the Market for the date in question or the most recent trading day.  If the Ordinary Shares are no longer listed or are no longer actively traded on the Market as of the applicable date, the fair market value of the Ordinary Shares shall be the value as reasonably determined by the Administrator for purposes of the award in the circumstances.  The Administrator also may adopt a different methodology for determining fair market value with respect to one or more awards if a different methodology is necessary or advisable to secure any intended favorable tax, legal or other treatment for the particular award(s) (for example, and without limitation, the Administrator may provide that fair market value for purposes of one or more awards will be based on an average of closing prices (or the average of high and low daily trading prices) for a specified period preceding the relevant date).

 

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5.6                               Transfer Restrictions.

 

5.6.1                     Limitations on Exercise and Transfer.  Unless otherwise expressly provided in (or pursuant to) this Section 5.6 or required by applicable law: (a) all awards are non-transferable and shall not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge; (b) awards shall be exercised only by the participant; and (c) amounts payable or shares issuable pursuant to any award shall be delivered only to (or for the account of), and, in the case of Ordinary Shares, registered in the name of, the participant.

 

5.6.2                     Exceptions.  The Administrator may permit awards to be exercised by and paid to, or otherwise transferred to, other persons or entities pursuant to such conditions and procedures, including limitations on subsequent transfers, as the Administrator may, in its sole discretion, establish in writing.  Any permitted transfer shall be subject to compliance with applicable securities laws and shall not be for value (other than nominal consideration, settlement of marital property rights, or for interests in an entity in which more than 50% of the voting interests are held by the Eligible Person or by the Eligible Person’s family members).

 

5.6.3                     Further Exceptions to Limits on Transfer.  The exercise and transfer restrictions in Section 5.6.1 shall not apply to:

 

(a)                                 transfers to the Company (for example, in connection with the expiration or termination of the award);

 

(b)                                 the designation of a beneficiary to receive benefits in the event of the participant’s death or, if the participant has died, transfers to or exercise by the participant’s beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution;

 

(c)                                  subject to any applicable limitations on ISOs, transfers to a family member (or former family member) pursuant to a domestic relations order if received by the Administrator;

 

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(d)                                 if the participant has suffered a disability, permitted transfers or exercises on behalf of the participant by his or her legal representative; or

 

(e)                                  the authorization by the Administrator of “cashless exercise” procedures with third parties who provide financing for the purpose of (or who otherwise facilitate) the exercise of awards consistent with applicable laws and any limitations imposed by the Administrator.

 

5.7                               International Awards.  One or more awards may be granted to Eligible Persons who provide services to the Company or one of its Subsidiaries outside of the United States.  Any awards granted to such persons may be granted pursuant to the terms and conditions of any applicable sub-plans, if any, appended to this Plan and approved by the Administrator from time to time.  The awards so granted need not comply with other specific terms of this Plan, provided that shareholder approval of any deviation from the specific terms of this Plan is not required by applicable law or any applicable listing agency.

 

6.              EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE ON AWARDS

 

6.1                               General.  The Administrator shall establish the effect (if any) of a termination of employment or service on the rights and benefits under each award under this Plan and in so doing may make distinctions based upon, inter alia, the cause of termination and type of award.  If the participant is not an employee of the Company or one of its Subsidiaries, is not a member of the Board, and provides other services to the Company or one of its Subsidiaries, the Administrator shall be the sole judge for purposes of this Plan (unless a contract or the award otherwise provides) of whether the participant continues to render services to the Company or one of its Subsidiaries and the date, if any, upon which such services shall be deemed to have terminated.

 

6.2                               Events Not Deemed Terminations of Employment.  Unless the express policy of the Company or one of its Subsidiaries, or the Administrator, otherwise provides, or except as otherwise required by applicable law, the employment relationship shall not be considered terminated in the case of: (a) sick leave, (b) military leave, or (c) any other leave of absence authorized by the Company or one of its Subsidiaries, or the Administrator; provided that, unless reemployment upon the expiration of such leave is guaranteed by contract or law or the Administrator otherwise provides, such leave is for a period of not more than three months.  In the case of any employee of the Company or one of its Subsidiaries on an approved leave of absence, continued vesting of the award while on leave from the employ of the Company or one of its Subsidiaries may be suspended until the employee returns to service, unless the Administrator otherwise provides or applicable law otherwise requires.  In no event shall an award be exercised after the expiration of any applicable maximum term of the award.

 

6.3                               Effect of Change of Subsidiary Status.  For purposes of this Plan and any award, if an entity ceases to be a Subsidiary of the Company a termination of employment or service shall be deemed to have occurred with respect to each Eligible Person in respect of such Subsidiary who does not continue as an Eligible Person in respect of the Company or another Subsidiary that continues as such after giving effect to the transaction or other event giving rise to the change in status unless the Subsidiary that is sold, spun-off or otherwise divested (or its successor or a direct or indirect parent of such Subsidiary or successor) assumes the Eligible Person’s award(s) in connection with such transaction.

 

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7.              ADJUSTMENTS; ACCELERATION

 

7.1                               Adjustments.

 

(a)                                 Subject to Section 7.2, upon (or, as may be necessary to effect the adjustment, immediately prior to): any reclassification, recapitalization, share split (including a share split in the form of a share dividend) or reverse share split; any merger, combination, consolidation, conversion or other reorganization; any spin-off, split-up, or similar extraordinary dividend distribution in respect of the Ordinary Shares; or any exchange of Ordinary Shares or other securities of the Company, or any similar, unusual or extraordinary corporate transaction in respect of the Ordinary Shares; then the Administrator shall equitably and proportionately adjust: (1) the number and type of Ordinary Shares (or other securities) that thereafter may be made the subject of awards (including the specific share limits, maximums and numbers of shares set forth elsewhere in this Plan); (2) the number, amount and type of Ordinary Shares (or other securities or property) subject to any outstanding awards; (3) the grant, purchase, or exercise price (which term includes the base price of any SAR or similar right) of any outstanding awards; and/or (4) the securities, cash or other property deliverable upon exercise or payment of any outstanding awards, in each case to the extent necessary to preserve (but not increase) the level of incentives intended by this Plan and the then-outstanding awards.

 

(b)                                 Without limiting the generality of Section 3.3, any good faith determination by the Administrator as to whether an adjustment is required in the circumstances pursuant to this Section 7.1, and the extent and nature of any such adjustment, shall be conclusive and binding on all persons.

 

7.2                               Corporate Transactions - Assumption and Termination of Awards.

 

(a)                                 Upon any event in which the Company does not survive, or does not survive as a public company in respect of its Ordinary Shares (including, without limitation, a dissolution, merger, combination, consolidation, conversion, amalgamation, exchange of securities, or other reorganization, or a sale of all or substantially all of the business, shares or assets of the Company, in any case in connection with which the Company does not survive or does not survive as a public company in respect of its Ordinary Shares), then the Administrator may make provision for a cash payment in settlement of, or for the termination, assumption, substitution or exchange of any or all outstanding awards or the cash, securities or property deliverable to the holder of any or all outstanding awards, based upon, to the extent relevant under the circumstances, the distribution or consideration payable to holders of the Ordinary Shares upon or in respect of such event.  Upon the occurrence of any event described in the preceding sentence in connection with which the Administrator has made provision for the award to be terminated (and the Administrator has not made a provision for the substitution, assumption, exchange or other continuation or settlement of the award): (1) unless otherwise provided in the applicable award agreement, each then-outstanding option and SAR shall become fully vested, all restricted shares then outstanding shall fully vest free of restrictions, and each other award granted under this Plan that is then outstanding shall become payable to the holder of such award (with any performance goals applicable to the award in each case being deemed met, unless otherwise provided in the award agreement, at the “target” performance level); and (2) each award (including any award or portion thereof that, by its terms, does not accelerate and vest in the circumstances) shall terminate upon the related event; provided that the holder of an option or SAR shall be given reasonable advance notice of the impending termination and a reasonable opportunity to exercise his or her outstanding vested options and SARs (after giving effect to any accelerated vesting required in the circumstances) in accordance with their terms before the termination of such awards (except that in no case shall more than ten days’ notice of the impending termination be required and any acceleration of vesting and any exercise of any portion of an award that is so accelerated may be made contingent upon the actual occurrence of the event).

 

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(b)                                 Without limiting the preceding paragraph, in connection with any event referred to in the preceding paragraph or any change in control event defined in any applicable award agreement, the Administrator may, in its discretion, provide for the accelerated vesting of any award or awards as and to the extent determined by the Administrator in the circumstances.

 

(c)                                  For purposes of this Section 7.2, an award shall be deemed to have been “assumed” if (without limiting other circumstances in which an award is assumed) the award continues after an event referred to above in this Section 7.2, and/or is assumed and continued by the surviving entity following such event (including, without limitation, an entity that, as a result of such event, owns the Company or all or substantially all of the Company’s assets directly or through one or more subsidiaries (a “Parent”)), and confers the right to purchase or receive, as applicable and subject to vesting and the other terms and conditions of the award, for each Ordinary Share subject to the award immediately prior to the event, the consideration (whether cash, shares, or other securities or property) received in the event by the shareholders of the Company for each Ordinary Share sold or exchanged in such event (or the consideration received by a majority of the shareholders participating in such event if the shareholders were offered a choice of consideration); provided, however, that if the consideration offered for an Ordinary Share in the event is not solely the ordinary shares of a successor corporation or a Parent, the Administrator may provide for the consideration to be received upon exercise or payment of the award, for each share subject to the award, to be solely ordinary shares of the successor corporation or a Parent equal in fair market value to the per share consideration received by the shareholders participating in the event.

 

(d)                                 The Administrator may adopt such valuation methodologies for outstanding awards as it deems reasonable in the event of a cash or property settlement and, in the case of options, SARs or similar rights, but without limitation on other methodologies, may base such settlement solely upon the excess if any of the per share amount payable upon or in respect of such event over the exercise or base price of the award.  In the case of an option, SAR or similar right as to which the per share amount payable upon or in respect of such event is less than or equal to the exercise or base price of the award, the Administrator may terminate such award in connection with an event referred to in this Section 7.2 without any payment in respect of such award.

 

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(e)                                  In any of the events referred to in this Section 7.2, the Administrator may take such action contemplated by this Section 7.2 prior to such event (as opposed to on the occurrence of such event) to the extent that the Administrator deems the action necessary to permit the participant to realize the benefits intended to be conveyed with respect to the underlying shares.  Without limiting the generality of the foregoing, the Administrator may deem an acceleration and/or termination to occur immediately prior to the applicable event and, in such circumstances, will reinstate the original terms of the award if an event giving rise to an acceleration and/or termination does not occur.

 

(f)                                   Without limiting the generality of Section 3.3, any good faith determination by the Administrator pursuant to its authority under this Section 7.2 shall be conclusive and binding on all persons.

 

(g)                                  The Administrator may override the provisions of this Section 7.2 by express provision in the award agreement and may accord any Eligible Person a right to refuse any acceleration, whether pursuant to the award agreement or otherwise, in such circumstances as the Administrator may approve.  The portion of any ISO accelerated in connection with an event referred to in this Section 7.2 (or such other circumstances as may trigger accelerated vesting of the award) shall remain exercisable as an ISO only to the extent the applicable US$100,000 limitation on ISOs is not exceeded.  To the extent exceeded, the accelerated portion of the option shall be exercisable as a nonqualified stock option under the Code.

 

8.              OTHER PROVISIONS

 

8.1                               Compliance with Laws.  This Plan, the granting and vesting of awards under this Plan, the offer, issuance and delivery of Ordinary Shares, and/or the payment of money under this Plan or under awards are subject to compliance with all applicable federal, state, local and foreign laws, rules and regulations (including, but not limited to, securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith.  The person acquiring any securities under this Plan will, if requested by the Company or one of its Subsidiaries, provide such assurances and representations to the Company or one of its Subsidiaries as the Administrator may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.

 

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8.2                               No Rights to Award.  No person shall have any claim or rights to be granted an award (or additional awards, as the case may be) under this Plan, subject to any express contractual rights (set forth in a document other than this Plan) to the contrary.

 

8.3                               No Employment/Service Contract.  Nothing contained in this Plan (or in any other documents under this Plan or in any award) shall confer upon any Eligible Person or other participant any right to continue in the employ or other service of the Company or one of its Subsidiaries, constitute any contract or agreement of employment or other service or affect an employee’s status as an employee at will, nor shall interfere in any way with the right of the Company or one of its Subsidiaries to change a person’s compensation or other benefits, or to terminate his or her employment or other service, with or without cause.  Nothing in this Section 8.3, however, is intended to adversely affect any express independent right of such person under a separate employment or service contract other than an award agreement.

 

8.4                               Plan Not Funded.  Awards payable under this Plan shall be payable in shares or from the general assets of the Company, and no special or separate reserve, fund or deposit shall be made to assure payment of such awards.  No participant, beneficiary or other person shall have any right, title or interest in any fund or in any specific asset (including Ordinary Shares, except as expressly otherwise provided) of the Company or one of its Subsidiaries by reason of any award hereunder.  Neither the provisions of this Plan (or of any related documents), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company or one of its Subsidiaries and any participant, beneficiary or other person.  To the extent that a participant, beneficiary or other person acquires a right to receive payment pursuant to any award hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company.

 

8.5                               Tax Withholding.  Upon any exercise, vesting, or payment of any award, or upon the disposition of Ordinary Shares acquired pursuant to the exercise of an ISO prior to satisfaction of the holding period requirements of Section 422 of the Code, or upon any other tax withholding event with respect to any award, arrangements satisfactory to the Company shall be made to provide for any taxes the Company or any of its Subsidiaries may be required or permitted to withhold with respect to such award event or payment.  Such arrangements may include (but are not limited to) any one of (or a combination of) the following:

 

(a)                                 The Company or one of its Subsidiaries shall have the right to require the participant (or the participant’s personal representative or beneficiary, as the case may be) to pay or provide for payment of the amount of any taxes which the Company or one of its Subsidiaries may be required or permitted to withhold with respect to such award event or payment.

 

(b)                                 The Company or one of its Subsidiaries shall have the right to deduct from any amount otherwise payable in cash (whether related to the award or otherwise) to the participant (or the participant’s personal representative or beneficiary, as the case may be) the amount of any taxes which the Company or one of its Subsidiaries may be required or permitted to withhold with respect to such award event or payment.

 

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(c)                                  In any case where a tax is required to be withheld in connection with the delivery of Ordinary Shares under this Plan (including the sale of Ordinary Shares as may be required to comply with applicable foreign exchange rules), the Administrator may in its sole discretion (subject to Section 8.1) require or grant (either at the time of the award or thereafter) to the participant the right to elect, pursuant to such rules and subject to such conditions as the Administrator may establish, that the Company reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of shares, valued in a consistent manner at their fair market value or at the sales price in accordance with authorized procedures for cashless exercises, necessary to satisfy any applicable withholding obligation on exercise, vesting or payment.

 

8.6                               Effective Date, Termination and Suspension, Amendments.

 

8.6.1                     Effective Date.  This Plan is effective as of the United States Securities and Exchange Commission’s declaration of effectiveness of the Registration Statement on Form F-1 relating to the registration of the Company’s Ordinary Shares in the form of American depositary shares (the “Effective Date”).  This Plan shall be submitted for and subject to shareholder approval no later than twelve months after the Effective Date.  Unless earlier terminated by the Board and subject to any extension that may be approved by shareholders, this Plan shall terminate at the close of business on the day before January 16, 2031.  After the termination of this Plan either upon such stated termination date or its earlier termination by the Board, no additional awards may be granted under this Plan, but previously granted awards (and the authority of the Administrator with respect thereto, including the authority to amend such awards) shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of this Plan.

 

8.6.2                     Board Authorization.  The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part.  No awards may be granted during any period that the Board suspends this Plan.

 

8.6.3                     Shareholder Approval.  To the extent then required by applicable law or deemed necessary or advisable by the Board, any amendment to this Plan shall be subject to shareholder approval.

 

8.6.4                     Amendments to Awards.  Without limiting any other express authority of the Administrator under (but subject to) the express limits of this Plan, the Administrator by agreement or resolution may waive conditions of or limitations on awards to participants that the Administrator in the prior exercise of its discretion has imposed, without the consent of a participant, and (subject to the requirements of Sections 3.2 and 8.6.5) may make other changes to the terms and conditions of awards.

 

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8.6.5                     Limitations on Amendments to Plan and Awards.  No amendment, suspension or termination of this Plan or amendment of any outstanding award agreement shall, without written consent of the participant, affect in any manner materially adverse to the participant any rights or benefits of the participant or obligations of the Company under any award granted under this Plan prior to the effective date of such change.  Changes, settlements and other actions contemplated by Section 7 shall not be deemed to constitute changes or amendments for purposes of this Section 8.6.

 

8.7                               Privileges of Share Ownership.  Except as otherwise expressly authorized by the Administrator, a participant shall not be entitled to any privilege of share ownership as to any Ordinary Shares not actually delivered to and held of record by the participant.  Except as expressly required by Section 7.1 or otherwise expressly provided by the Administrator, no adjustment will be made for dividends or other rights as a shareholder for which a record date is prior to such date of delivery.

 

8.8                               Governing Law; Severability.

 

8.8.1                     Choice of Law.  This Plan, the awards, all documents evidencing awards and all other related documents shall be governed by, and construed in accordance with the laws of the Cayman Islands, notwithstanding any conflict of law provision to the contrary.

 

8.8.2                     Severability.  If a court of competent jurisdiction holds any provision invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.

 

8.9                               Captions.  Captions and headings are given to the sections and subsections of this Plan solely as a convenience to facilitate reference.  Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Plan or any provision thereof.

 

8.10                        Share-Based Awards in Substitution for Options or Awards Granted by Other Company.  Awards may be granted to Eligible Persons in substitution for or in connection with an assumption of employee options, SARs, restricted shares or other share-based awards granted by other entities to persons who are or who will become Eligible Persons in respect of the Company or one of its Subsidiaries, in connection with a distribution, merger, amalgamation or other reorganization by or with the granting entity or an affiliated entity, or the acquisition by the Company or one of its Subsidiaries, directly or indirectly, of all or a substantial part of the shares or assets of the employing entity.  The awards so granted need not comply with other specific terms of this Plan, provided the awards reflect adjustments giving effect to the assumption or substitution consistent with any conversion applicable to the ordinary shares (or the securities otherwise subject to the award) in the transaction and any change in the issuer of the security.  Any shares that are delivered and any awards that are granted by, or become obligations of, the Company, as a result of the assumption by the Company of, or in substitution for, outstanding awards previously granted or assumed by an acquired company (or previously granted or assumed by a predecessor employer (or direct or indirect parent thereof) in the case of persons that become employed by the Company or one of its Subsidiaries in connection with a business or asset acquisition or similar transaction) shall not be counted against the Share Limit or other limits on the number of shares available for issuance under this Plan.

 

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8.11                        Non-Exclusivity of Plan.  Nothing in this Plan shall limit or be deemed to limit the authority of the Board or the Administrator to grant awards or authorize any other compensation, with or without reference to the Ordinary Shares, under any other plan or authority.

 

8.12                        No Corporate Action Restriction.  The existence of this Plan, the award agreements and the awards granted hereunder shall not limit, affect, or restrict in any way the right or power of the Company or any Subsidiary (or any of their respective shareholders, boards of directors or committees thereof (or any subcommittees), as the case may be) to make or authorize: (a) any adjustment, recapitalization, reorganization or other change in the capital structure or business of the Company or any Subsidiary, (b) any merger, amalgamation, consolidation or change in the ownership of the Company or any Subsidiary, (c) any issue of bonds, debentures, capital, preferred or prior preference shares ahead of or affecting the authorized shares (or the rights thereof) of the Company or any Subsidiary, (d) any dissolution or liquidation of the Company or any Subsidiary, (e) any sale or transfer of all or any part of the assets or business of the Company or any Subsidiary, (f) any other award, grant, or payment of incentives or other compensation under any other plan or authority (or any other action with respect to any benefit, incentive or compensation), or (g) any other corporate act or proceeding by the Company or any Subsidiary.  No participant, beneficiary or any other person shall have any claim under any award or award agreement against any member of the Board or the Administrator, or the Company or any employees, officers or agents of the Company or any Subsidiary, as a result of any such action.  Awards need not be structured so as to be deductible for tax purposes.

 

8.13                        Other Company Benefit and Compensation Programs.  Payments and other benefits received by a participant under an award made pursuant to this Plan shall not be deemed a part of a participant’s compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Company or any Subsidiary, except where the Administrator expressly otherwise provides or authorizes in writing.  Awards under this Plan may be made in addition to, in combination with, as alternatives to or in payment of grants, awards or commitments under any other plans, arrangements or authority of the Company or its Subsidiaries.

 

8.14                        Clawback Policy.  The awards granted under this Plan are subject to the terms of the Company’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of awards or any Ordinary Shares or other cash or property received with respect to the awards (including any value received from a disposition of the shares acquired upon payment of the awards).

 

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