Document:

Exhibit 10.1

 

 

CONVERTIBLE PROMISSORY NOTE

 

THIS NOTE AND THE SECURITIES
ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
OR THE SECURITIES LAWS OF ANY OTHER STATE OR JURISDICTION. THEY MAY NOT BE PURCHASED WITH A VIEW FOR DISTRIBUTION OR RESALE, AND
MAY ONLY BE OFFERED, SOLD, MORTGAGED, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED IN COMPLIANCE WITH EITHER AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITY UNDER THE ACT OR ANY APPLICABLE STATE SECURITIES ACT, OR AN OPINION OF COUNSEL FOR THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR THE LAWS OF ANY OTHER JURISDICTION.

 

 

CANCER PREVENTION PHARMACEUTICALS, INC.

 

	
        Principal Amount: $5,000,000
	
        Issuance
        Date: January 9, 2016

 

 

FOR
VALUE RECEIVED, Cancer Prevention Pharmaceuticals, Inc., a Delaware corporation (the “Company”), promises to
pay to Sucampo AG, a Swiss corporation, or its registered assigns (“Lender”), the principal sum of Five Million
Dollars ($5,000,000), or such lesser amount as shall equal the outstanding principal amount hereof (the “Principal”),
and to pay simple interest on any outstanding Principal from the date set forth above as the Issuance Date (the “Issuance
Date”) of this Convertible Promissory Note (the “Note”) until the same becomes due and payable whether
on the Maturity Date or upon acceleration, prepayment or otherwise at a rate equal to 5.0% per annum, computed on the basis of
the actual number of days elapsed and a year of 365 days. All unpaid Principal, together with any then unpaid and accrued interest
and other amounts payable hereunder, shall be due and payable on the earlier of (i) January 31, 2019 or January 31, 2020, if the
proviso set forth under Section 2 is applicable (the “Maturity Date”), (ii) when, upon the occurrence and during
the continuance of an Event of Default, such amounts are declared due and payable by Lender or made automatically due and payable,
in each case, in accordance with the terms hereof, or (iii) upon a Sale in the event that the Lender has not elected to convert
this Note in accordance with Section 2(b) below.

 

This Note
is issued pursuant to that certain Securities Purchase Agreement dated of even date hereof (the “Purchase Agreement”)
by and between the Company and the Lender. Any capitalized term not otherwise defined herein shall have the meaning assigned to
it in the Purchase Agreement.

 

The following
is a statement of the rights of Lender and the conditions to which this Note is subject, and to which Lender, by the acceptance
of this Note, agrees:

 

1.                 
Form and Application of Payments; Equal Rank.

 

(a)                Unless
earlier converted into Common Stock as provided in this Note, all payments of Principal and interest under the Note shall be
in lawful money of the United States of America. All payments hereunder shall be applied first to any unpaid and
accrued interest on and second to the repayment of the unpaid Principal balance of the Note.

 

    

     

    

(b)              
This Note shall rank equally and ratably without priority over any other note issued by the Company.

 

 (c)              
This Note may be prepaid
without the written consent of the Lender as described in Section 8.

 

 2.                 
 Conversion.

 

(a)                Automatic
Conversion – Qualified Financing. If, prior to the Maturity Date, the Company consummates a Qualified Financing (as
such term is defined below), all Principal of and accrued and unpaid interest on this Note shall automatically
convert without further action by the Lender into fully paid and nonassessable shares of Qualified Financing securities at a
conversion price per share (the “Conversion Price”) equal to a ten percent (10%) discount to the lowest
per share purchase price for the Qualified Financing securities paid by the investors in the Qualified Financing if the
Qualified Financing is consummated prior to completion of the Futility Analysis (as described in the Option and Collaboration
Agreement) or a twenty percent (20%) discount to the lowest per share purchase price for the Qualified Financing securities
paid by the investors in the Qualified Financing if the Qualified Financing is consummated after completion of the Futility
Analysis (as described in the Option and Collaboration Agreement). A “Qualified Financing” means the first to
occur of (i) a firm commitment underwritten public offering of Common Stock pursuant to an effective registration statement
under the Securities Act covering the offer and sale of Common Stock for the account of the Company
(“IPO”), or (ii)   a
private placement in one financing transaction or a series of related financing transactions of debt, equity, preferred or
convertible securities, in each case with aggregate gross proceeds (before underwriters’ and/or financial advisory
fees and commissions and offering expenses) to the Company (excluding any investment by the Lender in such offering) of at
least Ten Million Dollars ($10,000,000). Notwithstanding the foregoing, in no event shall Lender be required to acquire
shares of the Company’s capital stock such that Lender’s ownership interest in the Company would exceed 19.9% of
the Company’s outstanding capital stock. Accordingly, the maximum amount of Principal and interest that Purchaser can
be obligated to convert pursuant to this Section 2(a) is such amount as would result in Purchaser’s ownership being
19.9% of the Company’s outstanding capital stock (or, to the extent permissible under U.S. GAAP for determining whether
the Company is an associate company or subsidiary of the Purchaser, the Company’s issued capital stock on a fully
diluted basis after taking into account the conversion of all convertible securities) (the “Threshold”). Any
remaining Principal and interest will remain outstanding under this Note until repaid in accordance with the terms hereof or
converted in accordance with the terms of the next proviso; provided, however that if at any time after the Qualified
Financing the Lender shall be able to convert any additional remaining Principal or interest outstanding under this Note
without its ownership exceeding the Threshold then it shall be obligated to convert such Principal and interest at such time;
and, provided, further that with respect to any Principal or interest which exceeds the Threshold and shall remain
outstanding under this Note: (i) the interest rate of this Note will be reduced to three percent (3.0%) and the default
interest rate set forth in Section 5 shall be reduced to eight percent (8.0%); (ii) the Maturity Date shall be extended to
January 31, 2010; (iii)   the
Events of Default under Section 4 shall be amended such that Sections 4(b)(e)(f) and (g) shall no longer be Events of Default
and the only Events of Default shall be those under Sections 4(a)(c) and (d); and (iv) Section 9 shall be deleted in its
entirety.

    2 

     

    

(b)              
Optional Conversion Upon Sale of the Company. In the event of the sale of all or substantially
all of the assets of the Company or consolidation or merger of the Company other than a reincorporation merger (the “Sale”)
that occurs prior to the Maturity Date or a Qualified Financing, then the Principal and accrued interest of this Note outstanding
at such time will convert immediately prior to the Sale, at the written election of the Lender (the “Lender Sale Notice”)
given within ten (10) days of the Lender’s receipt from the Company of notice of the Sale (the “Company’s
Sale Notice”) into fully paid and non-assessable shares of (i) Common Stock at a conversion rate equal to the lowest
per share price of the Company’s most recent Common Stock financing or (ii) if the most recent financing was a preferred
stock financing, preferred stock at a conversion rate equal to the lowest per share price of the Company’s most recent preferred
stock financing (the “Optional Sale Conversion Price”).

 

(c)               
Optional Conversion if no Qualified Financing or Sale. If a Qualified Financing or a Sale has not been consummated
prior to the Maturity Date, at the written election of the Lender given not less than ten (10) business days prior to the Maturity
Date (“Notice of Election to Convert”), the Principal together with all accrued and unpaid interest on
the Notes outstanding shall convert into shares of Common Stock on the date set forth in the Notice of Election to Convert at a
conversion rate equal to per share price of the Common Stock as set forth in its most recent 409A valuation conducted by a third
party appraiser (the “409A Optional Conversion Price”).

 

 (d)               
 Conversion Procedure.

 

(i)                
Conversion Pursuant to Automatic Conversion. If this Note is to be automatically converted, written notice shall
be delivered to Lender at the address last shown on the records of the Company for Lender or given by Lender to the Company for
the purpose of notice (“Notice Address”), notifying Lender of the conversion to be effected, specifying
the Conversion Price, the Principal to be converted, together with all accrued and unpaid interest, the date on which such conversion
is expected to occur and calling upon Lender to surrender to the Company, in the manner and at the place designated, the Note;
provided, however, that upon the consummation of a Qualified Financing, this Note shall be deemed converted and of
no further force and effect, whether or not it is delivered for cancellation. The Company shall, as soon as practicable thereafter,
at its costs issue and deliver to such Lender a certificate or certificates for the number of shares to which Lender shall be entitled
upon such conversion, including a check payable to Lender for any cash amounts payable as described in Section 2(e). Any
conversion of this Note pursuant to Section 2(a) shall be deemed to have been made immediately prior to the closing of the
Qualified Financing and on and after such date the persons entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of Common Stock. Any conversion of this Note pursuant to
Section 2(b) shall be deemed to have been made immediately prior to the closing of the Sale and on and after such date the
persons entitled to receive the shares of capital stock issuable upon such conversion shall be treated for all purposes as the
record holder of such shares of capital stock. Any conversion of this Note pursuant to Section 2(c) shall be deemed to have
been made on the date set forth in the Notice of Election to Convert and on and after such date the persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares
of Common Stock.

 

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(ii)               Conversion
Pursuant to Optional Conversion. Upon receipt of an executed Lender Sale Notice or an executed Notice of Election to
Convert together with this original Note, the Company shall, as soon as practicable after the Sale or the conversion date set
forth in the Notice of Election to Convert, issue and deliver to Lender a certificate or certificates for the number of
shares to which such Lender shall be entitled upon such conversion, including a check payable to Lender for any cash
amounts payable as described in Section 2(d). The Company shall send the Lender a notice via facsimile or electronic
mail confirming receipt of the Lender Sale Notice or Notice of Election to Convert within two (2) days of receipt thereof. If
for any reason the Sale does not occur on the date set forth in the Company’s Sale Notice, the Company will return to
the Lender this Note and the Lender Sale Notice shall be deemed rescinded.

 

Any certificates
representing shares of Common Stock issued pursuant to this Section 2(d) shall bear the following legend:

 

THE SECURITIES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS IN ACCORDANCE WITH APPLICABLE REGISTRATION REQUIREMENTS
OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER
THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS. THIS CERTIFICATE MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE SALE, TRANSFER,
PLEDGE OR HYPOTHECATION OF ANY INTEREST IN ANY OF THE SECURITIES REPRESENTED HEREBY.

THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE, INCLUDING A LOCK-UP PERIOD IN THE EVENT
OF A PUBLIC OFFERING, AS SET FORTH IN THE NOTE PURSUANT TO WHICH THESE SHARES WERE ISSUED, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE COMPANY.

 

(e)               
Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of this Note. Upon the conversion
of the outstanding principal and unpaid accrued interest under this Note into Common Stock, in lieu of the Company issuing any
fractional shares to the Lender, the Company shall pay to the Lender the amount of outstanding principal and accrued interest that
is not so converted.

 

(f)               
Release. Upon full conversion of this Note and the payment of the amounts specified in this Section 2, the
Company shall be forever released from all its obligations and liabilities under this Note.

 

3.                 
Principal and Interest Repayment. Unless this Note has been converted in accordance with the terms of Section 2 above
or has been satisfied in accordance with the terms of this Note, the entire outstanding Principal and all unpaid accrued interest
shall become fully due and payable on the Maturity Date, upon the occurrence of an Event of Default or upon a Sale. If the payments
to be made by the Company shall be stated to be due on a date which is not a business day, such payment may be made on the next
succeeding business day, and the interest payment on each such date shall include the amount thereof which shall accrue during
the period of such extension of time.

 

    4 

     

    

4.                 
Events of Default. Subject to the proviso set forth in Section 2 of this Note, each of the following shall constitute
an Event of Default hereunder:

 

(a)               
The Company’s failure to pay to the Lender any amount of Principal, or interest when and as due under this Note after
taking into account a thirty (30) day grace period;

 

(b)              
The Company shall fail to observe or perform any material covenant, obligation, condition or agreement contained in this
Note or the Securities Purchase Agreement and such failure shall continue for thirty (30) days after the Company’s receipt
of written notice to the Company of such failure;

 

(c)               
The Company shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself
or of all or a substantial part of its property, (ii) admit in writing its inability to pay its debts generally as they mature,
(iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated, (v) commence a
voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment
of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vi)
take any action for the purpose of effecting any of the foregoing;

 

(d)              
An involuntary petition is filed against the Company (unless such petition is dismissed or discharged within 120 days) under
any bankruptcy statute now or hereafter in effect, or a custodian, receiver, trustee, assignee for the benefit of creditors (or
other similar official) is appointed to take possession, custody or control of any property of the Company;

 

(e)               
Defaults shall exist under any material agreements of the Company with any third party or parties which consists of the
failure to pay any indebtedness for borrowed money in excess of Two Hundred and Fifty Thousand Dollars ($250,000) at maturity or
which results in a right by such third party or parties, whether or not exercised, to accelerate the maturity of such indebtedness
for borrowed money in excess of Two Hundred and Fifty Thousand Dollars ($250,000) of the Company; unless the Company is actively
controlling such default;

 

(f)               
A final judgment or order for the payment of money in excess of Two Hundred and Fifty Thousand Dollars ($250,000) (exclusive
of amounts covered by insurance) shall be rendered against the Company and the same shall remain undischarged for a period of 120
days during which execution shall not be effectively stayed, or any judgment, writ, assessment, warrant of attachment, or execution
or similar process shall be issued or levied against a substantial part of the property of the Company and such judgment, writ,
or similar process shall not be released, stayed, vacated or otherwise dismissed within 90 days after issue or levy; or

 

(g)              
Any representation or warranty made by or on behalf of the Company in the Purchase Agreement, this Note or otherwise furnished
in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date
as of which made.

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5.                 
Remedies Upon Event of Default. Upon the occurrence of any Event of Default (other than an Event of Default described
in Sections 4(c) or 4(d)) and at any time thereafter during the continuance of such Event of Default, Lender may,
by written notice to the Company, declare all outstanding amounts and obligations payable by the Company under this Note to be
immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in any other documents to the contrary notwithstanding. Upon the occurrence of any Event of
Default described in Sections 4(b) and 4(c), immediately and without notice, all outstanding amounts and obligations
payable by the Company hereunder shall automatically become immediately due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in any other documents to
the contrary notwithstanding. In addition to the foregoing remedies, upon the occurrence and during the continuance of any Event
of Default, Lender may exercise any other right, power or remedy granted to it by the Purchase Agreement, this Note or any other
documents, agreements or instruments delivered to Lender in connection with the execution of the Purchase Agreement or otherwise
permitted to it by law, either by suit in equity or by action at law, or both. If the indebtedness represented by this Note or
any part thereof is collected in bankruptcy, receivership or other judicial proceedings or if this Note is placed in the hands
of a third party for collection after default or if Lender seeks to enforce its rights under this Note, then the Company shall
pay, in addition to the Principal and interest payable hereunder, the reasonable attorneys’ fees and reasonable attorneys’
costs incurred by Lender in connection therewith. In addition to all other rights and remedies available to Lender under this Note,
applicable law or otherwise, after an Event of Default the rate of interest under this Note shall increase, subject to the proviso
set forth in Section 2 of this Note, to ten percent (10.0%) per annum from and after an Event of Default occurs until the
date that this Note is paid in full or such Event of Default is cured.

 

6.                 
Restrictions on Sale. The Lender hereby agrees not to sell or otherwise transfer, make any short sale of, grant any
option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, of any Common
Stock (or other securities) of the Company held by the Lender during the 180-day period following the effective date of the registration
statement for the Company’s IPO (or such other period as may be requested by the Company or an underwriter solely to accommodate
regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions,
including, but not limited to, the restrictions contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions
or amendments thereto)(the “Lock-up Period”), provided, that all officers and directors of the Company
and holders of at least 5% of the Company’s voting securities are bound by and have entered into similar agreements. Any
discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall
apply pro rata to all holders subject to such agreements, pro rata based on the number of shares subject to such agreements.
The obligations described in this Section 6 shall not apply to a registration relating solely to employee benefit plans
on Form S-l or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction
on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions and may stamp
each certificate with a legend as substantially set forth in Section 2(c) with respect to the shares of Common Stock (or
other securities) subject to the foregoing restriction until the end of such 180-day (or other) period. The Lender agrees to execute
a market stand- off agreement with the underwriters in the offering in customary form consistent with the provisions of this Section
6.

    6 

     

    

7.                 
Adjustments. The number of shares of Common Stock to be issued upon each conversion of this Note shall be subject to
adjustments as follows:

 

(a)               
If the Company at any time subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification
or otherwise) the shares of capital stock acquirable hereunder into a greater number of shares, then, after the date of record
for effecting such subdivision, the Optional Sale Conversion price and the 409A Optional Conversion Price Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced. If the Company at any time combines (by any reverse stock
split, recapitalization, reorganization, reclassification or otherwise) the shares of capital stock acquirable hereunder into a
smaller number of shares, then, after the date of record for effecting such combination, the Optional Sale Conversion price and
the 409A Optional Conversion Price Conversion Price in effect immediately prior to such combination will be proportionately increased.

 

(b)              
If at any time or from time to time after the date upon which this Note was issued by the Company, the shares of capital
stock issuable upon the conversion of this Note shall be changed into the same or a different number of shares of any class or
classes of stock, whether by recapitalization, reclassification, reorganization, merger, exchange, consolidation, sale of assets
or otherwise, then, in any such event, the Lender, unless this Note has been previously converted, shall have the right thereafter
to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization,
reclassification, reorganization, merger, exchange, consolidation, sale of assets, or otherwise by a holder of the number of shares
of capital stock into which such shares of this Note could have been converted immediately prior to such recapitalization, reclassification,
reorganization, merger, exchange, consolidation, sale of assets, distribution of assets or other change, or with respect to such
other securities or property by the terms thereof.

 

(c)               
Upon the occurrence of each adjustment or readjustment of the Optional Sale Conversion price and the 409A Optional Conversion
Price Conversion Price as a result of the events described in this Section 7, the Company, at its expense, shall compute
such adjustment or readjustment and prepare and furnish to the Lender a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is based. Failure to give such notice or any defect
therein shall not affect the legality or validity of the subject adjustment.

 

8.                  Prepayment. At
any time after the date hereof, the Company shall have the right to prepay all or part of the Principal and interest
outstanding. The portion of this Note subject to prepayment (the “Optional Prepayment Amount”)pursuant to
this Section 8 shall be redeemed by the Company in cash at a price (the “Company Optional Prepayment
Price”) equal to the Principal Amount and interest being redeemed as of the Company Optional Prepayment Date. The
Company may exercise its right to prepay this Note under this Section 8 by delivering a written notice thereof by
facsimile or electronic mail or overnight courier to the Lender (the “Company Optional Prepayment Notice”
and the date on which such notice is sent or delivered by the Company is referred to as the “Company Optional
Prepayment Notice Date”). The Company Optional Prepayment Notice shall (a) state the date on which the Company
Optional Prepayment shall occur (the “Company Optional Prepayment Date”), which date shall not be less
than five (5) days nor more than twenty (20) days following the Company Optional Prepayment Notice Date, and (b) state the
Optional Prepayment Amount and the Company Optional Prepayment Price. All amounts converted by the Lender after the Company
Optional Prepayment Notice Date shall reduce the Company Optional Prepayment Amount of this Note to be redeemed on the
Company Optional Prepayment Date. Prepayments made pursuant to this Section 8 shall be made in cash on the Company
Optional Prepayment Date. Any partial prepayment under this Note shall be in an amount of at
least $1,000,000 and increments of $1,000,000.

 

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9.             
Covenants. Until this Note has been converted, or paid in full (subject to the proviso set forth in Section 2 of this
Note), the following covenants shall apply:

 

(a)            
All payments under this Note shall rank pari passu with all other notes of the Company.

 

(b)              
The Company shall not, directly or indirectly, declare or pay any cash dividend or distribution on any of its capital stock.

 

(c)               
The Company shall maintain its corporate existence and good standing in the state of its incorporation, shall maintain qualification
and good standing in each other jurisdiction in which the failure to so qualify would reasonably be expected to have a material
adverse effect on its business.

 

(d)              
The Company shall deliver to Lender: (i) as soon as available, but in any event within 180 days after the end of the Company’s
fiscal year, audited consolidated and consolidating financial statements of the Company prepared in accordance with GAAP, consistently
applied; (ii) if applicable, copies of all statements, reports and notices sent or made available generally by the Company to its
security holders; and (iii) promptly upon receipt of notice thereof, a report of any legal actions pending or threatened against
the Company that could reasonably be expected to result in damages or costs to the Company of Two Hundred Fifty Thousand Dollars
($250,000) or more. Notwithstanding the foregoing, the Company will be deemed to have furnished the information referred to above
in clause (i) to the Lender if the Company has filed Forms 10-K with the Securities and Exchange Commission via the EDGAR filing
system and such reports are publicly available.

 

(e)               
The Company shall make due and timely payment or deposit of all material federal, state, and local taxes, assessments, or
contributions required of it by law, including, but not limited to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and
state disability, and will execute and deliver to Lender on demand, proof indicating that the Company has made such payments or
deposits and any appropriate certificates attesting to the payment or deposit thereof; provided that the Company needs not
make any payment if the amount or validity of such payment is contested in good faith by appropriate proceedings and is reserved
against (to the extent required by GAAP) by the Company.

 

(h) The
Company, at its expense, shall maintain liability and other insurance, in each case as ordinarily insured against by other owners
in businesses similar to the Company’s. Upon Lender’s request, the Company shall deliver to the Lender certified copies
of the policies of insurance and evidence of all premium payments.

 

10.             
Expenses. In the event of any default hereunder, the Company shall pay all reasonable attorneys’ fees, expenses
and court costs incurred by Lender in enforcing and collecting this Note.

    8 

     

    

11.             
Notices. All notices, requests, demands, consents, instructions or other communications required or permitted
hereunder shall be in writing and faxed, mailed or delivered to each party at the respective addresses of the parties as set forth
in the Purchase Agreement, or at such other address or facsimile number as the Company shall have furnished to Lender in writing.
All such notices and communications will be deemed effectively given the earlier of (i) when received, (ii) when delivered personally,
(iii) one business day after being delivered by facsimile (with receipt of appropriate confirmation), (iv) one business day after
being deposited with an overnight courier service of recognized standing or (v) four days after being deposited in the U.S. mail,
first class with postage prepaid.

 

12.             
Waiver. The Company hereby waives demand, notice, presentment, protest and notice of dishonor.

 

13.             
Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall
be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Note (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal
courts sitting in New York, New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in New York, New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper
or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such
service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit
or proceeding to enforce any provisions of this Note, the prevailing party in such action, suit or proceeding shall be reimbursed
by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.

 

14.             
Successors and Assigns; Transfer of this Note or Securities Issuable on Conversion Hereof.

 

(a)               
Subject to the restrictions on transfer described herein, the rights and obligations of the Company and Lender shall be
binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.

 

(b)              
Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise,
in whole or in part, by the Company or the Lender without the prior written consent of the other party.

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15.             
Waiver and Amendment. The provisions of this Note may only be amended, waived or modified upon the written consent
of the Company and Lender.

 

[Signature
page follows]

 

 

 

 

 

 

 

 

 

    10 

     

    

 

IN WITNESS
WHEREOF, the Company has caused this Note to be issued as of
the date first written above.

 

	 	CANCER PREVENTION PHARMACEUTICALS, INC.
	 	 
	 	By: 	/s/ Jeffrey Jacob
	 	Name:  Jeffrey Jacob
	 	Title:  Chief Executive OfficerExhibit 10.2

 

 

OPTION AND COLLABORATION
AGREEMENT

 

This
Option and Collaboration Agreement (“Agreement”) dated 9th day of January,
2016 (“Effective Date”) by and between Cancer Prevention Pharmaceuticals, Inc., a corporation organized and
existing under the laws of the State of Delaware, having a place of business at 1760 East River Road, Suite 250, Tucson, Arizona
85718 (“CPP”), and Sucampo AG, a corporation organized and existing under the laws of Switzerland, having a
place of business at Baarerstrasse 22, 6300 Zug, Switzerland (“Sucampo”). CPP and Sucampo are referred to in
this Agreement individually as a “Party” and collectively as the “Parties.”

 

RECITALS

 

WHEREAS,
Sucampo is a specialty pharmaceutical company with expertise in the development and commercialization of pharmaceutical products;

 

WHEREAS,
CPP is a pharmaceutical company that develops therapies for people with elevated risk for cancer;

 

WHEREAS,
concurrent with this Agreement, CPP and Sucampo have entered into that particular Securities Purchase Agreement dated January 9,
2016 under which Sucampo makes certain commitments to invest in CPP (the “SPA”);

 

WHEREAS,
CPP owns, holds, licenses or controls certain regulatory filings, data and intellectual property rights related to the Product
(as defined below);

 

WHEREAS,
CPP has licensed certain rights to certain formulations of the Product in certain fields and certain territories outside of the
United States to Tillotts Pharma AG under that particular agreement entered into by and between CPP and Tillotts Pharma AG (“Tillotts”)
dated December 27, 2013 (the “Tillotts Agreement”);

 

WHEREAS,
Sucampo wishes to receive, and CPP wishes to grant, Sucampo an exclusive Option (as defined below”) to enter into an exclusive
license agreement with CPP under the terms described in Exhibit A to develop and commercialize the Product (as defined below)
in the Territory (as defined below);

 

NOW, THEREFORE,
in consideration of the foregoing and the mutual covenants herein contained, the receipt and sufficiency of which are hereby acknowledged,
CPP and Sucampo hereby agree as follows:

 

		1.	DEFINITIONS

 

		1.1	“Additional Indication” is defined in Section 4.2.

 

		1.2	“Affiliate” means, with respect to a Party, any Entity
that controls, is controlled by, or is under common control with that Party. For the purpose of this definition, (a) “control”
means direct or indirect ownership of more than 50% of the shares of stock entitled to vote for the election of directors, in the
case of a corporation, or more than 50% of the

 

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equity interest
in the case of any other type of legal entity, status as a general partner in any partnership, or any other similar arrangement
whereby such Entity controls or has the right to control the board of directors or equivalent governing body of such Entity, or
the ability to cause the direction of the management or policies of such Entity, and (b) “Entity” means a partnership,
limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company,
trust, incorporated association, joint venture or similar entity or organization.

 

		1.3	“Chairperson” is defined in Section 3.2.

 

		1.4	“Commercially Reasonable Efforts” means with respect
to a Party, the efforts and resources that similarly situated biotechnology or pharmaceutical company would use for its own internally
discovered programs, drug candidates and pharmaceutical products of similar commercial potential and similar stage of product life,
in light of a product’s characteristic features, issues of safety and efficacy, Regulatory Authority-approved labeling, product
profile, the competitiveness of alternative products in the marketplace, the likely timing of the product’s entry into the
market, any patent and other proprietary position, the likelihood of regulatory approval and other similar relevant scientific,
technical and commercial factors. For purposes of this definition of “Commercially Reasonable Efforts” and with respect
to its use in Section 4.4, the efforts and resources of a similarly situated company will be no less than those measured in comparison
to a company similar to CPP as CPP exists immediately prior to the Effective Date.

 

		1.5	“Concurrence Notice” is defined in Section 4.3.

 

		1.6	“CPP Additional Indication Development Plan and Budget” is defined in Section 4.2.

 

		1.7	“CPP Additional Indication Expenses” means, with respect
to an indication for which Sucampo did not concur pursuant to Section 4.2, but later is the subject of a Concurrence Notice in
accordance with Section 4.3, any reasonable and documented expenses incurred by CPP in the performance of the applicable CPP Additional
Indication Development Plan and Budget prior to the delivery of the Concurrence Notice.

 

		1.8	“Data Package” is defined in Section 2.2.

 

		1.9	“Disclosing Party” is defined in Section 5.1.

 

		1.10	“DMC” is defined in Section 2.4(B).

 

		1.11	“Dollar” or “$” means the legal tender of the United States

 

		1.12	“Existing NDA” is defined in Section 5.1.

 

		1.13	“FAP” is defined in Section 4.2.

 

		1.14	“FAP Pivotal Trial” is defined in Section 2.4(B).

 

		1.15	“FAP Pivotal Trial Protocol” is defined in Section 2.4(B).

 

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		1.16	“FDA” means the United States Food and Drug Administration or any successor
entity thereto performing substantially the same functions.

 

		1.17	“First Payment” is defined in Section 2.4(A).

 

		1.18	“Indication Review Period” is defined in Section 4.2.

 

		1.19	“Joint Steering Committee” or “JSC” is defined in Section 3.1.

 

		1.20	“License” is defined in Section 2.1.

 

		1.21	“License Agreement” is defined in Section 2.2.

 

		1.22	“Licensed IP” is defined in Exhibit A.

 

		1.23	“NDA” means a new drug application for Regulatory Approval of the Product that
is filed with the FDA.

 

		1.24	“NDA Filing” is defined in Section 2.2.

 

		1.25	“Negotiation Period” is defined in Section 2.2.

 

		1.26	“Neutral Expert” is defined in Section 2.3.2.

 

		1.27	“Option” is defined in Section 2.1.

 

		1.28	“Option Effective Date” means the date upon which all of the following have occurred:

(a)  
Sucampo has paid CPP the First Payment in accordance with Section 2.4(A); and (b) Sucampo has purchased the Note (as defined
in the SPA) in accordance with the SPA.

 

		1.29	“Option Exercise Notice” is defined in Section 2.2.

 

		1.30	“Option Period” is defined in Section 2.2.

 

		1.31	“Product” is defined in Exhibit A.

 

		1.32	“Proposed Development Plan and Budget” is defined in Section 4.2.

 

		1.33	“Proposed License Agreement” is defined in Section 2.3.3.

 

		1.34	“Receiving Party” is defined in Section 5.1.

 

		1.35	“Regulatory Approval” means, with respect to a Product
in any country or jurisdiction, the approvals by the applicable Regulatory Authority in such country or jurisdiction necessary
for the marketing or sale of such Product in such country or jurisdiction.

 

		1.36	“Regulatory Authority” means, in a particular country or regulatory jurisdiction,
any applicable governmental authority involved in granting Regulatory Approval and/or, to

 

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the extent
required in such country or regulatory jurisdiction, pricing or reimbursement approval of a Product in such country or regulatory
jurisdiction.

 

		1.37	“Regulatory Filing” means, with respect to a Product,
any submission to a Regulatory Authority of any applications, notifications, and registrations for Regulatory Approvals or other
submissions made to or with a Regulatory Authority, together with all related correspondence to or from such Regulatory Authority,
that are necessary or reasonably desirable in order to develop, market or sell such Product in the applicable country or regulatory
jurisdiction.

 

		1.38	“Resolution Procedure” is defined in Section 2.3.1.

 

		1.39	“Resolution Procedure Notice” is defined in Section 2.3.1.

 

		1.40	“Second Payment” is defined in Section 2.4(B).

 

		1.41	“SPA” is defined in the Recitals.

 

		1.42	“Sucampo-Approved Indication” is defined in Section 4.2.

 

		1.43	“Sucampo-Approved Indication Development Plan and Budget” is defined in Section
4.2.

 

		1.44	“Term” is defined in Section 8.1.

 

		1.45	“Territory” means North America (the United States, Canada and Mexico, in each
case including its territories and possessions).

 

		1.46	“Tillotts” is defined in the Recitals.

 

		1.47	“Tillotts Agreement” is defined in the Recitals.

 

		2.	OPTION

 

		2.1	Option Grant. Subject to the terms and conditions of this Agreement
(including Section 2), as of the Option Effective Date CPP shall grant and hereby grants Sucampo an exclusive option to obtain
an exclusive license under the terms described in Exhibit A (such option, the “Option”) to make, have
made, use, import, offer for sale, sell, develop and commercialize the Product in the Field in the Territory (such license, the
“License”). Notwithstanding anything in this Agreement to the contrary, including this Section 2.1, if

(a)   
the Option Effective Date does not occur within ten (10) business days after the Effective Date of this Agreement, then
the Option described in this Section 2.1 shall be null and void and not exercisable by Sucampo, or (b) Sucampo does not make the
Investment (as defined in the SPA) in accordance with the SPA, then the Option described in this Section 2.1 shall be null and
void and not exercisable by Sucampo.

 

		2.2	Exercise; Negotiation. Sucampo shall have the right to exercise the Option at any time
during the Option Period by delivery of written notice to CPP (“Option Exercise

 

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Notice”).
Subject to Section 2.3, upon delivery of the Option Exercise Notice by Sucampo in accordance with this Section 2.2 and for a
period of one hundred and twenty (120) days thereafter (or such longer period of time as mutually agreed to by the Parties in
writing) (such time period, the “Negotiation Period”, as may be extended as set forth in Section 2.3.1),
the Parties shall negotiate in good faith a definitive written agreement for the License, which shall include the terms set
forth in Exhibit A and such other terms as are customary and commercially reasonable, and enter into such agreement
(such definitive agreement, the “License Agreement”). For purposes of this Agreement, “Option
Period” means the period of time beginning on the Option Effective Date and ending thirty (30) days after
CPP’s delivery of (a) written notice from CPP to Sucampo that the FDA has accepted the first NDA filed for the Product
in accordance with 21 CFR 314.101 (the “NDA Filing”) and (b) the Data Package to Sucampo. “Data
Package” means a true and accurate copy of (i) the NDA Filing (including all data and analyses included therewith),
and (ii) all Regulatory Filings. The Parties shall agree upon reasonable means of providing the Data Package and the format
therefor (e.g., through an electronic data room). During the Negotiation Period, CPP shall provide to Sucampo such additional
information in CPP’s possession or control relating to the Product as Sucampo may reasonably request to enable Sucampo
to make a reasonably informed decision with respect to the execution of the License Agreement.

 

		2.3	Dispute Resolution Procedure.

 

		2.3.1	If the License Agreement is not executed by the Parties prior to the expiration
of the Negotiation Period, then either Party may request in writing that a Neutral Expert determine the terms of the License Agreement
in accordance with the procedure described in this Section 2.3 (such procedure, the “Resolution Procedure”).
At any time after the expiration of the Negotiation Period, each Party shall have the right to initiate the Resolution Procedure
by delivery of written notice to the other Party (“Resolution Procedure Notice”). If a Resolution Procedure
is initiated, then the Negotiation Period shall continue until completion of the Resolution Procedure.

 

		2.3.2	After delivery of the Resolution Procedure Notice the Parties shall negotiate
in good faith to select a mutually acceptable neutral Third Party individual that is expert in the development and commercialization
of products similar to the Product in the Field in the Territory who is not, and has not in the past five (5) years been, an employee,
consultant, legal advisor, officer or director of, and does not have any conflict of interest with respect to (including, without
limitation, a financial interest), either Party (such Third Party, the “Neutral Expert”). If the Parties cannot
agree on a Neutral Expert within thirty (30) days after delivery of a Resolution Procedure Notice, then the selection of a Neutral
Expert shall be submitted to arbitration in accordance with Section 9.7.

 

		2.3.3	Following delivery of a Resolution Procedure Notice, each Party shall have forty five (45)
days to prepare and deliver a copy of such Party&rsquo;s proposed form of License Agreement (each, a &ldquo;<B>Proposed
License Agreement</B>&rdquo;) and, at the discretion of the submitting Party, a memorandum of reasonable length (not
to exceed 10 pages) describing the support for such Party&rsquo;s Proposed License Agreement to the other Party and to the
Neutral Expert. Within fifteen (15) days after delivery of the other Party&rsquo;s

 

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Proposed
License Agreement and support memorandum, each Party may submit to the Neutral Expert (with a copy to the other Party) a response
to the other Party’s support memorandum, such response not to exceed five (5) pages in length. Neither Party may have any
other communications (either written or oral) with the Neutral Expert other than for the sole purpose of initially engaging the
Neutral Expert to perform the Resolution Procedure or as expressly permitted in this Section 2.3; provided that the Neutral Expert
may convene a hearing if the Neutral Expert so chooses to ask questions of the Parties and hear oral argument and discussion regarding
each Party’s Proposed License Agreement.

 

		2.3.4	The sole authority of the Neutral Expert shall be to choose the single Proposed
License Agreement that, after reasonable consideration, most accurately and fairly reflects the transaction contemplated by the
Parties in entering into this Agreement, including the fidelity of such Proposed License Agreement to the terms described in Exhibit
A. The Neutral Expert must select as the only method to resolve the matter at issue one of the two Proposed License Agreements,
and may not combine elements of both Proposed License Agreements or award any other relief or take any other action. The Neutral
Expert shall render his/her decision in writing within thirty (30) days after receiving each Party’s Proposed License Agreement
and, if applicable, support memorandum. If a Party does not deliver a Proposed License Agreement in accordance with Section 2.3.3
and the other Party does deliver a Proposed License Agreement in accordance with Section 2.3.3, then such other Party’s Proposed
License Agreement shall automatically be selected by the Neutral Expert. The selection of the Proposed License Agreement by the
Neutral Expert shall be final and binding upon the Parties. Each Party shall share equally the fees and expenses of the Neutral
Expert.

 

		2.3.5	If the Neutral Expert selects Sucampo’s Proposed License Agreement,
then each Party shall execute such Proposed License Agreement within five (5) business days following such selection by the Neutral
Expert, after which such Proposed License Agreement shall be the License Agreement.

 

		2.3.6	If the Neutral Expert selects CPP’s Proposed License Agreement, then
within ten (10) business days following such selection by the Neutral Expert, Sucampo shall notify CPP in writing as to whether
Sucampo wishes to enter into such Proposed License Agreement. If Sucampo notifies CPP in writing that Sucampo wishes to enter into
such Proposed License Agreement, then each Party shall execute such Proposed License Agreement within five (5) business days following
CPP’s receipt of such notice, after which such Proposed License Agreement shall be the License Agreement. If Sucampo (a)
fails to notify CPP in writing within ten (10) business days following such selection by the Neutral Expert whether or not Sucampo
wishes to enter into such Proposed License Agreement, or (b) notifies CPP in writing prior to the expiration of such ten (10) business
days that Sucampo does not wish to enter into such Proposed License Agreement, then for each of (a) and (b) neither Party shall
have any further obligation to the other Party with respect to the execution of the License Agreement or the Option and Sucampo
shall pay CPP Two Million U.S. Dollars ($2,000,000) within five (5) business days of the

 

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expiration of such ten (10)
business days, or delivery of Sucampo’s written notice described in (b) above, as applicable.

 

		2.4	Option Fees. In partial consideration for the Option, Sucampo shall
pay CPP Seven Million Five Hundred Thousand U.S. Dollars ($7,500,000) as follows:

 

		(A)	First Payment. Within three (3) business days after the Effective Date, Sucampo shall
pay CPP Three Million U.S. Dollars ($3,000,000) (“First Payment”).

 

		(B)	Second Payment. Sucampo shall pay CPP Four Million Five Hundred Thousand

U.S. Dollars
($4,500,000) (“Second Payment”) within thirty (30) days after the earlier of (i) delivery to CPP of the Option
Exercise Notice in accordance with Section 2.2 and (ii) the date that CPP notifies Sucampo in writing that the DMC has completed
the futility analysis as specified by the FAP Pivotal Trial Protocol and statistical analysis plan (the “Futility Analysis”)
and has not determined that continuing the FAP Pivotal Trial is futile (“Successful Completion”). If the DMC
delivers to CPP a written report or notice on the Futility Analysis, then CPP shall deliver to Sucampo a copy of such report or
notice within ten (10) days.

 

For purposes of Section 2.4(B):

 

		i.	“DMC” means the data monitoring committee described in
the FAP Pivotal Trial Protocol.

 

		ii.	“FAP Pivotal Trial” means the clinical trial for the Product
that is in the process of being performed by CPP as of the Effective Date that is titled “Phase III Trial of the Safety and
Efficacy of Eflornithine Combined With Sulindac Compared to Eflornithine, Sulindac as Single Agents in Patients With Familial Adenomatous
Polyposis”.

 

		iii.	“FAP Pivotal Trial Protocol” means the protocol for the
FAP Pivotal Trial as it may be amended.

 

CPP’s sole remedy for
any failure by Sucampo to pay the Second Payment as set forth above shall be to terminate this Agreement in accordance with Section
8.1.

 

		3.	JOINT STEERING COMMITTEE

 

		3.1	Establishment. Within thirty (30) days after the Effective Date, the
Parties will establish a joint steering committee (the “Joint Steering Committee” or “JSC”)
to plan, administer, evaluate and carry out all aspects of the development, regulatory, and commercialization activities by the
Parties hereunder with respect to the Product in the Field in the Territory.

 

		3.2	Representatives. The JSC will consist of an equal number of representatives
of CPP and Sucampo. CPP shall have the right to appoint a CPP JSC representative to serve as chairperson of the JSC (the “Chairperson”).
The Chairperson shall have the right to make the final decision described in Section 3.6(a).

 

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		3.3	Meetings and Reports. The JSC shall meet no less frequently than
twice per year in person or as otherwise mutually agreed by the Parties, and such meeting shall be held in the U.S. or at such
other place and at such time as shall be determined by the Parties. Either Party may call additional ad hoc meetings of the JSC
as the needs arise with reasonable advance notice to the other Party, and such ad hoc meetings shall be conducted at times that
are mutually agreed upon by the Parties. Unless otherwise mutually agreed by the Parties, the Chairperson shall prepare and circulate
an agenda for such meetings and, as soon as practicable, all materials, documents and information for the meeting for distribution
to both Parties; provided, that either Party may propose additional topics to be included on such agenda, either prior to
or in the course of such meeting. Subject to the in-person meeting described above, the JSC may meet in person, by videoconference
or by teleconference. Unless otherwise mutually agreed by the Parties, the Chairperson will be responsible for preparing reasonably
detailed written minutes of all JSC meetings that reflect, without limitation, material decisions made at such meetings. Unless
otherwise mutually agreed by the Parties, the Chairperson shall send draft meeting minutes to the Sucampo members and the CPP members
of the JSC for review and approval within ten (10) days after each JSC meeting. Such minutes will be deemed approved unless one
or more members of the JSC objects to the accuracy of such minutes within one (1) week of receipt. In addition to such JSC meetings,
unless otherwise mutually agreed by the Parties CPP shall provide to all JSC members within thirty (30) days following the end
of each calendar quarter a report summarizing CPP’s development activities with respect to the Product during such calendar
quarter (including, without limitation, interactions with any regulatory authority relating to the Product) and an update on the
status of the development plans for the Product.

 

		3.4	Responsibilities. Subject to Sections 3.5, 3.6 and 3.7, the JSC shall
oversee CPP’s management of the FAP Pivotal Trial and other studies in the Territory as may be undertaken by the Parties
in support of the FAP Pivotal Trial and the Product NDA development program (i.e., clinical pharmacology studies etc.) in a manner
that allows CPP to fulfill its contractual obligations under this Agreement and the Tillotts Agreement.

 

		3.5	Tillotts Agreement. The Parties acknowledge that CPP has established
a joint steering committee with Tillotts under the Tillotts Agreement for oversight of the Development and Commercialization of
the Product outside of the Territory. The Parties shall perform the obligations described in this Agreement with respect to the
JSC in a manner that allows CPP to fulfill its contractual obligations under the Tillotts Agreement.

 

		3.6	Dispute Resolution. In all matters subject to the JSC’s decision-making
authority, the JSC will aim to make decisions by consensus. If the JSC cannot reach consensus within thirty (30) days of a matter
being brought to the JSC’s attention, then, as between the Parties, CPP shall have the right to make the final decision with
respect to such matters.

 

		3.7	Amendment; Modification. The JSC shall not have any power to amend,
modify, or waive compliance with the provisions of this Agreement. The final decision making authority under Section 3.6 shall
not authorize a Party to unilaterally modify, amend, or waive its own compliance with the provisions of this Agreement.

 

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		3.8	Termination of the JSC. The JSC shall be disbanded upon expiration
or earlier termination of this Agreement.

 

		3.9	CPP Right to Withdraw from JSC. At any time during the Term and for
any reason, CPP may withdraw from participation in the JSC upon written notice to Sucampo, which notice will be effective immediately
upon receipt (“JSC Withdrawal Notice”). Upon delivery of a JSC Withdrawal Notice and for so long as CPP is withdrawn
from the JSC, CPP representatives to the JSC may not participate in any meetings of the JSC or vote on any recommendation to be
made by the JSC. If at any time following the issuance of a JSC Withdrawal Notice, CPP wishes to resume participation in the JSC,
CPP must notify Sucampo in writing and, thereafter, CPP representatives to the JSC may attend any subsequent meeting of the JSC
and participate in the activities of, and vote on recommendations to be made by the JSC as provided in Section 3 as if CPP had
not issued a JSC Withdrawal Notice. Following CPP’s issuance of a JSC Withdrawal Notice, unless and until CPP resumes participation
in the JSC as provided above: (a) all meetings of the JSC will be held at Sucampo’s facilities; (ii) Sucampo’s representatives
may alone vote on any recommendations to be made by the JSC; and (iii) Sucampo shall provide CPP all notes and minutes of JSC meetings,
provided that CPP shall have no right to approve the minutes for any JSC meeting held during the time CPP has withdrawn from the
JSC.

 

		4.	DEVELOPMENT OF THE PRODUCT

 

		4.1	Development Expenses. Prior to the execution of the License Agreement
in accordance with Section 2, as between the Parties CPP shall have the obligation to pay for any expenses incurred by CPP in the
execution of the development program for the Product.

 

		4.2	Additional Indications. Prior to the execution of the License Agreement
in accordance with Section 2, CPP shall have the right, in its sole discretion, to develop the Product in any indication; provided,
however that if CPP wishes to develop the Product in the Field in the Territory in an indication other than familial adenomatous
polyposis (“FAP”) (such indication, an “Additional Indication”), then CPP shall provide Sucampo
with a proposed development plan and corresponding budget for the Product in such Additional Indication (“Proposed Development
Plan and Budget”) at least seventy (70) days prior to CPP submitting any Regulatory Filing for the Product in such Additional
Indication. Sucampo may, in its sole discretion, concur in the Development of the Product in such Additional Indication under such
Proposed Development Plan and Budget in writing within sixty (60) days of receiving such Proposed Development Plan and Budget,
or such later date as may be mutually agreed (such time period the “Indication Review Period”, such concurred
indication, a “Sucampo-Approved Indication”, and such concurred Proposed Development Plan and Budget, a “Sucampo-Approved
Indication Development Plan and Budget”). If, in response to a Proposed Development Plan and Budget, Sucampo does not
concur in the development of such Additional Indication prior to the expiration of the Indication Review Period, then subject to
Section 4.3, (a) CPP shall have the right to develop the Product in the corresponding Additional Indication at CPP’s sole
cost and expense in accordance with the Proposed Development Plan and

 

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Budget, and (b) such Proposed Development Plan and
Budget shall thereafter be a “CPP Additional Indication Development Plan and Budget”.

 

		4.3	Sucampo Additional Indication Right. Notwithstanding Section 4.2,
Sucampo shall have the right to concur in the Development of the Product in an Additional Indication under the corresponding CPP
Additional Indication Development Plan and Budget by delivery of written notice to CPP (“Concurrence Notice”).
Upon CPP’s receipt of the Concurrence Notice, (i) such Additional Indication shall automatically become a Sucampo-Approved
Indication, and (ii) such CPP Additional Indication Development Plan and Budget shall automatically become a Sucampo-Approved Indication
Development Plan and Budget.

 

		4.4	Diligence; Compliance. CPP shall use Commercially Reasonable Efforts
to conduct and complete the FAP Pivotal Trial and other development activities for the Products in the Territory in accordance
with the applicable development plan. CPP shall comply with all applicable laws, rules, regulations and guidances in connection
with its development of the Products.

 

		5.	CONFIDENTIALITY

 

		5.1	Confidential Information. “Confidential Information”
means any data, information or material disclosed by or on behalf of one Party (the “Disclosing Party”), whether
in writing, visually, orally or in electronic medium to the other Party (the “Receiving Party”) under this Agreement
or in the course of contemplating a transaction under this Agreement prior to the execution of this Agreement, including without
limitation any information disclosed pursuant to that certain Mutual Non-Disclosure Agreement between CPP and Sucampo Pharmaceuticals,
Inc., dated as of June 24, 2015 (the “Existing NDA”). Except as expressly set forth herein, the terms of this
Agreement shall be kept confidential by each Party as described in this Section 5 with respect thereto.

 

		5.2	Nondisclosure and Non-Use Obligations. Subject to Sections 5.3 and
5.4, unless the Disclosing Party provides prior written consent, the Receiving Party shall maintain in confidence all Confidential
Information of the Disclosing Party, shall not disclose such Confidential Information to any Third Party and shall not use such
Confidential Information for any purpose except to exercise such Party’s rights or fulfill its obligations under this Agreement.

 

		5.3	Exceptions. Each Party’s confidentiality and non-use obligations
under this Agreement shall not apply to any portion of the Confidential Information of the Disclosing Party that the Receiving
Party can demonstrate with competent written proof:

 

		(A)	Is known by the Receiving Party at the time of its receipt, without obligation
of confidentiality or non-use, and not through a prior confidential disclosure by the Disclosing Party, as documented by the Receiving
Party’s written records;

 

    10 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

     

    

		(B)	Is in the public domain before its receipt from the Disclosing Party, or
thereafter enters the public domain through no breach of this Agreement by the Receiving Party or with the consent of the Disclosing
Party;

 

		(C)	Is subsequently disclosed to the Receiving Party, without obligation of
confidentiality or non-use, by a Third Party who may lawfully do so and who is not under an obligation of confidentiality to the
Disclosing Party; or

 

		(D)	Is developed by the Receiving Party independently of Confidential Information
received from the Disclosing Party and without the aid, application or use of the Disclosing Party’s Confidential Information,
and such independent development can be properly documented by the Receiving Party.

 

Any combination
of features or disclosures shall not be deemed to fall within the foregoing exclusions merely because individual features are published
or available to the general public or in the rightful possession of the Receiving Party unless the combination itself and principle
of operation are published or available to the general public or in the rightful possession of the Receiving Party.

 

		5.4	Permitted Disclosure. Nothing in Section 5 shall restrict the Receiving
Party from disclosing Confidential Information of the Disclosing Party to the extent that such disclosure:

 

		(A)	Is made to the Receiving Party’s or its Affiliates’ employees,
officers, directors, agents or contractors (“Representatives”), for purposes the Receiving Party reasonably
deems necessary for the exploitation of its rights or fulfillment of its obligations under this Agreement, provided that
all such recipients agree to be bound by, or are otherwise bound by, confidentiality and non-use obligations that are no less stringent
than those confidentiality and non-use provisions contained in this Agreement (with potentially a shorter duration no less than
five years from the date such Confidential Information is disclosed to such recipients), and the Receiving Party shall be responsible
for and liable under this Agreement with respect to any breach of its confidentiality and non-use obligation caused by its Representatives;

 

		(B)	Is deemed necessary by the Receiving Party to be disclosed to attorneys,
independent accountants, potential or actual acquirers, merger candidates or investors or venture capital firms, investment bankers
or other financial institutions or investors, provided that, except with respect to the disclosure of pro forma financial
projections, all such recipients are, or agree to be, bound by confidentiality and non-use obligations; or

 

		(C)	Is required to comply with applicable law, valid order of a court of competent
jurisdiction, or other judicial or administrative process of governmental authority or agency, provided that the Receiving
Party shall (i) promptly inform the Disclosing Party of the disclosure that is being sought in order to provide the Disclosing
Party, where possible, an opportunity to challenge, limit or receive

 

    11 

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confidential
treatment for the required disclosure, (ii) upon request, reasonably cooperate with any efforts by the Disclosing Party to challenge,
limit or receive confidential treatment for, the required disclosure, (iii) only disclose the minimum Confidential Information
necessary to comply, as determined by the Receiving Party’s legal counsel, and (iv) in the event of a limited disclosure
of any Confidential Information as required by applicable law, continue to treat such information as Confidential Information of
the Disclosing Party for all other purposes and subject to Section 5.

 

		5.5	Disclosures Required by Securities Laws or Exchanges. Notwithstanding
anything to the contrary in this Agreement, to the extent a Party reasonably determines that it is necessary to disclose the information
relating to this Agreement under applicable (a) securities laws or rules, including those promulgated by the U.S. Securities and
Exchange Commission (the “SEC”), or (b) any rules or requirements of stock exchanges on which equity securities
of such Party may be listed, such Party may disclose this Agreement and its terms, and material developments or material information
generated under this Agreement, in securities filings with the SEC (or equivalent foreign agency) (a “Required Disclosure”)
after complying with the procedures set forth in this Section 5.5.
If pursuant to a Required Disclosure a Party is required to disclose this Agreement or any of its terms, such Party shall, prior
to any such Required Disclosure, prepare and send to the other Party for review a draft confidential treatment request and proposed
redacted version of this Agreement to be filed with the SEC (or equivalent foreign agency) to request confidential treatment of
this Agreement. The reviewing Party shall promptly (and in any event, no more than three (3) business days after receipt of such
confidential treatment request and proposed redactions) provide its reasonable comments, which the disclosing Party shall take
into reasonable consideration. If no response or comments are received by the disclosing Party within such three (3) business days
then it shall be conclusively presumed that the reviewing Party has no comments. The Party seeking such disclosure of this Agreement
shall exercise commercially reasonable efforts to obtain confidential treatment of this Agreement from the SEC (or equivalent foreign
agency) as represented by the redacted version reviewed by the other Party. If pursuant to a Required Disclosure a Party is required
to disclose material developments or material information generated under this Agreement, which information has not previously
been publicly disclosed, such disclosing Party shall, prior to any such disclosure, send to the other Party the proposed disclosure
for review. The reviewing Party shall promptly (and in any event, no more than three (3) business days after receipt of such proposed
disclosure) provide its reasonable comments on the proposed disclosure, which the disclosing Party shall take into reasonable consideration.
If any information has been previously disclosed in a public filing it may be disclosed by a Party in other future filings without
the consent of the other Party.

 

		5.6	Disclosure of Agreement Terms. Each Party and any of its Affiliates
may disclose the terms and conditions of this Agreement to a Third Party is connection with a prospective financing, license, corporate
transaction or asset sale relating to the relevant Party or any of its Affiliates subject to such disclosure being made under a
written confidentiality

 

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agreement with confidentiality
terms that are at least as stringent as those described in Section 5.

 

		6.	REPRESENTATIONS AND WARRANTIES

 

		6.1	Mutual Representations and Warranties. Each Party hereby represents
and warrants to the other Party as of the Effective Date that: (a) it has the full right, power and authority to enter into this
Agreement and to perform its obligations hereunder; and (b) this Agreement has been duly executed by it and is legally binding
upon it, enforceable in accordance with its terms, and does not conflict with any agreement, instrument or understanding, oral
or written, to which it is a Party or by which it may be bound, nor violate any material law or regulation of any court, governmental
body or administrative or other agency having jurisdiction over it.

 

		6.2	CPP Representations and Warranties. CPP hereby represents and warrants
to Sucampo that as of the Effective Date:

 

		(A)	it has the full right, power and authority to grant the rights hereunder, including the license
set forth in Exhibit A;

 

		(B)	it has not assigned, transferred, conveyed, licensed, or otherwise encumbered
its right, title and interest in the Licensed IP in any manner that would prevent it from granting the rights hereunder, including
the license set forth in Exhibit A;

 

		(C)	it has not received any written notice of any claim that any intellectual
property right owned or controlled by a third party would be or is infringed or misappropriated by the manufacture, use, sale,
offer for sale or importation of the Product in the Field and, to CPP’s knowledge, the manufacture, use, sale, offer for
sale or importation of the Product in the Field in the Territory would not and does not infringe or misappropriate any intellectual
property right owned or controlled by a third party;

 

		(D)	neither CPP nor any of its Affiliates or their employees, officers, or directors
have made, nor to CPP’s knowledge has any other third party acting under CPP’s authority made, an untrue statement
of a material fact to any Regulatory Authority with respect to the Product, or knowingly failed to disclose a material fact required
to be disclosed to any Regulatory Authority with respect to the Product. CPP, its Affiliates and their employees, officers, or
directors and to CPP’s knowledge all such third parties have complied with all regulatory requirements with respect to the
Product and active pharmaceutical ingredients contained therein. To CPP’s knowledge (1) all information within the Regulatory
Filings have been generated in compliance with all applicable laws, including, as applicable, cGMP, cGCP and cGLP, and (2) all
Regulatory Filings are true and correct in all material respects.

 

		6.3	CPP Covenant. CPP covenants that it shall not during the Term assign, transfer, convey,
exclusively license, or otherwise encumber its right, title and interest in the Licensed IP

 

    13 

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in any manner that would prevent
it from granting the rights hereunder, including the licenses set forth in Exhibit A.

 

		6.4	Disclaimer. EXCEPT AS EXPRESSLY STATED IN THIS SECTION 6, (A) NO REPRESENTATION,
CONDITION OR WARRANTY WHATSOEVER IS MADE OR GIVEN BY OR ON BEHALF OF CPP OR SUCAMPO; (B) ALL OTHER CONDITIONS AND WARRANTIES WHETHER
ARISING BY OPERATION OF LAW OR OTHERWISE ARE HEREBY EXPRESSLY EXCLUDED, INCLUDING ANY CONDITIONS AND WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT; AND (C) ALL KNOW-HOW AND MATERIALS PROVIDED BY A PARTY TO THE OTHER PARTY
UNDER THIS AGREEMENT ARE PROVIDED “AS-IS”.

 

		7.	INDEMNIFICATION; LIMITATION OF LIABILITY

 

		7.1	Indemnification by CPP. CPP shall indemnify, defend and hold Sucampo,
its Affiliates and their respective agents, employees, officers and directors (each a “Sucampo Indemnitee”)
harmless from and against any and all Third Party claims, suits, actions, demands, judgments, liabilities, expenses or losses,
including reasonable legal expenses and attorneys’ fees (collectively, “Sucampo Losses”), to which any
Sucampo Indemnitee may become subject to the extent such Sucampo Losses are directly or indirectly caused by or otherwise arise
out of or in connection with the breach by any CPP Indemnitee of any covenant, representation or warranty or other agreement made
by CPP in this Agreement or arising in connection with CPP’s development of the Products, except to the extent such Sucampo
Losses result from the breach by any Sucampo Indemnitee of any covenant, representation, warranty or other agreement made by Sucampo
in this Agreement or any Sucampo Indemnitee’s negligence, recklessness or willful misconduct.

 

		7.2	Indemnification by Sucampo. Sucampo shall indemnify, defend, and hold
CPP, its Affiliates and their respective agents, employees, officers and directors (each a “CPP Indemnitee”)
harmless from and against any and all Third Party claims, suits, actions, demands, judgments, liabilities, expenses, or losses,
including reasonable legal expenses and attorneys’ fees (collectively, “CPP Losses”) to which any CPP
Indemnitee may become subject to the extent such CPP Losses are directly or indirectly caused by or otherwise arise out of or in
connection with a breach by any Sucampo Indemnitee of any covenant, representation, warranty or other agreement made by Sucampo
in this Agreement, except to the extent such CPP Losses result from the breach by any CPP Indemnitee of any covenant, representation,
warranty or other agreement made by CPP in this Agreement or any CPP Indemnitee’s negligence, recklessness or willful misconduct.

 

		7.3	Indemnification Procedure. In the event of any such claim against
any Sucampo Indemnitee or CPP Indemnitee, the indemnified Party shall provide the indemnifying Party with prompt notice of the
claim giving rise to the indemnification obligation pursuant to this Article 7 and the exclusive ability to defend (with the reasonable
cooperation of the indemnified Party) or settle any such claim at its sole expense; provided, however, that the indemnifying
Party shall not enter into any settlement for damages other than monetary damages without the indemnified Party’s written
consent,

 

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such
consent not to be unreasonably withheld. The indemnified Party shall have the right to participate, at its own expense and with
counsel of its choice, in the defense of any claim or suit that has been assumed by the indemnifying Party. If the Parties cannot
agree as to the application of Sections 7.1 and 7.2 to any particular claim, the Parties may conduct separate defenses of such
claim. Each Party reserves the right to claim indemnity from the other in accordance with Sections 7.1 and 7.2 above upon resolution
of the underlying claim, notwithstanding the provisions of this Section 7.3 requiring the indemnified Party to tender to the indemnifying
Party the exclusive ability to defend such claim or suit.

 

		7.4	LIMITATION OF LIABILITY. EXCEPT FOR LIABILITIES ARISING UNDER SECTION
7.1 AND 7.2, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, PUNITIVE, INDIRECT, INCIDENTAL, EXEMPLARY
OR CONSEQUENTIAL DAMAGES (INCLUDING ANY CLAIMS FOR LOST PROFITS, SALES, REVENUES OR OPPORTUNITIES) ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT (OR THE EXERCISE OF ITS RIGHTS HEREUNDER) UNDER ANY THEORY OF LIABILITY, AND REGARDLESS OF ANY NOTICE OR KNOWLEDGE
OF THE POSSIBILITY OF SUCH DAMAGES.

 

		8.	TERM AND TERMINATION

 

		8.1	Term. This Agreement shall begin on the Effective Date and shall expire
on the first to occur of the following: (a) the expiration of the Option Period if Sucampo has not exercised its Option in accordance
with this Agreement prior to the expiration of the Option Period; (b) the date on which the License Agreement becomes effective;
(c) the date on which the Option becomes null and void and not exercisable by Sucampo in accordance with Section 2.1; (d) Sucampo’s
failure to pay CPP the Second Payment, if due, within the 30-day period set forth in Section 2.4(B); and (e) termination by either
Party pursuant to Section 8.2 (“Term”).

 

		8.2	Termination for Material Breach. If either Party believes that the
other is in material breach of its obligations hereunder, then such Party may deliver notice of such breach to the other Party.
The allegedly breaching Party shall have thirty (30) days from such notice to cure such breach. If the Party receiving notice of
breach fails to cure such breach within the period set forth above, then the Party originally delivering the notice of breach may
terminate this Agreement effective on written notice of termination to the other Party. Notwithstanding the foregoing, if a Party
gives notice of termination under this Section 8.2 and the other Party disputes whether such termination is proper, then the issue
of whether this Agreement may properly be terminated upon expiration of the notice period (unless such material breach is cured
as provided above) shall be resolved in accordance with Section 9.7. If as a result of such dispute resolution process under Section
9.7 it is determined that the notice of termination was proper, then such termination shall be deemed to have been effective thirty
(30) days following the date of the notice of termination. If as a result of such dispute resolution process it is determined that
the notice of termination was improper, then no termination shall have occurred and this Agreement shall remain in effect.

 

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		8.3	Validity Challenges. If Sucampo challenges the validity or enforceability
of any of the Licensed IP, or aids or assists any Affiliate or Third Party in such challenge other than as required by applicable
law, then CPP shall have the right to terminate this Agreement immediately upon written notice to Sucampo.

 

		8.4	Survival. The provisions of Sections 1, 5, 6 (excluding Section 6.3),
7, 8.4 and 9 shall survive the expiration or termination of this Agreement.

 

		9.	MISCELLANEOUS

 

		9.1	Entire Agreement. This Agreement, together with Exhibit A,
contains the entire understanding of the Parties with respect to the subject matter contained herein. Any other express or implied
agreements and understandings, negotiations, writings and commitments, either oral or written, in respect to the subject matter
contained herein are superseded by the terms of this Agreement, including without limitation the Existing NDA. Exhibit A to
this Agreement is incorporated herein by reference and shall be deemed a part of this Agreement.

 

		9.2	Notices. Any notice required or permitted by this Agreement shall be in writing and shall
be delivered as follows, with notice deemed given as indicated: (a) by personal delivery, when actually delivered; (b) by overnight
courier, upon written verification of receipt; (c) by facsimile transmission, upon personal acknowledgment of receipt of electronic
transmission; (d) by certified or registered mail, return receipt requested, upon verification of receipt; or (e) by electronic
mail, upon delivery to the recipient’s electronic mail system and personal acknowledgment thereof by the recipient (i.e.,
not by an automated response), and provided that such electronic mail states in the subject line that it is a notice under this
Section 9.2. All notices delivered by personal delivery or overnight courier shall be delivered to the addresses set forth on the
first page of this Agreement. All notices delivered by facsimile transmission or electronic mail shall be sent to the following
addresses:

 

If to Sucampo:

 

Sucampo AG

c/o Sucampo Pharmaceuticals,
Inc.

805 King Farm Boulevard, Suite 550

Rockville, Maryland 20850

ATTN:
General Counsel

 

Facsimile: +1 301 961 3440

 

If to CPP:

Cancer Prevention Pharmaceuticals,
Inc.,

1760 East River Road, Suite 250

Tucson Arizona 85718

ATTN: Chief Executive Officer

 

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Facsimile: (520)
232-2191

 

Notice shall be sent to the
addresses set forth above or to such other address as either Party may provide in writing delivered in accordance with this Section
9.2.

 

		9.3	Payment. All payments due CPP shall be paid in Dollars and shall be
transmitted to CPP by bank wire transfer of immediately available funds. The remittance shall be made to the following bank account
of CPP:

 

Wells Fargo Bank, N.A. 420
Montgomery St.

San Francisco,
CA 94104

 

Account Name: Cancer Prevention
Pharmaceuticals, Inc.

Routing No.: 121000248

Account No.:
9421629651

  

CPP may change the designated
bank account by written notice to Sucampo signed by a duly authorized representative of CPP.

 

All payments
owed under this Agreement shall be paid in full when due, without any deductions or offsets for withholding taxes, wire transfer
fees, currency exchange fees or otherwise, except only as is otherwise expressly authorized elsewhere in this Agreement.

 

		9.4	Assignment. Except as provided in this Section 9.4, neither Party
may assign or otherwise transfer this Agreement or any right or obligation hereunder, without the prior written consent of the
other Party. Notwithstanding the foregoing, either Party may, without consent of the other Party, assign this Agreement or any
of its rights or obligations hereunder in whole or in part to: (a) an Affiliate of such Party; or (b) its successor in interest
in connection with a Strategic Transaction; provided, however, that in the case of assignment to an Affiliate, the
assigning Party shall, notwithstanding such assignment, remain liable for the performance of such Affiliate under this Agreement.
The terms and conditions of this Agreement shall be binding upon, and shall inure to the benefit of, the Parties and their respected
successors and permitted assigns. For purposes of this Section 9.4, “Strategic Transaction” means, with respect
to a Party, the occurrence of any of the following events: (x) the direct or indirect acquisition by any Third Party of more than
fifty percent (50%) of the combined voting power of the then outstanding voting securities of such Party normally entitled to vote
in elections of directors; (y) the sale, transfer, conveyance or other disposition of all or substantially all of such Party’s
assets to which this Agreement relates to a Third Party, or (z) the consummation of a merger, acquisition, consolidation or other
similar transaction between or involving a Third Party and such Party (or the ultimate parent Entity which, immediately prior to
the Strategic Transaction, directly or indirectly controls such Party.)

 

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		9.5	Severability. If any one or more of the provisions contained in this
Agreement is held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby, unless the absence of the invalidated provision(s)
adversely affects the substantive rights of the Parties. The Parties shall in such an instance use their best efforts to replace
the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical,
implement the purposes of this Agreement.

 

		9.6	Choice of Law. This Agreement and any dispute arising in connection
with it will be governed by the laws of the State of New York, United States of America.

 

		9.7	Dispute Resolution. Each such dispute, controversy or claim shall
be finally resolved by binding arbitration (an “Arbitration”) administered by JAMS pursuant to its Comprehensive
Arbitration Rules and Procedures and in accordance with the Expedited Procedures in those Rules then in effect (the “JAMS
Rules”), and judgment on the Arbitration award may be entered in any court having jurisdiction thereof. The proceedings
and decisions of the arbitrators in any Arbitration under this Section 9.7 shall be confidential except as otherwise expressly
permitted in this Agreement, agreed upon by the Parties, or required by applicable Law. Each Arbitration shall be conducted by
a panel of three (3) arbitrators, each with at least ten (10) years’ experience in the pharmaceutical or biotechnology business
selected pursuant to the JAMS Rules. Within thirty (30) days after initiation of Arbitration, each Party shall select one person
to act as an arbitrator and the two Party-selected arbitrators shall select a third arbitrator within thirty (30) days of their
appointment. If the arbitrators selected by the Parties are unable or fail to agree upon the third arbitrator, the third arbitrator
shall be appointed by JAMS. The place of arbitration shall be New York City, New York, and all proceedings and communications shall
be in English.

 

		9.8	Headings. The captions to the several Sections and subsections hereof
are not a part of this Agreement, but are merely for convenience to assist in locating and reading the several Articles and Sections
hereof.

 

		9.9	Independent Contractors. It is expressly agreed that Parties shall
be independent contractors and that the relationship between the two Parties shall not constitute a partnership, joint venture
or agency. Neither Party shall have the authority to make any statements, representations or commitments of any kind, or to take
any action, which shall be binding on the other Party, without the prior written consent of the other Party.

 

		9.10	Waiver. The waiver by either Party of any right hereunder, or of
any failure of the other Party to perform, or of any breach by the other Party, shall not be deemed a waiver of any other right
hereunder or of any other breach by or failure of such other Party whether of a similar nature or otherwise.

 

		9.11	Amendments. This Agreement may be amended, or any term hereof modified,
only by a written instrument duly executed by authorized representative(s) of both Parties.

 

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		9.12	Counterparts. This Agreement may be executed in counterparts by original
signature, facsimile or PDF files, each of which shall be deemed an original, but all of which together shall constitute one and
the same instrument.

 

 

[Signature page follows]

 

 

 

 

 

 

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IN WITNESS WHEREOF, the
Parties intending to be bound have caused this Option Agreement to be executed by their duly authorized representatives.

 

 

CPP:

 

Cancer Prevention Pharmaceuticals, Inc.

 

	 	Signature 	/s/ Jeffrey Jacob	 
	 	 	 	 
	 	Name	Jeffrey Jacob	 
	 	 	 	 
	 	Title	Chief Executive Officer	 
	 	 	 	 
	 	Date	January 9, 2016	 

 

SUCAMPO:

 

Sucampo AG

 

	 	Signature 	/s/ Matthias Alder	 
	 	 	 	 
	 	Name	Matthias Alder	 
	 	 	 	 
	 	Title	Executive Vice President, Business Development and Licensing, General Counsel and Corporate Secretary	 
	 	 	 	 
	 	Date	January 9, 2016	 

 

 

 

 

	 	Signature 	/s/ Andrew Smith	 
	 	 	 	 
	 	Name	Andrew Smith	 
	 	 	 	 
	 	Title	Authorized Signatory	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

 

 

 

Signature Page
to Option and Collaboration Agreement

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Exhibit
A

License Agreement
Terms

 

	Product	CPP-1X/sul, a product including both eflornithine and sulindac as active ingredients (each, an "Active Ingredient"), together as the sole active ingredients or both together in combination with additional active ingredients. For clarity, “Product” includes any product configuration in which the Active Ingredients are packaged for concurrent administration, whether as a single capsule or multiple capsules.
	Field	Treatment, prevention and diagnosis of human diseases and conditions
	Territory	North America
	Additional Definitions	
        The following definitions
        are intended for guidance in negotiations only and will be further refined in the License Agreement.

         

        “Commercialize”
        or “Commercialization” means any and all activities directed to the commercialization of a Product, including pre-launch
        and post-launch marketing, promoting, distribution, detailing or selling of a Product (as well as importing and exporting activities
        in connection therewith). When used as a verb, “Commercialize” means to engage in Commercialization.

         

        “Control” or
        “Controlled” means, ,the legal authority or right (whether by ownership, license or otherwise) to: (i) with respect
        to any molecule or material, grant ownership of or a license or sublicense to use such molecule or material; (ii) with respect
        to any know-how, patents, other intellectual property, grant ownership of or a license or a sublicense under such know-how, patents,
        or intellectual property; or (iii) with respect to any proprietary or trade secret information, disclose such information; in each
        case without breaching the terms of any agreement with, obligation to or other arrangement with a Third Party, or misappropriating
        the proprietary or trade secret information of a Third Party; in each case as provided in the License Agreement.

         

        “Develop” means
        any and all research and development activities for any Product conducted anywhere in the Territory on and after Effective Date
        relating to such Product, including all non-clinical, preclinical and clinical activities, testing and studies of any Product,
        manufacturing development, process development, toxicology studies, distribution of Products for use in clinical trials (including
        placebos and comparators), research and development of companion diagnostics for use in connection with clinical trials of Products
        as well as approved Products, statistical analyses, and the preparation, filing and prosecution of any Marketing Approval Application
        and obtaining or maintaining Regulatory Approvals for any Product, as well as all regulatory affairs related to any of the foregoing.
        When used as a verb, “Develop” means to engage in Development.

         

        “Licensed IP” means
        the Licensed Patents and Licensed Know-How.

         

        “Licensed
        Know-How” means any and all know-how Controlled by CPP or any of its Affiliates as of the Effective Date or thereafter during
        the Term that relates to, or is otherwise reasonably necessary or reasonably useful for, the use, Development,

 

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        manufacture, or Commercialization
        of the Product.

         

        “Licensed Patents”
        means any and all patents and patent applications that are Controlled by CPP or any of its Affiliates as of the effective date
        or thereafter during the Term that: (a) are set forth in Schedule 1; and/or (b) claim the composition of matter of, or the
        method of manufacturing or using, any Product; or (c) that otherwise relate to, or are reasonably necessary or reasonably useful
        for, the use, Development, manufacture or Commercialization of any Product.

         

        “NDA”
        means a new drug application for Regulatory Approval of the Product that is filed with the FDA.

         

        “Option Agreement” means the Agreement
        to which this Exhibit A is attached. “Sucampo-Approved Indications” is defined in the Option Agreement.

	Collaboration Governance	
        Sucampo and CPP would establish
        a Joint Steering Committee (JSC) to provide strategic leadership for the development of the Product and a Joint Commercialization
        Committee (JCC) to establish and update annually a commercial plan and budget for the Product in the Territory and to determine
        in good faith potential co-promotion by CPP if in the best interests of maximizing sales. As between the parties, Sucampo would
        have the final decision making vote on matters decided by the JSC relating to the development of the Product in the Field in the
        Territory and on matters decided by the JCC related to Commercialization.

         

        The Parties shall coordinate
        the activities overseen by the JSC under the License Agreement with those overseen by the joint steering committee described in
        the Tillotts Agreement in a manner that allows CPP to fulfill its contractual obligations under the Tillotts Agreement.

	License	CPP would grant Sucampo an exclusive license, with the right to sublicense, under the Licensed IP to develop, make, have made, use, import, offer for sale and sell the Product in the Field and in the Territory (“License”). Sucampo’s rights to manufacture the Product will be subject to the existing exclusive supply arrangement with a third party described below to the extent such arrangement exists at time of execution of the License Agreement.
	Sublicense Rights	Sucampo would have the right to grant sublicenses under the License, through multiple tiers, to any Affiliate or Third Party. Each sublicense of Sucampo’s rights shall be in writing, shall be consistent with the terms and conditions of this Exhibit A, and shall require the sublicensee, in granting any further sublicenses, to comply with Sucampo’s sublicensing obligations hereunder as though  such  sublicensee were Sucampo. If Sucampo grants a sublicense to any Third Party, then Sucampo shall: (i) include in each such sublicense agreement terms that permit Sucampo to comply with its obligations under this Agreement, including related to reporting sales of Product to CPP; (ii) notify CPP of such sublicense or amendment thereto within thirty (30) days  after it becomes  effective, including  the identity of the sublicensee and the territory in which such rights have been sublicensed; (iii) at

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

     

    

	 	CPP’s request, provide CPP a copy of such sublicense agreement and amendment thereto (provided that Sucampo may redact those provisions of such agreement or amendment that are unrelated to Sucampo’s obligations under the License Agreement); and (iv) use commercially reasonable efforts to enforce the terms of such sublicense agreement that relate to Sucampo’s obligations under the License Agreement.
	Supply and Manufacturing	The parties acknowledge and agree that, as of the Effective Date of the Option Agreement, CPP is subject to legally binding obligations with a third party regarding the exclusivity of its current source of Product. Contemporaneously with execution of the License Agreement, the parties shall enter into a supply agreement whereby CPP shall supply Product to Sucampo on the same terms as CPP purchases Product from such third party until such time as such exclusivity obligation has ceased. On the request of Sucampo, the parties shall together negotiate in good faith with such third party to secure supply of Product for Sucampo directly with such third party manufacturer.
	Regulatory Matters; Right of Reference	Sucampo shall control regulatory interactions and decisions relating to the Product in the Territory and shall hold the NDA and other Regulatory Approvals for the Product in the Territory. Sucampo would have the exclusive right to reference and use all information, know-how, and data generated in the FAP Pivotal Trial (as defined in the Option Agreement) and other Product development activities conducted by CPP in support of Regulatory Filings and Regulatory Approvals for the Product in the Territory.
	Product Rights	Subject to the Excepted Matters, Sucampo would be responsible for and control the development, manufacture and commercialization of the Product in the Field and Territory at its own expense.
	Diligence	
        Sucampo would use commercially
        reasonable efforts to develop, manufacture and commercialize the Product in the Field in the Territory, including in FAP and in
        indications in the Field other that FAP that are (i) Sucampo-Approved Indications or

        (ii) granted Regulatory Approval
        in the Territory.

	Exclusivity	Except for the Product, CPP would not develop or commercialize in the Territory (i) any product with both of the Active Ingredients (or where both Active Ingredients are co-packaged or co-marketed) for use in the Field, or (ii) any product that uses any Active Ingredient (whether both or a single Active Ingredient) for the treatment of FAP.
	Financial Terms	 
	License Fee	Payable upon execution of the license agreement if the option was exercised prior to the completion (i.e., database lock and completion of analyses) of the FAP trial	
         

        $5 million

	Payable upon execution of the license agreement if the option was exercised after the completion of the FAP trial	$10 million
	Total License Fee	$5-10 million
	Milestone Payments	NDA approval for FAP	[***]
	First dosing in pivotal trial in each of up to three additional 

indications (i.e., other than FAP)	[***] 

([***])
	NDA approval for second indication	[***]
	NDA approval for third indication	[***]

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

     

    

	 	NDA approval for fourth indication	[***]
	Total Development Milestones	[***]
	First time annual net sales of the Product in the Territory > $100M	[***]
	First time annual net sales of the Product in the Territory > $250M	[***]
	First time annual net sales of the Product in the Territory > $500M	[***]
	First time annual net sales of the Product in the Territory > $750M	[***]
	Total Sales Milestones	[***]
	Patent Prosecution and Enforcement	
        Prosecution: As between
        the Parties, CPP shall have the first right, but not the obligation, to prosecute any Licensed Patent in the Territory. Sucampo
        shall cooperate with CPP in the preparation, filing, prosecution and maintenance of such Licensed Patents. CPP shall copy Sucampo
        on all correspondence from and to any patent office relating to such Licensed Patents in a timely manner, and CPP shall provide
        Sucampo with drafts of all proposed filings and material correspondences to the patent authorities with respect to such Licensed
        Patents in reasonably adequate time before filing or submission of such materials, for Sucampo’s review and comment. CPP
        will reasonably consider in good faith Sucampo’s comments prior to submitting such filings and correspondences to the extent
        such comments are timely provided and it is reasonably practicable to do so. CPP shall notify Sucampo of any decision not to file
        for, prosecute or maintain, or not to continue to pay the expenses of prosecution or maintenance of, any such Licensed Patents,
        including divisional and continuation patents. CPP shall provide such notice at least thirty (30) days prior to any filing or payment
        due date, or any other due date that requires action, in connection with such Licensed Patent. In such event, Sucampo shall have
        the right, but not the obligation, to file for, or continue prosecution or maintenance of, such Licensed Patent. All costs incurred
        by a Party in prosecuting the Licensed Patents in the Territory shall be shared by the Parties as a deduction from Net Profit.
        Sucampo would have the right to direct the filing of an Orange Book listing or application for regulatory exclusivity in the Territory.

         

        Enforcement: Each
        Party shall give the other Party notice of any known or suspected infringement by a Third Party of any Licensed Patent in the Territory
        (“Patent Infringement”) within fifteen (15) Business Days after such Patent Infringement comes to such Party’s
        attention. Sucampo shall have the first right, but not the obligation, to bring and control any legal action, including by declaratory
        judgment action, patent litigation or similar proceeding, in connection with any Patent Infringement at its own expense and discretion
        as it reasonably determines appropriate. Sucampo shall keep CPP informed and reasonably consult with CPP in the course of such
        legal action. CPP shall have the right to be represented in any such action by counsel of its choice at its own expense. At the
        request of Sucampo, CPP shall reasonably cooperate and provide any information or assistance in connection with any legal action
        with respect to Patent Infringement, including executing reasonably appropriate documents, cooperating in discovery and, if required
        by applicable law, joining as a party to the action at Sucampo’s cost. If Sucampo does not commence an action for Patent
        Infringement within one-hundred eighty (180) days after a notice from either Party, then CPP shall have the right to commence such
        action at its own cost. Any recoveries resulting from such any action relating to a claim of Patent Infringement, including

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

     

    

	 	pursuant to a settlement, shall be applied as follows: (i) first to reimburse each Party, on a pro rata basis, for such Party’s out-of-pocket costs and expenses in connection with such Patent Infringement proceeding; (ii) any damages, including exemplary damages for willful infringement, will be shared equally by the Parties under the terms for the sharing of Net Profits.
	Profit-Split	
        ·    Sucampo would pay to CPP 50% of the Adjusted Net Profits generated by Sucampo from the sale of the Product.

        ·    Net Profit would be defined as revenues received by Sucampo from the sale of the Product, less costs incurred by Sucampo
        (excluding payments to CPP) in the development, manufacture, marketing, sale and distribution of the Product.

        ·    Adjusted Net Profits would be defined as 90% of Net Profits.

        ·    10%
of Net Profits would be distributed among CPP and Sucampo pro rata of the total development costs borne by such party in the development
of the Product until such costs have been recuperated, as follows: (i) for FAP, all development costs incurred by either party
following the execution of the Option Agreement; (ii) for Sucampo-Approved Indications, all development costs incurred by either
party following the date that CPP first provided Sucampo the development plan for such indication (with CPP Additional Indication
Expenses, if any, multiplied by 150% for purposes of such distribution); and (iii) for all other indications in the Field that
receive Regulatory Approval in the Territory, all development costs incurred at any time by either party, provided that any costs
incurred by CPP for developing such indications would be multiplied by 150% for purposes of such distribution. The License Agreement
will provide for a Sucampo Additional Indication Right equivalent to that set forth in Section 4.3 of the Option Agreement.

        ·    The profit-sharing terms would commence on a country-by-country basis starting with first commercial sale of the Product
        in such country and expire on the later of patent expiration in such country or 10 years from such first sale.

	Term and Termination	
        Term:
        The License Agreement would begin on the effective date and expire on a country-by-country basis on the date Sucampo no longer
        has an obligation to share profits with CPP in such country. Following such expiration, the License in such country will be fully
        paid up, irrevocable and perpetual.

         

        Termination for Material
        Breach: Each Party would have the right to terminate the License Agreement on thirty (30) days‘ written notice for uncured
        material breaches relating to payment obligations. The License Agreement will set forth termination provisions for other material
        breaches, and will provide for the tolling of termination in connection with a bona fide dispute.

         

        Sucampo
        Termination Right: Sucampo would have the right to terminate the License Agreement for any reason or no reason upon 180 days
        prior written notice prior to first commercial sale of the first Product in the Territory and 1 year thereafter.

         

        CPP Termination Right
        for Patent Challenge: The Agreement set forth reasonable provisions for termination in the event of a challenge by Sucampo
        to the validity or enforceability of a Licensed Patent, subject to the ability to cure or to assert a legal

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

     

    

	 	defense.
	Effects of Termination	
        The following sets forth
        general principles that will apply in the event of termination. The License Agreement will provide for a mechanism for a reasonable
        remuneration to Sucampo in the event of a Product reversion reflecting Sucampo’s payment, if any, of out-of-pocket costs
        for the development of the Products.

         

        Termination by Sucampo for
        Convenience:

        ·   
        The license granted by CPP to Sucampo would terminate

        ·   
All of Sucampo’s right, title and interest in, to and under any Regulatory Filings and Regulatory Approvals for the
        Product would be assigned to CPP.

        ·   
Sucampo would assign all manufacturing, distribution and supply agreements that are assignable to CPP.

         

        Termination by Sucampo for
        Material Breach:

        ·   
Sucampo would have the right to keep the license granted by CPP in effect, provided Sucampo continued to make the profit sharing
payments to CPP.

        ·   
The JSC would be terminated.

        ·   
Sucampo would have the right to sue CPP for damages due to such material breach.

         

        Termination by CPP for Material
        Breach:

        ·     
        The license granted by CPP to Sucampo would terminate

        ·     
        All of Sucampo’s right, title and interest in, to and under any Regulatory Filings and Regulatory Approvals for the
        Product would be assigned to CPP.

        ·     
        Sucampo would assign all manufacturing, distribution and supply agreements that are assignable to CPP

 

 

 

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

     

    

Schedule
1 Licensed Patents

 

 

 

 

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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

     

    

 

 

 

28

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE
DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

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