LICENSE AGREEMENT BY AND BETWEEN CHICAGO LABS, INC. AND SPECTRUM PHARMACEUTICALS, INC

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EXHIBIT 10.1

Confidential treatment has been requested for portions of this Exhibit. The copy

filed herewith omits the information subject to the confidentiality request.

Omissions are designated by ***. A complete version of this exhibit has been

filed separately with the Securities and Exchange Commission.

LICENSE AGREEMENT

BY AND BETWEEN

CHICAGO LABS, INC.

AND

SPECTRUM PHARMACEUTICALS, INC.

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LICENSE AGREEMENT

THIS LICENSE AGREEMENT (this "AGREEMENT"), entered into as of February

18, 2005 (the "EFFECTIVE DATE"), by and between CHICAGO LABS, INC., an Illinois

corporation ("CHICAGO LABS"), and SPECTRUM PHARMACEUTICALS, INC., a Delaware

corporation ("SPECTRUM"). Chicago Labs and Spectrum may each be referred to

herein individually as a "PARTY" and collectively as the "PARTIES."

RECITALS

A. Whereas, Chicago Labs is the exclusive worldwide licensee under the

University License Agreement (defined below) for the patent rights and know-how

owned by University to an invention (the "Invention") entitled "Evidence for

prevention and therapeutic use of endothelin ET-B receptor antagonists in breast

tumor" and has developed additional know-how concerning the Invention.

B. Whereas, the Invention is the subject of United States patent

application entitled "Method and composition for preventing and treating solid

tumors," US Patent application publication number US 2004/0138121A1, publication

date July 15, 2004; and the international application published under the Patent

Cooperation Treaty, international publication number WO 2004/037235 A2,

international publication date May 6, 2004; both owned by the Board of Trustees

of the University of Illinois.

C. Whereas, Spectrum is engaged in the development and eventual

marketing, sale and licensing of pharmaceutical products and desires to have

access to the Invention and Chicago Labs' proprietary discoveries and

technologies relating to the Invention.

D. Whereas, Chicago Labs and Spectrum desire to enter into a license

agreement whereby Spectrum shall obtain the right to use the Invention and

Chicago Labs' proprietary discoveries and technologies relating to the Invention

to develop and commercialize products or methods for the prevention and/or

treatment of cancer.

NOW, THEREFORE, in consideration of the mutual covenants and conditions

set forth herein, Chicago Labs and Spectrum hereby agree as follows:

AGREEMENT

1. DEFINITIONS. Capitalized terms shall have the meaning set forth below.

1.1 AFFILIATE. The term "Affiliate" shall mean any entity which

directly or indirectly controls, is controlled by, or is under common control

with Spectrum or Chicago Labs, as applicable. The term "control" as used in this

definition means having (i) more than fifty percent (50%) ownership of the

assets,

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profit interest or outstanding voting securities or (ii) the power to direct or

cause the direction of the management and the policies of an entity, whether by

contract or otherwise.

1.2 CHICAGO LABS KNOW-HOW. The term "Chicago Labs Know-how" shall mean

Chicago Labs methods, processes, techniques and data that relate to the Chicago

Labs Patent Rights or the Chicago Labs Materials which are necessary or useful

for researching, developing, manufacturing, using or selling a Product, now or

in the future owned or Controlled by Chicago Labs, whether or not: (i) the same

is eligible for protection under the patent laws of the United States or

elsewhere; (ii) enforceable as a trade secret; or (iii) the copying of which

would be enjoined or restrained by a court as constituting unfair competition.

The Chicago Labs Know-how in existence as of the Effective Date is contained in

the documents listed in the attached Exhibit A.

1.3 CHICAGO LABS MATERIALS. The term "Chicago Labs Materials" shall

mean the materials provided by Chicago Labs to Spectrum under this Agreement as

set forth in Exhibit B, as the same may be amended by the Parties from time to

time.

1.4 CHICAGO LABS PATENT RIGHTS. The term "Chicago Labs Patent Rights"

shall mean United States patent application entitled "Method and composition for

preventing and treating solid tumors," US Patent application publication number

US 2004/0138121A1, publication date July 15, 2004; and the international

application published under the Patent Cooperation Treaty, international

publication number WO 2004/037235 A2, international publication date May 6,

2004; all rights (including without limitation all US and foreign Patents)

arising out of or resulting from such patent applications; and any other U.S.

and foreign Patents now or in the future owned or Controlled by Chicago Labs

having claims covering or directed to the Inventions, the Chicago Labs Know-how,

the Chicago Labs Materials or the preventative and/or therapeutic use of

endothelin ET-B receptor antagonists and/or agonists in cancer related

applications.

1.5 CHICAGO LABS TECHNOLOGY. The term "Chicago Labs Technology" shall

mean the Chicago Labs Patent Rights, Chicago Labs' rights arising out of or

resulting from Patents to Joint Inventions and Improvements, Chicago Labs

Know-how and Chicago Labs Materials.

1.6 CONFIDENTIAL INFORMATION. The term "Confidential Information" shall

mean all know-how, trade secrets and other proprietary or confidential

information of a disclosing Party or held by the disclosing Party under an

obligation of confidentiality to a Third Party, which may be disclosed from one

Party to the other Party at any time and from time to time during the term of

this Agreement. "Confidential Information" shall include the terms of this

Agreement as well as any proprietary or confidential information that is jointly

owned by the Parties. Information shall not be considered Confidential

Information to the extent such information:

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(a) is known by the receiving Party at the time of its receipt,

and not through a prior disclosure by the disclosing Party, as

documented by business records;

(b) is properly in the public domain;

(c) is subsequently disclosed to the receiving Party by a Third

Party who may lawfully do so and is not under an obligation of

confidentiality to the disclosing Party; or

(d) is developed by the receiving party independently of

Confidential lnformation received from the disclosing Party,

as documented by research and development records.

Nothing in this definition shall preclude a Party from use or disclosure of any

proprietary or Confidential Information owned by that Party where the other

Party has no rights of ownership.

1.7 CONTROLLED. The term "Controlled" shall mean possessing the ability

to grant a license or sublicense without violating (i) any applicable law or

governmental regulation or (ii) the terms of an agreement with a Third Party

that has an effective date which predates the Effective Date hereof.

1.8 DEVELOPMENT COMMITTEE. The term "Development Committee" shall have

the meaning given such term in Section 2.1.

1.9 EMEA. The term "EMEA" shall mean the European Agency for the

Evaluation of Medicinal Products, any successor agency thereto (European

Medicines Agency) or any equivalent replacement agency having substantially the

same functions.

1.10 EVENT OF DEFAULT. The term "Event of Default" shall have the

meaning set forth in Section 11.4.1 of this Agreement.

1.11 FDA. The term "FDA" shall mean the United States Food and Drug

Administration, or any successor agency thereto.

1.12 FIRST COMMERCIAL SALE. The term "First Commercial Sale" shall

mean, with respect to any Product, the first sale for end use or consumption of

such Product in a country after all required approvals, including marketing and

pricing approvals, have been granted by the governing Regulatory Authority of

such country.

1.13 GAAP. The term "GAAP" shall mean generally accepted accounting

principles in the United States or International Accounting Standards outside

the United States, in each case as consistently applied by Spectrum, its

Affiliates, its sublicensees or its distributors in their respective financial

statements, audited if applicable.

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1.14 IMPROVEMENTS. The term "Improvements" shall mean one or more

enhancements, improvements or modifications in the manufacture, formulation,

conjugations, ingredients, preparation, dosage, administration or packaging of a

Product or the Chicago Labs Technology.

1.15 IND. The term "IND" shall mean (i) an Investigational New Drug

application as defined in the United States Food, Drug & Cosmetic Act and

applicable regulations promulgated thereunder, as amended from time to time or

(ii) an equivalent application or filing with the applicable Regulatory

Authority in any country other than the United States allowing the commencement

of human clinical trials.

1.16 INVENTION. The term "Invention" is defined in Recital A above.

1.17 JOINT INVENTIONS. The term "Joint Inventions" shall have the

meaning set forth in Section 5.1 of this Agreement.

1.18 JOINT PATENT. The term "Joint Patent" shall mean any Patent filed

with respect to a Joint Invention.

1.19 LICENSED FIELD. The term "Licensed Field" shall mean the

prevention and/or treatment of cancer.

1.20 MILESTONE PAYMENT. The term "Milestone Payment" shall mean the

payments from Spectrum to Chicago Labs under Section 4.4.

1.21 NDA. The term "NDA" shall mean a New Drug Application, as defined

in the United States Food, Drug & Cosmetic Act and applicable regulations

promulgated thereunder, as amended from time to time, to obtain approval from

the FDA for commercial sale of a Product, or an equivalent application or filing

with the applicable Regulatory Authority in any country other than the United

States.

1.22 NET SALES. The term "Net Sales" shall mean the amount received by

Spectrum, its Affiliates, its sublicensees or distributors on account of sales

of a Product to Third Parties in the Territory, less the following deductions to

the extent actually allowed or specifically allocated to the Product by the

selling party using GAAP and not separately invoiced: (i) sales and excise taxes

and duties paid or allowed by the selling party and any other governmental

charges imposed upon the production, importation, use or sale of such Product;

(ii) customary trade, quantity and cash discounts allowed on Product; (iii)

allowances or credits to customers on account of rejection or return of Product

or on account of retroactive price reductions affecting such Product; (iv)

freight and insurance costs; (v) rebates, chargebacks and other amounts paid on

sale or dispensing of the Product; and (vi) the booked cost of devices or

systems used for delivering a Product into the patient where the Product when

sold is a

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combination of the active pharmaceutical ingredient and the device or system.

For the avoidance of doubt, for each Product the Net Sales shall be calculated

only once for the first sale of such Product by either Spectrum, its Affiliate,

its sublicensee or its distributor, as the case may be, to a Third Party which

is neither an Affiliate, sublicensee or distributor of Spectrum. A sale of

Products by Spectrum, its Affiliate, its sublicensee or its distributor to a

wholesaler shall be regarded as the first sale of the Product for the purpose of

calculating Net Sales unless such sale is made by one of them directly to a

hospital, pharmacy, physician, retailer or other entity which provides the

Product to the patient in which case the first sale shall be the sale to such

hospital, pharmacy, physician, retailer or other entity. Net Sales shall not

include the amount received on account of sales of a Product or of sales of a

Product in a particular country for which the term of this Agreement has expired

in accordance with Section 11.1 on or before the date of the invoice for such

sales.

1.23 PATENT. The term "Patent" shall mean any and all unexpired patent

applications, provisional patent applications and any patent issuing therefrom

worldwide, together with any extensions, registrations, confirmations, reissues,

continuations, divisions, continuations-in-part, reexamination certificates,

confirmations, registrations, revalidations, additions, supplementary protection

certificates, substitutions or renewals thereof and any patents anywhere in the

world, claiming the priority date of any of the foregoing.

1.24 PHASE I CLINICAL TRIAL. The term "Phase I Clinical Trial" shall

mean those further and lawful studies of a Product conducted anywhere in the

Territory that the applicable Regulatory Authority requires to be performed on a

sufficient number of healthy human patients to generate sufficient data to

establish the safety and biological activity of that Product, and to permit

commencement of a Phase II Clinical Trial.

1.25 PHASE II CLINICAL TRIAL. The term "Phase II Clinical Trial" shall

mean those further and lawful studies of a Product conducted anywhere in the

Territory that the applicable Regulatory Authority requires to be performed on a

sufficient number of human patients with the condition treated by the Product to

generate sufficient data to establish the safety, and biological activity of

that Product for its intended use and to permit commencement of a Phase III

Clinical Trial.

1.26 PHASE III CLINICAL TRIAL. The term "Phase III Clinical Trial"

shall mean those controlled and lawful studies of a Product conducted anywhere

in the Territory on sufficient numbers of patients with the condition treated by

the Product that are prospectively designed, using predetermined endpoints, to

demonstrate clinically and statistically the efficacy and safety of that Product

for one or more indications as a pivotal study intended to lead to regulatory

approval of such Product for such indication or indications.

1.27 PRODUCT. The term "Product" shall mean any product, including

products under

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development and products approved by a Regulatory Authority, that includes, is

based upon or is derived from the Chicago Labs Technology. The term "Products"

shall mean more than one Product.

1.28 PRODUCT LICENSE. The term "Product License" shall have the meaning

set forth in Section 3.1.

1.29 REGULATORY AUTHORITY. The term "Regulatory Authority" shall mean

the principal governmental organization or agency that has the right to approve

the sale and, if applicable price, of Products in a given country, including,

without limitation, the FDA, the EMEA and the Ministry of Health, Labour and

Welfare in Japan.

1.30 ROYALTY TERM. The term "Royalty Term" shall have the meaning set

forth in Section 4.5.5.

1.31 SUBLICENSE. The terms "Sublicense" and "Sublicenses" shall have

the meanings set forth in Section 3.2.

1.32 TERRITORY. The term "Territory" shall mean all of the countries in

the world (including their territories and possessions).

1.33 THIRD PARTY. The term "Third Party" shall mean any person or

entity other than a Party hereto or an Affiliate.

1.34 UNIVERSITY. The term "University" shall mean the Board of Trustees

of the University of Illinois.

1.35 UNIVERSITY LICENSE AGREEMENT. The term "University License

Agreement" shall mean the Exclusive License Agreement dated August 15, 2003

between Chicago Labs and the University, a certified copy of which has been

delivered to Spectrum concurrent with the execution of this Agreement, as may be

amended from time to time as permitted by this Agreement.

1.36 VALID CLAIM. The term "Valid Claim" shall mean a claim in any

unexpired, issued patent within the Chicago Labs Patent Rights which has not

been held invalid and/or unenforceable in a decision by a court or other body of

competent jurisdiction from which there is no appeal or, if appealable, from

which no appeal has been taken.

2. RESEARCH AND DEVELOPMENT PROGRAM.

2.1 DEVELOPMENT COMMITTEE. After the Effective Date, Spectrum shall

establish a committee (the "DEVELOPMENT COMMITTEE") to be responsible for

planning, overseeing and directing the development and commercialization of, and

regulatory filings relating to, Products. One representative

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from Chicago Labs shall be allowed to participate in all meetings of the

Development Committee on a consultative basis and to receive copies of all

minutes, if any, of the Development Committee's deliberations. The Development

Committee shall meet at least quarterly until such time as the first NDA for a

Product is filed and then as appropriate to keep the Parties' representatives

informed thereafter. The President of Chicago Labs shall appoint Chicago Labs'

representative and may change such representative from time to time on written

notice to Spectrum.

3. PRODUCT LICENSE.

3.1 PRODUCT LICENSE. Chicago Labs hereby grants to Spectrum an

exclusive (even as to Chicago Labs), right and license under Chicago Labs'

rights to use the Chicago Labs Technology to develop, make, have made, use,

offer for sale, sell, have sold, distribute, import, and export Products in the

Licensed Field in the Territory (the "PRODUCT LICENSE"). Spectrum acknowledges

that (i) Chicago Labs' rights to use "Know How" under the University License

Agreement are nonexclusive and (ii) the grant of rights under the Chicago Labs

Patent Rights is qualified by the scope of the claims under the Patents included

in such Chicago Labs Patent Rights. The Product License shall not be construed

to confer any rights upon Spectrum by implication, estoppel or otherwise as to

any technology not included in the Chicago Labs Technology. Notwithstanding any

other provisions of this Agreement, Chicago Labs retains the rights to use and

license Chicago Labs Know-how outside the Licensed Field. In addition, Chicago

Labs hereby grants to Spectrum an exclusive (even as to Chicago Labs),

perpetual, royalty-free, license to any Product that may be used for the

diagnosis of cancer that was developed by Spectrum using the Chicago Labs

Know-how. The use of the Chicago Labs Know-how to develop such a Product shall

not be a breach by Spectrum of the terms of this Agreement.

3.2 SUBLICENSES. Spectrum shall have the right, but not the obligation,

to grant sublicenses (one a "Sublicense; more than one "Sublicenses") under the

Product License to its Affiliates and Third Parties, provided, however, that any

such sublicense shall be subject to and in all material respects consistent with

the material terms and conditions of this Agreement, including but not limited

to the following:

3.2.1 Termination. Every Sublicense shall contain a statement

describing the date upon which Chicago Lab's exclusive rights, privileges and

license under the University License Agreement shall terminate.

3.2.2 Binding Terms From University License Agreement. Spectrum

shall be bound by the obligations of Chicago Labs of Articles 5, 7.1, 7.3, 8, 9,

10 and 15.4 of the University License Agreement as if it were a party to the

University License Agreement. Spectrum acknowledges that Chicago Labs has

provided it with a certified true copy of the University License Agreement

containing such Articles. Further any Sublicenses granted by Spectrum shall

provide that the obligations

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to Chicago Labs of such Articles shall be binding upon the sublicensee as if it

were a party to the University License Agreement. Spectrum shall attach copies

of such Articles to all Sublicenses or faithfully reproduce such Articles within

such Sublicenses.

3.2.3 Copy of Sublicenses. Spectrum shall forward to University and

Chicago Labs a copy of any and all fully executed Sublicenses, and shall forward

to Chicago Labs *** a copy of such reports received by Spectrum from its

sublicensees during the preceding *** period under the Sublicenses as shall be

pertinent to a royalty accounting under said Sublicenses. Spectrum may redact

from such Sublicenses any terms that are not relevant to the Products so long as

the terms that are relevant to the Products, including the terms related to the

royalties payable on such Products thereunder, remain comprehensible. In the

event that the terms of a Third Party agreement prevent Spectrum from providing

a copy of Spectrum's Sublicense with the Third Party, Spectrum shall provide a

summary in sufficient detail to enable Chicago Labs to calculate and verify the

royalties payable to Chicago Labs with respect to such Sublicense.

3.3 UNIVERSITY LICENSE AGREEMENT. Spectrum acknowledges that under the

University License Agreement, University retained the right to practice the

Chicago Labs Patent Rights and Know How (as defined in Articles 1.13 and 1.8

respectively of the University License Agreement) for its own non-commercial

teaching and research activities, the results of which shall not be used for any

commercial purpose without the prior consent of Chicago Labs. Chicago Labs shall

not grant such consent to University without the prior written consent of

Spectrum which shall not be unreasonably withheld, provided that it shall not be

considered unreasonable for Spectrum to withhold its consent if the commercial

purpose might compete with the Products or any products that Spectrum develops

or markets, directly or indirectly.

3.4 MATERIAL TRANSFER.

3.4.1 Chicago Labs Materials. Chicago Labs shall transfer those

Chicago Labs Materials, if any, described in Exhibit B to Spectrum together with

the data related thereto on or about the delivery dates set forth in Exhibit B.

Spectrum shall also have the right to further transfer the Chicago Labs

Materials transferred hereunder to its Affiliates or sublicensees, solely in

accordance with Sections 3.2 and 3.4, under a sublicense or material transfer

agreement consistent with the terms of this Agreement.

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3.4.2 Transfer and Use. The Parties shall mutually agree on the

method for packaging and delivering Chicago Labs Materials, and Chicago Labs

transferring its materials to Spectrum which shall bear all costs of generating,

preparing, packaging and delivering such materials. Each Party understands and

agrees that Chicago Labs Materials may have unpredictable and unknown biological

and/or chemical properties and that they are to be used with caution. Spectrum,

its Affiliates and sublicensees will use Chicago Labs Materials subject to the

terms of this Agreement, and in material compliance with applicable laws and

regulations, including but not limited to, any laws or regulations relating to

the research, testing, production, storage, transportation, export, packaging,

labeling or other authorized use of such materials.

4. FINANCIAL TERMS AND CONDITIONS.

4.1 INITIAL FEE. Spectrum shall pay to Chicago Labs a fee of One

Hundred Thousand Dollars ($100,000). Such payment shall be made within *** days

after the Effective Date.

4.2 INITIAL RESEARCH AND DEVELOPMENT FUNDING ESTIMATES AND ADDITIONAL

PAYMENTS. The Parties estimate that the development costs required to complete a

work program consisting of completion of preclinical testing and filing an IND

to be approximately *** to ***. Beginning on the date *** after the Effective

Date, Spectrum shall pay to Chicago Labs ***. Furthermore, ***.

4.3 PRODUCT LICENSE FEE. Subject to Section 11.5(d) and provided there

has been a U.S. Patent issued upon United States patent application entitled

"Method and composition for preventing and treating solid tumors," US Patent

application publication number US 2004/0138121A1; publication date July 15,

2004, upon the enrollment of the first patient in a Phase II Clinical Trial by

Spectrum, Spectrum shall pay to Chicago Labs *** in *** installments of ***. The

first such payment shall be made not later than *** after the enrollment of the

first patient in the Phase II Clinical Trial. If for any reason a US Patent

issues after the enrollment of such first patient, Spectrum shall pay to Chicago

Labs within *** of the issuance of the Patent all of the *** installments that

would have been due and payable had a US Patent been issued at the time of such

enrollment and shall thereafter continue such payments until Spectrum has paid

Chicago Labs the full ***. Spectrum shall pay to Chicago Labs each *** payment

before the *** in which the payment is due.

4.4 MILESTONE PAYMENTS. Spectrum shall pay to Chicago Labs the

following one-time payments (one time regardless of the number of Products)

within *** of the achievement of each of the following events:

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<TABLE>

<CAPTION>

Milestone

Milestone Payment

--------- ---------

<S> <C>

A. First approval of an NDA for a Product by the FDA ***

B. First approval of an NDA for a Product by the EMEA ***

C. First Approval of an NDA for a Product by the Ministry of Health, ***

Labour and Welfare in Japan

D. Approval of the *** for a Product by the FDA ***

E. Approval of the *** for a Product by the EMEA ***

F. Approval of the *** for a Product by the Ministry of Health, Labour and ***

Welfare in Japan

G. Annual Net Sales of a Product in *** of *** ***

H. Annual Net Sales of a Product in *** of *** ***

I. Annual Net Sales of a Product in *** of *** ***

</TABLE>

4.5 PRODUCT ROYALTIES.

4.5.1 Patent Royalties. During the Royalty Term, Spectrum shall pay

Chicago Labs the following royalties on the aggregate annual Net Sales of each

Product sold by Spectrum, its Affiliates and any Third Party sublicensees in the

Territory during each calendar year:

*** percent (***%) of annual Net Sales up to and including ***; and

*** percent (***%) of annual Net Sales greater than ***.

The applicable royalty rate determined above shall be applied to the Net Sales

in each country where there is a Valid Claim covering the Product, as determined

on a Product-by-Product and country-by-country basis. Multiple royalties shall

not be earned or paid on a particular Product if such Product or its

manufacture, use, importation or sale is covered by more than one Valid Claim.

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4.5.2 Step-Down Royalty. After the expiration of the Royalty Term

for a country and in consideration of the grant by Chicago Labs to Spectrum of

the rights under this Agreement to Chicago Labs Know-how, for a period of *** or

until there is generic competition within such country, whichever comes first,

Spectrum shall pay Chicago Labs the following royalties on the aggregate annual

Net Sales of each such Product sold by Spectrum, its Affiliates and any Third

Party sublicensees in the Territory during each calendar year:

*** percent (***%) of annual Net Sales up to and including ***; and

*** percent (***%) of annual Net Sales greater than ***.

The applicable royalty rate shall be determined on a Product-by-Product and

country-by-country basis.

4.5.3 Know-How Royalties. For the period of *** from the First

Commercial Sale of each Product in each country where there is no Valid Claim

covering the Product or until there is generic competition in such country,

whichever comes first, Spectrum shall pay Chicago Labs the following royalties

on the aggregate annual Net Sales of each such Product sold by Spectrum, its

Affiliates and any Third Party sublicensees in the Territory during each

calendar year:

*** percent (***%) of annual Net Sales up to and including ***; and

*** percent (***%) of annual Net Sales greater than ***.

The applicable royalty rate determined above shall be applied to the Net Sales

in each country where there is no Valid Claim covering the Product, as

determined on a Product-by-Product and country-by-country basis.

4.5.4 ***

4.5.5 Royalty Term. The "ROYALTY TERM" shall begin on the First

Commercial Sale of a particular Product in a particular country and expire on

the expiration of the last Valid Claim covering such Product in that country, as

determined on a Product-by-Product basis and a country-by-country basis.

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4.5.6 Royalty Offsets. In the event that royalty payments are owed

by Spectrum to Third Parties with respect to licenses necessary to use, develop,

manufacture or sell a Product and such royalty payments exceed *** percent

(***%) of Net Sales, the royalties owed to Chicago Labs under Section 4.5.1

shall be reduced by the amount of the royalty payments actually paid by Spectrum

to such Third Parties provided that such reductions shall not exceed *** of the

royalties due Chicago Labs under such Section in such country for the reporting

period. ***

4.5.7 Sublicense Income. In case Spectrum grants sublicenses under

Section 3.2 hereof, Spectrum shall pay to Chicago Labs (A) if before ***, ***

percent (***%) or (B) if after ***, *** percent (***%), of any lump sum,

periodic or other consideration (other than royalties based on Net Sales)

received by Spectrum from sublicensees including, but not limited to, any

upfront fees, sublicense fees, or other consideration paid for the authorization

to use the Chicago Labs Technology to develop, make, have made, use, offer for

sale, sell, have sold, distribute, import, and export Products in the Licensed

Field in the Territory. Notwithstanding anything else contained herein, upon

receipt by Spectrum of any payment from a sublicensee upon the achievement of

any applicable milestone (a "SUBLICENSEE MILESTONE"), (i) if the Sublicensee

Milestone is also a milestone described in Section 4.3 or 4.4, Spectrum shall

make the applicable milestone payment under Section 4.3 or 4.4 to Chicago Labs

and (ii) the payment received by Spectrum from such sublicensee shall be treated

as sublicense income and subject to the first sentence of this Section 4.5.7;

provided that Spectrum may deduct any payment made pursuant to clause (i) of

this from such sublicense income before calculating the percentage owed to

Chicago Labs pursuant to this Section 4.5.7 in determining Spectrum's obligation

under this Section. Spectrum may only deduct from such sublicense income, under

clause (ii) of this Section, the amount actually paid by Spectrum to Chicago

Labs pursuant to clause (i) of this Section. If Spectrum receives as

Sublicensing Revenues anything of value in lieu of cash payments, Spectrum shall

pay Chicago Labs royalties at the applicable rate under Section 4.5.1, 4.5.2, or

4.5.3 as applicable, above based on the fair market value of such payment,

unless Chicago Labs waives in writing such payment obligation.

4.5.8 *** Royalty Payments. Royalties owed to Chicago Labs pursuant

to this Section 4.5 shall be payable by Spectrum within *** after the *** (i.e.,

*** after ***) based upon the Net Sales of each Product during such ***. Any

underpayment or overpayment of the *** royalty payments shall be reconciled and

added or deducted to the royalty payment due in the *** in which such

underpayment or overpayment is discovered. All payments to Chicago Labs under

this Agreement shall be made in U. S. Dollars by bank wire transfer in

immediately available funds to such bank account in the

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United States designated in writing by Chicago Labs from time to time. In the

case of sales outside the United States, the rate of exchange to be used in

computing the amount of currency equivalent in U. S. Dollars due Chicago Labs

shall be made at the rate of exchange utilized by Spectrum in its worldwide

accounting system under GAAP.

4.5.9 Income Tax Withholding. If laws, rules or regulations require

withholding of income taxes or other rates imposed upon payments set forth in

this Section 4, Spectrum may make such withholding payments as required and

subtract such withholding payments from the payments set forth in this Section

4. Spectrum shall submit appropriate proof of payment of the withholding rates

to Chicago Labs within a reasonable period of time. Spectrum shall use efforts

consistent with its usual business practices to ensure that any withholding

taxes imposed are reduced as far as possible under the provisions of the current

or any future double taxation treaties or agreements between foreign countries,

and the Parties shall cooperate with each other with respect thereto, with the

appropriate Party under the circumstances providing the documentation required

under such treaty or agreement to claim benefits thereunder.

4.5.10 Reports. Spectrum shall furnish to Chicago Labs at the same

time as each royalty payment is made by Spectrum, a written report of Net Sales

of the Products on a Product by Product and country by country basis and the

royalty due and payable thereon, for the *** period upon which the royalty

payment is based. Net Sales made in currencies other than U.S. Dollars will be

translated into U.S. Dollars as provided in Section 4.5.8 and added to Net Sales

made in U.S. Dollars for purposes of determining aggregate Net Sales and the

royalties due to Chicago Labs.

4.6 RECORDS. Spectrum shall keep full, complete and proper records and

accounts of all sales of Products by Spectrum, its Affiliates, and to the extent

it acquires rights to do so, its sublicensees and distributors, in accordance

with GAAP, in sufficient detail and in the currencies in which the sale was made

to enable the royalties payable on each Product to be determined. All such

records, statements, reports and accounts referred to in this Section 4.6 shall

be retained for a period of *** after the end of the period to which they apply.

4.7 AUDIT

4.7.1 If Chicago Labs disagrees with a report provided by Spectrum,

pursuant to Section 4.5.10, Chicago Labs, at its own expense, shall have the

right, upon reasonable prior notice during regular business hours, to meet with

Spectrum's independent auditor to inspect and discuss the

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books and accounts of Spectrum or its Affiliates, related to the payment and

calculation of royalties arising under this Agreement. After this inspection, if

Chicago Labs still disagrees with the report provided by Spectrum, with

reasonable justification for such disagreement, Chicago Labs, at its own

expense, shall have the right, upon reasonable prior notice during regular

business hours, to appoint independent auditors reasonably acceptable to

Spectrum and have them during normal business hours, inspect and copy the books

and accounts of Spectrum or its Affiliates, related to the payment and

calculation of royalties arising under this Agreement. Spectrum shall cooperate

and cause Spectrum's Affiliates, to cooperate with such auditors. The auditors

performing the audit shall disclose to Chicago Labs only information relating to

the accuracy of records kept and the payments made, and shall be under a duty to

keep confidential any other information obtained from such records. Spectrum

shall audit the books and accounts of its sublicensees and/or distributors, if

any, using its independent auditor or a comparable reputable auditor. Spectrum

shall share the results of its audit with Chicago Labs.

4.7.2 If any such audit establishes that Spectrum has underpaid or

overpaid the amount due, Spectrum shall promptly pay any remaining amounts due

as established by such audit or Chicago Labs shall promptly refund any over

payment. If the underpayment is by *** percent (***%) or more during any

calendar year, Spectrum shall reimburse Chicago Labs for its out-of-pocket

expense of such audit with interest at the rate specified in Section 4.8 below

for late payments on any such overdue payment from the date due until paid.

4.8 LATE PAYMENTS. Any payments or reimbursements due Chicago Labs

under this Agreement that are not paid on the due date shall accrue interest at

the lower of the rate of *** percent (***%) per annum, or the maximum rate

allowed by law, from the due date until paid in full.

4.9 NO REFUNDS. No payments or reimbursements once received by Chicago

Labs pursuant to Sections 4.1 through 4.4 above are refundable in whole or in

part.

5. OWNERSHIP AND PATENT MATTERS.

5.1 OWNERSHIP. As between the parties, all Chicago Labs Technology

shall be owned by Chicago Labs. Improvements that are made by an employee, agent

or consultant of Spectrum, solely or jointly with a Third Party other than an

employee, agent or consultant of Chicago Labs, shall be owned by Spectrum.

Improvements that are made jointly by employees, agents or consultants of

Spectrum and employees, agents or consultants of Chicago Labs ("JOINT

INVENTIONS") shall be jointly owned by

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Spectrum and Chicago Labs and treated as joint inventions under U.S. laws

applicable to joint inventions. Chicago Labs shall, and hereby does, grant

Spectrum the exclusive and unrestricted right (even as to Chicago Labs) in the

Licensed Field to make, have made, use, sell, have sold, import, export and

license all Improvements that are owned by Chicago Labs and all Joint Inventions

for so long as Spectrum is prosecuting and maintaining the Patents contained in

such Joint Inventions. Chicago Labs shall, and hereby does, grant Spectrum a

perpetual, royalty-free license to use all Improvements owned by Chicago Labs

and all information, know-how and other data pertaining to all Improvements and

the Joint Inventions after Spectrum's royalty obligations under Section 4.5 have

expired or been terminated by Spectrum due to a breach of this Agreement by

Chicago Labs or due to the insolvency of Chicago Labs pursuant to Section 11.4.5

and all royalties then owed Chicago Labs have been paid, provided that Chicago

Labs has not previously terminated this Agreement prior to such expiration.

Spectrum shall own any trademarks associated with the Products.

5.2 PROSECUTION AND MAINTENANCE OF CHICAGO LABS PATENT RIGHTS.

5.2.1 Patent Prosecution and Maintenance. Spectrum, at its own

expense, shall direct and control the preparation, filing, prosecution and

maintenance of all United States and foreign Patents within the Chicago Labs

Patent Rights, including any interferences and foreign oppositions. Spectrum

shall, in its sole discretion, select outside patent counsel reasonably

acceptable to Chicago Labs to carry out such activities. ***

5.2.2 Chicago Labs Participation and Assistance. Spectrum shall

consult with Chicago Labs with regard to the preparation, filing, prosecution

and/or maintenance of the Patents within the Chicago Labs Patent Rights and

Joint Patents and the scope of claims contained therein. Notwithstanding the

preceding sentence, however, Spectrum shall in all events have final

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