Exhibit 10.1

 

Litigation Funding Agreement

 

This Litigation Funding Agreement (“Agreement”) is made and entered into as of
December 27, 2019 (the “Effective Date”) by and between LEGALIST FUND II, L.P.,
a Delaware limited partnership (the “Funder”), and DiaMedica Therapeutics Inc.,
a corporation organized under the laws of British Columbia, Canada and
headquartered in Minnesota, United States of America (the “Plaintiff”). Each of
the Funder and the Plaintiff is individually referred to as a “Party” hereunder
and collectively, the “Parties” hereunder.

 

Recitals

A.     The Plaintiff has filed a lawsuit against PRA Health Sciences, Inc. and
Pharmaceutical Research Associates Group B.V. (collectively, the “Defendant”) in
an action styled: DiaMedica Therapeutics Inc. v. PRA Health Sciences, Inc., et
al., Case No. 1:18-cv-01318-MN, currently pending in the United States District
Court for the District of Delaware (the “Action”) in connection with the
Claim(s) (as defined below) it has against the Defendant.

 

B.      The Plaintiff is being advised on and/or represented in connection with
the Claim(s) by Fisher Broyles LLP (the “Lead Counsel”).

 

C.      The Plaintiff and the Funder have agreed that the Funder will provide
certain funding to facilitate the prosecution of the Claim(s) in exchange for
certain payments if any recovery is awarded to the Plaintiff in connection with
the Claim(s).

 

Agreement

The Plaintiff and the Funder, in consideration of the foregoing recitals, the
mutual covenants, promises, and agreements hereinafter set forth, the mutual
benefits to be gained by the performance thereof, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged and accepted, intend to be legally bound by the terms and
conditions of this Agreement.

 

1.0

Definitions

 

“Agreement” has the meaning set forth in the introductory paragraph.

 

“Budget” means the Lead Counsel’s reasonable estimate of the funding required to
pursue the Claim(s), which is attached hereto as Exhibit A and may be amended by
the Parties from time to time in accordance with Section 9.8 of this Agreement.

 

“Claim(s)” means the claims and causes of action asserted by the Plaintiff in
the Action, and in each and every Proceeding(s) (as defined below), as may be
amended from time to time, arising out of or in connection with such claims and
causes of action.

 

“Claim Proceeds” means any and all net proceeds, receivables, property, cash,
and other consideration due to and/or received by, on behalf of, or in lieu of
payment to, the Plaintiff arising out of or in connection with the Claim(s) as a
result of any judgment, award, order, settlement arrangement, and/or compromise
(including payment of any damages (whether treble, compensatory, punitive, or
special), compensation, interest, restitution, recovery, judgment sum, arbitral
award, settlement sum, compensation payment, costs, and interest on costs),
whether in monetary or non-monetary form, whether actual or contingent, and
before deduction of any taxes which the Plaintiff may be liable to pay in
connection with such value due to and/or received by Plaintiff; but after
deduction of recoupments or setoffs in respect of any claim or counterclaim
asserted against Plaintiff by the Defendant; provided, however, that
notwithstanding the foregoing, Claim Proceeds shall not include specific
performance or any injunctive relief by the Defendant, including, without
limitation, production of clinical records or performance of services.

 

“Committed Funds” means up to an aggregate of $1,000,000.00.

 

 

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“Common Interest Material” means any discussion, evaluation, negotiation, or any
other communication or exchange of information relating to the Claim(s) in any
way, whether written or oral, between or among the Plaintiff, the Lead Counsel,
the Funder, and/or the Funder’s legal counsel, provided that such communication
or exchange of information would be protected by attorney–client privilege
between the Lead Counsel and the Plaintiff, the attorney work-product doctrine,
or some other privilege or discovery protection if not disclosed to a third
party lacking a common legal interest.

 

“Confidential Information” means the Common Interest Material and, to the extent
not already covered as Common Interest Material, any communication or exchange
of information relating to the Claim(s), including: (a) information, of any
type, relevant to understanding the Claim(s); (b) the Lead Counsel’s or the
Funder’s counsel’s strategies, tactics, analyses, or expectations of the Parties
to the Proceeding(s), regarding the Claim(s) or Claim Proceeds; and (c) any
professional work product relating to the Claim(s) or the Claim Proceeds,
whether prepared for the Plaintiff, the Lead Counsel, the Funder, or the
Funder’s counsel. Notwithstanding the foregoing, Confidential Information does
not include information that (i) was or becomes generally available to the
public other than by breach of this Agreement; (ii) was, as documented by the
written records of the receiving Party, known by the receiving Party at the time
of disclosure to it or was developed by the receiving Party or its
representatives without using Confidential Information or information derived
from it; or (iii) was disclosed to the receiving Party in good faith by a third
party who has an independent right to such subject matter and information.

 

“Costs and Disbursements” means the legal fees, court costs, and other
miscellaneous expenses specified in the Budget or approved by the Lead Counsel.

 

“Lead Counsel” has the meaning set forth in the recitals.

 

“Defendant” has the meaning set forth in the recitals.

 

“Effective Date” has the meaning set forth in the introductory paragraph.

 

“Funder” has the meaning set forth in the introductory paragraph.

 

“Funder Costs Amount” means the total of all Costs and Disbursements actually
paid or otherwise funded by the Funder pursuant to this Agreement plus the
reimbursement of $10,000.00 to the Funder for its diligence and underwriting
costs, whether or not those Costs or Disbursements were reasonably incurred by
the Plaintiff in accordance with this Agreement, or whether or not they were
specified in the Budget.

 

“Funder Recovery Amount” means the greater of: 1,2

 

(i)

$1,000,000.00 if repayment occurs within nine (9) months of the Transfer Date,
$2,000,000.00 if repayment occurs after nine (9) months from the Transfer Date
but before trial has begun, or $3,000,000.00 thereafter; or

 

 

(ii)

twenty percent (20%) of the Claim Proceeds.

 

“JAMS” has the meaning set forth in Section 9.5.

 

“Non-Monetary Claim Proceeds Fair Market Valuation” means the Plaintiff’s good
faith determination of the fair market value of any and all non-monetary Claim
Proceeds constituting real or personal property other than cash; provided,
however, that such Non-Monetary Claim Proceeds Fair Market Valuation shall not
include specific performance by the Defendant or any injunctive relief against
any Defendants, including without limitation, production of clinical records or
performance of services.

 

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1 Note that in all cases, this is the premium amount paid in addition to the
repayment of actual funds spent. 

2 In the event of a termination of this Agreement by either or both of the
Parties, the percentage in subsection Funder Recovery Amount will be multiplied
by the percentage of the Committed Funds actually paid by the Funder prior to
termination.

 

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“Plaintiff” has the meaning set forth in the introductory paragraph.

 

“Proceeding(s)” means each and every litigation or alternative dispute
resolution proceeding arising out of or in connection with the Claim(s),
including any settlement negotiation, arbitration, mediation or appeal, as well
as any other proceedings which Funder and Plaintiff agree in writing shall be
the subject of this Agreement. For the avoidance of doubt, Proceedings shall not
include any proceedings governed by Section 9.5 of this Agreement.

 

“Obligations” means (a) the obligation of the Plaintiff to pay the Funder Costs
Amount and Funder Recovery Amount to the Funder, (b) all other debts,
liabilities, obligations, covenants and duties of the Plaintiff to the Funder
now or hereafter existing, whether joint or several, direct or indirect,
absolute or contingent, or due or to become due, arising under or in connection
with this Agreement, or any of the transactions contemplated thereby and
including any interest due thereon all as set forth in this Agreement; (c) all
debts, liabilities, obligations, covenants and duties of the Plaintiff to pay or
reimburse the Funder for all expenses, including reasonable out-of-pocket and
documented attorneys’ fees, incurred by the Funder in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Agreement, including all such costs and expenses incurred during any
legal proceeding, including any proceeding under any applicable bankruptcy,
insolvency or other similar debtor relief laws; and (d) all interest and fees on
any of the foregoing, whether accruing prior to or after the commencement by or
against Plaintiff of any proceeding under any applicable bankruptcy, insolvency,
or other similar debtor relief laws naming Plaintiff as the debtor in such
proceeding, regardless of whether such interest and fees are allowed claims in
such proceeding.

 

“Transfer Date” means the date on which the Action is transferred to the U.S.
District Court for the District of Minnesota.

 

2.0 Funding Terms

 

2.1 Agreement to Fund Plaintiff. In return for the Plaintiff’s agreement to pay
from any Claim Proceeds recovered the Funder Costs Amount and the Funder
Recovery Amount to the Funder in accordance with the terms of this Agreement,
the Funder agrees to pay reasonable Costs and Disbursements in accordance with
the terms of this Agreement.

 

 

2.1.1

Transfer of Case or Denial of Motion. Plaintiff has filed a motion to transfer
venue of the Claims from Delaware to Minnesota. The Funder’s agreement to pay
reasonable Costs and Disbursements is conditioned on the Claims being
transferred to the U.S. District Court for the District of Minnesota. Plaintiff
has an obligation to inform Funder when the motion is decided. The Funder shall
promptly, no later than three (3) business days after receiving notice of the
transfer, advance to the Plaintiff $200,000.00 to an account designated in
writing by the Plaintiff to the Funder, which sum represents fees and costs
previously paid by Plaintiff in the Action.

 

2.2 Reasonable Costs and Disbursements Only. Unless otherwise agreed by the
Funder, the Funder will not pay and will not be liable under this Agreement for
any unreasonable Costs and Disbursements, including without limitation, the
following costs, disbursements, or liabilities that may be incurred by the
Plaintiff:

 

 

2.2.1

costs and/or other sums incurred as a result of the Plaintiff’s willful failure
(on any one or more occasions) to cooperate with or to follow the advice of the
Lead Counsel, subject to Section 6.4;

 

 

2.2.2.

costs and/or other sums incurred as a result of any default by the Plaintiff
under this Agreement after the expiration of any applicable grace or cure period
hereunder;

 

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2.2.3

any liability for payment of the Defendant’s costs or the Plaintiff’s liability
for fines or penalties as set forth in a final non-appealable order or decision
entered in the Action;

 

 

2.2.4

costs and/or other sums incurred as a result of any unreasonable failure by the
Plaintiff or the Lead Counsel to comply with applicable law, an order or
procedural rule of the applicable court during the Proceedings, or any discovery
or other related obligations, in each instance, as set forth in a final
non-appealable order or decision entered into in such Proceedings;

 

 

2.2.5

costs and/or other sums incurred as a result of any sanctions ordered against
the Plaintiff or the Lead Counsel in the Proceedings;

 

 

2.2.6

costs and/or other sums incurred prior to the Effective Date (unless such costs
are included in the Budget or in this Agreement) or after the term of this
Agreement;

 

 

2.2.7

costs and/or other sums incurred over sixty (60) days prior to the date the
invoice is submitted to the Funder, except as otherwise provided in Sections
2.2.1 and 2.2.6 above; or

 

 

2.2.8

any Costs or Disbursements in excess of the Committed Funds.

 

2.3 Payment Terms; Disputed Amounts. The Plaintiff shall instruct the Lead
Counsel and any other service providers provided for in the Budget to address
invoices relating to the work described in the Budget to the Plaintiff but mark
such invoices payable by the Funder, and to deliver such invoices to the
Plaintiff (with a copy delivered to the Funder simultaneously) for payment.
After the Plaintiff approves such invoices and the Funder agrees that the Costs
and Disbursements on an invoice are reasonable, the Funder shall promptly pay
(without setoff, claims, defenses or any deduction) the applicable amount when
due up to an aggregate amount not to exceed the Committed Funds. If the Funder,
in its reasonable opinion, believes that some or all of the Costs and
Disbursements on an invoice are unreasonable and are not required to be paid by
the Funder pursuant to this Agreement, the Funder shall provide a written notice
setting out the reasons for its belief to the Plaintiff (with a copy to the
relevant billing party simultaneously) within twenty (20) days of receipt of the
invoice. In the event the Funder provides such a notice, the Funder and the
Plaintiff agree to work together with the relevant billing party to resolve the
disputed amounts. Pending resolution of such disputed amounts, the Funder shall
pay any Costs and Disbursements that are not subject to dispute. In the event
that the Funder and Plaintiff are unable to resolve the disputed amounts within
thirty (30) days, the Funder and the Plaintiff shall rely on the arbitration
procedure set out in Section 9.5 for resolution. The Parties acknowledge and
agree that the funding by the Funder to the Plaintiff shall be on a non-recourse
basis except to the extent of the Funder’s right to share in the Claim Proceeds
as set forth in this Agreement.

 

2.4 Failure to Fund; Cessation of Funding. If the Funder fails to timely release
and/or notifies the Plaintiff that it will cease to pay Costs and Disbursements
in accordance with the terms of this Agreement, the Plaintiff shall thereafter
exercise its reasonable best efforts to enter into alternative funding
arrangements in connection with the Claim(s). Funder acknowledges and agrees
that it will accept the subordination of its right or entitlement to the Funder
Costs Amount or the Funder Recovery Amount to facilitate Plaintiff’s ability to
secure alternative funding arrangements.

 

2.5 Change to Lead Counsel Agreement. If Costs and Disbursements under this
Agreement include fees for the Lead Counsel, the Plaintiff verifies that the
Lead Counsel and the Plaintiff have modified their fee agreement for advice
and/or representation in connection with the Claim(s) to convert 25 percent of
the Lead Counsel’s hourly rate to an alternative fee agreement, which does not
affect the Funder’s priority on the Funder Costs Amount or the Funder Recovery
Amount.

 

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3.0 Recovery Terms

 

3.1 Agreement to Pay Funder. The Funder Costs Amount and the Funder Recovery
Amount shall become payable only in the event that the Plaintiff recovers Claim
Proceeds and in all other circumstances shall be non-recourse. In return for the
Funder’s agreement to pay the Plaintiff’s reasonable Costs and Disbursements
incurred in accordance with the terms of this Agreement, the Plaintiff agrees to
pay the Funder, upon recovery of Claim Proceeds, the Funder Costs Amount and the
Funder Recovery Amount. The Plaintiff acknowledges and agrees that the Funder’s
entitlement to the Funder Costs Amount and the Funder Recovery Amount shall
begin to accrue upon the Funder’s payment of any portion of the Committed Funds
and continue to accrue with subsequent payments by the Funder pursuant to this
Agreement, whether or not the Funder provides the entirety of the Committed
Funds but only for so long as this Agreement is not terminated by the Funder or
by the Plaintiff as a result of the Funder’s breach of this Agreement, in which
event, Funder Costs Amount and Funder Recovery Amount will be proportionately
reduced as noted above. If the Claim Proceeds are insufficient to pay in full
both the Funder Costs Amount and the Funder Recovery Amount, then the Claim
Proceeds shall be applied exclusively and entirely to paying these amounts to
the Funder, after which no further sum shall be due and/or payable to the Funder
by the Plaintiff or any other Person pursuant to this Agreement.

 

3.2 Payment of Claim Proceeds; Non-Monetary Claim Proceeds. The Plaintiff agrees
that the Lead Counsel will hold any Claim Proceeds received by it or by the Lead
Counsel on its behalf in trust for the Funder, on terms that shall entitle the
Funder to receive such part of the Claim Proceeds as shall be equal to the total
of the Funder Costs Amount and the Funder Recovery Amount to the extent of such
Claim Proceeds. The Plaintiff shall use its good faith best efforts to release
Claim Proceeds to the Funder to pay the Funder Costs Amount and the Funder
Recovery Amount pursuant to this Agreement as promptly as possible. All Claim
Proceeds received in monetary form shall be paid into the Lead Counsel’s escrow
account immediately upon receipt for further payment to the Funder. In the case
of Claim Proceeds received in non-monetary form constituting real or personal
property other than cash, as defined above, provided that monetary Claim
Proceeds are inadequate to fund the Funder Costs and Funder Recovery Amounts,
and unless otherwise agreed by the Funder and the Plaintiff in writing, the
Plaintiff shall, as promptly as practicable, pay into the Lead Counsel’s escrow
account an amount equal to the Non-Monetary Claim Proceeds Fair Market Valuation
and simultaneously provide to the Funder in writing (with a copy delivered to
the Lead Counsel simultaneously) a statement of the details of the Non-Monetary
Claim Proceeds Fair Market Valuation. If the Funder, in its reasonable opinion,
disagrees with the Non-Monetary Claim Proceeds Fair Market Valuation, the Funder
shall provide a written notice setting out the reasons for its belief to the
Plaintiff (with a copy to the Lead Counsel simultaneously) within twenty (20)
days of receipt of the Non-Monetary Claim Proceeds Fair Market Valuation
statement. In the event the Funder provides such a notice, the Funder and the
Plaintiff agree to work together to resolve the disputed fair market value
determination of the non-monetary Claim Proceeds. In the event the Funder and
the Plaintiff are unable to resolve the disputed fair market value determination
of the non-monetary Claim Proceeds within thirty (30) days, the Funder and the
Plaintiff shall rely on the arbitration procedure described in Section 9.5 for
resolution. Notwithstanding anything to the contrary in this Agreement, no Claim
Proceeds shall be released from the Lead Counsel’s escrow account until such
dispute is finally resolved in accordance with this Section 3.2.

 

3.3 Unexpected Delay. “Unexpected Delay” occurs when repayment has not occurred
within three and one-half (3.5) years past the Transfer Date, and thereafter,
the Funder shall receive interest on such unpaid amounts equal to 20% per annum
commencing on the three and one-half year anniversary of the Transfer Date and
which shall be added to the Funder Costs Amount and Funder Recovery Amount. Such
interest will be calculated on an annual basis and will be added to the
principal at the end of the prior year. End of year principal will include
Funder Costs Amount and Funder Recovery Amounts due based on funding and
recovery terms set forth above, plus additional interest accrued to date as
provided in this Section 3.3.

 

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4.0 Plaintiff’s Representations and Warranties

 

The Plaintiff represents and warrants to the Funder as follows:

 

4.1 Full Disclosure. The Plaintiff and the Lead Counsel have provided the Funder
with all material information relating to the Claim(s), as requested by the
Funder, excluding information protected solely by the attorney–client privilege.
To the Plaintiff’s knowledge, all information the Plaintiff and the Lead Counsel
have provided to the Funder is true and correct in all material respects.

 

4.2 No Impairment. Other than as already disclosed to the Funder in writing
prior to the date hereof or as alleged by the Defendants in the Action, the
Plaintiff has not taken any action (including executing documents) or failed to
take any action to its knowledge that (a) would materially and adversely affect
the Claim(s), or (b) would give any person or entity (other than the Funder and
the Plaintiff) an interest in the Claim Proceeds.

 

4.3 Solvency. The Plaintiff has no bankruptcy proceedings outstanding and has
not received any written notice of potential proceedings against it.

 

4.4 Authority. The Plaintiff is duly organized, validly existing, and in good
standing under the laws of its jurisdiction of organization. The Plaintiff has
the power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate (or, if applicable, other entity)
action on the part of the Plaintiff and no further corporate (or, if applicable,
other entity) action is required on the part of the Plaintiff to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Plaintiff and constitutes the valid and binding
obligations of the Plaintiff, enforceable in accordance with its terms, subject
to (a) laws of general application relating to bankruptcy, insolvency, and
relief of debtors and (b) rules of law governing specific performance,
injunctive relief, and other equitable remedies.

 

4.5 Common Interest. The Plaintiff has received the advice of the Lead Counsel,
or of another duly qualified law firm or attorney, regarding the common interest
doctrine in California.

 

5.0 Funder’s Representations and Warranties

 

The Funder represents and warrants to the Plaintiff as follows:

 

5.1 Committed Funds. The Funder has, and will continue at all times during the
term of this Agreement to have, sufficient funds available to fulfill its
obligations under this Agreement.

 

5.2 No Conflicts. Other than as already disclosed to Plaintiff, the Funder has
not, as of the Effective Date, (a) paid a referral fee to the Lead Counsel in
connection with the Claim(s), the Plaintiff, or this Agreement; (b) entered into
any transaction with the Lead Counsel that has or would make the Lead Counsel a
part owner of the Funder; (c) contracted with any other party or potential party
to the Claim(s); (d) engaged in negotiations with any other party or potential
party to the Claim(s); or (e) entered into any relationship with the Lead
Counsel that conflicts with the Plaintiff’s interests regarding the Claim(s).
The Funder does not have a duty, contractual obligation, or other requirement to
monetize its interest in the Claim(s) within any particular time frame or which
would require the Funder to cease funding the Claim(s). For the avoidance of
doubt, the preceding sentence does not include a fiduciary duty that would
require the Funder to cease funding the Claim(s) pursuant to Section 8.2.3
because of the Funder’s assessment of the viability of the Claim(s). In
addition, the Funder has not instituted any action, suit, or arbitration
separate from the Claim(s) arising from the same facts, circumstances or law
giving rise to the Claim(s), and has not granted (or purported to grant) any
charge, lien, or other security interest with respect to the Claim(s) and the
Claim Proceeds in any way, other than such payments that would become due after
all payments due to the Funder under this Agreement have been satisfied in full.

 

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5.3 No Disclosure of Common Interest Material. The Funder and its legal counsel
have not disclosed any Common Interest Material to anyone without the prior
written consent of the Plaintiff and has and will continue to maintain at all
times during the term of this Agreement the Common Interest Material strictly
confidential. The disclosure of Common Interest Material to the Funder pursuant
to this Agreement will not at any time result in any waiver of the
attorney-client, work product or any other legal privileges that may attach to
all or any portion of such Common Interest Material under any applicable law.

 

5.4 Authority. The Funder is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. The Funder has the
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Funder and no
further corporate action is required on the part of the Funder to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Funder and constitutes the valid and binding
obligations of the Funder, enforceable in accordance with its terms, subject to
(a) laws of general application relating to bankruptcy, insolvency, and relief
of debtors and (b) rules of law governing specific performance, injunctive
relief, and other equitable remedies.

 

6.0 Additional Covenants 

 

6.1 Accuracy of Representations and Warranties. Each of the Parties covenants
and agrees that all of its representations and warranties made pursuant to this
Agreement shall continue to be true and correct throughout the term of this
Agreement. Each Party further agrees to promptly notify the other Party in the
event a representation or warranty is no longer true and correct.

 

6.2 Duty to Cooperate. The Plaintiff covenants to cooperate in the prosecution
of the Claim(s), including without limitation, that the Plaintiff will cause its
officers, executives, and employees to promptly and fully assist the Lead
Counsel as reasonably necessary to conduct and conclude the Claim(s). For the
avoidance of doubt, such assistance includes all actions any plaintiff may
reasonably expect undertaking, including, without limitation, submitting to
examination, verifying statements under oath, and appearing at any Proceedings.

 

6.3 Duty to Conduct Claim(s). The Plaintiff covenants that it shall exercise its
reasonable best efforts to continue to conduct its prosecution of the Claim(s)
until their settlement or final resolution as long as the Lead Counsel continues
to represent the Plaintiff on a contingency basis or the Funder continues to
fund the Claim(s) in accordance with this Agreement.

 

6.4 Control of Claim(s). The Plaintiff shall retain control over the conduct of
the Claim(s) and in particular over settlement of the Claim(s) with the
Defendant. Without limiting the previous sentence, however, the Plaintiff agrees
to take and follow the legal advice of the Lead Counsel at all appropriate
junctures (excluding, however, the Lead Counsel’s advice whether to make or
accept any offer to settle the Claim(s), which shall be decided by the Plaintiff
in its sole and absolute discretion).

 

6.5 No Interference. The Parties recognize that the Lead Counsel must at all
times comply with its ethical duties to act in the best interests of the
Plaintiff and in accordance with its other professional responsibilities and
duties. Nothing in this Agreement entitles the Funder to interfere in the
conduct of the Claim(s) and/or the Proceedings.

 

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6.6 Duty to Inform. The Plaintiff agrees and undertakes to keep the Funder
reasonably informed about the progress of the Claim(s) insofar as is
proportionate, reasonably practicable, and in a manner consistent with
maintaining applicable privileges and all applicable laws. In providing to the
Funder any documents or information about the Claim(s) and the Proceedings, the
Plaintiff does not intend to waive any privilege that may attach to such
documents or information. Subject to the Funder’s confidentiality obligations
under this Agreement, subject to and pursuant to any applicable protective
order, and subject to the Lead Counsel’s reasonable judgment with respect to the
preservation of all applicable legal privileges of the Plaintiff’s, the
Plaintiff hereby irrevocably instructs the Lead Counsel to provide written
status reports to the Funder, in form and detail reasonably acceptable to the
Funder, at least once each calendar quarter during the pendency of the Claim(s);
upon the occurrence of any material event in the Claim(s); and from time to time
upon the Funder’s reasonable request. In addition, but subject to the foregoing,
the Plaintiff hereby irrevocably instructs the Lead Counsel to provide to the
Funder within three (3) business days following receipt a copy of any material
document or filing made or obtained in the Proceedings by way of discovery,
subpoena, or any other lawful means, including without limitation, the
following:

 

 

6.6.1

Non-Privileged Information: The Plaintiff hereby irrevocably instructs the Lead
Counsel, and if further instructions are needed, undertakes to instruct the Lead
Counsel, to provide the Funder with copies or summaries of all material,
non-privileged information, regardless of the information’s source,
confidentiality, or form, unless the Funder already possesses or controls such
information.

 

 

6.6.2

Attorney Work Product: Acknowledging that this Agreement contains provisions
requiring the Parties to protect the confidentiality of any Confidential
Information disclosed to it and that such information includes attorney work
product, the Plaintiff hereby irrevocably instructs the Lead Counsel, and if
further instructions are needed, undertakes to instruct the Lead Counsel, to
provide the Funder with all material attorney work product relating to the Claim
as soon as practicable.

 

 

6.6.3

Attorney–Client Privileged Information: Relying on the Parties’ agreement that
they share a common legal interest and that communicating attorney–client
privileged information to the Funder in the furtherance of that interest does
not waive the privilege, the Plaintiff undertakes to share such information on a
topic-by-topic basis, provided that neither the Plaintiff nor the Lead Counsel
shall disclose attorney–client protected information to the Funder unless (i)
the Plaintiff has discussed with the Lead Counsel the information to be shared,
the reason for the sharing, and the probable consequences if the sharing is
ultimately held to waive the privilege; and (ii) the Plaintiff has given written
consent to such information sharing.

 

6.7 No Change in Lead Counsel Without Funder Notice. The Plaintiff agrees and
undertakes that it will not engage a new attorney or law firm by executing a
retainer agreement or other contract to employ such attorney or law firm to
advise and/or represent the Plaintiff in connection with the Claim(s), without
giving the Funder thirty (30) days’ prior notice and without giving good faith
consideration to the Funder’s response, if any.

 

6.8 Funder Notifications of Settlement. The Plaintiff agrees that it will
immediately notify the Funder upon receiving a settlement offer and provide the
Funder with the complete details of the offer in such notice. The Plaintiff
agrees that it will not make a settlement offer without first notifying the
Funder of the proposed offer, including the complete details of the proposed
offer. The Plaintiff agrees that it will not respond to a settlement offer or
make a settlement offer until after giving good faith consideration to the
Funder’s analysis of the offer, provided that the Funder communicates its
analysis within two (2) business days of receiving notice of the offer in
accordance with this section. The Funder agrees to waive the right to offer
analysis if the Lead Counsel and the Plaintiff determine that doing so would
adversely affect their ability to come to an agreement with the Defendant. Such
waivers can be called on by the Lead Counsel without notification, on a
case-by-case basis. For the avoidance of doubt, the Parties acknowledge and
agree that any decision regarding settlement of Claim(s), including the ultimate
decision whether and for how much to settle any Claim(s), lies solely with the
Plaintiff.

 

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6.9 Indemnification. Plaintiff agrees to indemnify the Funder with respect to
any and all losses or damages (including reasonable out-of-pocket and documented
attorney’s fees and any other costs of recovering the same) suffered by the
Funder as a result of any negligence or breach of duty owed by the Lead Counsel
to the Plaintiff in connection with the Claim(s) or the Proceedings, including
without limitation, duties owed in connection with (a) the preparation and/or
provision of (or failure to provide) any documents, materials, or information
relating to the Claim(s) prior to or subsequent to the Effective Date and (b)
the prosecution of the Claim(s) and/or the conduct of the Proceedings prior to
or subsequent to the Effective Date. The Plaintiff agrees to cooperate with the
Funder in the pursuit of any suit filed against the Lead Counsel by either the
Plaintiff or the Funder in connection with such loss or damage. The indemnity in
this section is limited to the extent of any successful recovery of such loss or
damage or costs in any such proceedings against the Lead Counsel. The Funder
shall indemnify the Plaintiff with respect to any and all losses or damages
(including reasonable out-of-pocket and documented attorneys’ fees and any other
costs of recovering the same) suffered by the Plaintiff as a result of (i) the
breach of, inaccuracy of, or failure to comply with, any of the warranties,
representations or covenants of the Funder in this Agreement, including, without
limitation, any damages suffered by the Plaintiffs arising out of the loss of
any privilege with respect to any Common Interest Materials disclosed to the
Funder pursuant to this Agreement.

 

6.10 Future Encumbrances. The Plaintiff shall not itself, nor shall it cause,
permit, or allow, directly or indirectly, anyone else to, create, assume, incur,
suffer, or permit to exist any pledge, encumbrance, security interest,
assignment, lien, or charge of any kind or character on the Claim(s) without the
Funder’s written approval. The Plaintiff shall not itself, nor shall it cause,
permit, or allow any sale sell, transfer, issue, reissue, exchange, or grant any
option with respect to the Claim(s) without the Funder’s written approval.

 

7.0 Common Interest and Confidentiality

 

7.1 Common Interest. The Plaintiff and the Funder agree they share a common
legal interest and, to the degree necessary to further their common legal
interest, agree to share Common Interest Material in accordance with the terms
of this Agreement only to the extent such disclosure would not, in the sole
judgment of the Lead Counsel, result in a waiver of any privilege that may
attach to such Common Interest Material. The Plaintiff and the Funder agree the
material would not be shared if the common legal interest did not exist. The
Plaintiff and the Funder do not waive any legal professional privilege, common
interest privilege, or other privilege or protection attaching to any documents
and information disclosed to the Funder. Any privileged information and
documents disclosed at any time to the Funder have been or will be disclosed on
the additional basis that the Funder has, or will have, a common interest in the
pursuit and success of the Proceedings and will at all times take all reasonable
steps to maintain that privilege. It is agreed that the provision of privileged
documents does not amount to any waiver of privilege, and the Funder shall not
use these for any purpose other than in respect of this Agreement, except a
purpose to which the Parties have consented in writing or as required by law or
regulation.

 

7.2 Non-Disclosure Generally. During the term of this Agreement and for five (5)
years following its termination, the recipient of Confidential Information of
the other Party shall not disclose, use, or make available, directly or
indirectly, any such Confidential Information to anyone (including, without
limitation, the existence and terms of this Agreement), except as needed to
perform its obligations under this Agreement, as the disclosing Party otherwise
authorizes in writing, or as required by law. When disclosing, using, or making
Confidential Information available in connection with the performance of its
obligations under this Agreement or as permitted by the disclosing Party, the
recipient shall take reasonable steps to preserve the confidentiality of the
Confidential Information on terms no less restrictive than as set forth in this
Agreement. The Parties agree that neither the execution of this Agreement nor
the provision of Confidential Information enables the other Party to use the
Confidential Information for any purpose or in any way other than as specified
in this Agreement.

 

7.3 Potentially Enforceable Disclosure Requests. If a Party receiving
Confidential Information receives a potentially enforceable request for the
production of such Confidential Information, including without limitation, a
subpoena or other official process, that Party will promptly notify the
disclosing Party in writing, unless such notice is prohibited by law. If
allowed, such notice shall be given before complying with the request and shall
include a copy of the request. If the request is of the recipient of
Confidential Information, and notice to the disclosing Party is prohibited by
law, the recipient must make a good faith effort to contest the disclosure, if
permitted under applicable law. The recipient shall also make a good faith
effort to obtain an agreement protecting the confidentiality of the Confidential
Information prior to disclosing it. If a disclosing Party elects to contest the
request, the receiving Party shall not make any disclosure until a final,
non-appealable or non-stayed order has been entered compelling such disclosure.
The contesting Party shall pay its own expenses and control its contest,
provided that, if the recipient contests a request when forbidden by law to give
the disclosing Party notice of the disclosure request, the disclosing Party
shall reimburse the recipient’s reasonable expenses promptly after being
notified of them.

 

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8.0 Term

 

8.1 Term. The term of this Agreement shall commence on the Effective Date and
terminate upon the earlier to occur of (a) the satisfaction in full of all
payment obligations of the Plaintiff to the Funder pursuant to this Agreement
and (b) the early termination of this Agreement pursuant to Section 8.2.

 

8.2 Termination. The term of this Agreement may be terminated by:

 

 

8.2.1

the mutual written agreement of the Parties;

 

 

8.2.2

either Party in the event the other Party commits a material breach of this
Agreement, which breach has not been cured within ten (10) days following
written notice of the breach from the non-breaching Party to the breaching Party
(provided that if such breach is impossible to cure, the term may be terminated
immediately upon notice of such breach to the breaching Party); or

 

 

8.2.3

by the Plaintiff upon written notice to the Funder after a failure by the Funder
to fund the Costs and Disbursements as provided in this Agreement; or

 

 

8.2.4

the Funder, upon thirty (30) days advance written notice to the Plaintiff, in
the event that:

 

(a)      the Plaintiff or the Lead Counsel has made a material misrepresentation
or omitted to disclose a material fact that is materially adverse to the merits
of the Claim(s);

 

(b) the Lead Counsel is no longer actively representing the Plaintiff in the
Claim(s) or the Plaintiff has provided the Funder with notice in accordance with
Section 6.7 that it intends to engage a new attorney or law firm (unless the
Plaintiff has obtained the Funder’s prior written consent to engage the new
attorney or law firm);

 

(c)     the Funder reasonably concludes that because of a change of factual
circumstances the Claim(s) is not or are not commercially viable; or

 

(d)     there exists one or more events or a material change of circumstances
that make it unlikely that the Plaintiff can recover Claim Proceeds sufficient
to repay the Funder the Funder Costs Amount.

 

Any mutual agreement or notice of termination pursuant to this Section 8.2 shall
be simultaneously provided to the Lead Counsel.

 

8.3 Effect of Termination. In the event the term of this Agreement is terminated
pursuant to Section 8.2, the Funder shall have no further obligation to fund the
reasonable Costs and Disbursements of the Plaintiff following the effective date
of the termination. Any such termination by the Plaintiff shall not affect any
accrued rights or entitlement of the Funder to receive the Funder Costs Amount
and the Funder Recovery Amount pursuant to this Agreement. Any such termination
by the Funder shall result in the proportionate reduction of the accrued rights
or entitlement of the Funder to receive the Funder Costs Amount and the Funder
Recovery Amount as noted above. Any termination pursuant to Section 8.2 shall
not serve as a waiver of such Party’s right to seek damages at law or other
remedy in equity.

 

8.4 Survival. Sections 1, 3 (other than Section 3.1), 4, 5, 7, 8, and 9 shall
survive any termination of the term of this Agreement.

 

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9.0 Miscellaneous

 

9.1 Limitation of Funder’s and Plaintiff’s Liability. Except where directly and
demonstrably caused by gross negligence or willful misconduct on the part of
Funder, under no circumstances shall the Funder be liable for any outcome or
disposition with respect to the Claim(s). IN NO EVENT SHALL FUNDER, PLAINTIFF,
THEIR RESPECTIVE AFFILIATES OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, ATTORNEYS, OR AGENTS BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL,
CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES ARISING FROM OR DIRECTLY OR
INDIRECTLY RELATED TO THE AGREEMENT, INCLUDING, WITHOUT LIMITATION, LOSS OF
REVENUE, ANTICIPATED PROFITS, OR LOST BUSINESS, DATA OR SALES, OR COST OF
SUBSTITUTE SERVICES, EVEN IF FUNDER OR ITS REPRESENTATIVE OR SUCH INDIVIDUAL HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL THE TOTAL
LIABILITY OF FUNDER FOR ALL DAMAGES, LOSSES, AND CAUSES OF ACTION (WHETHER IN
CONTRACT OR TORT, INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE OR OTHERWISE)
ARISING FROM THE AGREEMENT EXCEED, IN THE AGGREGATE, THE COMMITTED FUNDS.

 

9.2 Survival of Warranties. Unless otherwise set forth in this Agreement, the
representations and warranties of the Parties contained herein shall survive the
execution and delivery of this Agreement and shall in no way be affected by any
investigation or knowledge of the subject matter thereof by or on behalf of the
other Party.

 

9.3 Successors and Assigns. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the Parties, provided that the Plaintiff may not assign the rights
and obligations under this Agreement without the prior written consent of the
Funder.

 

9.4 Governing Law. This Agreement shall be governed by the internal laws of the
State of California without respect to any rules regarding choice of law.

 

9.5 Dispute Resolution. Any dispute, claim, or controversy arising out of or
relating to this Agreement or the breach, termination, enforcement,
interpretation, or validity thereof, including the determination of the scope or
applicability of this agreement to arbitrate, shall be determined by arbitration
in San Francisco, CA before one (1) arbitrator. The arbitration shall be
administered by JAMS Alternative Dispute Resolution (“JAMS”) pursuant to its
Comprehensive Arbitration Rules and Procedures then in effect and in accordance
with the Expedited Procedures in those Rules. Service of any notice, including
for service of process in any subsequent enforcement of the arbitration award in
court may occur via electronic mail. The Parties agree to submit to the personal
jurisdiction of California for the purposes of such arbitration, and judgment
upon any award rendered in such arbitration will be binding and may be entered
in any court having jurisdiction thereof.

 

Each Party will bear its own costs in respect of any disputes arising under this
Agreement, except that the prevailing Party shall be entitled to recovery of
reasonable attorney’s fees in connection with any dispute that results in a
total or partial judgment in favor of the prevailing Party.

 

9.6 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Counterparts may be
delivered via facsimile, electronic mail, or other transmission method.

 

9.7 Notices. All notices and other communications given or made pursuant to this
Agreement shall be in writing and shall be deemed effectively given upon the
earlier of actual receipt, or (a) personal delivery to the Party to be notified,
(b) when sent, if sent by electronic mail or facsimile during normal business
hours of the recipient, and if not sent during normal business hours, then on
the recipient’s next business day, (c) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (d)
one (1) business day after deposit with a nationally recognized overnight
courier, freight prepaid, specifying next business day delivery, with written
verification of receipt. All communications shall be sent to the respective
Parties at their address as set forth on the signature page, or to such e-mail
address, facsimile number, or address as subsequently modified by written notice
given in accordance with this section.

 

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9.8 Amendments and Waivers. Any term of this Agreement may be amended,
terminated, or waived only with the written consent of the Parties.

 

9.9 Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision. If
any provision of this Agreement is determined to be invalid or unenforceable
under applicable law and regulations by a court of competent jurisdiction, that
provision shall be limited or eliminated to the minimum extent necessary so that
this Agreement shall otherwise remain in full force and effect and be
enforceable.

 

9.10 Delays or Omissions. No delay or omission to exercise any right, power, or
remedy accruing to any Party under this Agreement, upon any breach or default of
any other Party under this Agreement, shall impair any such right, power, or
remedy of such non-breaching or non-defaulting Party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent, or
approval of any kind or character on the part of any Party of any breach or
default under this Agreement, or any waiver on the part of any Party of any
provisions or conditions of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
Party, shall be cumulative and not alternative.

 

9.11 Force Majeure. In the event that either Party fails or is unable to perform
any of its obligations under this Agreement due to any cause beyond its
reasonable control, such Party shall give the other Party prompt notice of such
cause, and use its reasonable best efforts to promptly correct such failure or
delay in performance.

 

9.12 Investments Not Loans. All references in this Agreement to funding the
costs and expenses of pursuing the Claim(s), however described, shall be
construed to be references to Funder’s investment in the Claim(s) and associated
right to share in the Claim Proceeds together with the other rights set out in
this Agreement, in return for its associated obligations set out in this
Agreement, and it shall not be construed as a loan from the Funder to the
Plaintiff or giving rise to a lender-borrower arrangement and/or relationship.

 

9.13 Additional Savings Clause. The Parties agree that this Agreement is not a
loan and is not subject to any usury provision of the applicable state. All
agreements between the Plaintiff, the Lead Counsel and the Funder are hereby
expressly limited so that in no contingency or event whatsoever shall the amount
paid or agreed to be paid to the Funder for the use, forbearance, or detention
of the money to be funded in this Agreement exceed the maximum permissible under
applicable law. If, from any circumstance whatsoever, fulfillment of any
provision hereof, at the time performance of such provision shall be due, shall
be prohibited by law, the obligation to be fulfilled shall be reduced to the
maximum not so prohibited, and if from any circumstance the Funder should ever
receive as interest (although Funder denies any “interest” is due) hereunder an
amount which would exceed the highest lawful rate, such amount as would be
excessive interest shall be applied to the reduction of the principal of the
Agreement (against installments of principal due hereunder in the inverse order
of their maturity) and not to the payment of interest. This provision shall
control every other provision of all agreements between and among the Plaintiff,
the Lead Counsel, and the Funder.

 

9.14 Advice on this Agreement. Each Party represents to the other Party that it
(a) has read this Agreement; (b) has been represented in the preparation,
negotiation, and execution of this Agreement by legal counsel of the Party’s own
choice or has voluntarily declined to seek such counsel; (c) understands the
terms and consequences of this Agreement; and (d) is fully aware of the legal
and binding effect of this Agreement.

 

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9.15 Entire Agreement. This Agreement (including any exhibits or schedules
thereto) constitutes the full and entire understanding and agreement between the
Parties with respect to the subject matter hereof, and any other written or oral
agreements relating to the subject matter hereof existing between the Parties
are expressly canceled.

 

 

 

(Signature Page Follows)

 

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IN WITNESS WHEREOF, the Parties hereto have executed this Litigation Funding
Agreement as of the Effective Date.

 

 

PLAINTIFF:

 

DiaMedica Therapeutics Inc.

 

 

 

By: /s/ Rick Pauls                                

Name: Rick Pauls

Title: President and Chief Executive Officer

Address: 2 Carlson Pkwy, Suite 200

Minneapolis, MN 55447

E-mail: rpauls@diamedica.com

 

 

FUNDER:

 

LEGALIST FUND II, L.P.

   By: Legalist GP II, L.L.C., its General Partner

 

 

By: /s/ Eva Shang                                  

Name: Eva Shang

Title: Manager

Address: 880 Harrison Street

San Francisco, CA 94107

E-mail: eva@legalist.com

 

LEAD COUNSEL:

 

Fisher Broyles, LLP

 

 

By: /s/ Alfred J. Monte                           

Name: Alfred J. Monte

Title: Partner

Address: 1650 Market Street, 36th Fl

Philadelphia, PA 19103

Email: alfred.monte@fisherbroyles.com

 

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List of Exhibits

 

Each of the following exhibits to this Litigation Funding Agreement has been
omitted in accordance with Item 601(a)(5) of Regulation S-K. The registrant will
furnish supplementally copies of the omitted exhibits to the SEC upon its
request.

 

Exhibit A – Budget

 

Exhibit B – Wire Details

 

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