Exhibit 10.2

 

Portions of this exhibit have been omitted and filed separately with the
Secretary of the Securities and Exchange Commission (the “Commission”) pursuant
to an application for confidential treatment filed with the Commission pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. Such
portions are marked as indicated below.

 

LICENSE AGREEMENT

 

BY AND BETWEEN

 

THE CHILDREN’S HOSPITAL OF PHILADELPHIA

 

AND

 

NEUROFIX, LLC

 

 

 

 

TABLE OF CONTENTS

 

    Page       ARTICLE 1 DEFINITIONS 1       ARTICLE 2 LICENSES AND OTHER RIGHTS
8       2.1 Grant of License to Licensee 8       2.2 Future CHOP IP 8       2.3
Limitations on License and Option 9       2.4 Grant of Sublicense by Licensee 9
      2.5 No Implied License 11       2.6 No Development or Commercialization
Outside the Field 11       2.7 Research License to CHOP 11       2.8 [  ***  ]
11       ARTICLE 3 DILIGENCE 12       3.1 Development Plan 12       3.2
Diligence Events 12       3.3 Progress Reports 13       ARTICLE 4 FINANCIAL
PROVISIONS 13       4.1 Equity Issuance 13       4.2 Milestone Payments 14      
4.3 Royalties 15       4.4 Annual Maintenance Fees 15       4.5 CHOP Sublicense
Income 15       4.6 Mode of Payment and Currency 16       4.7 Royalty and CHOP
Sublicense Income Reports 16       4.8 Late Payments 17       4.9 Default
Payment 17       4.10 Accounting 17       4.11 Books and Records 17       4.12
Audits 17       4.13 Taxes 18

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 -i- 

 

 

TABLE OF CONTENTS

(continued)

 

    Page       ARTICLE 5 INTELLECTUAL PROPERTY 19       5.1 Patent Filing
Prosecution and Maintenance 19       5.2 Patent Costs 20       5.3 Infringement
20       5.4 Invalidity or Unenforceability Defenses or Actions 22       5.5
Litigation Costs and Expenses 23       5.6 Patent Marking 23       5.7
Confidentiality 23       ARTICLE 6 REPRESENTATIONS, WARRANTIES AND COVENANTS 24
      6.1 Mutual Representations and Warranties 24       6.2 CHOP
Representations and Warranties 24       6.3 Disclaimer of Representations and
Warranties 24       6.4 Covenants of Licensee 25       ARTICLE 7
INDEMNIFICATION; INSURANCE AND LIMITATION OF LIABILITY 26       7.1
Indemnification by Licensee 26       7.2 Insurance 26       7.3 LIMITATION OF
LIABILITY 27       ARTICLE 8 TERM AND TERMINATION 28       8.1 Term 28       8.2
Termination by Licensee for Convenience 28       8.3 Termination by CHOP for
Cause 28       8.4 Effects of Termination 29       ARTICLE 9 ADDITIONAL
PROVISIONS 31       9.1 Relationship of the Parties 31       9.2 Third Party
Beneficiary 31       9.3 Use of Names 31       9.4 No Discrimination 31      
9.5 Successors and Assignment 32       9.6 Further Actions 32       9.7 Entire
Agreement of the Parties; Amendments 32       9.8 Governing Law 32       9.9
Dispute Resolution 32

 

 -ii- 

 

 

TABLE OF CONTENTS

(continued)

 

    Page       9.10 Notices and Deliveries 32       9.11 Waiver 33       9.12
Severability 33       9.13 Interpretation 33       9.14 Counterparts 34

 

Schedule 1.1 Diligence Events and Achievement Dates Schedule 1.4 CHOP Patent
Rights Schedule 2.3.2 Third Party Rights Appendix A Purchase Agreement Appendix
B Equity Issuance Agreement Appendix C The Children’s Hospital of
Philadelphia-Patent and Intellectual Property Policy Effective Date July 1, 2009

 

 -iii- 

 

 

LICENSE AGREEMENT

 

This License Agreement (this “Agreement”) is dated as of September 9, 2015 (the
“Effective Date”) by and between The Children’s Hospital of Philadelphia, a
non-profit entity organized and existing under the laws of the Commonwealth of
Pennsylvania (“CHOP”), and neuroFix, LLC, a limited liability company organized
under the laws of the State of Delaware (“Licensee”). CHOP and Licensee may be
referred to herein as a “Party” or, collectively, as “Parties”.

 

RECITALS:

 

WHEREAS, CHOP owns and controls certain innovative technology related to (a) the
Association of Rare Recurrent Genetic Variations to Attention-Deficit,
Hyperactivity Disorder (“ADHD”) and Methods of Use Thereof for the Diagnosis and
Treatment of the same (“ADHD Technology”) as disclosed in CHOP Invention
Disclosure No. [ *** ] (the “ADHD Disclosures”) that was developed in the course
of research at CHOP by [ *** ] (the “ADHD Inventors”); (b) [ *** ]; (c) the
diagnosis and treatment of [ *** ]; and (d) [ *** ], the “Technology”) [ *** ],
the “Disclosures”) [ *** ] the “Inventors”);

 

WHEREAS, CHOP and Licensee entered into an Option Agreement effective May 7,
2013 covering a portion of the Technology;

 

WHEREAS, Licensee wishes to exercise its option and license from CHOP the
Technology and CHOP’s intellectual property rights in the Technology, to
develop, manufacture and commercialize such Technology, all on the terms and
conditions of this Agreement;

 

WHEREAS, CHOP desires to license to Licensee the Technology and CHOP’s
intellectual property rights in the Technology, in a manner that will benefit
the public and best facilitate the distribution of useful products and the
utilization of new technology, consistent with CHOP’s missions and goals, all on
the terms and conditions of this Agreement;

 

NOW, THEREFORE, in consideration of the various promises and undertakings set
forth herein, the Parties agree as follows:

 

ARTICLE 1

DEFINITIONS

 

Unless otherwise specifically provided herein, the following terms shall have
the following meanings:

 

1.1“Achievement Date” means, with respect to a Diligence Event, the
corresponding date such Diligence Event is to be achieved as provided in
Schedule 1.1 attached hereto subject to modification pursuant to Section 3.2.3
below.

 

1.2“Affiliate” means a Person that controls, is controlled by or is under common
control with a Party, but only for so long as such control exists. For the
purposes of this Section 1.2, the word “control” (including, with correlative
meaning, the terms “controlled by” or “under the common control with”) means the
actual power, either directly or indirectly through one or more intermediaries,
to direct the management and policies of such Person or entity, whether by the
ownership of more than fifty percent (50%) of the voting stock or interests of
such entity, or by contract or otherwise.

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 

 

 

1.3“CHOP Know-How” means all information, know-how and knowledge relating to the
development, manufacture and use of the Technology disclosed in the CHOP Patent
Rights or the Disclosure and all other information, know-how and knowledge
Controlled by CHOP as of the Effective Date or at any time thereafter during the
Term that relates to the Technology or Compound, was Derived from the Inventors
and is reasonably necessary or useful for the development, manufacture,
commercialization or use of the Product in the Field, but excluding inventions
covered by claims of CHOP Patent Rights.

 

1.4“CHOP Patent Rights” means (a) the Patent Rights listed in Schedule 1.4, (b)
any priority documents to which the Patent Rights of subpart (a) claim priority,
(c) any continuations (including continuations-in-part solely to the extent of
claims entirely supported in the specification and entitled to the priority date
of the parent application), continued prosecution applications, substitutions,
divisions, extensions and term restorations, registrations, confirmations,
reexaminations, renewals or reissues of subpart (a) above, (d) any Patent Rights
created pursuant to Section 5.1.1 or 5.1.2 of this License, (e) any
corresponding foreign Patent Rights to the foregoing and (f) any patents issuing
on the foregoing. CHOP Patent Rights also include any Patent Rights covering
NFC-1 Trial IP determined to be owned by CHOP.

 

1.5“Commercially Reasonable Efforts” means the carrying out of activities in a
sustained and diligent manner and using efforts and resources that are
comparable to the efforts and resources commonly used by a company with similar
resources as Medgenics, for products or services of similar market potential at
a similar stage of development or product life, based on conditions then
prevailing and taking account of competition, technological relevance or
obsolescence, changes in regulatory status and law and changes in reimbursement
rates, policies and procedures.

 

1.6“Compound” means [ *** ].

 

1.7“Compound Know-How” means any information related to the Compound disclosed
in the CHOP Patent Rights, but excluding inventions covered by claims of CHOP
Patent Rights.

 

1.8“Confidential Information” of a Party means (a) information relating to the
intellectual property, research, business, operations or products of a Party or
any of its Affiliates, including any know-how, that was or is disclosed by such
Party to the other Party prior to or during the Term of this Agreement, or that
otherwise becomes known to the other Party by virtue of this Agreement, and (b)
the terms of this Agreement.

 

1.9“Controlled” means, with respect to intellectual property rights, that a
Party or one of its Affiliates owns or has a license or sublicense to such
intellectual property rights and has the ability to provide to, grant a license
or sublicense to, or assign its right, title and interest in and to, such
intellectual property rights as provided for in this Agreement without violating
the terms of any agreement or other arrangement with any Third Party.

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 2 

 

 

1.10“Derived” means, in whole or in part, obtained, developed, created,
designed, derived or resulting from, based upon, enabled by, containing,
incorporating, using or otherwise generated from.

 

1.11“Diligence Event” means each of the events that Licensee is expected to
accomplish in the development of a Product as provided in Schedule 1.1 attached
hereto, as may be amended pursuant to Section 3.2.3.

 

1.12“Drug Approval Application” means a New Drug Application or a Biologics
License Application for an Indication, as applicable, as defined in the United
States Federal Food, Drug, and Cosmetic Act or United States Public Health
Services Act, as each may be amended from time to time, or any rules,
regulations and requirements promulgated thereunder (including all additions,
supplements, extensions, and modifications thereto) or any similar foreign
application.

 

1.13“FDA” means the United States Food and Drug Administration, and any
successor or replacement agency.

 

1.14“Field” means any commercial activities related to the methods or therapies
disclosed in the CHOP Patent Rights or CHOP Know-How, where such activities are
for the diagnosis or treatment of an Indication.

 

1.15“First Commercial Sale” means, on a country-by-country basis, the first
commercial transfer or disposition for value of Product in such country to a
Third Party by Licensee, or any of its Affiliates or Sublicensees.

 

1.16“Future CHOP IP” means all discoveries and inventions relating to diagnosis
or treatment of a disease or disorder identified by [ *** ] in the Field or
relating to other neurological or neurodevelopmental diseases and disorders,
including without limitations neurodegenerative and neuropsychiatric disorders,
in each case that satisfy all of the following: (a) are Controlled by CHOP, free
from any obligations to any Third Parties (other than the United States
Government, provided that any rights granted to Future CHOP IP hereunder will be
subject to the rights of the United States Government) and (b) are invented as a
result of, or arising out of the research conducted at CHOP by Dr. Hakon
Hakonarson or those under his control.

 

1.17“GAAP” means United States generally accepted accounting principles applied
on a consistent basis.

 

1.18“Governmental Approval” means, with respect to a Product in a country or
region, all approvals, licenses, registrations and authorizations of the
relevant Governmental Body, if applicable, required for the commercialization of
such Product in such country.

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 3 

 

 

1.19“Governmental Body” means any: (a) nation, principality, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, provincial, state, local, municipal,
foreign or other government; (c) governmental or quasi-governmental authority of
any nature (including any governmental division, subdivision, department,
agency, bureau, branch, office, commission, council, board, instrumentality,
officer, official, representative, organization, unit, body or entity and any
court or other tribunal); (d) multi-national or supranational organization or
body; or (e) individual, entity, or body exercising, or entitled to exercise,
any executive, legislative, judicial, administrative, regulatory, police,
military or taxing authority or power of any nature.

 

1.20“Indication” means (a) ADHD, (b) [ *** ], (c) chromosome 22q11.2 deletion or
duplication, (d) [ *** ], (e) [ *** ], (f) [ *** ], (g) [ *** ], and (h) [ ***
].

 

1.21“Law” or “Laws” means all applicable laws, statutes, rules, regulations,
ordinances and other pronouncements having the binding effect of law of any
Governmental Body.

 

1.22“Major Market” means the United States, the United Kingdom, France, Germany,
Italy, Spain and Japan.

 

1.23“Medgenics” means Medgenics, Inc., a Delaware corporation or one of its
Affiliates.

 

1.24“Net Sales” means the gross amount invoiced or otherwise billed by Licensee
or its Affiliates or Sublicensees (the “Selling Party”) for sales of Product to
a Third Party purchaser from and after the Effective Date, less the following to
the extent reasonable and customary (collectively, “Net Sales Deductions”):

 

(a)[ *** ];

 

(b)[ *** ];

 

(c)[ *** ];

 

(d)[ *** ]; and

 

(e)[ *** ];

 

provided that all of the foregoing deductions shall be calculated in accordance
with then-current GAAP or international financial reporting standards,
consistently applied during the applicable calculation period throughout the
Selling Party’s organization. To the extent that Net Sales Deductions are based
on estimates, such estimates will be adjusted to actual on a periodic basis.
Notwithstanding the foregoing, the supply of the Product for (i) samples, (ii)
charitable donations or compassionate use, or (iii) any clinical study materials
used in any clinical study shall not be included within the computation of Net
Sales; provided that such supply is provided at no cost.

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 4 

 

 

A sale of a Product is deemed to occur in accordance with GAAP or international
reporting standards, consistently applied during the applicable calculation
period throughout the Selling Party’s organization.

 

For sake of clarity and avoidance of doubt, the transfer of a Product by a
Selling Party to another Affiliate of such Selling Party or to a licensee or
sublicensee of such Selling Party for resale shall not be considered a sale; in
such cases, Net Sales shall be determined based on the amount invoiced or
otherwise billed by such Affiliate or licensee or sublicensee to an independent
Third Party, less the Net Sales Deductions allowed under this Section.

 

[ *** ].

 

1.25“NFC-1 Trial IP” means all intellectual property arising from the Phase I
Single Dose, Open-Label Pharmacokinetic Study and Single-Blind,
Placebo-Controlled Dose Escalation Study of NFC-1 in Adolescents With
Attention-Deficit Hyperactivity Disorder (NFC1-GREAT) to the extent that it is
owned by CHOP.

 

1.26“Patent Rights” means any of the following, whether existing now or in the
future anywhere in the world: issued patent, including inventor’s certificates,
substitutions, extensions, confirmations, reissues, re-examination, renewal or
any like governmental grant for protection of inventions, and any pending
application for any of the foregoing.

 

1.27“Person” means any natural person, corporation, firm, business trust, joint
venture, association, organization, company, partnership or other business
entity, or any government or agency or political subdivision thereof.

 

1.28“Phase II” means a human clinical trial of a Product, the principal purpose
of which is a determination of safety and efficacy in the target patient
population, which is prospectively designed to generate sufficient data that may
permit commencement of pivotal clinical trials, including the trials referred to
in 21 C.F.R. §312.21(b), as amended.

 

1.29“Phase III” means a human clinical trial of a Product in an indicated
patient population that is designed to establish that such Product is safe and
efficacious for its intended use and to determine the benefit/risk relationship,
warnings, precautions, and adverse reactions that are associated with such
Product, which trial is intended to support marketing approval of such Product,
including all tests and studies that are required by the FDA from time to time,
pursuant to Law or otherwise, including the trials referred to in 21 C.F.R.
§312.21(c), as amended.

 

1.30“Product” means any (a) process, service or method that is (i) covered by or
Derived from CHOP Know-How, (ii) covered by a Valid Claim or (iii) whose use or
practice would, absent the License, constitute an infringement, inducement of
infringement or contributory infringement of any Valid Claim (“Method”); (b)
article, composition, apparatus, substance, chemical or any other material that
is (i) covered by or Derived from the CHOP Know-How, (ii) covered by a Valid
Claim or (iii) whose manufacture, import, use offer for sale or sale would,
absent the License, constitute an infringement, inducement of infringement or
contributory infringement of any Valid Claim; or (c) service, article,
composition, apparatus, chemical, substance or any other material made, used or
sold by or utilizing or practicing a Method.

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 5 

 

 

1.31“Purchase Agreement” means the Equity Interest Purchase Agreement by and
among Medgenics, Licensee, CHOP and the other parties thereto, a copy of which
is attached hereto as Appendix A.

 

1.32Reserved.

 

1.33“Royalty Term” means, with respect to each Product and each country or other
jurisdiction in the Territory, the period beginning on the Effective Date and
ending on the later to occur of (a) the expiration, invalidation or abandonment
of the last CHOP Patent Rights that include a Valid Claim and (b) January 1,
2025.

 

1.34“Sale” means any transaction for which consideration is received or expected
by Licensee, its Affiliates or Sublicensees for sale, use, lease, transfer or
other disposition of a Product to or for the benefit of a Third Party. For
clarity, sale, use, lease, transfer or other disposition of a Product by
Licensee or any of its Affiliates or Sublicensees to another of these entities
for resale by such entity to a Third Party shall not be deemed a Sale unless
such Product is not ultimately resold.

 

1.35“Sublicensee” means a Person (including any Affiliate) to which a Sublicense
is granted pursuant to the terms of Section 2.4.

 

1.36“Sublicense Documents” means any and all agreements, amendments or written
understandings entered into with a Sublicensee (including any of its Affiliates)
that are directly or indirectly related to a Sublicense, CHOP Patent Rights,
CHOP Know How or Product. For clarity, a development agreement or distribution
agreement for a Product is a Sublicense Document.

 

1.37“Sublicense Income” means income received by Licensee or its Affiliates in
consideration for a Sublicense or other agreement providing the right to
negotiate or obtain a Sublicense. Sublicense Income includes income received
from a Sublicensee in the form of license issue fees, milestone payments and the
like but specifically excludes (a) royalties on the sale or distribution of
Product, including royalties paid as a percentage of Net Sales, and (b) payments
received for funding research and development services pursuant to a written
research and development agreement between Licensee (or one of its Affiliates)
and Sublicensee up to the fair market value of such services.

 

1.38“Tax” means all taxes, duties, fees, premiums, assessments, imposts, levies,
rates, withholdings, dues, government contributions and other charges of any
kind whatsoever, whether direct or indirect, together with all interest,
penalties, fines, additions to tax or other additional amounts, imposed by any
Governmental Body.

 

1.39“Third Party” means any Person other than CHOP, Licensee or any of their
respective Affiliates.

 

1.40“Third Party Royalties” means any royalties Licensee has paid to one or more
Third Parties pursuant to one or more licenses to issued Patent Rights entered
into by Licensee that is required to avoid infringement of such issued Patent
Rights in the manufacture, use, import or sale of any Product.

 

1.41“United States” or “US” means the United States of America, its territories
and possessions.

 

 6 

 

 

1.42“USD” or “$” means the lawful currency of the United States of America.

 

1.43“Valid Claim” means a claim of (a) an issued and unexpired patent in CHOP
Patent Rights which claim has not been revoked or held unenforceable or invalid
by a decision of a court or governmental agency of competent jurisdiction from
which no further appeal can be taken or has been taken within the time allowed
for appeal, and has not been abandoned, disclaimed, denied or admitted to be
invalid or unenforceable through reissue or disclaimer; or (b) a pending patent
application that is included in CHOP Patent Rights which was filed and is being
prosecuted in good faith, and has not been abandoned or finally disallowed
without the possibility of appeal.

 

1.44Other Terms. The definition of each of the following terms is set forth in
the section of the Agreement indicated below:

 

Defined Term   Section ADHD   Recitals Adjustment Equity   4.1.2 Advance Payment
  5.2.2 Agreement   Preamble Annual Maintenance Fee   4.4 [ *** ]   2.8 [ *** ]
  5.1.2 Bankruptcy Action   8.3.4 CHOP   Preamble CHOP Indemnitees   7.1.1 CHOP
Sublicense Income   4.5 Claimed Amount Due   8.3.5 Development Plan   3.1
Disclosure   Recitals Effective Date   Preamble Event Explanation   3.2.2 Equity
Interest   4.1.1 Event Plan   3.2.2 Exclusive License   2.1.1 Financial Report  
4.7 Founders   4.1.2 Infringement Notice   5.3.1 Inventor(s)   Recitals License
  2.1.2 Licensee   Preamble Method   1.30 Milestone   4.2 Milestone Payment  
4.2 [ *** ]   5.1.1

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 7 

 

 

Defined Term   Section Non-Exclusive License   2.1.2 Option   2.2 Parties  
Preamble Party   Preamble Patent Costs   5.2.1 Patent Termination Notice   5.2.2
Progress Report   3.3.1 Royalty   4.3.1 Sublicense   2.4.1 Sublicense Payment
Percentage   4.5.1 Technology   Recitals Term   8.1

 

ARTICLE 2

LICENSES AND OTHER RIGHTS

 

2.1Grant of License to Licensee.

 

2.1.1Subject to the terms and conditions of this Agreement, CHOP hereby grants
to Licensee an exclusive, worldwide, royalty-bearing right and license (with the
right to sublicense as provided in, and subject to, the provisions of Section
2.4) under CHOP Patent Rights and Compound Know-How to make, have made, use,
sell, offer for sale, import and otherwise commercially exploit Products in the
Field during the Term (the “Exclusive License”).

 

2.1.2Subject to the terms and conditions of this Agreement, CHOP hereby grants
to Licensee a non-exclusive, worldwide, royalty-bearing right and license (with
the right to sublicense as provided in, and subject to, the provisions of
Section 2.4) under CHOP Know-How (other than Compound Know-How) to make, have
made, use, sell, offer for sale, import and otherwise commercially exploit
Products in the Field during the Term (the “Non-Exclusive License” and, together
with the Exclusive License, the “License”).

 

2.2Future CHOP IP. Subject to the terms and conditions of this Agreement, CHOP
hereby grants to Licensee an exclusive option during the Term to negotiate an
exclusive license to Future CHOP IP (the “Option”). Licensee may elect to
exercise the option for a particular Future CHOP IP by giving written notice to
CHOP no later than six (6) months after CHOP’s Office of Technology Transfer
provides a copy of the invention disclosure for such Future CHOP IP to Licensee.
CHOP shall inform Licensee of any Future CHOP IP within four (4) weeks of
receipt by the CHOP Office of Technology Transfer of relevant disclosure and
CHOP Office of Technology Transfer shall follow up such initial invention
disclosure with notice of any relevant Third Party rights. Upon exercise of the
option by Licensee with respect to a particular Future CHOP IP, the Parties
shall negotiate in good faith a license agreement for such Future CHOP IP on
terms comparable to the terms of this Agreement and the Purchase Agreement (with
adjustments for any differences in value between such Future CHOP IP and the
intellectual property licensed hereunder) for a period ending on the later of
(a) three (3) months after the date that the Licensee exercises its option over
such Future CHOP IP or (b) six (6) months after CHOP’s Office of Technology
Transfer provides a copy of the invention disclosure for such Future CHOP IP.
The license agreement negotiation period may be extended for an additional three
(3) months upon mutual written agreement of the Parties, after which and
assuming the Parties do not enter into license or other agreement, all rights of
Licensee relating to such Future CHOP IP under this Agreement shall terminate.

 

 8 

 

 

2.3Limitations on License and Option. Notwithstanding anything to the contrary
in this Agreement:

 

2.3.1CHOP retains the right under CHOP Patent Rights and CHOP Know-How for each
of the following: (a) to conduct teaching, educational, research and patient
care activities itself,

(b) to conduct collaborations with and extend such rights to the following
Persons for the purposes of performing such collaborations: not-for-profit,
governmental, educational or non-commercial Third Parties and (c) for all
purposes outside of the Field.

 

2.3.2The rights granted by CHOP to Licensee under this Agreement (including
under Sections 2.1 and 2.2) are subject in all respects to the obligations of
CHOP, if any, existing as of the Effective Date or imposed by Law, including (a)
any rights and interests of any Government Agency including all applicable
provisions of any license to the United States Government executed by CHOP and
any overriding obligations to the United States Government under 35 U.S.C.
§§200-212, as amended, applicable governmental implementing regulations, and any
U.S. Government sponsored research agreement or other guidelines, including that
products that result from intellectual property funded by the United States
Government that are sold in the United States be substantially manufactured in
the United States, (b) human subject consents and other institutional review
board-related limitations and (c) the Third Party rights as set forth on
Schedule 2.3.2. The rights granted by CHOP to Licensee under Section 2.2 shall
be subject in all respects to the obligations of CHOP, if any, existing at the
time the applicable invention disclosure is received by CHOP.

 

2.4Grant of Sublicense by Licensee.

 

2.4.1CHOP grants to Licensee the right to grant sublicenses, in whole or in
part, under the License (each, a “Sublicense”) subject to the terms and
conditions of this Agreement and specifically this Section 2.4.

 

2.4.2All Sublicenses will be (a) issued in writing, (b) to the extent
applicable, include all of the rights of CHOP and require the performance of
obligations due to CHOP (and, if applicable, the U.S. Government under 35 U.S.C.
§§200-212) contained in this Agreement, (c) subject to the provisions of Section
2.3 and (d) shall include no less than the following terms and conditions:

 

(a)Reasonable record keeping, audit and reporting obligations sufficient to
enable Licensee and CHOP to reasonably verify the payments due to Licensee and
CHOP under such Sublicense and to reasonably monitor such Sublicensee’s progress
in developing and/or commercializing Product, provided that such obligations
(including reporting and auditing requirements) shall be no less stringent that
those provided in this Agreement for Licensee.

 

(b)A provision prohibiting Sublicensee from sublicensing its rights under the
Sublicense.

 

 9 

 

 

(c)Infringement and enforcement provisions that do not conflict with the
restrictions and procedural requirements imposed on Licensee and do not provide
greater rights to Sublicensee than as provided in Sections 5.3 and 5.4.

 

(d)Confidentiality provisions with respect to confidential information of CHOP
consistent with the restrictions on Licensee in Section 5.7 of this Agreement.

 

(e)Covenants by Sublicensee that are equivalent to those made by Licensee in
Section 6.4.

 

(f)A requirement of indemnification of CHOP that is equivalent to the
indemnification of CHOP Indemnities by Licensee under Section 7.1 of this
Agreement and providing that the CHOP Indemnities are third party beneficiaries
of the Sublicense for purposes of such indemnification.

 

(g)A requirement of obtaining and maintaining insurance by Sublicensee that is
equivalent to the insurance requirements of Licensee under Section 7.2 of this
Agreement, including coverage under such insurance of CHOP as provided in
Section 7.2.

 

(h)A provision providing that CHOP may assume the Sublicense pursuant to Section
8.4.6 if this Agreement is terminated.

 

(i)Restriction on use of CHOP’s names etc. consistent with Section 9.3 of this
Agreement.

 

(j)A requirement of antidiscrimination no less stringent than that provided in
Section 9.4 of this Agreement.

 

(k)requirement that CHOP is a third party beneficiary of such Sublicense.

 

Should any sublicense attempted to be granted fail to include all of the terms
and conditions set forth in this Section 2.4.2, or is otherwise issued lacking
accordance with the terms and conditions set forth in this Section 2.4, Licensee
shall promptly attempt to rectify by entering into a new Sublicense Document
meeting the necessary requirements. Any Sublicense that does not include all of
the terms and conditions set forth in this Section 2.4.2 or which is not issued
in accordance with the terms and conditions set forth in this Section 2.4, shall
be considered null and void with no further notice from CHOP.

 

2.4.3Within thirty (30) days after the execution of a Sublicense Document,
Licensee shall provide a complete and accurate copy of such Sublicense Document
to CHOP. Following receipt of such Sublicense Document, CHOP shall promptly
notify Licensee of any alleged breach in Section 2.4.2.

 

2.4.4When the public health and safety so require, in the reasonable opinion of
CHOP, acting in good faith, and after written notice to Licensee providing
Licensee a sixty (60) day opportunity to respond, CHOP shall have the right to
require Licensee to grant Sublicenses to responsible applicants, on reasonable
terms in accordance with this Agreement, unless Licensee can reasonably
demonstrate that the granting of the Sublicense would not materially improve or
address the public health and safety issue. CHOP shall not require the granting
of a Sublicense unless the responsible applicant has first negotiated in good
faith with Licensee.

 

 10 

 

 

2.4.5Licensee’s granting of a Sublicense shall not relieve Licensee of any of
its obligations under this Agreement. Licensee shall be liable to CHOP for any
act or omission of an Affiliate or other Sublicensee of Licensee that would be a
breach of this Agreement if performed or omitted by Licensee, and Licensee shall
be deemed in breach of this Agreement as a result of such act or omission.

 

2.5No Implied License. Each Party acknowledges that the rights and licenses
granted in this Agreement are limited to the scope expressly granted.
Accordingly, except for the rights expressly granted under this Agreement, no
right, title, or interest of any nature whatsoever is granted whether by
implication, estoppel, reliance, or otherwise, by either Party to the other
Party. All rights with respect to any know-how, patent or other intellectual
property right rights that are not specifically granted herein are reserved to
the owner thereof.

 

2.6No Development or Commercialization Outside the Field. Notwithstanding
anything to the contrary in this Agreement, Licensee shall not, and shall ensure
that no Affiliates, either directly or through Third Parties, develop or
commercialize any Product outside the Field, except to the extent Licensee or
its Affiliates have entered into and maintain a license agreement with CHOP on
mutually agreeable economic and other terms governing such development or
commercialization outside of the Field.

 

2.7Research License to CHOP. Licensee hereby grants to CHOP, a non-exclusive,
worldwide, fully paid up, royalty-free license under all intellectual property
rights Controlled by Licensee to make and use the Products for educational and
non-commercial research purposes. CHOP may sublicense its rights under this
Section 2.7 for its non-commercial collaborations with and use by other
not-for-profit, governmental, non-commercial scientific and educational
entities. For the avoidance of doubt, the granting of such sublicenses by CHOP
shall not require approval of Licensee, provided that CHOP shall notify Licensee
of the existence of each such sublicense. If CHOP requests that Licensee provide
it with reasonable quantities of Products for educational and non-commercial
research purposes, then the Parties shall discuss, in good faith, working
collaboratively to provide such materials to CHOP for such purposes. In
connection with such supply, upon request by Licensee, CHOP and Licensee shall
enter into a customary materials transfer agreement with reasonable terms.

 

2.8[ *** ].

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 11 

 

 

ARTICLE 3

DILIGENCE

 

3.1Development Plan.

 

3.1.1Within ninety (90) days of the Effective Date, Licensee shall submit to
CHOP a development plan for the development and commercialization of Products
for the first Indication in the United States, including timelines for
achievement of activities thereunder consistent with the Diligence Events (as
revised or amended pursuant to this Section, the “Development Plan”). CHOP shall
have a right to consider and comment on the Development Plan. While approval by
CHOP is not required, Licensee shall consider comments by CHOP in good faith.

 

3.1.2Licensee shall use Commercially Reasonable Efforts to perform the
activities set forth in the Development Plan and to develop, market and
commercialize Product in the United States identified in the Development Plan.

 

3.2Diligence Events.

 

3.2.1Licensee shall use Commercially Reasonable Efforts to achieve each
Diligence Event by the corresponding Achievement Date.

 

3.2.2If Licensee believes that, despite using Commercially Reasonable Efforts,
it will not achieve a Diligence Event by the corresponding Achievement Date, it
may notify CHOP in writing in advance of the relevant deadline. Licensee shall
include with such notice (a) a reasonable explanation of the reasons for such
failure (“Event Explanation”) and (b) a reasonable, detailed, written plan for
promptly achieving a reasonable extension in the applicable Achievement Date
and/or amendment to the applicable Diligence Event (“Event Plan”).

 

3.2.3If Licensee timely provides CHOP with an Event Explanation and Event Plan
pursuant to Section 3.2.2 then:

 

(a)if both the Event Explanation and Event Plan are reasonably acceptable to
CHOP, Schedule 1.1 shall be automatically amended to incorporate the extended
Achievement Date and/or amended Diligence Event set forth in the Event Plan; or

 

(b)if either or both of the Event Explanation and Event Plan are not reasonably
acceptable to CHOP, then CHOP shall provide notice to Licensee explaining why
the Event Explanation or Event Plan is not acceptable and Licensee shall have
until the existing Achievement Date to provide CHOP with an updated Event
Explanation and Event Plan that are reasonably acceptable to CHOP. If Licensee
timely provides CHOP with an updated Event Explanation and Event Plan that are
reasonably acceptable to CHOP, Schedule 1.1 shall be automatically amended to
incorporate the extended Achievement Date and/or amended Diligence Event set
forth in the updated Event Plan.

 

 12 

 

 

3.2.4If Licensee fails to timely provide CHOP with both an Event Explanation and
Event Plan reasonably acceptable to CHOP pursuant to Section 3.2.2, then
Licensee shall have until the existing Achievement Date to achieve the
applicable Diligence Event. If Licensee fails to achieve a Diligence Event by
the Achievement Date, as may be amended pursuant to Section 3.2.3 and Licensee
is no longer using Commercially Reasonable Efforts to do so, then CHOP shall
have the termination right as set forth in Section 8.3.1(b) with respect to all
Indications other than any Indication for which the Diligence Event has been
achieved.

 

3.3Progress Reports.

 

3.3.1Licensee, within ninety (90) days after the end of each calendar year
basis, shall submit to CHOP a progress report for the preceding calendar year
(each, a “Progress Report”) covering Licensee’s (and any Affiliates’ and
Sublicensees’) activities related to the development of all Products for each
Indication and the obtaining of Governmental Approvals necessary for
commercialization of Products for each Indication.

 

3.3.2Each Progress Report must include all of the following for each Indication:

 

(a)Summary of work completed, including comparison against the prior year’s
Development Plan Progress Report ;

 

(b)Status of applications for Governmental Approvals, if applicable;

 

(c)Key scientific discoveries;

 

(d)Current schedule of anticipated events or milestones, including anticipated
timeline for achievement of Diligence Events;

 

(e)Commercialization plans for Products, if applicable;

 

(f)An updated listing of any and all Sublicenses granted by Licensee; and

 

(g)The names and addresses of all Sublicensees, and a current and valid phone
number and e-mail address for a principal point of contact at each such
Sublicensee who is responsible for administering the Sublicensee.

 

3.3.3Licensee shall report to CHOP the date of First Commercial Sale of Product
in each country within sixty (60) days of its occurrence. Following the First
Commercial Sale for a Product in a given country, Licensee shall use
Commercially Reasonable Efforts to make such Licensed Product reasonably
accessible to the public in such country.

 

ARTICLE 4

FINANCIAL PROVISIONS

 

4.1Equity Issuance. As partial consideration for the License:

 

4.1.1Licensee shall, contemporaneous with the execution of this Agreement and
subject to the terms of the Equity Issuance Agreement in substantially the form
attached hereto as Appendix B, issue to CHOP an ownership interest in Licensee
(“Equity Interest”) that is equal to twenty percent (20%) of all securities of
Licensee outstanding on a fully diluted basis as of the Effective Date, assuming
the exercise, conversion and exchange of all outstanding securities of Licensee
and that Licensee is cash free and debt free on date of issue of the Equity
Interest. If the securities of Licensee are certificated, Licensee shall also,
within ten (10) days of the Effective Date, deliver a stock certificate in the
name of CHOP reflecting the Equity Interest.

 

 13 

 

 

4.1.2If any securities of Licensee other than ownership interests that have
already been issued as of the Effective Date have been or will be issued to the
founders of Licensee (i.e., Mr. Harper or Dr. Hakonarson collectively the
“Founders”) as a group, in proportion to the original allocation of securities
to the Founders, or without cash consideration (other than nominal cash
consideration), Licensee shall provide to CHOP twenty percent (20%) of such
securities contemporaneous with the provision of such securities to the Founders
(“Adjustment Equity”). For clarity, Adjustment Equity shall be issued at no
additional consideration from CHOP and Licensee shall, if its securities are
certificated, deliver a certificate in the name of CHOP reflecting the
Adjustment Equity within thirty (30) days of issuance of Adjustment Equity.

 

4.1.3If (a) any securities of Licensee other than ownership interests that have
already been issued to the Founders as of the Effective Date have been or will
be issued to the Founders for cash consideration (other than nominal cash
consideration) or (b) Licensee wishes to conduct an equity financing or a
financing in which the offered securities are convertible into equity, then, in
both cases (a) and (b), CHOP shall have the right to participate pari passu with
the Founders in order to maintain its twenty percent (20%) ownership interest in
Licensee.

 

4.1.4The obligations of Licensee contained in Sections 4.1.2 and 4.1.3 shall
terminate and be of no effect upon the Closing (as such term is defined in the
Purchase Agreement) of the transactions contemplated by the Purchase Agreement.

 

4.2Milestone Payments. As additional consideration for the License, Licensee
will pay CHOP the milestone payments (each, a “Milestone Payment”) provided in
the table below upon achievement of the corresponding milestone in the table
below for the first Product for each Indication (each, a “Milestone”). Licensee
shall promptly notify CHOP in writing of the achievement of any such Milestone
and Licensee shall pay CHOP in full the corresponding Milestone Payment within
thirty (30) days of such achievement. For clarity, each Milestone Payment is
payable multiple times (i.e., once for each Indication). The Milestone Payments
are non-refundable, and are not an advance against royalties due to CHOP or any
other amounts due to CHOP.

 

    Milestone   Milestone   Payment   [ *** ]   $ [ *** ]   [ *** ]   $ [ *** ]
 

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 14 

 

 

4.3Royalties.

 

4.3.1As further consideration for the License, during the Royalty Term, Licensee
shall pay to CHOP a non-refundable, non-creditable royalty as set forth in the
table below (subject to the adjustment set forth in Section 6.4.1) on all Net
Sales of Product (“Royalty”).

 

    Percent of   Time Period   Net Sales   [ *** ]     [ *** ] % [ *** ]     [
*** ] % [ *** ]     [ *** ] %

 

4.3.2[ *** ]:

 

(a)[ *** ]; and

 

(b)[ *** ].

 

4.3.3Licensee must pay Royalties owed to CHOP on a calendar quarter basis within
two months of the end of each calendar quarter (i.e., paid by Feb. 28, May 31,
August 31 and Nov. 30 of each year).

 

4.4Annual Maintenance Fees. Licensee shall pay to CHOP the annual maintenance
fees (“Annual Maintenance Fees”) set forth below by each due date in the table
below for which such fee applies. The Annual Maintenance Fees paid for a
calendar year shall be creditable against Royalties or Milestone Payments due in
such calendar year.

 

    Annual   Due Date   Maintenance Fee   [ *** ]   $ [ *** ]   [ *** ]   $ [
*** ]   [ *** ]   $ [ *** ]  

 

4.5CHOP Sublicense Income.

 

4.5.1Licensee will pay to CHOP [ *** ] (“ Sublicense Payment Percentage”) of
Sublicense Income within 30 days of receipt by Licensee, subject to the
following adjustments, if applicable (“CHOP Sublicense Income”). If a Sublicense
Document includes the grant to Sublicensee of rights to Licensee-owned Patent
Rights in addition to CHOP Patent Rights and/or CHOP Know-How, the Sublicense
Payment Percentage shall: (a) remain [ *** ] if such Sublicense document is
executed before the third anniversary of the Effective Date, (b) be [ *** ] if
such Sublicense document is executed on or after the third anniversary of the
Effective Date but before the sixth anniversary of the Effective Date and (c) be
[ *** ] if such Sublicense document is executed on or after the sixth
anniversary of the Effective Date.

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 15 

 

 

4.5.2To the extent required by the Agreement between Licensee and Nippon
Shinyaku Co., Ltd (“Nippon Shinyaku”) dated November 13, 2013, Licensee may
grant a Sublicense to Nippon Shinyaku in the territory of Japan that does not
require the payment of royalties or fees and, in such case, sales by Nippon
Shinyaku in Japan shall not be included for purposes of the calculation of
Royalties owed to CHOP hereunder, no Sublicense Income shall be collected by
Licensee, and, accordingly, no CHOP Sublicense Income shall be payable to CHOP.

 

4.6Mode of Payment and Currency. All payments to CHOP hereunder must be made in
USD in the requisite amount to “The Children’s Hospital of Philadelphia Research
Institute” by one of the following delivery methods (subject to updates pursuant
to Section 9.10):

 

By ACH/Wire to: By Check (lockbox) to: Wells Fargo Bank, N.A. The Children’s
Hospital of Philadelphia Research ABA #031201467 Institute (domestic wires) Lock
Box #1457 SWIFT CODE: PNBPUS33 P.O. Box 8500 (international wires only)
Philadelphia, PA 19178-1457 Account Number: 2000049262603 Attention: Director of
Research Finance Payment must include the necessary amount Reference: CHOP OTT
Technology 0494 to cover any bank charges incurred  

 

If payment is made by ACH/Wire, notice of payment including confirmation of wire
transfer must be provided to:

 

The Children’s Hospital of Philadelphia Research Institute

Colket Translational Research Building

3501 Civic Center Blvd, Suite 2200

Philadelphia, PA 19104-4319

Attention: Director of Research Finance

Reference: CHOP OTT Technology 0494

 

All Royalties and other payments payable shall be calculated first in the
currency of the jurisdiction in which payment was made, and if not in the United
States, then converted into USD. The exchange rate for such conversion shall be
the average of the rate quoted in The Wall Street Journal, Eastern Edition for
the last business day of each month in the calendar quarter for such Royalty or
other payment made.

 

4.7Royalty and CHOP Sublicense Income Reports. Within sixty (60) days after the
end of each calendar quarter (i.e. Feb. 28, May 31, August 31 and Nov. 30),
Licensee shall deliver to CHOP a report (“Financial Report”) setting out all
details necessary to calculate the Royalty and CHOP Sublicense Income due under
this Article 4 for such calendar quarter, including:

  

 16 

 

 

4.7.1Number of each Product Sold by Licensee, its Affiliates and Sublicensees in
each country, the corresponding name of each such Product;

 

4.7.2Gross sales and Net Sales of each Product made by Licensee, its Affiliates
and Sublicensees;

 

4.7.3Royalties;

 

4.7.4Sublicense Income and the calculation of CHOP Sublicense Income;

 

4.7.5The method and currency exchange rates (if any) used to calculate the
Royalties and CHOP Sublicense Income;

 

4.7.6A specification of all deductions and their dollar value that were taken to
calculate Net Sales; and

 

4.7.7A list of all countries in which Product is being manufactured.

 

4.8Late Payments. In addition to any other remedies available to CHOP, including
the right to terminate this Agreement, any failure by Licensee to make a payment
within thirty (30) days after the date when due shall obligate Licensee to pay
computed interest, the interest period commencing on the due date and ending on
the actual payment date, to CHOP at a rate per annum equal to the average of the
United States Prime Rate as published by the Wall Street Journal, Eastern
Edition, plus an additional one percent (1.0%) per month calculated for the
period of the delinquent payment, or the highest rate allowed by Law, whichever
is lower. The interest rate shall be adjusted with changes to the reference rate
published by the Wall Street Journal, Eastern Edition, and interest shall be
calculated daily and compounded monthly in arrears.

 

4.9Default Payment. In the event of default in payment of any payment owing to
CHOP under the terms of this Agreement, and if it becomes necessary for CHOP to
undertake legal action to collect said payment, Licensee shall pay reasonable,
documented legal fees and costs incurred in connection therewith.

 

4.10Accounting. Licensee shall calculate all amounts, and perform other
accounting procedures required, under this Agreement and applicable to it in
accordance with GAAP.

 

4.11Books and Records. Licensee will keep accurate books and records of all
Products developed, manufactured, used or sold and all Sublicenses,
collaboration agreements and joint venture agreements entered into by Licensee
that involved CHOP Patent Rights and/or CHOP Know-How. Licensee will preserve
these books and records for at least six (6) years from the date of the
Financial Report to which they pertain. Upon reasonable notice, the books and
records will be open to examination by representatives or agents of CHOP during
regular office hours to determine their accuracy and assess Licensee’s
compliance with the terms of this Agreement, provided that Licensee shall not
have an obligation to provide access more than once in any given twelve (12)
month period, other than for cause.

 

4.12Audits.

 

4.12.1Licensee agrees to conduct an independent audit of the relevant records of
Licensee pertaining to the calculation of any Royalties and CHOP Sublicense
Income due to CHOP under this Agreement at least every two years if annual sales
of the Licensed Product or Licensed Processes are over fifty million dollars
($50,000,000). Such audit shall address, at a minimum, the amount of gross sales
by or on behalf of Licensee during the audit period, the amount of Sublicense
Income, the amount of funds owed to CHOP under this Agreement, and whether the
amount owed has been paid to CHOP and is reflected in the records of the
Licensee. A report by the auditor shall be submitted promptly to CHOP on
completion. Licensee shall pay for the entire cost of such audit.

 

 17 

 

 

4.12.2In addition to the right of CHOP to examine the books and records as
provided in Section 4.9 and the periodic audit required in Section 4.12.1, CHOP,
at its own cost, through an independent auditor reasonably acceptable to
Licensee (and who has executed an appropriate confidentiality agreement
reasonably acceptable to Licensee that requires the auditor to keep any
information learned by it confidential except as needed to report its audit
conclusions to CHOP), may inspect and audit the relevant records of Licensee
pertaining to the calculation of any Royalties and CHOP Sublicense Income due to
CHOP under this Agreement. Licensee shall provide such auditors with access to
the records during reasonable business hours. Such access need not be given to
any such set of records more often than once each year. CHOP shall provide
Licensee with written notice of its election to inspect and audit the records
related to the royalty due hereunder not less than thirty (30) days prior to the
proposed date of review of Licensee’s records by CHOP’s auditors. Should the
auditor find any underpayment of Royalties or CHOP Sublicense Income by
Licensee, Licensee shall (a) promptly pay CHOP the amount of such underpayment,
and shall reimburse CHOP for the cost of the audit, should such underpayment
equal or exceed five percent (5%) of Royalties or CHOP Sublicense Income paid
during the time period audited, and (b) provide such auditors with an audit
right exercisable within six (6) months after Licensor receives the audit
report. If the auditor finds overpayment by Licensee, then Licensee shall have
the right to deduct the overpayment from any future royalties due to CHOP by
Licensee or, if no such future royalties are payable, then CHOP shall refund the
overpayment to Licensee within thirty (30) days after Licensor receives the
audit report. Licensee may designate competitively sensitive information which
such auditor may see and review but which it may not disclose to Licensor;
provided, however, that such designation shall not restrict the auditor’s
investigation or conclusions.

 

4.13Taxes. All payments made by Licensee under the Agreement shall be made free
and clear of and without any deduction for or on account of any Taxes.

 

 18 

 

 

ARTICLE 5

INTELLECTUAL PROPERTY

 

5.1Patent Filing Prosecution and Maintenance.

 

5.1.1CHOP Patent Rights, [ *** ]. Licensee shall be engaged [ *** ] as client,
and CHOP shall be engaged by [ *** ] as an accommodated party, each in
accordance with an engagement letter reasonably satisfactory to CHOP and
Licensee. Licensee shall control all actions and decisions with respect to the
filing, prosecution and maintenance of such CHOP Patent Rights; provided that
Licensee may not take any actions that may adversely impact such CHOP Patent
Rights without CHOP’s prior written approval and CHOP may take any actions that
are necessary to preserve rights if Licensee has failed to do so in a timely
fashion. In addition, Licensee will consider any reasonable comments or
suggestions by CHOP with respect to the filing, prosecution and maintenance of
such CHOP Patent Rights. Licensee will copy, and will instruct [ *** ] to copy,
CHOP on all correspondence related to such CHOP Patent Rights (including all
copies of patent applications, office action, response to office action, request
for terminal disclaimer, and request for reissue or reexamination of any patent
or patent application) and to interact with CHOP in regards to the preparation,
filing, prosecution and maintenance of such CHOP Patent Rights. Licensee has the
right to take any action to preserve rights whether or not CHOP has commented,
and will not allow any such CHOP Patent Rights for which Licensee is licensed
and is underwriting the costs to lapse or become abandoned without providing at
least thirty (30) days prior written notice to CHOP and CHOP’s written
authorization under this Agreement, except for filing of continuations,
divisionals, or the like that substitute for the lapsed application. Control of
CHOP Patent Rights (including the right to control all actions and decisions
with respect to the filing, prosecution and maintenance) will revert to CHOP
upon termination of this Agreement or upon any decision by Licensee to terminate
or abandon any CHOP Patent Rights in accordance with Section 5.2.2 or otherwise.

 

5.1.2CHOP Patent Rights [ *** ]. CHOP shall control all actions and decisions
with respect to the filing, prosecution and maintenance of such CHOP Patent
Rights and will consider any reasonable comments or suggestions by Licensee with
respect to such. CHOP will instruct [ *** ] to copy Licensee on all
correspondence related to such CHOP Patent Rights (including all copies of
patent applications, office action, response to office action, request for
terminal disclaimer, and request for reissue or reexamination of any patent or
patent application) and to interact with Licensee in regards to the preparation,
filing, prosecution and maintenance of such CHOP Patent Rights. CHOP has the
right to take action to preserve rights whether or not Licensee has commented,
and will use reasonable efforts to not allow any such CHOP Patent Rights for
which Licensee is licensed and is underwriting the costs to lapse or become
abandoned without Licensee’s written authorization under this Agreement, except
for filing of continuations, divisionals, or the like that substitute for the
lapsed application. For clarity, CHOP shall have no requirement to file,
prosecute, or maintain such CHOP Patent Rights if Licensee is not current with
the Patent Cost obligations as set forth in this Agreement.

 

5.1.3Disagreements regarding the filing, prosecution, and maintenance of CHOP
Patent Rights will be resolved by the Parties in favor of preserving rights and
breadth of claim coverage. If there is a dispute between the Parties relating to
the actions and decisions with respect to the filing, prosecution and
maintenance of CHOP Patent Rights that cannot be resolved based on the foregoing
principle, then the dispute shall first be referred to the chief scientific
officers of the Parties, who shall confer in good faith on the resolution of the
issue. Any final decision mutually agreed to by the chief scientific officers
shall be conclusive and binding on the Parties. If the chief scientific officers
are not able to agree on the resolution of any such issue within thirty (30)
days after such issue was first referred to them (or such shorter time period as
may be required due to filing, prosecution or maintenance deadlines), then, such
dispute shall be handled in accordance with Section 9.9; provided that while any
such dispute is ongoing, all actions will continue to be taken in favor of
preserving rights and breadth of claim coverage.

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 19 

 

 

5.2Patent Costs.

 

5.2.1Within thirty (30) days of the Effective Date, Licensee will reimburse CHOP
for all out-of-pocket costs incurred prior to the Effective Date for the filing,
prosecution and maintenance of CHOP Patent Rights, including all accrued
attorney fees, expenses, official and filing fees (“Patent Costs”). As of July
10, 2015, Patent Costs are approximately $85,000 US dollars.

 

5.2.2Licensee will bear all Patent Costs incurring during the Term. Licensee
shall pay [ *** ] directly, and will reimburse CHOP for all costs associated
with [ *** ] preparation and prosecution of CHOP Patent Rights, as applicable,
for any such Patent Costs within thirty (30) days of receipt of each invoice.

 

5.2.3Licensee may terminate its rights in, and obligations with respect to any
or all of CHOP Patent Rights by providing written notice to CHOP (“Patent
Termination Notice”). Termination of Licensee’s rights in and obligation with
respect to such Patent Rights will be effective six (6) months after receipt of
such Patent Termination Notice by CHOP. In the event of termination of less than
the full CHOP Patent Rights, the non-terminated Rights remain subject to all
terms of License. CHOP will use reasonable efforts to curtail Patent Costs
chargeable to Licensee under this Agreement after the receipt of the Patent
Termination Notice is received. CHOP may prosecute and maintain such Patent
Rights at its sole discretion and expense, and such Patent Rights will
thereafter not be subject to this Agreement, including the License, and Licensee
will have no further rights or license to them.

 

5.3Infringement.

 

5.3.1If either Party believes that an infringement by a Third Party with respect
to any CHOP Patent Right in the Field is occurring or may potentially occur, the
knowledgeable Party will provide the other Party with (a) written notice of such
infringement or potential infringement and (b) evidence of such infringement or
potential infringement (the “Infringement Notice”). During the period in which,
and in the jurisdiction where, Licensee has exclusive rights under this
Agreement, neither CHOP or Licensee will notify such a Third Party (including
the infringer) of infringement or put such Third Party on notice of the
existence of CHOP Patent Rights without first obtaining the written consent of
the other Party. Both CHOP and Licensee will use their diligent efforts to
cooperate with each other to terminate such infringement without litigation.

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 20 

 

 

5.3.2If infringing activity of potential commercial significance has not been
abated within ninety (90) days following the date the Infringement Notice for
such activity was provided, then Licensee may institute suit for patent
infringement against the infringer in the Field. CHOP may voluntarily join such
suit at Licensee’s reasonable expense, but may not thereafter commence suit
against the infringer for the acts of infringement that are the subject of
Licensee’s suit or any judgment rendered in such suit. Licensee may not join
CHOP in a suit initiated by Licensee without CHOP’s prior written consent. If in
a suit initiated by Licensee, CHOP is involuntarily joined other than by
Licensee, then Licensee and CHOP may choose mutually agreeable co-counsel, and
Licensee will pay any costs incurred by CHOP arising out of such suit, including
any legal fees of co-counsel. If CHOP and Licensee choose to employ co-counsel,
CHOP and Licensee each may engage separate counsel in addition to co-counsel, at
the engaging Party’s expense. Licensee shall be free to enter into a settlement,
consent judgment or other voluntary disposition, provided that any settlement,
consent judgment or other voluntary disposition that (a) limits the scope,
validity or enforcement of CHOP Patent Rights or (b) admits fault or wrongdoing
on the part of Licensee or CHOP must be approved in advance by CHOP in writing.
Licensee’s request for such approval shall include complete copies of final
settlement documents, a detailed summary of such settlement, and any other
information material to such settlement. CHOP shall provide Licensee notice of
its approval or denial within thirty (30) days of any request for such approval
by Licensee, provided that, in the event CHOP wishes to deny such approval, such
notice shall include a detailed written description of CHOP’s reasonable
objections to the proposed settlement, consent judgment, or other voluntary
disposition.

 

5.3.3If, within one hundred and twenty (120) days following the date the
Infringement Notice was provided, infringing activity of potential commercial
significance has not been abated and if Licensee has not brought suit against
the infringer, then CHOP may, following consultation with and good faith
consideration of any Licensee comments, and only if Licensee fails to provide a
reasonable basis for its decision, institute suit for patent infringement
against the infringer. If CHOP institutes such suit, then Licensee may not join
such suit without the prior written consent of CHOP and may not thereafter
commence suit against the infringer for the acts of infringement that are the
subject of CHOP’s suit or any judgment rendered in such suit.

 

5.3.4Notwithstanding Sections 5.3.2 and 5.3.3, in the event that any CHOP Patent
Rights are infringed by a Third Party (a) prior to the First Commercial Sale of
a Product in the United States or (b) if any of the infringed CHOP Patent Rights
are also licensed by CHOP to a Third Party, prior to any enforcement action
being taken by either Party regarding such infringement, the Parties shall
discuss, and will mutually agree, in writing, as to how to handle such
infringement by such Third Party.

 

5.3.5In the event that any CHOP Patent Right in the Field is the subject of a
Paragraph IV Certification (21 U.S.C. § 355(j)(2)(B)(iv)) or the like, Licensee
and CHOP will convene to mutually consider options for response. In the event
that CHOP and Licensee cannot come to a mutually agreeable response, Licensee
will have unilateral rights to determine how and when respond.

 

5.3.6Any recovery or settlement received in connection with any suit in the
Field will first be shared by CHOP and Licensee equally to cover any litigation
costs of co-counsel. Any remaining recoveries shall be allocated as follows:

 

 21 

 

 

(a)For any portion of the recovery or settlement where Licensee was a party in
the litigation, other than for amounts attributable and paid as enhanced damages
for willful infringement:

 

(i)for any suit that is initiated by Licensee and in which CHOP was not a party
in the litigation, CHOP shall receive twenty five percent (25%) of the recovery
and Licensee shall receive the remainder; and

 

(ii)for any suit that is initiated by Licensee or CHOP and that the other Party
joins voluntarily (but only to the extent such voluntary joining is allowed
under this Agreement or expressly by the other Party in a separate agreement) or
involuntarily, the non-initiating party’s percentage of the total litigation
costs incurred by CHOP and Licensee, but in no event shall the non-initiating
Party receive less than twenty five percent (25%) of such recovery, while the
initiating party shall receive the remainder.

 

(b)For any portion of the recovery or settlement paid as enhanced damages for
willful infringement where Licensee was a party in the litigation:

 

(i)for any suit that is initiated by Licensee and in which CHOP was not a party
in the litigation, CHOP shall receive thirty percent (30%) and Licensee shall
receive the remainder; and

 

(ii)for any suit that is initiated by Licensee or CHOP and the other Party
voluntarily but only to the extent such voluntary joining is allowed under this
Agreement or expressly by the other Party in a separate agreement) or
involuntarily, CHOP shall receive fifty percent (50%) and Licensee shall receive
the remainder.

 

(c)For any portion of the recovery or settlement received in connection with any
suit that is initiated by CHOP and in which Licensee was not a party in the
litigation, any recovery in excess of litigation costs will belong to CHOP.

 

5.4Invalidity or Unenforceability Defenses or Actions.

 

5.4.1Each Party shall promptly notify the other Party in writing of any alleged
or threatened assertion of invalidity or unenforceability of any of the CHOP
Patent Rights by a Third Party of which such Party becomes aware.

 

5.4.2Licensee shall have the first right, but not the obligation, to defend and
control the defense of the validity and enforceability of the patents in CHOP
Patent Rights at its own expense. CHOP may participate in any such claim, suit,
or proceeding with counsel of its choice. If Licensee elects not to defend or
control the defense of the patents in CHOP Patent Rights in a suit, or otherwise
fails to initiate and maintain the defense of any such claim, suit, or
proceeding, then CHOP may, but shall not have the obligation to, conduct and
control the defense of any such claim, suit, or proceeding.

 

 22 

 

 

5.5Litigation Costs and Expenses. If CHOP is a party to any suit or action under
Sections 5.3 or 5.4, Licensee shall reimburse CHOP for all reasonable costs,
expenses, and fees (including reasonable attorneys’ fees), which CHOP incurs as
a result of becoming a party to such suit or other action, including any and all
costs, expenses and fees (including attorneys’ fees), except if CHOP and
Licensee engage separate counsel in addition to co-counsel according to Section
5.4.2. Licensee shall reimburse any and all such costs, expenses and fees within
thirty (30) days after receiving an invoice from CHOP.

 

5.6Patent Marking. Licensee shall place in a conspicuous location on any Product
(or its packaging where appropriate and practicable) made or sold under this
Agreement a patent notice in accordance with the Laws concerning the marking of
patented articles where such Product is made or sold, as applicable.

 

5.7Confidentiality.

 

5.7.1Each Party agrees that, for the Term and for five (5) years thereafter,
such Party shall (a) use the same degree of care to maintain the secrecy of the
Confidential Information of the other Party that it uses to maintain the secrecy
of its Confidential Information of like kind but in no case less than a
reasonable degree of care, (b) use the Confidential Information only to
accomplish the purpose of this Agreement or for audit or management purposes and
(c) ensure that any employees, customers, distributors are bound to it by
similar obligations of confidence and to make sure such disclosure only as
required to accomplish the purposes of this Agreement.

 

5.7.2Neither Party will have any confidentiality obligations with respect to
Confidential Information belonging to the other Party that:

 

(a)is or becomes generally available to the public other than as a result of
disclosure by the recipient;

 

(b)is already known by or in the possession of the recipient at the time of
disclosure by the disclosing Party;

 

(c)is independently developed by recipient without use of or reference to the
disclosing Party’s Confidential Information; or

 

(d)is obtained by recipient from a Third Party that lawfully obtained it and has
not breached any obligations of confidentiality.

 

5.7.3A Party may disclose the Confidential Information of the other Party to the
extent required by Law or court order; provided, however, that the recipient
promptly provides to the disclosing Party prior written notice of such
disclosure and provides reasonable assistance in obtaining an order or other
remedy protecting the Confidential Information from public disclosure.

 

 23 

 

 

ARTICLE 6

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

6.1Mutual Representations and Warranties. Each Party represents and warrants to
the other Party that, as of the Effective Date:

 

6.1.1such Party is duly organized and validly existing under the Laws of the
jurisdiction of its incorporation or organization;

 

6.1.2such Party has taken all action necessary to authorize the execution and
delivery of this Agreement and the performance of its obligations under this
Agreement;

 

6.1.3this Agreement is a legal and valid obligation of such Party, binding upon
such Party and enforceable against such Party in accordance with the terms of
this Agreement, except as enforcement may be limited by applicable bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors’ rights generally and by general equitable
principles; and

 

6.1.4such Party has all right, power and authority to enter into this Agreement,
to perform its obligations under this Agreement.

 

6.2CHOP Representations and Warranties. CHOP represents and warrants that,
subject to Schedule 2.3.2:

 

6.2.1CHOP owns or Controls the CHOP Patent Rights;

 

6.2.2Hakon Hakonarson is “Hospital Personnel” as per the definition in CHOP’s
Patent and Intellectual Property Policy dated July 1, 2009 (“CHOP IP Policy”;
copy at Appendix C);

 

6.2.3CHOP has the right to grant the licenses set forth in this Agreement;

 

6.2.4CHOP’s entry into and performance of this Agreement shall not violate or
conflict with any agreement between CHOP and any Third Party; and

 

6.2.5except for potential rights of the United States Government including under
35 U.S.C. §§200-212, as amended, the CHOP Patent Rights are not subject to the
rights of any Third Party that funded the research at CHOP that resulted in the
creation of the CHOP Patent Rights.

 

6.3Disclaimer of Representations and Warranties.

 

6.3.1Other than the representations and warranties provided in Sections 6.1 and
6.2 above,

 

CHOP MAKES NO REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR IMPLIED, AND
EXPLICITLY DISCLAIMS ANY REPRESENTATION AND WARRANTY, INCLUDING WITH RESPECT TO
ANY ACCURACY, COMPLETENESS, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
COMMERCIAL UTILITY, VALIDITY OR NON-INFRINGEMENT FOR THE TECHNOLOGY, CHOP PATENT
RIGHTS, CHOP KNOW HOW, LICENSE AND ANY PRODUCT. LICENSEE ACCEPTS CHOP PATENT
RIGHT AND CHOP KNOW-HOW “AS IS” AND CHOP DOES NOT OFFER ANY GUARANTEE OF ANY
KIND.

 

 24 

 

 

6.3.2Furthermore, nothing in this Agreement will be construed as:

 

(a)A representation or warranty by CHOP as to the validity or scope of any CHOP
Patent Right;

 

(b)A representation or warranty that anything made, used, sold or otherwise
disposed of under the License is or will be free from infringement of patents,
copyrights, trademarks or any other forms of intellectual property rights or
tangible property rights of Third Parties;

 

(c)Obligating CHOP to bring or prosecute actions or suits against Third Parties
for patent, copyright or trademark infringement;

 

(d)Conferring by implication, estoppel or otherwise any license or rights under
any Patent Rights of CHOP other than CHOP Patent Rights as defined herein, and
regardless of whether such Patent Rights are dominant or subordinate to CHOP
Patent Rights.

 

6.4Covenants of Licensee.

 

6.4.1Licensee and its Affiliates will not, directly or indirectly (including
where done by a Third Party on behalf of Licensee or its Affiliates, at the
urging of Licensee or its Affiliates or with the assistance of the Licensee or
its Affiliates) challenge the validity, scope, or enforceability of or otherwise
oppose any CHOP Patent Right, provided that if any CHOP Patent Right is asserted
against Licensee or its Affiliate for activities authorized under this
Agreement, then such Licensee or its Affiliates is entitled to all and any
defenses available to it including challenging the validity or enforceability of
such Patent Right. In the event of breach of this Section 6.4.1, the royalty
rates set forth in the table in Section 4.3.1 shall immediately double unless
and until a court of competent jurisdiction finally finds (without the
possibility of appeal) all CHOP Patent Rights to be invalid or unenforceable.

 

6.4.2Licensee will comply with all Laws that apply to its activities or
obligations under this Agreement. For example, Licensee will comply with
applicable United States export laws and regulations. The transfer of certain
technical data and commodities may require a license from the applicable agency
of the United States government and/or written assurances by Licensee that
Licensee will not export data or commodities to certain foreign countries
without prior approval of the agency.

 

6.4.3Licensee will not grant a security interest in the License or this
Agreement.

 

 25 

 

 

ARTICLE 7

INDEMNIFICATION; INSURANCE AND LIMITATION OF LIABILITY

 

7.1Indemnification by Licensee.

 

7.1.1Licensee shall indemnify CHOP and its current and former directors,
governing board members, trustees, officers, faculty, students, fellows,
employees, consultants, contractors and agents and their respective successors,
heirs and assigns (the “CHOP Indemnitees”) from and against any and all
liability, damage, loss, demands, cost or expense (including reasonable
attorneys’ fees), including bodily injury, risk of bodily injury, death and
property damage to the extent arising out of claims or suits related to (a)
Licensee, Affiliate or Sublicensee or their customers activities related to
Products, Patent Rights, CHOP Patent Rights or CHOP Know-How, (b) this Agreement
or any Sublicense, including (i) the development, design, testing, use,
manufacture, packaging, promotion, import, export, distribution, lease, sale or
other disposition of any Product (including any product liability claim), (ii)
any enforcement action or suit brought by Licensee against a Third Party for
infringement of CHOP Patent Rights, (iii) any claim by a Third Party that the
practice of CHOP Patent Rights or the design, composition, manufacture, use,
sale or other disposition of any Product infringes or violates any patent,
copyright, trade secret, trademark or other intellectual property right of such
Third Party, (iv) any breach of this Agreement or Laws by Licensee, its
Affiliates or Sublicensees, and (c) Licensee’s negligence, omissions or willful
misconduct, provided that Licensee’s obligations pursuant to this Section 7.1
shall not apply to the extent such claims or suits result from the gross
negligence or willful misconduct of CHOP.

 

7.1.2CHOP shall: (a) promptly notify Licensee as soon as it becomes aware of a
claim or suit for which indemnification may be sought pursuant hereto; provided
that any failure to provide such prompt notice shall not relieve Licensee of any
of its obligations hereunder except and only to the extent Licensee is
prejudiced thereby; (b) reasonably cooperate, and cause the individual CHOP
Indemnitees to reasonably cooperate, with Licensee in the defense, settlement or
compromise of such claim or suit; and (c) permit the Licensee to control the
defense, settlement or compromise of such claim or suit, including the right to
select defense counsel reasonably acceptable to CHOP. In no event, however, may
Licensee compromise or settle any claim or suit in a manner which (a) admits
fault or negligence on the part of CHOP or any other CHOP Indemnitee; or (b)
commits CHOP or any other CHOP Indemnitee to take, or forbear to take, any
action, without the prior written consent of CHOP.

 

7.1.3Notwithstanding Section 7.1.2 above, in the event that CHOP believes in
good faith that a bona fide conflict exists between Licensee and CHOP or any
other CHOP Indemnitee with respect to a claim or suit subject to indemnification
hereunder, then CHOP or any other CHOP Indemnitee shall have the right in
defending against any such claim or suit itself, including by selecting its own
counsel, and Licensee will not be required to pay for any fees and expenses
incurred by CHOP.

 

7.2Insurance.

 

7.2.1Licensee, at its sole cost and expense, must insure its activities in
connection with the work under this Agreement and obtain, and keep in force and
maintain Commercial Form General Liability Insurance (contractual liability
included) with limits as follows:

 

(a) Each occurrence $ [   *** ]           (b) General aggregate $ [   *** ]

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 26 

 

 

Prior to the commencement of clinical trials, if applicable, involving Product:

 

(c)Clinical Trial coverage $[ *** ]

 

Prior to the First Commercial Sale of a Product:

 

(d)Product Liability $[ *** ]

 

CHOP may review periodically the adequacy of the minimum amounts of insurance
for each coverage required by this Section 7.2.1, and has the right to require
Licensee to adjust the limits in CHOP reasonable discretion

 

7.2.2If the above insurance is written on a claims-made form, it shall continue
for three (3) years following termination or expiration of this Agreement. The
insurance shall have a retroactive date of placement prior to or coinciding with
the Effective Date of this Agreement.

 

7.2.3Licensee expressly understands, however, that the coverages and limits in
Section 7.2.1 do not in any way limit Licensee’s liability or indemnification
obligations. Licensee’s insurance will:

 

(a)Be issued by an insurance carrier with an A.M. Best rating of “A” or better;

 

(b)Provide for thirty (30) day advance written notice to CHOP of any
modification;

 

(c)State that CHOP is endorsed as an additional insured with respect to the
coverages in Section 7.2.1; and

 

(d)Include a provision that the coverages will be primary and will not
participate with nor will be excess over any valid and collective insurance or
program of self insurance carried or maintained by CHOP.

 

7.2.4Licensee must furnish to CHOP with (a) valid certificate of insurance
evidencing compliance with all requirements of this Agreement and (b) additional
insured endorsements for Licensee’s applicable policies naming “The Children’s
Hospital of Philadelphia” as an additional insured. Licensee must furnish both
documents within thirty (30) days of the Effective Date, once per year
thereafter and at any time there is a modification in such insurance.

 

7.3LIMITATION OF LIABILITY. EXCEPT FOR LICENSEE’S INDEMNIFICATION OBLIGATIONS
UNDER SECTION 7.1, IN NO EVENT SHALL EITHER PARTY OR ANY OF ITS AFFILIATES BE
LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES FOR SPECIAL, INDIRECT,
INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING LOSS OF PROFITS,
WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREIN OR ANY BREACH HEREOF.

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 27 

 

 

ARTICLE 8

TERM AND TERMINATION

 

8.1Term. The term of this Agreement (the “Term”) shall commence on the Effective
Date and, unless terminated sooner as provided below, shall continue in full
force and effect until the expiration of the Royalty Term. Upon expiration of
the Term, the licenses granted to Licensee under Section 2 shall automatically
become non-exclusive, perpetual, irrevocable, fully paid-up and royalty-free and
shall remain subject to the provisions of Section 2.3.

 

8.2Termination by Licensee for Convenience. At any time during the Term,
Licensee may, at its convenience, terminate this Agreement upon providing at
least six (6) months prior written notice to CHOP of such intention to
terminate.

 

8.3Termination by CHOP for Cause.

 

8.3.1Termination for Breach of Diligence Obligations. If Licensee fails to
fulfill its obligations under Sections 3.1 or 3.2 (including the failure to
achieve any Diligence Event by the corresponding Achievement Date, as may be
amended pursuant to

 

Section 3.2.3), CHOP may provide written notice to Licensee of such failure. If
Licensee fails to address such failure to the reasonable satisfaction of CHOP
within three (3) months of receiving such written notice, CHOP may, upon written
notice to Licensor, terminate this Agreement (a) in its entirety or (b) if such
failure is with respect to a given Indication, terminate this Agreement with
respect to such Indication.

 

8.3.2Termination for Other Material Breach. If Licensee materially breaches any
of its material obligations under this Agreement other than those covered in
Section 8.3.1 above, CHOP may give to Licensee a written notice specifying the
nature of the default, requiring it to cure such breach, and stating its
intention to terminate this Agreement. If such breach is not cured within thirty
(30) days of such notice, such termination shall become effective upon a notice
of termination by CHOP thereafter. For clarity, such breach of a material
obligation includes:

 

(a)failure to deliver to CHOP any payment at the time or times that such payment
is due to CHOP under this Agreement;

 

(b)failure to provide reports as set forth in Sections 3.3.1 and 4.7;

 

(c)failure to possess and maintain insurance as set forth in Section 7.2;

 

(d)grant of a sublicense under the CHOP Patent Rights or CHOP Know-How that is
not in accordance with the terms of this Agreement;

 

(e)failure to terminate a Sublicense upon written request of CHOP where
Sublicensee is in breach of the obligations on it pursuant to (i) Sections
2.4.2(a), 2.4.2(d), 2.4.2(g) and 2.4.2(i) and fails to cure such breach within
thirty (30) days of being notified of such breach and (ii) Section 2.4.2(e).

 

 28 

 

 

8.3.3Termination for Patent Challenge. In addition to all other remedies
available to it, CHOP may terminate this Agreement, upon written notice, with
immediate effect, upon a breach of Section 6.4.1.

 

8.3.4Termination for Insolvency. CHOP may terminate this Agreement, upon written
notice, with immediate effect if, at any time, Licensee files in any court or
agency pursuant to any statute or regulation of any state, country or
jurisdiction, a petition in bankruptcy or insolvency or for reorganization or
for an arrangement or for the appointment of a receiver or trustee of Licensee
or of its assets, or if Licensee proposes a written agreement of composition or
extension of its debts, or if Licensee is served with an involuntary petition
against it, filed in any insolvency proceeding, and such petition is not
dismissed within ninety (90) days after the filing thereof, or if Licensee
proposes or is a party to any dissolution or liquidation, or if Licensee makes
an assignment for the benefit of its creditors of all or substantially all its
assets (in each case, a “Bankruptcy Action”).

 

8.3.5Termination for Breach of Purchase Agreement. If the transaction for the
purchase of Licensee contemplated by the Purchase Agreement is consummated, and
Medgenics, its Affiliates, successors or assigns fails to pay CHOP an amount due
under Article II of the Purchase Agreement by the applicable due date, CHOP may
give Medgenics written notice of such failure in accordance with the Purchase
Agreement (such amount, the “Claimed Amount Due”). If Medgenics pays the Claimed
Amount Due in accordance with the terms of the Purchase Agreement, CHOP shall
have no right to terminate this Agreement. If Medgenics disputes the Claimed
Amount Due pursuant to the terms of Section 2.5 of the Purchase Agreement, the
dispute shall be subject to the dispute procedures set forth in Section 2.5(g)
of the Purchase Agreement. If the result of such formal dispute resolution
process is that Medgenics is ordered to pay CHOP in a final order from which no
appeal can be taken or is taken within the deadline to take such appeal, then
Medgenics shall make the required payment pursuant to the terms of the Purchase
Agreement. If such required payment is not paid pursuant to the terms of the
Purchase Agreement, then CHOP may deliver notice to Medgenics specifying the
nature of the default and stating its intention to terminate this Agreement. If
such required payment is not made by Medgenics within ninety (90) days of such
notice, such termination of this Agreement shall become effective upon a notice
of termination by CHOP thereafter.

 

8.4Effects of Termination.

 

8.4.1Notwithstanding the termination or expiration of this Agreement, the
following provisions shall survive termination or expiration: Article 1, Section
2.7, Section 4.1, Sections 4.8 - 4.12, Section 5.7, Article 6, Article 7,
Sections 8.1 and 8.4, and Article 9.

 

8.4.2Upon the effective date of termination of this Agreement, all rights and
licenses granted by CHOP hereunder shall terminate and Licensee shall cease all
activities that use or derive from the CHOP Know-How or would infringe the CHOP
Patent Rights. If Licensee violates this Section 8.4.2 and continues such
activities, in addition to all other remedies available to CHOP under Law or
this Agreement, Sections 4.2, 4.3, 4.4, 4.5.1, 4.6, 4.7, and 4.13 shall also
survive termination of this Agreement and Licensee shall continue to pay all
Milestone Payments, Royalties and Annual Maintenance Fees applicable to such
ongoing activities following termination.

 

 29 

 

 

8.4.3Upon the effective date of the termination of this Agreement for any
reason, either Party may request in writing, and the other Party either, with
respect to Confidential Information to which such first Party does not retain
rights under the surviving provisions of this Agreement: (a) as soon as
reasonably practicable, destroy all copies of such Confidential Information in
the possession of the other Party and confirm such destruction in writing to the
requesting Party; or (b) as soon as reasonably practicable, deliver to the
requesting Party, at the other Party’s expense, all copies of such Confidential
Information in the possession of the other Party; provided, that the other Party
shall be permitted to retain one (1) copy of such Confidential Information for
the sole purpose of performing any continuing obligations hereunder, as required
by Law, or for archival purposes. Notwithstanding the foregoing, such other
Party also shall be permitted to retain such additional copies of or any
computer records or files containing such Confidential Information that have
been created solely by such Party’s automatic archiving and back-up procedures,
to the extent created and retained in a manner consistent with such other
Party’s standard archiving and back-up procedures, but not for any other use or
purpose.

 

8.4.4Termination of this Agreement shall not relieve the Parties of any
obligation or liability that, at the time of termination, has already accrued
hereunder, or which is attributable to a period prior to the effective date of
such termination. Termination of this Agreement shall not preclude either Party
from pursuing all rights and remedies it may have hereunder or at Law or in
equity with respect to any breach of this Agreement nor prejudice either Party’s
right to obtain performance of any obligation.

 

8.4.5Upon termination of this Agreement for any reason, Licensee shall promptly
pay all amounts owed to CHOP under this Agreement before the earlier of (a)
sixty (60) days from the effective date of termination or (b) the due date for
such payment in accordance with the terms of this Agreement.

 

8.4.6If this Agreement is terminated for any reason, all outstanding Sublicenses
(including all Sublicense Documents for each Sublicense) not in default will be,
in CHOP’s sole discretion either (a) assigned by Licensee to CHOP or (b)
terminated. Each assigned Sublicense will remain in full force and effect with
CHOP as the licensor instead of Licensee, but the duties and obligations of CHOP
under the assigned Sublicenses will not be greater than the duties of CHOP under
this Agreement, and the rights of CHOP under the assigned Sublicenses will not
be less than the rights of CHOP under this Agreement, including all financial
consideration and other rights of CHOP. CHOP may, at its sole discretion, amend
such outstanding Sublicenses to contain the terms and conditions found in this
Agreement.

 

8.4.7If this Agreement is terminated for any reason, the following shall apply
with regard to Products:

 

(a)Licensee shall assign to CHOP, at Licensee’s sole cost and expense, all
rights, title and interest of Licensee in and to (i) all regulatory approvals
and applications therefor and all pricing and reimbursement approvals pertaining
to Products (ii) all trademarks (including, without limitation, the goodwill
associated with such trademarks) used to brand the Products and (iii) any
copyrights to the extent necessary or useful for marketing or commercialization
of the Products.

 

 30 

 

 

(b)Licensee shall transfer to CHOP, at Licensee’s sole cost and expense, copies
of all non-clinical and clinical data and material regulatory correspondence of
Licensee relating to the Products.

 

(c)Licensee agrees to grant, and hereby does grant, to CHOP a perpetual,
irrevocable, worldwide, exclusive (even as to Licensee), fully paid up,
royalty-free and fully transferable and sublicensable license under all Patent
Rights and other intellectual property rights Controlled by Licensee to the
extent necessary or useful to make, use, sell, offer for sale or import the
Products.

 

(d)Licensee shall furnish CHOP with reasonable cooperation to assure a smooth
transition of any clinical or other studies in progress related to Product, CHOP
Patent Rights or CHOP Know-How that CHOP determines to continue.

 

(e)Licensee shall have the right to dispose of all previously made or partially
made Products within a period of one hundred and eighty (180) days following the
effective date of any such termination; provided, however, that the sale of such
Products shall be subject to the terms of this Agreement including the payment
of royalties at the rate and at the time provided herein and the rendering of
reports thereon.

 

ARTICLE 9

ADDITIONAL PROVISIONS

 

9.1Relationship of the Parties. Nothing in this Agreement is intended or shall
be deemed, for financial, tax, legal or other purposes, to constitute a
partnership, agency, joint venture or employer-employee relationship between the
Parties. The Parties are independent contractors and at no time will either
Party make commitments or incur any charges or expenses for or on behalf of the
other Party.

 

9.2Third Party Beneficiary. The Parties agree that each Sublicensee is a third
party beneficiary of this Agreement with respect to Section 8.4.6.

 

9.3Use of Names. Licensee, its Affiliates and Sublicensees may not use the name,
logo, seal, trademark, or service mark (including any adaptation of them) of
CHOP or any CHOP school, organization, employee, student or representative,
without the prior written consent of CHOP. Notwithstanding the foregoing,
Licensee may use the name of CHOP in a non-misleading and factual manner solely
in (a) executive summaries, business plans, offering memoranda and other similar
documents used by Licensee for the purpose of raising financing for the
operations of Licensee as related to Product, or entering into commercial
contracts with Third Parties, but in such case only to the extent necessary to
inform a reader that the CHOP Patent Rights has been licensed by Licensee from
CHOP, and to inform a reader of the identity and published credentials of
Inventors of the Technology, and (b) any securities reports required to be filed
with the Securities and Exchange Commission.

 

9.4No Discrimination. Neither CHOP nor Licensee will discriminate against any
employee or applicant for employment because of race, color, sex, sexual or
affectional preference, age, religion, national or ethnic origin, handicap, or
veteran status

 

 31 

 

 

9.5Successors and Assignment.

 

9.5.1The terms and provisions hereof shall inure to the benefit of, and be
binding upon, the Parties and their respective successors and permitted assigns.

 

9.5.2Licensee may not assign or transfer this Agreement or any of Licensee’s
rights or obligations created hereunder, by operation of law or otherwise,
without the prior written consent of CHOP. Notwithstanding the foregoing, no
such consent shall be required in connection with an assignment to a successor,
whether in a merger, sale of stock, sale of assets or any other transaction, of
all or substantially all the business of Licensee to which this Agreement
relates; provided that, in the case of successors other than Medgenics pursuant
to the Purchase Agreement, Licensee provides prompt notice to CHOP of such
proposed assignment and evidence reasonably satisfactory to CHOP that such
proposed assignee is able to perform the obligations of Licensee under this
Agreement. Any permitted assignee shall assume all obligations of Licensee under
this Agreement.

 

9.5.3Any assignment not in accordance with this Section 9.5 shall be void.

 

9.6Further Actions. Each Party agrees to execute, acknowledge and deliver such
further instruments and to do all such other acts as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.

 

9.7Entire Agreement of the Parties; Amendments. This Agreement, the Appendices
and Schedules hereto, the Equity Issuance Agreement and the Purchase Agreement
constitute and contain the entire understanding and agreement of the Parties
respecting the subject matter hereof and cancel and supersede any and all prior
negotiations, correspondence, understandings and agreements between the Parties,
whether oral or written, regarding such subject matter including the Option
Agreement. No waiver, modification or amendment of any provision of this
Agreement shall be valid or effective unless made in a writing referencing this
Agreement and signed by a duly authorized officer of each Party.

 

9.8Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Pennsylvania, excluding
application of any conflict of laws principles that would require application of
the law of a jurisdiction outside of the Commonwealth of Pennsylvania.

 

9.9Dispute Resolution. If a dispute arises between the Parties concerning this
Agreement, then the Parties will confer, as soon as practicable, in an attempt
to resolve the dispute. If the Parties are unable to resolve such dispute
amicably, then the Parties will submit to the exclusive jurisdiction of, and
venue in, the state and Federal courts located in the Eastern District of
Pennsylvania.

 

9.10Notices and Deliveries. Any notice, request, approval or consent required or
permitted to be given under this Agreement shall be in writing and directed to a
Party at its address, facsimile number, or e-mail as shown below or such other
address, e-mail, or facsimile number as such Party shall have last given by
notice to the other Party. A notice will be deemed received: if delivered
personally, on the date of delivery; if mailed, five (5) days after deposit in
the United States mail; if sent via courier, one (1) business day after deposit
with the courier service; or if sent via facsimile or e-mail, upon receipt of
confirmation of transmission provided that a confirming copy of such notice is
sent by certified mail, postage prepaid, return receipt requested.

 

 32 

 

 

For CHOP with a copies to:     The Children’s Hospital of Philadelphia
Abrahamson Research Center Research Institute The Children’s Hospital of
Philadelphia Officer of Technology Transfer Office of General Counsel 3501 Civic
Center Blvd., Suite 2200 34th & Civic Center Blvd Philadelphia, PA 19104
Philadelphia, PA, 19104 Attention: Director, Technology Transfer Attention:
Deputy General Counsel Fax: (215) 590-5484         Morgan, Lewis & Bockius LLP  
502 Carnegie Center   Princeton, NJ 08540-6241   Attention: Steven M. Cohen  
Fax No.: (877) 432-9652     For Licensee: with copies to: NeuroFix, LLC Fox
Rothschild LLP c/o Philip Harper 747 Constitution Drive, Suite 100 1877 Covered
Bridge Road P.O. Box 673 Malvern, PA 19355 Exton PA 19341-0673 Fax: (610)
647-5095 Attention: Michael S. Harrington, Esquire Email:
philipharper173@gmail.com Fax: (610) 458-7337 Email:
mharrington@foxrothschild.com     with copies to: and Medgenics, Inc. Pepper
Hamilton LLP 435 Devon Park Drive, Building 700 3000 Two Logan Square Wayne, PA
19087 18th & Arch Streets Attention: Scott Applebaum, Esquire Philadelphia, PA
19103 Fax No.: (610) 717-3390 Attention: Brian M. Katz, Esquire Fax: (215)
981-4750

 

9.11Waiver. A waiver by either Party of any of the terms and conditions of this
Agreement in any instance shall not be deemed or construed to be a waiver of
such term or condition for the future, or of any other term or condition hereof.
All rights, remedies, undertakings, obligations and agreements contained in this
Agreement shall be cumulative and none of them shall be in limitation of any
other remedy, right, undertaking, obligation or agreement of either Party.

 

9.12Severability. When possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under law, but if any
provision of this Agreement is held to be prohibited by or invalid under law,
such provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement. The Parties
shall make a good faith effort to replace the invalid or unenforceable provision
with a valid one which in its economic effect is most consistent with the
invalid or unenforceable provision.

 

9.13Interpretation. The words “include,” “includes” and “including” shall be
deemed to be followed by the phrase “without limitation.” All references herein
to Articles, Sections, and Schedules shall be deemed references to Articles and
Sections of, and Schedules to, this Agreement unless the context shall otherwise
require. Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time. Unless the context otherwise requires, countries shall
include territories. References to any specific Law or article, section or other
division thereof, shall be deemed to include the then-current amendments or any
replacement Law thereto.

 

 33 

 

 

9.14Counterparts. This Agreement may be executed in counterparts, each of which
will be deemed an original, and all of which together will be deemed to be one
and the same instrument. A facsimile or a portable document format (PDF) copy of
this Agreement, including the signature pages, will be deemed an original.

 

IN WITNESS WHEREOF, duly authorized representatives of the Parties have executed
this Agreement as of the Effective Date.

 

THE CHILDREN’S HOSPITAL OF PHILADELPHIA   NEUROFIX , LLC           By: /s/
Madeline Bell   By: /s/ Philip R. Harper   Name: Madeline Bell     Name: Philip
R. Harper   Title: President & CEO     Title: President & CEO

 

 34 

 

 

Schedule 1.1

 

Diligence Events and Achievement Dates

 

ADHD           Diligence Event   Achievement Date Initiation of Phase II in the
United States   The 18 month anniversary of the Effective Date       Initiation
of Phase III in the United States or a pivotal Phase II if the FDA determines
Phase III is not required   The fourth anniversary of the Effective Date      
First Commercial Sale of Product   The sixth anniversary of the Effective Date  
    SECOND INDICATION           Diligence Event   Achievement Date Initiation of
Phase I in the United States   The 18 month anniversary of the Effective Date  
    If Phase I results are such that Phase II should be initiated:   The third
anniversary of the completion of Phase I Initiation of Phase II in the United
States    

 

 

 

 

Schedule 1.4

 

CHOP Patent Rights

 

1.[   ***   ]

 

·US Provisional Patent Application Serial Number [   ***   ];

·US Provisional Patent Application Serial Number [   ***   ];

·PCT Patent Application Serial Number [   ***   ];

·Australia Patent Application Serial Number [   ***   ];

·Canada Patent Application Serial Number [   ***   ];

·European Patent Application Serial Number [   ***   ];

·Japan Patent Application Serial Number [   ***   ];

·US Patent Application Serial Number [   ***   ].

 

2.[   ***   ]

 

·US Provisional Patent Application Serial Number [   ***   ];

·PCT Patent Application Serial Number [   ***   ];

·US Patent Application Serial Number [   ***   ].

 

3.[   ***   ]

 

·Any patent claim that issues from US Patent Application Serial Number
[   ***   ];

 

·Any US or foreign patent claim that issues from an application that claims
priority to US

Patent Application Serial Number [   ***   ].

 

4.US provisional patent application based on the invention disclosure received
by CHOP’s Office of Technology Transfer on [   ***   ], reference number
[   ***   ], related to [   ***   ], filed in the United States Patent and
Trademark Office on [   ***   ].

 

5.US provisional patent application based on the invention disclosure received
by CHOP’s Office of Technology Transfer on [   ***   ], reference number
[   ***   ] related to [   ***   ], filed in the United States Patent and
Trademark Office on [   ***   ].

 

6.US provisional patent application based on the invention disclosure received
by CHOP’s Office of Technology Transfer on [   ***   ], reference number
[   ***   ], related to [   ***   ], filed in the United States Patent and
Trademark Office on [   ***   ].

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 

 

 

7.US provisional patent application based on the invention disclosure received
by CHOP’s Office of Technology Transfer on [ *** ], reference number [ *** ],a
related to [ *** ], including [ *** ], filed in the United States Patent and
Trademark Office on [ *** ].

 

8.Any additional Patent Rights covering NFC-1 Trial IP, to the extent that CHOP
owns or controls such Patent Rights.

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 

 

 

Schedule 2.3.2

 

Third Party Rights

 

I. Third Party License

 

The following rights have been granted to a Third Party and are expressly
excluded from this Agreement:

 

Patents

The following CHOP intellectual property is currently exclusively licensed,
worldwide, in all fields of use:

 

1.The following applications:

a.PCT patent application serial no. [   ***   ], entitled [   ***   ], which
claims priority to U.S. provisional patent application serial no. [   ***   ],
[   ***   ] and U.S. provisional patent application serial no[   ***   ], filed
[   ***   ];

b.PCT patent application serial no. [   ***   ], entitled [   ***   ], which
claims priority to U.S. provisional patent application serial no. [   ***   ],
filed [   ***   ].

c.all patent applications and patents that may be based on, or derived from CHOP
OTT ID Number [   ***   ]by [   ***   ] dated [   ***   ], entitled [   ***   ]
("CHOP disclosure [   ***   ]"), and an associated schedule of Copy Number
Variants, including US application [   ***   ].

d.all applications from which such applications and patents claim priority, all
divisions and continuations of these applications, all patents issuing from such
applications, divisions, and continuations, and any reissues, reexaminations,
and extensions of all such patents;

 

2.All i) continuations-in-part of above; ii) all divisions and continuations of
these continuations-in-part; iii) all patents issuing from such
continuations-in-part, divisions, and continuations; and iv) any reissues,
reexaminations, and extensions of all such patents, including US Application
[   ***   ], subject to 4 below;

3.All counterpart foreign applications and patents to the above.

4.The license does not include the claims of 2 or 3 above, to the extent that
such claims are directed to new matter that is not the subject matter disclosed
in 1 above.

 

Know-How

The following CHOP intellectual property is currently non-exclusively licensed,
worldwide, to the extent necessary or useful to practice Technologies.
“Technologies” mean any service, process, and/or product which, in the course of
manufacture, use, or sale would, in the absence of a license to the above patent
rights, infringe or would induce infringement of, or constitute contributory
infringement of, one or more claims covering the above that have not been held
invalid or unenforceable by an unappealed or unappealable judgment of a court of
competent jurisdiction.

 

1.discoveries, data, information, processes, methods, techniques, materials,
cell lines, molecules, compounds, technology, results or other know-how, whether
or not patentable, that is necessary or useful for the manufacture, use,
commercial development, or sale of Technologies.

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 

 

 

Improvements

In addition to the above licenses, CHOP granted an option to include CHOP's
patent rights in any inventions conceived and reduced to practice: (i) directly
relate to and directly involve the subject matter of the above patent rights and
(ii) arise directly from research performed at CHOP by or under the supervision
of, or in the laboratories of, any of the inventors named in the above patent
rights (any such invention an "Improvement"). Such Improvements may include, for
example, surrogate markers of those markers already described in the above
patent rights, but shall expressly not include (i) new independent markers
identified in research performed at CHOP and (ii) intellectual property
conceived and reduced to practice in a certain Sponsored Research Agreement.

 

[ *** ].

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 

 

 

Appendix A

 

Purchase Agreement

 

 

 

 

 

Appendix A

 

Portions of this exhibit have been omitted and filed separately with the
Secretary of the Securities and Exchange Commission (the “Commission”) pursuant
to an application for confidential treatment filed with the Commission pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. Such
portions are marked as indicated below.

 

EQUITY INTEREST PURCHASE AGREEMENT

 

BY AND AMONG

 

NEUROFIX THERAPEUTICS, INC.

 

NEUROFIX, LLC

 

PHILIP HARPER

 

HAKON HAKONARSON

 

THE CHILDREN’S HOSPITAL OF PHILADELPHIA

 

MEDGENICS, INC.

 

DATED AS OF SEPTEMBER 9, 2015

 

 

 

 

TABLE OF CONTENTS

      ARTICLE I SALE OF LLC EQUITY INTERESTS 2       1.1. Purchase and Sale of
the LLC Equity Interests 2 1.2. Method of Conveyance 2       ARTICLE II
CONSIDERATION 2       2.1. Consideration 2 2.2. Payment of Base Purchase Price 2
2.3. Milestone Consideration 3 2.4. Earnout Consideration 4 2.5. Adjustments to
Milestone Consideration or Earnout Consideration;  Maintenance of Records;
Audits 5 2.6. Provisions Related to the Issuance of Purchaser Shares 8      
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS 10       3.1.
Authorization and Enforceability 10 3.2. Non-contravention; Consents 10 3.3. The
Legacy Corporation 11 3.4. Title to LLC Equity Interests 11 3.5. Brokers 11 3.6.
Compliance with Law; Permits 11 3.7. Representations Regarding Equity
Consideration 12       ARTICLE IV REPRESENTATIONS AND WARRANTIES RELATING TO THE
COMPANY AND THE LEGACY CORPORATION 13       4.1. Organization and Power 13 4.2.
Authorization and Enforceability 14 4.3. Non-contravention; Consents 14 4.4.
Capitalization; Subsidiaries 14 4.5. Financial Information; Indebtedness 15 4.6.
Absence of Changes 16 4.7. Absence of Undisclosed Liabilities 16 4.8. Title to
and Adequacy of Assets 16 4.9. Real Property 16 4.10. Intellectual Property 16
4.11. Contracts, Leases, Etc 19 4.12. Compliance with Law; Permits 19 4.13.
Taxes 20 4.14. Employee Relations 21 4.15. Environmental Laws 22 4.16. Legal
Proceedings 22 4.17. Transactions with Affiliates 23 4.18. Insurance 23

 

 -i- 

 

 

4.19. Brokers 24 4.20. Corporate Records 24 4.21. Bank Accounts 24 4.22. Powers
of Attorney 24 4.23. Statements and Other Documents Not Misleading 24      
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER 24       5.1. Organization
24 5.2. Authority 24 5.3. Conflict with other Instruments; Absence of
Restrictions 25 5.4. Government Approvals 25 5.5. Brokers 25 5.6. Purchaser SEC
Documents 25 5.7. Valid Issuance of Purchaser Shares 26 5.8. No Additional
Representations 26       ARTICLE VI CLOSING 26       6.1. Closing 26 6.2.
Closing Deliveries 26       ARTICLE VII COVENANTS 28       7.1. The Legacy
Corporation’s Business Following the Closing 28 7.2. Assistance in Defense 29
7.3. Public Announcements 29 7.4. General Release 29 7.5. Future Sale of
Purchaser 29 7.6. Third Party Consents 29 7.7. Further Assurances 30 7.8. Right
of First Refusal 30       ARTICLE VIII INDEMNIFICATION 31       8.1. Survival 31
8.2. The Selling Parties’ Indemnification 31 8.3. Purchaser Indemnification 33
8.4. Payment; Procedure for Indemnification 34 8.5. Limitation on
Indemnification 36 8.6. Characterization of Indemnity Payments 37 8.7. Sole
Remedy 37       ARTICLE IX TAXES; BULK SALES 37       9.1. Preparation and
Filing of Pre-Closing and Post-Closing Tax Returns for LLC 37 9.2. Allocation 38

 

 -ii- 

 

 

9.3. Cooperation on Tax Matters 38 9.4. Transfer Taxes 38 9.5. Tax Advice 38    
  ARTICLE X RESTRICTIVE COVENANTS 39       10.1. Confidentiality 39 10.2.
Restrictive Covenants 39 10.3. Specific Enforcement 40 10.4. Disclosure 40 10.5.
Interpretation 40 10.6. Acknowledgment 41       ARTICLE XI REGISTRATION RIGHTS
41       11.1. Registration 41 11.2. Expenses of Registration 41 11.3.
Obligations of Purchaser 41 11.4. Furnishing Information 43 11.5.
Indemnification; Contribution 44       ARTICLE XII STOCKHOLDER REPRESENTATIVE 46
      12.1. Appointment of the Stockholder Representative; Duties; and Power of
Attorney 46 12.2. Reliance 47 12.3. Limitation of Liability; Indemnification 47
12.4. Fees and Expenses 47       ARTICLE XIII MISCELLANEOUS 48       13.1.
Severability 48 13.2. Amendment and Waivers 48 13.3. Entire Agreement 48      
13.4. Expenses 48 13.5. Notice 49 13.6. Governing Law and Jurisdiction 50 13.7.
Waiver of Jury Trial 50 13.8. Assignment; Binding Effect; No Third Party Rights
51 13.9. Counterparts; Execution by Electronic Means 51       ARTICLE XIV
INTERPRETATION; DEFINITIONS 51       14.1. Rules of Construction 51 14.2.
Certain Terms 51

 

 -iii- 

 

 

EQUITY INTEREST PURCHASE AGREEMENT

 

THIS EQUITY INTEREST PURCHASE AGREEMENT (“Agreement”) is entered into as of
September 9, 2015, by and among neuroFix therapeutics, inc., a Delaware
corporation (the “Legacy Corporation”), neuroFix, LLC, a Delaware limited
liability company (the “Company”), Philip Harper, an individual resident in the
Commonwealth of Pennsylvania (“Harper”), Hakon Hakonarson, an individual
resident in the Commonwealth of Pennsylvania (“Hakonarson”), The Children’s
Hospital of Philadelphia, a Pennsylvania non-profit corporation (“CHOP”), and
Medgenics, Inc., a Delaware corporation (“Purchaser”). The Legacy Corporation,
the Company, Harper, Hakonarson, CHOP, and Purchaser are sometimes referred to
herein individually as “Party” and collectively as the “Parties.” Capitalized
terms not otherwise defined herein have the respective meanings assigned to such
terms in Article XIV hereof.

 

BACKGROUND

 

WHEREAS, the Legacy Corporation and the Company are engaged in the Business;

 

WHEREAS, Harper and Hakonarson (the “Legacy Stockholders”) are the owners of all
of the issued and outstanding equity Securities of the Legacy Corporation
(collectively, the “Legacy Equity Interests”);

 

WHEREAS, prior to the date hereof, the Legacy Corporation formed the Company, to
which the Legacy Corporation contributed all of its assets (including the option
to enter into the CHOP License Agreement and all regulatory filings) and
liabilities, and pursuant to which the Legacy Corporation became the sole holder
of equity Securities of the Company (the “Reorganization”);

 

WHEREAS, the Company and CHOP have entered into the License Agreement attached
hereto as Exhibit A (the “CHOP License Agreement”);

 

WHEREAS, upon entering into the CHOP License Agreement, CHOP became a holder of
LLC Equity Interests of the Company and, together, CHOP and the Legacy
Corporation (the “Equityholders”) are the only owners of all of the issued and
outstanding equity Securities of the Company (collectively, the “LLC Equity
Interests”);

 

WHEREAS, the Equityholders desire to sell the LLC Equity Interests to Purchaser,
and Purchaser desires to purchase the LLC Equity Interests from the
Equityholders, on the terms and subject to the conditions hereinafter set forth;
and

 

WHEREAS, to induce Purchaser to enter into this Agreement and consummate the
Contemplated Transactions, each of the Legacy Stockholders and the Equityholders
agrees to be bound by the Restrictive Covenants applicable to such Party
contained herein.

 

 -1- 

 

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the representations, warranties, covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and adequacy of which are conclusively acknowledged, the Parties,
intending to be legally bound, hereby agree as follows:

 

ARTICLE I

SALE OF LLC EQUITY INTERESTS

 

1.1.          Purchase and Sale of the LLC Equity Interests. On and subject to
the terms and conditions of this Agreement, each of the Equityholders hereby
sells, transfers and delivers to Purchaser, and Purchaser hereby purchases and
acquires from the Equityholders, the LLC Equity Interests, free and clear of any
Encumbrances. The LLC Equity Interests sold and purchased hereunder constitute
one hundred percent (100%) of the issued and outstanding equity Securities of
the Company.

 

1.2.          Method of Conveyance. The sale, transfer, and delivery of the LLC
Equity Interests by the Equityholders to Purchaser in accordance with this
Article I shall be effected by each Equityholder’s delivery of membership
interest transfer powers being duly executed in blank for transfer of all of the
LLC Equity Interests owned by such Equityholder to Purchaser at Closing.

 

ARTICLE II

CONSIDERATION

 

2.1.          Consideration. In full consideration of the sale and transfer of
the LLC Equity Interests and entry into the Restrictive Covenants, Purchaser
shall pay and deliver, or cause to be paid and delivered on Purchaser’s behalf,
to the Equityholders an amount equal to (a) (i) with respect to the Legacy
Corporation, One Million Six Hundred Thousand Dollars ($1,600,000) and (ii) with
respect to CHOP, Four Hundred Thousand Dollars ($400,000) (the sum of (i) and
(ii), the “Base Purchase Price”), plus (b) the Milestone Consideration (as set
forth in Section 2.3 and subject to adjustment pursuant to Sections 2.5 and
2.6), if any, plus (c) the Earnout Consideration (as set forth in Section 2.4
and subject to adjustment pursuant to Section 2.5), if any. The Base Purchase
Price, plus the Milestone Consideration, if any, plus the Earnout Consideration,
if any, is the “Consideration.” The Equityholders acknowledge and agree that the
Consideration will be paid as set forth in this Article II, and to the extent
applicable, to the account of each Equityholder in accordance with their
respective Pro Rata Share and in accordance with instructions delivered to
Purchaser at least ten (10) Business Days prior to the date hereof or any
subsequently scheduled payment date as agreed by the Parties, as applicable (the
“Equityholder Instructions”).

 

2.2.          Payment of Base Purchase Price.

 

(a)          The Legacy Corporation hereby directs that Purchaser pay the
portion of the Base Purchase Price that is payable to the Legacy Corporation
hereunder to Legacy Corporation, by wire transfer of immediately available
funds, by no later than the end of the second Business Day following the date
hereof to an account designated by Legacy Corporation.

 

 -2- 

 

 

(b)          Purchaser shall pay the CHOP portion of the Base Purchase Price to
CHOP by wire transfer of immediately available funds, by no later than the end
of the second Business Day following the date hereof to an account designated by
CHOP.

 

2.3.          Milestone Consideration.

 

(a)          Subject to the satisfaction of the conditions precedent set forth
in this Section 2.3 (each, a “Milestone Event,” and the time periods described
therein, the “Milestone Periods”), the Final Reports pursuant to Section 2.5 and
adjustment pursuant to Section 2.6, Purchaser or an Affiliate of Purchaser shall
pay to the Equityholders the following payments (each, a “Milestone Payment” and
together, the “Milestone Payments”), payable in the manner set forth in this
Section 2.3 (in the aggregate, the “Milestone Consideration”), subject at all
times to any offset thereto in accordance with Section 8.4(c). Except with
respect to the Milestone Event described in Section 2.3(a)(iii) (which may be
paid more than once), all Milestone Payments shall only be paid once upon the
initial achievement of the particular Milestone Event. Purchaser shall notify
the Stockholder Representative and CHOP within ten (10) Business Days from when
a Milestone Event has occurred. Within ten (10) Business Days from Purchaser’s
receipt of Equityholder Instructions in response to such notice, Purchaser shall
pay the following Milestone Payments:

 

(i)          following the earlier of (A) the consummation date of the
successful completion of a firm underwritten or registered direct offering of
Purchaser Common Shares with proceeds to Purchaser, net of underwriters’ fees
and expenses, of at least Thirty-Five Million Dollars ($35,000,000) (the
“Qualified Offering”), and (B) March 31, 2016 (in either case (A) or (B), the
“Offering Date”), a Milestone Payment equal to:

 

(A)         with respect to the Legacy Corporation, (x) One Million Six Hundred
Thousand Dollars ($1,600,000), by wire transfer of immediately available funds
and in accordance with the Equityholder Instructions, and (y) a number of
Purchaser Common Shares, deliverable to the Legacy Corporation in accordance
with the Equityholder Instructions, equal to Three Million Two Hundred Thousand
Dollars ($3,200,000) divided by the Purchaser Stock Price (rounded to the
nearest whole share); and

 

(B)         with respect to CHOP, One Million Two Hundred Thousand Dollars
($1,200,000), by wire transfer of immediately available funds and in accordance
with the Equityholder Instructions;

 

(ii)         [ *** ]:

 

(A)         [ *** ]; and

 

(B)         [ *** ];

 

 

***  Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 -3- 

 

 

(iii)        [ *** ];

 

(iv)        [ *** ] payable to the Equityholders, by wire transfer of
immediately available funds and in accordance with their respective Pro Rata
Share and the Equityholder Instructions; and

 

(v)         upon the first instance of cumulative Annual Net Sales from all
Products, Improved Products and NCEs in any calendar year (each, an “Annual
Period”) as follows, payable to the Equityholders by wire transfer of
immediately available funds and in accordance with their respective Pro Rata
Share and the Equityholder Instructions:

 

Cumulative Annual Net Sales   Milestone Payment       > = $[   ***   ]  
$[   ***   ]       > = $[   ***   ]   $[   ***   ]       > = $[   ***   ]  
$[   ***   ]       > = $[   ***   ]   $[   ***   ]       > = $[   ***   ]  
$[   ***   ]

 

(b)          Except with respect to the Milestone Event described in Section
2.3(a)(iii) (which may be paid more than once), once Purchaser (or its
Affiliates) has made any particular Milestone Payment under this Section 2.3,
Purchaser shall not be obligated to make any payment under this Section 2.3 with
respect to the re-occurrence of the same Milestone Event, whether or not such
re-occurrence is with respect to a different or the same Product, Improved
Product or NCE (or any combination thereof), or a different or the same Annual
Period. If a Milestone Event is achieved in terms of Annual Net Sales, all
Milestone Payments for lower Annual Net Sales Milestone Events shall become due
and payable to the extent not previously paid.

 

(c)          From and after the Closing, Purchaser shall, and shall cause its
controlled Affiliates to, use Commercially Reasonable Efforts to (i) Develop the
Product for the Primary Indication, and (ii) following the FDA’s approval of a
NDA for a Product for the Primary Indication, Commercialize the Product in the
United States.

 

2.4.          Earnout Consideration. Subject to the conditions set forth in this
Section 2.4 and the Product Reports and Final Reports pursuant to Section 2.5,
Purchaser or an Affiliate of Purchaser shall pay to the Equityholders the
following payments (each, an “Earnout Payment” and together, the “Earnout
Payments”), payable in the manner set forth in this Section 2.4 (in the
aggregate, the “Earnout Consideration”), subject at all times to any offset
thereto in accordance with Section 8.4(c). The Earnout Payments are based on the
Net Sales, as defined and subject to the provisions set forth in Section
14.2(a). The Earnout Consideration shall consist of the following Earnout
Payments, payable no later than the due date for the applicable Product Reports
with any additional payments reflected in the corresponding Final Report payable
no later than thirty (30) Business Days after the earliest date on which the
corresponding Final Reports are available, and payable to the Equityholders, by
wire transfer of immediately available funds and in accordance with their
respective Pro Rata Share and the Equityholder Instructions:

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 -4- 

 

 

(a)          [   ***   ]:

 

Increment of Annual   Percentage of Annual Net Sales from such Net Sales from a
Product   Product Payable as Earnout Payment <= $[   ***   ]   [   ***   ] >
$[   ***   ]   [   ***   ] > $[   ***   ]   [   ***   ] > $[   ***   ]  
[   ***   ]

 

(b)          [   ***   ]:

 

Increment of Annual Net Sales     from Improved Products and   Percentage of
Annual Net Sales from Improved NCEs   Products and NCEs Payable as Earnout
Payment           <= $[   ***   ]   [   ***   ]   [   ***   ]           >
$[   ***   ]   [   ***   ]   [   ***   ]           >$[   ***   ]   [   ***   ]  
[   ***   ]

 

2.5.          Adjustments to Milestone Consideration or Earnout Consideration;
Maintenance of Records; Audits.

 

(a)          [ *** ].

 

(b)          Reports and Payments. Within sixty (60) days after the end of each
Reporting Period commencing in the Reporting Period immediately following the
Reporting Period in which there was the First Commercial Sale, Purchaser shall
deliver to the Stockholder Representative and CHOP a report setting forth for
the most recently completed Reporting Period the following information on a
Product-by-Product, Improved Product-by-Improved Product, NCE-by-NCE and
country-by-country basis (the “Product Reports”): (i) the gross sales and Net
Sales of each Product, Improved Product or NCE; (ii) the number of units sold by
Purchaser and all of its Affiliates, licensees and sublicensees; (iii) the
Milestone Payment or Earnout Payment due hereunder, if any; (iv) the applicable
exchange rate as determined pursuant to Section 2.5(e); and (v) the calculation
of any true-up required with respect to Net Sales reported and payments made in
the Reporting Period(s).

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 -5- 

 

 

(c)          Setoff. Notwithstanding anything to the contrary in this Agreement,
if the Legacy Stockholders or the Equityholders breach this Agreement (including
with respect to indemnification obligations set forth in Article VIII),
Purchaser may offset the Milestone Payments and Earnout Payments payable under
this Agreement to the breaching party pursuant to Section 8.4(c) against such
Losses until such time as Purchaser has been paid such Losses in full (net of
offset).

 

(d)          Taxes and Withholding. If Purchaser is required to make a payment
to the Equityholders subject to a deduction of tax or withholding tax, the sum
payable by Purchaser (in respect of which such deduction or withholding is
required to be made) shall be made to the Equityholders after deduction of the
amount required to be so deducted or withheld, which deducted or withheld amount
shall be remitted in accordance with applicable Laws. Any such withholding taxes
required under applicable Laws to be paid or withheld shall be an expense of,
and borne solely by the Equityholders. To the extent Purchaser is required to
deduct and withhold taxes on any payments to the Equityholders, Purchaser shall
pay the amounts of such taxes to the proper governmental authority in a timely
manner and promptly transmit to the Stockholder Representative and CHOP an
official tax certificate or other evidence of such withholding sufficient to
enable the Equityholders to claim such payments of taxes. The Equityholders
shall provide to Purchaser any tax forms that may be reasonably necessary in
order for Purchaser not to withhold tax or to withhold tax at a reduced rate
under an applicable bilateral income tax treaty. The Equityholders shall use
reasonable efforts to provide any such tax forms to Purchaser at least thirty
(30) days prior to the due date for any payments for which the Equityholders
desire that Purchaser apply a reduced withholding rate. Each Party will
reasonably assist the other Party in claiming tax refunds, deductions, or
credits at the other Party’s request and will reasonably cooperate to minimize
the withholding tax, if available, under various treaties applicable to any
payment made under this Agreement.

 

(e)          Payment and Currency Exchange. All amounts payable and calculations
hereunder shall be in U.S. Dollars and shall be paid by bank wire transfer in
immediately available funds to such bank account as may be designated in writing
by the Stockholder Representative and CHOP from time to time. In the event that
Net Sales are generated in a currency other than United States Dollars, the Net
Sales shall be converted into United States Dollars in accordance with the
accounting practices, principles, judgments and methodologies (which shall be in
accordance with GAAP or IFRS) with respect to the conversion of transactions
conducted in a foreign currency to United States Dollars used by Purchaser for
the preparation of its financial statements.

 

 -6- 

 

 

(f)          Record-Keeping. Purchaser shall keep, and shall cause its
Affiliates and sublicensees to keep, books and accounts of record in connection
with the sale of Products, Improved Products and NCEs and in sufficient detail
to permit accurate determination of all figures necessary for verification of
Milestone Payments and Earnout Payments to be paid hereunder. Purchaser shall
maintain, and shall cause its Affiliates, licensees and sublicensees to
maintain, such records for a period of at least three (3) years after the end of
the Reporting Period for which they were generated. At the conclusion of each
Reporting Period, Purchaser shall promptly deliver Product Reports to the
Stockholder Representative and CHOP with respect to each such Reporting Period
on Purchaser’s Net Sales, Milestone Payments status and Earnout Payments status.

 

(g)          Disagreements.

 

(i)          If the Stockholder Representative and/or CHOP disagrees with
Purchaser’s calculation of Net Sales, Milestone Payments or Earnout Payments in
a Product Report, then, within sixty (60) calendar days after receipt thereof,
the Stockholder Representative and/or CHOP (as applicable, the “Disagreeing
Party”) shall provide Purchaser with notice in writing of such disagreement (the
“M/E Notice of Disagreement”), setting forth in reasonable detail the
particulars of such disagreement, including a copy of the Product Report marked
to indicate those specific items that are in dispute (the “M/E Disputed Items”)
and the Disagreeing Party’s calculation of each of the M/E Disputed Items. To
the extent the Disagreeing Party provides an M/E Notice of Disagreement within
such sixty (60) calendar day period, only those items that are not M/E Disputed
Items shall be non-appealable, final, binding and conclusive for all purposes
hereunder. If neither the Stockholder Representative nor CHOP provides a M/E
Notice of Disagreement within such sixty (60) calendar day period, the Parties
shall be deemed to have accepted in full the Product Report as prepared by
Purchaser, which shall be non-appealable, final, binding and conclusive for all
purposes hereunder. If any M/E Notice of Disagreement is timely provided,
Purchaser and the Disagreeing Party shall, for a period of twenty (20) calendar
days (or such longer period as they may mutually agree), in good faith try to
resolve any M/E Disputed Items. During the twenty (20) calendar day period
following the delivery by the Disagreeing Party of the M/E Notice of
Disagreement, Purchaser and the Disagreeing Party, along with their respective
Representatives, shall have access to the working papers, schedules and
calculations of the other used in the preparation of the Product Report and the
M/E Notice of Disagreement and the determination of the Net Sales, Milestone
Payments, Earnout Payments and the M/E Disputed Items. If, during the aforesaid
twenty (20) calendar day period, the Parties have reached written agreement with
respect to all M/E Disputed Items covered by the Notice of Disagreement, the
calculations of Net Sales, Milestone Payments and Earnout Payments shall be
adjusted to reflect such written agreement and shall become non-appealable,
final, binding and conclusive upon the Parties for all purposes hereunder.

 

(ii)         If, at the end of the aforesaid twenty (20) calendar day period,
Purchaser and the Disagreeing Party shall have failed to reach written agreement
with respect to all M/E Disputed Items covered by a M/E Notice of Disagreement,
then those M/E Disputed Items that remain in dispute at the end of such period
(the “M/E Unresolved Changes”) shall be submitted to BDO USA, LLP (the
“Settlement Arbitrator”) to examine, at the Equityholders’ sole expense, the
relevant books and records of Purchaser or any of its Affiliates, licensees and
sublicensees (the “Audited Party”) as may be reasonably necessary to verify the
amounts reported in accordance with Section 2.5(f) and the payment of Milestone
Payments or Earnout Payments; provided, however, that if BDO USA, LLP shall be
unable or unwilling to do so, Purchaser and the Disagreeing Party shall select
another independent firm of nationally recognized financial experts to serve as
the Settlement Arbitrator. The Settlement Arbitrator shall consider only the M/E
Unresolved Changes. An examination by the Disagreeing Party under this Section
2.5(g) shall be limited to the pertinent books and records for the relevant
Reporting Period. The Settlement Arbitrator shall be provided access to such
books and records at the Audited Party’s facility(ies) where such books and
records are normally kept and such examination shall be conducted during the
Audited Party’s normal business hours; no other information pertaining to the
Audited Party’s books and records shall be provided to the Disagreeing Party.
The Audited Party may require the Settlement Arbitrator to sign a standard
non-disclosure agreement before providing the Settlement Arbitrator access to
the Audited Party’s facilities or records. Upon completion of the audit, the
Settlement Arbitrator shall provide Purchaser, the Disagreeing Party and the
Audited Party a written report disclosing any discrepancies in the reports
submitted by the Audited Party and in each case, the specific details concerning
any discrepancies. The determination of the Settlement Arbitrator shall be
non-appealable, final, binding and conclusive for all purposes hereunder. The
Parties shall request that the Settlement Arbitrator use its commercially
reasonable efforts to reach a resolution of the M/E Unresolved Changes within
ninety (90) calendar days after the submission of the M/E Unresolved Changes to
the Settlement Arbitrator.

 

 -7- 

 

 

(iii)        The Product Reports, as determined pursuant to this Section 2.5(g)
after all actions and procedures described herein have been completed, are
hereinafter referred to as the “Final Reports.”

 

(h)          Confidentiality. All financial information of an Audited Party that
is subject to review under this Section 2.5 shall be deemed to be confidential
information of such Audited Party subject to the provisions of Section 10.1, and
the Legacy Stockholders and the Equityholders shall not disclose such
confidential information to any Third Party or use such confidential information
for any purpose other than verifying payments to be made by Purchaser to the
Equityholders hereunder.

 

2.6.          Provisions Related to the Issuance of Purchaser Shares.

 

(a)          Notwithstanding anything contained in this Agreement, Purchaser
shall not, without the prior approval of its stockholders as required pursuant
to the rules and regulations of the NYSE MKT, be required to pay any of the
Consideration in Purchaser Common Stock under this Agreement: (i) if the
aggregate number of Purchaser Common Shares to be issued hereunder would exceed
19.99% of the outstanding Purchaser Common Shares as of the date hereof (as such
ownership is calculated pursuant to the rules of the NYSE MKT); or (ii) to any
Equityholder that, together with such Equityholder’s Affiliates and any other
persons acting as a group together with such Equityholder and any of such
Equityholder’s Affiliates, (x) immediately prior to the applicable payment date,
does not beneficially own more than 19.99% of the outstanding Purchaser Common
Shares (as such ownership is calculated pursuant to the rules of the NYSE MKT),
if as a result of such issuance of Purchaser Common Shares, such Equityholder
(together with such Equityholder’s Affiliates and any other persons acting as a
group together with such Equityholder’s and any of such Equityholder’s
Affiliates) would beneficially own more than 19.99% of the outstanding Purchaser
Common Shares (as such ownership is calculated pursuant to the rules of the NYSE
MKT) immediately after giving effect to the issuance of such Purchaser Common
Shares; or (y) immediately prior to the applicable payment date beneficially
owns more than 19.99% of the outstanding Purchaser Common Shares (as such
ownership is calculated pursuant to the rules of the NYSE MKT), if such
Equityholder (together with such Equityholder’s Affiliates and any other persons
acting as a group together with such Equityholder and any of such Equityholder’s
Affiliates) is not the largest beneficial owner of the Purchaser Common Shares
(as such ownership is calculated pursuant to the rules of the NYSE MKT)
immediately prior to the applicable payment date, but, as a result of such
issuance of Purchaser Common Shares to such Equityholder, such Equityholder
(together with such Equityholder’s Affiliates and any other persons acting as a
group together with such Equityholder’s and any of such Equityholder’s
Affiliates) would (X) become the largest beneficial owner of the Purchaser
Common Shares (as such ownership is calculated pursuant to the rules of the NYSE
MKT) immediately after giving effect to the issuance of such Purchaser Common
Shares or (Y) become the beneficial owner of a number of Purchaser Common Shares
(as such ownership is calculated pursuant to the rules of the NYSE MKT)
immediately after giving effect to the issuance of such Purchaser Common Shares
which, had such Purchaser Common Shares been received by such Equityholder as of
the date such Equityholder entered into this Agreement, would have caused such
Equityholder to become the largest beneficial owner of Purchaser Common Shares
(as such ownership is calculated pursuant to the rules of the NYSE MKT) as of
such earlier date. Immediately following the date (if ever) that Purchaser
obtains the requisite stockholder approval required pursuant to the rules and
regulations of the NYSE MKT, the restrictions in this Section 2.6(a) shall
terminate and be of no further force or effect.

 

 -8- 

 

 

(b)          Notwithstanding anything contained in this Agreement, in no event
shall the number of Purchaser Common Shares issuable hereunder exceed at any
time in the aggregate 49.99% of the outstanding Purchaser Common Shares as of
the date hereof.

 

(c)          The applicable amount of the Purchaser Common Shares to be issued
in connection with this Agreement to either the Legacy Stockholders or the
Legacy Corporation, as applicable, may be either (i) registered securities
pursuant to the Securities Act, or (ii) issued in a transaction exempt from
registration under the Securities Act, by reason of Section 4(a)(2) thereof
and/or Regulation D promulgated under the Securities Act and may not be
re-offered or resold other than in conformity with the registration requirements
of the Securities Act and such other laws or pursuant to an exemption therefrom
(with the certificates issued by Purchaser with respect to such Purchaser Common
Stock legended to the effect described above and shall include such additional
legends as necessary to comply with applicable U.S. federal securities laws and
Blue Sky laws).

 

(d)          The Legacy Stockholders and the Equityholders shall use
commercially reasonable efforts to cause the Legacy Stockholders and the
Equityholders to provide such information, take such further actions and execute
such documents as Purchaser may determine to be necessary to ensure that the
Purchaser Common Shares to be issued in connection with this Agreement are
issued in a transaction exempt from registration under the Securities Act, by
reason of Section 4(a)(2) thereof and/or Regulation D promulgated under the
Securities Act, including requiring that the Legacy Stockholders and the
Equityholders make the representations to Purchaser set forth in Section 3.7
hereof as of the date(s) of issuance of the Purchaser Common Shares to be issued
in connection with this Agreement.

 

 -9- 

 

 

(e)          To the extent that any Consideration otherwise payable in Purchaser
Common Stock would exceed the limitations set forth in Sections 2.6(a) or 2.6(b)
as of the time such Consideration is due and payable, the portion of such
Consideration that exceeds the limitations set forth in Sections 2.6(a) or
2.6(b) shall be paid in cash, in lieu of Purchaser Common Stock. Such amount
shall be paid by Purchaser or an Affiliate of Purchaser to the Equityholders by
wire transfer of immediately available funds and in accordance with their
respective Pro Rata Share and the Equityholder Instructions, in an amount equal
to the product of the Purchaser Stock Price and the applicable number of shares
of Purchaser Common Stock.

 

(f)          Purchaser shall deliver any Purchaser Common Shares it is obligated
to deliver upon the occurrence of a Milestone Event within ten (10) Business
Days after the occurrence of such Milestone Event. Such delivery of Purchaser
Common Shares shall be in book-entry form with the Purchaser’s transfer agent.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

 

Except as disclosed to Purchaser in a letter (the “Disclosure Schedule”)
delivered to them on behalf of the Equityholders and the Legacy Stockholders
(together, the “Sellers”) prior to the execution of this Agreement, each Seller
(to the extent applicable), severally and not jointly, hereby represents and
warrants to Purchaser that each of the representations and warranties contained
in this Article III are true and correct on the date hereof (except to the
extent that such representations and warranties speak as of another date, in
which case, as of such date).

 

3.1.          Authorization and Enforceability. Each such Seller has the full
right, power and authority and capacity to enter into and perform this Agreement
and each of the other Transaction Documents to which it is a party and to
consummate the Contemplated Transactions. This Agreement and each of the other
Transaction Documents to which such Seller is a party have been duly executed
and delivered by such Seller and constitutes legal, valid and binding
obligations of such Seller, enforceable against such Seller in accordance with
its respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or similar Laws affecting the rights of
creditors generally and general equity principles (regardless of whether
enforceability is considered in a proceeding at or in equity) (the “Bankruptcy
and Equity Exceptions”).

 

3.2.          Non-contravention; Consents.

 

(a)          The execution, delivery and performance by such Seller of this
Agreement and each of the other Transaction Documents to which such Seller is a
party and the consummation of the Contemplated Transactions do not and will not:
(i) result in a Default of or under (A) any Law, Permit or Order applicable to
or binding upon such Seller, or (B) any Contract to which such Seller is a party
or by which he is bound; or (ii) (1) result in the termination, amendment or
modification of, or give any party the right to terminate, amend, modify,
abandon, cancel or refuse to perform any Contract or Permit to which such Seller
is a party or by which he, or any of his properties or assets, are bound, or (2)
result in the acceleration or modification, or give any party the right to
accelerate or modify, the time within which, or the terms under which, any
duties or obligations are to be performed, or any rights or benefits are to be
received under any Contract or Permit to which such Seller is a party or by
which he, or any of his properties or assets, is bound.

 

 -10- 

 

  

(b)          No Consent of any Governmental Entity or other Person (including
any party to any Contract with such Seller) is required (i) for the execution,
delivery and performance by such Seller of this Agreement or any of the other
Transaction Documents to which such Seller is a party; or (ii) in connection
with the consummation by such Seller of the Contemplated Transactions.

 

3.3.          The Legacy Corporation.

 

(a)          Authorized Legacy Equity Interests. The authorized Legacy Equity
Interests consist of 10,000,000 shares of common stock, $0.0001 par value per
share of the Legacy Corporation, of which 80,000 are issued and outstanding and
held as set forth on Section 3.3(a) of the Disclosure Schedule. The Legacy
Equity Interests constitute the only issued and outstanding equity Securities of
the Legacy Corporation and are owned of record and beneficially solely by the
Legacy Stockholders. There are no outstanding warrants, options or other rights,
commitments, Contracts or understandings to purchase or acquire any equity
Securities of the Legacy Corporation and there are no outstanding debt
Securities of the Legacy Corporation convertible into equity Securities or
otherwise containing equity provisions.

 

(b)          Other than the Company, the Legacy Corporation does not have any
Subsidiaries. The Legacy Corporation has not acquired any business or Person,
whether by merger or consolidation, purchase of assets or equity Securities or
otherwise.

 

(c)          The Harper Indebtedness is Indebtedness of the Legacy Corporation
and not the Company and is the only Indebtedness of the Legacy Corporation.

 

3.4.          Title to LLC Equity Interests.

 

(a)          The Equityholders have good and valid title to its LLC Equity
Interests free and clear of all Encumbrances, other than restrictions on
transfer under applicable securities Laws and restrictions set forth in the
Company’s Organizational Documents, as applicable.

 

(b)          Such Equityholder has not entered into or granted any outstanding
warrants, options, commitments, voting trusts, Contracts or understandings with
respect to any LLC Equity Interests.

 

3.5.          Brokers. No broker, investment banker, financial advisor or other
Person is entitled to any broker’s, finder’s, financial advisor’s or other
similar fee or commission in connection with the Contemplated Transactions based
upon arrangements made by or on behalf of such Seller or any Person acting on
his behalf.

 

 -11- 

 

 

3.6.          Compliance with Law; Permits.

 

(a)          Such Seller has not (i) directly or indirectly given or agreed to
give any illegal gift, contribution, payment or similar benefit to any supplier,
customer, governmental official or employee or other Person who was, is or may
be in a position to help or hinder the Company (or assist the Company in
connection with any actual or proposed transaction) or made or agreed to make
any illegal contribution, or reimbursed any illegal political gift or
contribution made by any other Person, to any candidate for federal, state,
local or foreign public office (x) which could reasonably be expected to subject
the Company, Purchaser or the Business to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, or (y) the non-continuation
of which has had or could reasonably be expected to have an adverse effect; (ii)
established or maintained any unrecorded fund or asset or made any false entries
on any Books or Records for any purpose or (iii) engaged in price fixing, bid
rigging or any other anticompetitive activity.

 

(b)          Such Seller has complied with every, and is not presently in
violation of any, Law or Order to which he, she or it is subject related to, and
has not failed to obtain, or to adhere to the requirements of, any Permit
necessary to, such Seller’s ownership of the Company, or the Company’s operation
of the Business. Such Seller has not received, nor does such Seller have
Knowledge of the issuance of, any notice from any Governmental Entity, or other
Third Party of any such violation or alleged violation by him or it of any Laws
or Orders applicable to the Business or his or its ownership thereof. To the
Knowledge of such Seller, there is no investigation relating to the Company,
such Seller’s ownership or the Business in progress by any Governmental Entity.

 

(c)          Such Seller has not engaged in any anticompetitive or unlawful
activity or unfair business practice relating to the Business. With respect to
the Company’s and such Seller’s past business practices relating to the
Business, such Seller has not received any written notice of any investigation
of the Company, the Business, such Seller, or the Company’s respective officers,
employees or representatives by any Governmental Entity and, to the Knowledge of
such Seller, no such investigation is under consideration or threatened.

 

3.7.          Representations Regarding Equity Consideration. Each Seller, to
the extent that it receives unregistered Purchaser Common Shares pursuant to
this Agreement:

 

(a)          is acquiring the Consideration Shares being issued to it pursuant
to this Agreement solely for its own account and not with a view to resale or
distribution of all or any part thereof, and has no present arrangement,
understanding or agreement for transferring or disposing of all or any part of
the Consideration Shares being issued to it pursuant to this Agreement, except
as such Consideration Shares may be distributed by the Legacy Corporation to the
Legacy Stockholders upon a dissolution or liquidation of the Legacy Corporation;

 

(b)          has such knowledge and experience in financial and business matters
that he, she or it is capable of evaluating the merits and risks of an
investment in the Consideration Shares being issued to it pursuant to this
Agreement and to form an investment decision with respect thereto, and it and
its advisers, if any, have also made such investigation, review, examination and
inquiry concerning Purchaser and its business and affairs as they have deemed
appropriate;

 

 -12- 

 

 

(c)          is an “accredited investor” within the meaning of Rule 501 of
Regulation D under the Securities Act;

 

(d)          recognizes that an investment in Purchaser is speculative and
involves certain risks and such party has taken full cognizance of and
understands and can evaluate all of the risks of the investment in the
Consideration Shares being issued to it pursuant to this Agreement;

 

(e)          has adequate net worth and means of providing for its current needs
and personal contingencies to sustain a complete loss of such party’s investment
in Purchaser;

 

(f)          understands that the Consideration Shares are being offered and
sold in reliance on specific exemptions from the registration requirements of
federal and state securities laws and that Purchaser is relying upon the truth
and accuracy of the representations, warranties, agreements, acknowledgments and
understandings set forth herein in order to determine the applicability of such
exemptions and the suitability of such party to acquire the Consideration Shares
being issued to it pursuant to this Agreement; and

 

(g)          understands that, neither Purchaser nor any other Person has any
obligation or intention to effect the registration of the Consideration Shares
being issued to it pursuant to this Agreement for sale, transfer or disposition
by such party under the Securities Act, or applicable state securities laws and
any other applicable Law, or to take any action or provide any information
(including, without limitation, the filing of reports or the publication of
information required by Rule 144) which would make available any exemption from
the registration requirements of the Securities Act or applicable state
securities laws and any other applicable Law.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY AND THE LEGACY
CORPORATION

 

Except as disclosed to Purchaser in the Disclosure Schedule, the Company hereby
represents and warrants to Purchaser that each of the representations and
warranties contained in this Article IV are true and correct on the date hereof
(except to the extent that such representations and warranties speak as of
another date, in which case, as of such date).

 

4.1.          Organization and Power.

 

(a)          The Company is duly organized, validly existing and in good
standing under the laws of the state of Delaware. The Company has the full power
and authority (corporate or otherwise) to own its property and to carry on the
Business as presently conducted and as proposed to be conducted. The Company is
duly qualified and authorized to conduct business and are in good standing under
the laws of each jurisdiction in which the nature of the business conducted by
them makes such qualification necessary. All of such jurisdictions are listed on
Section 4.1(a) of the Disclosure Schedule.

 

 -13- 

 

 

(b)          The Company has delivered to Purchaser correct and complete copies
of the Organizational Documents of the Company, as amended through the Closing
Date. The Company is not in violation of any term of their respective
Organizational Documents, as amended through the Closing Date. A true and
complete listing of the officers and directors of the Company is set forth in
Section 4.1(b) of the Disclosure Schedule.

 

4.2.          Authorization and Enforceability. The Company has the full power
and authority to enter into and perform this Agreement and each of the other
Transaction Documents to which it is a party and to consummate the Contemplated
Transactions. The execution, delivery and performance by the Company of this
Agreement and each of the other Transaction Documents to which it is a party,
and the consummation by the Company of the Contemplated Transactions, have been
duly authorized by all necessary action (corporate or otherwise) on the part of
the Company. This Agreement and each of the other Transaction Documents to which
the Company is a party have been duly executed and delivered by the Company and,
assuming due authorization, execution and delivery by the other parties thereto,
constitute legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as such
enforceability may be limited by the Bankruptcy and Equity Exceptions.

 

4.3.          Non-contravention; Consents.

 

(a)          Except as set forth in Section 4.3(a) of the Disclosure Schedule,
the execution, delivery and performance by the Company of this Agreement and
each of the other Transaction Documents to which it is a party and the
consummation of the Contemplated Transactions do not and will not: (i) result in
a Default of or under (A) any of the terms of the Organizational Documents of
the Company, (B) any Law, Permit or Order applicable to or binding upon the
Company, or (C) any Contract (1) to which the Company is a party or by which
they, or any of their properties or assets, are bound or (2) which otherwise
relates to, or was entered into on behalf of, the Business (or any portion
thereof); (ii) result in the creation or imposition of any Encumbrance upon any
of the assets or properties of the Company; or (iii) (A) result in the
termination, amendment or modification of, or give any party the right to
terminate, amend, modify, abandon, cancel or refuse to perform any Contract or
Permit (1) to which the Company is a party or by which they, or any of their
properties or assets, are bound or (2) which otherwise relates to, or was
entered into on behalf of, the Business (or any portion thereof), or (B) result
in the acceleration or modification, or give any party the right to accelerate
or modify, the time within which, or the terms under which, any duties or
obligations are to be performed, or any rights or benefits are to be received
under any Contract or Permit (1) to which the Company is a party or by which
they, or any of their properties or assets, are bound or (2) which otherwise
relates to, or was entered into on behalf of, the Business (or any portion
thereof).

 

(b)          Except as listed on Section 4.3(b) of the Disclosure Schedule, no
Consent of any Governmental Entity or other Person (including any party to any
Material Contract with the Company) is required (i) for the execution, delivery
and performance by the Company of this Agreement or any of the other Transaction
Documents to which it is a party; or (ii) in connection with the consummation by
the Company of the Contemplated Transactions.

 

 -14- 

 

 

4.4.          Capitalization; Subsidiaries.

 

(a)          Authorized LLC Equity Interests. The authorized LLC Equity
Interests that are issued and outstanding are held as set forth in Section
4.4(a) of the Disclosure Schedule. The LLC Equity Interests constitute the only
issued and outstanding equity Securities of the Company and are owned of record
and beneficially solely by the Equityholders. Each of the LLC Equity Interests
has been validly issued and is fully paid and non-assessable and the issuance
thereof did not create any Encumbrances thereon. None of the LLC Equity
Interests have been issued in violation of any preemptive or similar right. All
of the LLC Equity Interests were sold in compliance with all Laws and have been
exempt from registration pursuant to the registration provisions of the
Securities Act and applicable national or state securities Laws, and no such
equity Securities were registered under any such act or Laws. No private
offering memorandum or other information furnished (whether orally or in
writing) to any offeree or purchaser of such LLC Equity Interests contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading.

 

(b)          No Equityholder Agreements; Obligations.

 

(i)          There are no outstanding warrants, options or other rights,
commitments, Contracts or understandings to purchase or acquire any equity
Securities of the Company and there are no outstanding debt Securities of the
Company convertible into equity Securities or otherwise containing equity
provisions. There are no rights of first refusal, rights of first offer,
subscription rights, preemptive rights or other similar rights with respect to
the issuance or sale of the LLC Equity Interests. Except as set forth in Section
4.4(b) of the Disclosure Schedule, (A) no Contract exists between or among any
of the Legacy Stockholders or Equityholders with respect to any of the LLC
Equity Interests; and (B) there are no outstanding or authorized stock
appreciation, phantom stock, profit participation or similar rights with respect
to the Company.

 

(ii)         There are no voting trusts or other similar agreements or
understandings to which the Company is a party with respect to the voting of
equity of the Company. There are no restrictions on the transfer of any equity
Securities or other ownership interest in the Company, other than those arising
from federal and state securities Laws and there are no understandings or
agreements respecting the ownership interests of the Company.

 

(c)          Subsidiaries. The Company does not have any Subsidiaries. The
Company has not acquired any business or Person, whether by merger or
consolidation, purchase of assets or equity Securities or otherwise. There are
no equity or debt securities of any Subsidiary issued or outstanding.

 

4.5.          Financial Information; Indebtedness.

 

(a)          Reserved.

 

(b)          Attached to Section 4.5(b) of the Disclosure Schedule is a true and
accurate list setting forth all assets transferred to the Company by the Legacy
Corporation and all liabilities assumed by the Company and assigned by the
Legacy Corporation, in connection with the Reorganization.

 

 -15- 

 

 

(c)          The Company does not have any Indebtedness other than Indebtedness,
if any, that has been taken into consideration in calculating the Base Purchase
Price.

 

4.6.          Absence of Changes. Since its formation, the Company has conducted
the Business in the ordinary course of business consistent with past practices
(including the payment of payables and the making of capital expenditures) and
there has not occurred any event or condition which, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect on the Company or the Business. Without limiting the generality of the
foregoing, since its formation, the Company has used commercially reasonable
efforts to preserve the Business, to keep its business organizations intact, to
retain its Permits, and to preserve the existing Contracts and goodwill of its
suppliers, vendors, service providers, manufacturers, personnel and others with
which they have business relations.

 

4.7.          Absence of Undisclosed Liabilities. Except as set forth in Section
4.7 of the Disclosure Schedule, there is no Liability of or by the Company or
any other Person in respect of the Business of any nature except Liabilities
arising since the formation of the Company in the ordinary course of business
consistent with past practices that, individually or in the aggregate, are (i)
not material or (ii) could not reasonably be expected to have a Material Adverse
Effect on the Company or the Business.

 

4.8.          Title to and Adequacy of Assets. The Company has good, valid and
marketable title to, or in the case of leased properties and assets, valid
leasehold interests in, all of the properties and assets (whether tangible or
intangible), real, personal and mixed, used or held for use in the Business (the
“Property”), free and clear of any and all Encumbrances. The tangible personal
property included in such Property (including equipment), taken as a whole, is
in good working order and fit for its intended use, reasonable wear and tear
excepted. The Property, taken as a whole, is adequate to conduct the Business as
currently conducted or as proposed to be conducted. No Property used by the
Company in connection with the Business is held under any Lease or Encumbrance
or is located other than in the possession of the Company. All of the leases of
personal property to which the Company is a party are valid and in effect and
afford the Company peaceful and undisturbed possession of the subject matter of
such leases.

 

4.9.          Real Property. The Company does not own or lease any Real
Property, and the Company is not a party to any option, Contract or other
document pursuant to which the Company has the right or obligation to lease,
purchase or acquire title to or any interest in any Real Property.

 

4.10.         Intellectual Property.

 

(a)          Set forth in Section 4.10(a) of the Disclosure Schedule is a true
and complete list of all (i) Registered Intellectual Property of the Company;
and (ii) un-registered Intellectual Property of the Company or its Affiliates
that is material to the Business, including, a brief description of each listed
Intellectual Property item, including, the owner, including the chain of title
as evidenced by reel/frame numbers of recorded assignments, or by non-recorded
assignments, from each inventor to owner; the applicable jurisdiction; the
registration number; the application number; the patent number or issuance
number; and the filing date of the application or registration.

 

 -16- 

 

 

(b)          To the Company’s Knowledge, neither the Company nor any Legacy
Stockholder or any current or former director, officer, employee, consultant or
independent contractor of the Company owns or has any rights, with respect to
any Intellectual Property that may be necessary for the operation of the
Business and the research, development, manufacture or commercialization of the
Product. The execution, delivery and performance of this Agreement, and the
transfer of the LLC Equity Interests contemplated hereby, will not affect
Purchaser’s ownership rights in or use of such Intellectual Property after
Closing in any manner. The Company has, and Purchaser will have after Closing,
the right to bring actions for the infringement or other violations of all
Intellectual Property owned or exclusively licensed by the Company, or purported
by the Company to be owned or exclusively licensed by the Company.

 

(c)          The operation of the Business does not infringe, dilute, or
otherwise violate the Intellectual Property rights of any Person in any material
respect. No Legal Proceeding is pending or, to the Knowledge of the Company,
threatened, and the Company has not received written notice to the effect that:
(i) the Company infringes upon, misappropriates or conflicts with the rights of
any other Person under any Intellectual Property; or (ii) the Company’s interest
in any Intellectual Property owned or licensed by the Company or which the
Company otherwise has the right to use, is invalid or unenforceable by the
Company. To the Knowledge of the Company, no Person is infringing upon,
misappropriating or using in any unauthorized manner, any of the Company’s
rights to its Intellectual Property or Proprietary Information. No Third Party
has exercised any rights to indemnification granted by the Company against
infringement of Intellectual Property rights.

 

(d)          The Company has complied and is in compliance with all applicable
Laws of all Governmental Entities, or any self-regulating organization,
regarding privacy, security and/or data protection (collectively, “Privacy
Laws”), in each case in all material respects. The Company has maintained,
enforce and have enforced and complied with in all respects written privacy,
security and data protection policies (the “Privacy Policies”) with respect to
any Proprietary Information providing for, without limitation: (i) clear and
conspicuous disclosure of the Company’s privacy, security and data protection
practices, including the Company’s collection, storage, use and disclosure of,
and provision of access and corrections to any Proprietary Information, and (ii)
protection from loss, misappropriation, disclosure or corruption of, and
unauthorized access to any Proprietary Information. Neither this Agreement nor
the Contemplated Transactions violate or will violate the terms and conditions
of any Privacy Policies, any applicable Privacy Laws or the privacy rights of
any Person. The current and former consultants and contractors of the Company
have executed proprietary information and confidentiality agreements, none of
which will be terminated as a result of the Contemplated Transactions and all of
which shall be enforceable by or on behalf of the Company after the Closing.

 

(e)          To the Knowledge of the Company, no Proprietary Information has
been subject to any breach, misappropriation, unauthorized disclosure, or
unauthorized access or use by any Person. There are no Legal Proceedings pending
or threatened, or complaints filed, against the Company, and the Company is not
subject to any settlement agreements, directives or orders, at Law or in equity
before or by a Governmental Entity or self-regulating organization, regarding
the Company’s Privacy Policies and/or Proprietary Information.

 

 -17- 

 

 

(f)          Set forth in Section 4.10(f) of the Disclosure Schedule is a true
and correct list of all Contracts (including licenses and sublicenses)
pertaining to any Intellectual Property by which the Company licenses, or by
which a Third Party licenses or otherwise authorizes the Company to use, any
Intellectual Property. None of the Company or any other party is in breach of or
Default under any such license or other Contract, and each such license and
other Contract is valid and in full force and effect. The Company owns and has
owned all licenses necessary to use the COTS Software as actually used in the
operation of the Business without Claims of infringement or other violation of
rights of the owner of the COTS Software. The Company has not received any
written notice claiming that any of them is, was or could be using any COTS
Software in violation of the rights of any Third Party or been the subject of an
investigation or audit by any Third Party in relation to their respective use of
COTS Software. The Company is not in breach or Default under any Contract
governing the use of COTS Software, and each such Contract is valid and in full
force and effect.

 

(g)          All Intellectual Property developed by or for the Company was
conceived, invented, reduced to practice, reduced to tangible form, written or
otherwise created solely by either (i) employees of the Company acting within
the scope of their employment; or (ii) persons or entities who have executed a
written confidentiality and assignment agreement that irrevocably assigns and
transfers all right, title and interest in and to such Intellectual Property
(including the right to seek past and future damages with respect to such
Intellectual Property) to the Company, and the Company is the sole and exclusive
owner of such Intellectual Property. Each past or present Employee and
independent contractor performing material activities related to the
manufacture, use, sale, offer for sale or importation of products or services
marketed by or under development by the Company has entered into a proprietary
information and confidentiality agreement. The Company has made available to
Purchaser’s legal advisor copies of such agreements.

 

(h)          None of the Registered Intellectual Property is subject to the
payment of any registration, maintenance or renewal fees or Taxes or actions
and/or responses falling due within ninety (90) calendar days following the
Closing Date, and none of the Registered Intellectual Property has expired, been
cancelled or abandoned.

 

(i)          The Company has never agreed to indemnify any Person for or against
any interference, proceeding with the Patent Trial and Appeal Board (PTAB) of
the U.S. Patent and Trademark Office, opposition, infringement,
misappropriation, or other conflict with respect to Intellectual Property.

 

(j)          The Company has taken commercially reasonable steps to provide for
the archival, back-up, recovery and restoration of their critical business data.

 

(k)          Section 4.10(k) of the Disclosure Schedule describes all instances
in which the Company (i) has received government funding, (ii) has Knowledge
that the Intellectual Property licensed by the Company from CHOP was made using
government funding; and (iii) has contracted for the use of facilities of a
university, college, other educational institution or research center in the
development of any Intellectual Property of the Company where, as a result of
such funding or the use of such facilities, the government or any university,
college, other educational institution or research center has any rights in such
Intellectual Property of the Company.

 

 -18- 

 

 

4.11.         Contracts, Leases, Etc.

 

(a)          Set forth in Section 4.11(a) of the Disclosure Schedule is a true
and complete list (organized by subclause) of all Contracts to which the Company
is a party, or by which any of their respective property or assets are bound
(each, a “Material Contract”).

 

(b)          The Company has provided to Purchaser true and correct copies of
all Material Contracts (or descriptions thereof, in the case of oral Contracts).
Each Material Contract (or description) sets forth the entire agreement and
understanding between the parties thereto. The Company is not (with or without
the lapse of time or the giving of notice or both) in Default under any Material
Contract and, to the Knowledge of the Company, no other party to any such
Material Contract is (with or without the lapse of time or the giving of notice
or both) in Default thereunder. No party to any Material Contract has
threatened, or provided notice to the Company of its intent to terminate or
withdraw its participation in any such Material Contract. The Company does not
have any Knowledge of any event or condition which has occurred or exists which
would cause the acceleration of any obligations or loss of any rights of any
party to any Material Contract or give rise to any right of termination or
cancellation thereof. All of the Material Contracts are in full force and effect
and are valid and binding obligations of the Company (to the extent binding
obligations of the other parties thereto) enforceable in accordance with their
respective terms, except as such enforceability may be limited by the Bankruptcy
and Equity Exceptions.

 

(c)          The execution, delivery and performance of this Agreement and the
other Transaction Documents and the consummation of the Contemplated
Transactions will not result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments under
any Material Contract. None of such Material Contracts contain any provisions
that would cause the Company to be liable to any other party thereto for any
amount (or any increased price for goods or services being provided by the other
party thereto) as a result of the consummation of the Contemplated Transactions.

 

4.12.         Compliance with Law; Permits.

 

(a)          The Company has complied with every, and is not presently in
violation of any, Law or Order applicable to the Company or the Business.
Neither the Company nor the Legacy Corporation has received, nor does the
Company have Knowledge of the issuance or threat of, any notice from any
Governmental Entity or Third Party of any such violation.

 

(b)          Set forth in Section 4.12(b) of the Disclosure Schedule is a true
and correct list of all Permits issued in favor of the Company which are
material to the Company or the Business. All of such Permits are in full force
and effect, and the Business is currently being operated in compliance, in all
respects, with the terms of each of such Permit. Neither Purchaser nor any of
its Affiliates (including after the Closing, the Company) will be required,
following the Closing, to file, apply for or obtain any Permit in order to
purchase the Equity Interests pursuant to this Agreement and to operate the
Business as currently operated. The Company has not taken any action, or failed
to take any action, which could reasonably be expected to result in or enable,
with or without notice or lapse of time or both, the revocation or termination
of any of such Permits or the imposition of any restrictions thereon. No Legal
Proceeding is pending or, to the Knowledge of the Company, threatened, to
revoke, refuse to renew or modify any of the Permits. There are no other Permits
which are material to the Company or the Business which the Company is required
to obtain or, to the Knowledge of the Company, which, in good industry practice,
the Company should hold for the conduct of the Business. The Company does not
have any Knowledge of any threatened suspension, revocation or invalidation of
any such Permits, or any reasonable basis therefor.

 

 -19- 

 

 

4.13.         Taxes.

 

(a)          All Tax Returns required to have been filed by or with respect to
the Company and the Legacy Corporation have been duly and timely filed, and each
such Tax Return correctly and completely reflects liability for Taxes and all
other information required to be reported thereon. All Taxes owed by the Company
or the Legacy Corporation (whether or not shown on any Tax Return) have been
timely paid. Both the Company and the Legacy Corporation have adequately
provided for, in their books of account and related records, liability for all
unpaid Taxes of the Company or the Legacy Corporation, as the case may be, being
current Taxes not yet due and payable. Neither the Company nor the Legacy
Corporation have been a member of a Relevant Group.

 

(b)          There is no action, audit, dispute or Claim now in process or
pending or, to the Knowledge of the Company or the Legacy Corporation, proposed
or threatened against, or with respect to, the Company or the Legacy Corporation
in respect of any Taxes. Neither the Company nor the Legacy Corporation is the
beneficiary of any extension of time within which to file any Tax Return that
has not been filed. No Claim has been made by an authority in a jurisdiction
where the Company or the Legacy Corporation does not file Tax Returns that such
entity is, or may be, subject to taxation by that jurisdiction. There are no
Encumbrances on the stock or assets of the Company or the Legacy Corporation
with respect to Taxes other than Permitted Encumbrances.

 

(c)          Both the Company and Legacy Corporation have withheld and timely
paid all Taxes required to have been withheld and paid and has complied with all
information reporting and backup withholding requirements.

 

(d)          Section 4.13(d) of the Disclosure Schedule lists all Tax Returns
filed with respect to the Company and the Legacy Corporation, respectively,
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of an audit. Both the Company and the
Legacy Corporation have delivered to Purchaser correct and complete copies of
all Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by it. Neither the Company nor the Legacy Corporation is
subject to a waiver of any statute of limitations in respect of Taxes or any
extension of time with respect to a Tax assessment or deficiency.

 

 -20- 

 

 

(e)          None of the Equityholders is a “foreign person” within the meaning
of Section 1445 of the Code.

 

(f)          Both the Company and the Legacy Corporation have not been the
“distributing corporation” or the “controlled corporation” with respect to a
transaction described in Section 355 of the Code. Both the Company and Legacy
Corporation are not subject to any private ruling from any taxing authority or
any agreement with a taxing authority.

 

(g)          Neither the Company nor the Legacy Corporation is a party to any
Tax allocation or sharing agreement. The Company and the Legacy Corporation do
not have any Liability for the Taxes of any Person (other than themselves) (i)
as a transferee or successor, (ii) by Contract, (iii) under Section 1.1502-6 of
the Treasury Regulations (or any similar provision of state, local or foreign
Law), or (iv) otherwise.

 

(h)          The Company and the Legacy Corporation will not be required to
include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing Date
as a result of any: (i) installment sale or open transaction disposition made on
or prior to the Closing Date; (ii) prepaid amount received or accrued on or
prior to the Closing Date; (iii) cancellation of debt income or (iv) method of
accounting that defers the recognition of income to any period (or portion
thereof) ending after the Closing Date or accelerates any deduction to any
period (or portion thereof) ending on or before the Closing Date.

 

(i)          The Company has validly been treated for income Tax purposes as a
disregarded entity at all times since its inception, until such time as CHOP
became an Equityholder, at which time the Company became a partnership for
income Tax purposes and is currently a partnership for income Tax purposes. The
Legacy Corporation had a valid election to be treated as an S corporation in
effect and has validly been treated for federal and state income Tax purposes as
a S corporation at all times since January 1, 2014. Neither the Legacy
Corporation nor the Company will be liable for any Taxes pursuant to Sections
1374 or 1375 of the Code (or any corresponding provision of state, local or
non-US Tax law) as a result of the transactions contemplated by this Agreement

 

(j)          There is no power of attorney in effect with respect to the

Company or the Legacy Corporation with respect to Taxes.

 

(k)          Neither the Company nor the Legacy Corporation has engaged in any
transaction that is, or is substantially similar to, any listed or reportable
transaction within the meaning of Treasury Regulation Section 1.6011-4.

 

4.14.         Employee Relations.

 

(a)          Labor Matters. Set forth in Section 4.14(a)(i)(A) of the Disclosure
Schedule is a complete and accurate list of all officers and directors of the
Company. The Company has no employees and has never had any employees. Set forth
in Section 4.14(a)(i)(B) of the Disclosure Schedule is a complete and accurate
list of all Persons who have ever performed any type of work or service for the
Legacy Corporation or the Company and, if applicable, the amount of
consideration owed and due to such Persons for such work or services. Neither
the Legacy Corporation nor the Company are, nor have they ever been, bound by or
subject to (and none of their respective assets or properties is or has ever
been bound by or subject to) any collective bargaining or other relationship
with any labor organization. The Company has complied and is in compliance with
all Laws which relate to equal opportunity and non-discrimination, wage and
hour, and terms and conditions of employment. No Employees or independent
contractors of the Legacy Corporation or the Company are represented by any
labor organization or covered by any collective bargaining agreement. No
campaign to establish such representation is or has ever been in progress and
there is no pending or, to the Knowledge of the Company, threatened, labor
dispute involving the Company, and any group of their respective employees or
independent contractors.

 

 -21- 

 

 

(b)          Status. The Company has properly classified all independent
contractors and leased employees who have rendered services to the Company as
non-employees for all federal, state, local and foreign Tax purposes, as well as
ERISA and employee benefits purposes.

 

(c)          Employee Benefit Plans.

 

(i)          There are not currently and there have never been any Employee
Benefit Plans. There are no pending or threatened Claims by or on behalf of any
Employee Benefit Plan.

 

(ii)         The execution of and performance of the Contemplated Transactions
will not (either alone or upon the occurrence of any additional or subsequent
events) result in any payment to or acceleration, vesting or increase in the
rights of any current or former employee or service provider of the Company. No
payment or benefit which is or may be made in connection with the transactions
contemplated by this Agreement to any current or former employee or service
provider of the Company or any ERISA Affiliate could constitute an “excess
parachute payment” under Section 280G of the Code.

 

(iii)        No service provider of the Company is, or can reasonably in the
future expect to be, subject to additional Tax or interest imposed under Section
409A of the Code.

 

4.15.         Environmental Laws. The ownership and use of the Company’s
premises and assets, the occupancy and operation thereof, and the conduct of the
Company’s operations and Business, are in compliance in all material respects
with all Environmental Laws and, the Company has not received any notice of any
alleged violation or noncompliance. There is no Liability attaching to the
Company or any of their premises or assets or the ownership or operation thereof
as a result of any Hazardous Materials that may have been discharged on or
released from such premises, or disposed of on-site or off-site, or any other
circumstance occurring prior to the Closing or existing as of the Closing.

 

4.16.         Legal Proceedings.

 

(a)          Except as set forth in Section 4.16(a) of the Disclosure Schedule,
there is no Order outstanding and/or no Legal Proceeding pending or, to the
Knowledge of the Company, threatened, against or affecting, the Company or the
Business or the assets or properties, tangible or intangible, of the Company,
nor has there been any such Legal Proceeding. The Company is not currently
planning to initiate any Legal Proceeding. The matters disclosed on Section
4.16(a) of the Disclosure Schedule will be fully covered by the Company’s
insurance policies, subject to applicable deductibles.

 

 -22- 

 

 

(b)          To the Knowledge of the Company, there are no currently existing
events, facts or circumstances that could reasonably be expected to form the
basis for any Legal Proceeding or Order.

 

4.17.         Transactions with Affiliates. Except as set forth in Section 4.17
of the Disclosure Schedule, no director, manager, officer, key employee,
Equityholder of the Company or any Affiliate of any of the foregoing: (a) has
received or earned; (b) has had an ownership interest (whether direct or
indirect) in any business, corporate or otherwise, which has or had any business
arrangement or relationship of any kind under which it has received or earned,
payments from the Company; or (c) is a party to a Related Party Agreement with
the Company. All transactions required to be listed in Section 4.17 of the
Disclosure Schedule have been recorded in the Books and Records of the Company
at their full value, as if they were rendered in arm’s length transactions.

 

4.18.         Insurance.

 

(a)          The Company has maintained in effect and presently has in effect,
all errors and omissions, directors and officers, employee professional
liability and fiduciary liability insurance policies, and all other insurance
policies, required by Law and reasonably appropriate in connection with the
operation of the Business. Set forth in Section 4.18(a) of the Disclosure
Schedule is a true and complete list of each insurance policy (including
policies providing property, casualty, liability, errors and omissions, and
workers compensation coverage) to which the Company has been a party, the named
insured, additional insured(s) or otherwise the beneficiary of coverage at any
time.

 

(b)          The Company has provided to Purchaser a correct and complete copy
of each insurance policy listed on Section 4.18(a) of the Disclosure Schedule
and in effect immediately prior to the Closing. With respect to each such
insurance policy: (i) such policy is legal, valid, binding, enforceable in
accordance with its terms, and in full force and effect in all respects and all
premiums due thereunder have been paid, and no notice of cancellation or
termination has been received by the Company or any Equityholder with respect to
such policies; (ii) to the Knowledge of the Company, no other party to the
policy is in a material breach or Default (including with respect to the payment
of premiums or the giving of notices), and no event has occurred which would
permit termination, modification, or acceleration, under such policy; and (iii)
no other party to such policy has repudiated any provision thereof.

 

(c)          The Company has notified all applicable insurance companies that
have issued the policies listed on Section 4.18(a) of the Disclosure Schedule of
any and all potential incidents, events or circumstances of which the Company
has Knowledge that could reasonably give rise to a covered Claim under such
policy.

 

 -23- 

 

 

4.19.         Brokers. No broker, investment banker, financial advisor or other
Person is entitled to any broker’s, finder’s, financial advisor’s or other
similar fee or commission in connection with the Contemplated Transactions based
upon arrangements made by or on behalf of the Company or any Person acting on
their behalf.

 

4.20.         Corporate Records. The Books and Records of the Company accurately
and completely record and reflect all transactions material to the operations of
the Company and the Business.

 

4.21.         Bank Accounts. Set forth in Section 4.21 of the Disclosure
Schedule is the name, address and account number of each bank, financial
institution, fund, investment or money manager, brokerage house and similar
institution in which the Company maintains any account (whether checking,
savings, investment, trust or otherwise), lock box or safe deposit box and the
account numbers and name of all Persons having authority to affect transactions
with respect thereto. All such accounts are solely in the Company’s name and
solely owned and controlled by the Company.

 

4.22.         Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company, any Legacy Stockholder or any Equityholder
relating to the Company or the Business.

 

4.23.         Statements and Other Documents Not Misleading. Neither this
Agreement, including the Disclosure Schedule and all other schedules hereto, nor
any other Transaction Document or other instrument heretofore or hereafter
furnished by the Company or the Equityholders to Purchaser in connection with
the Contemplated Transactions contains or will contain any untrue statement of
any material fact or omits or will omit to state any material fact required to
be stated in order to make such statement, document or other instrument not
misleading.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser represents and warrants to the Equityholders that each of the
representations and warranties contained in this Article V are true and correct
as of the date hereof (except to the extent that such representations and
warranties speak as of another date, in which case, as of such date):

 

5.1.          Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.

 

5.2.          Authority. Purchaser has the requisite corporate power and
authority to enter into and perform this Agreement and each of the Transaction
Documents to which it is a party and to consummate the Contemplated
Transactions. The execution, delivery and performance by Purchaser of this
Agreement and each of the Transaction Documents to which it is a party, and the
consummation by it of the Contemplated Transactions have been duly authorized by
all necessary limited liability company action on the part of Purchaser. This
Agreement and each of the Transaction Documents to which Purchaser is a party
have been duly executed and delivered by Purchaser and, assuming due
authorization, execution and delivery by the Company and the Equityholders (as
the case may be) constitute legal, valid and binding obligations of Purchaser
enforceable against Purchaser in accordance with their respective terms, except
as such enforcement may be limited by the Bankruptcy and Equity Exceptions.

 

 -24- 

 

 

5.3.          Conflict with other Instruments; Absence of Restrictions. The
execution, delivery and performance of this Agreement and each of the
Transaction Documents, and the consummation of the Contemplated Transactions, by
Purchaser do not and will not: (a) result in a Default of or under (i) any of
the terms of the Organizational Documents of Purchaser, or (ii) any Law, Permit,
Order or material Contract applicable to or binding upon Purchaser; or (b) (1)
result in the termination, amendment or modification of, or give any party the
right to terminate, amend, modify, abandon, or refuse to perform any material
Contract or Permit to which Purchaser is a party or by which it, or any of its
respective properties or assets, is bound, or (2) result in the acceleration or
modification, or give any party the right to accelerate or modify, the time
within which, or the terms under which, any duties or obligations are to be
performed, or any rights or benefits are to be received under any material
Contract or Permit to which Purchaser is a party or by which it, or any of its
respective properties or assets, is bound.

 

5.4.          Government Approvals. No Consent of any Governmental Entity is
required (a) for the execution, delivery and performance by Purchaser of this
Agreement or any of the Transaction Documents to which Purchaser is a party, or
(b) in connection with Purchaser’s consummation of the Contemplated
Transactions.

 

5.5.          Brokers. Purchaser has not employed any broker, finder or
investment banker or incurred any Liability for any brokerage fees, commissions
or finder’s fees in connection with the Contemplated Transactions. Purchaser has
not made any arrangement or taken any other action that might cause the
Equityholders to become liable for a broker’s fee, commission or finder’s fee as
a result of the Contemplated Transactions.

 

5.6.          Purchaser SEC Documents(a). Purchaser has filed with or furnished
to the Securities and Exchange Commission (the “SEC”) all forms, reports,
statements, certifications and other documents required to be filed by it with
the SEC since January 1, 2014 (collectively, and in each case including all
exhibits and schedules thereto and documents incorporated by reference therein,
the “Purchaser SEC Documents”). As of their respective effective dates (in the
case of Purchaser SEC Documents that are registration statements filed pursuant
to the requirements of the Securities Act) and as of their respective SEC filing
dates (in the case of all other Purchaser SEC Documents), Purchaser SEC
Documents complied in all material respects with the requirements of the
Securities Act, the Securities Exchange Act of 1934, as amended, (the “Exchange
Act”) and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
Purchaser SEC Documents, and none of Purchaser SEC Documents as of such
respective dates (or, if amended prior to the date of this Agreement, the date
of the filing of such amendment, with respect to the disclosures that are
amended) contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of the date of this Agreement, no Subsidiary of Purchaser is
subject to the reporting requirements of Section 13(a) or 15(d) under the
Exchange Act. Each of the audited consolidated financial statements and
unaudited consolidated financial statements of Purchaser included in Purchaser
SEC Documents (including the related notes and schedules), as of their
respective effective dates (in the case of Purchaser SEC Documents that are
registration statements filed pursuant to the requirements of the Securities
Act) and as of their respective SEC filing dates (in the case of all other
Purchaser SEC Documents), complied as to form in all material respects with all
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto (except, in the case of unaudited statements, as
permitted by Quarterly Report Form 10-Q of the SEC), were prepared in accordance
with GAAP and applicable accounting requirements and published rules and
regulations of the SEC consistently applied during the periods involved (except
(i) with respect to financial statements included in Purchaser SEC Documents
filed as of the date of this Agreement, as may be indicated in the notes
thereto, or (ii) as permitted by the rules and regulations of the SEC, including
Regulation S-X), and fairly present in all material respects the consolidated
financial position of Purchaser and its consolidated Subsidiaries as of the
dates thereof and the consolidated statements of operations, changes in
stockholders’ equity and cash flows of such companies as of the dates and for
the periods shown therein.

 

 -25- 

 

 

5.7.          Valid Issuance of Purchaser Shares. Upon their receipt of the
Purchaser Common Shares, the Equityholders will acquire good and valid title to
such Purchaser Common Shares, free and clear of all Encumbrances. The Purchaser
Common Shares will, when issued in accordance with the provisions of this
Agreement, be validly issued, fully paid and non-assessable.

 

5.8.          No Additional Representations. Except for the representations and
warranties contained in this Article V, neither Purchaser nor any other Person
makes any express or implied representation or warranty on behalf of Purchaser,
and Purchaser hereby disclaims any representations, warranties or other
statements made by it or any of its direct or indirect directors, equity
holders, subsidiaries, Affiliates or Representatives with respect to the subject
matter hereof.

 

ARTICLE VI

CLOSING

 

6.1.          Closing. The closing of the Contemplated Transactions (the
“Closing”) shall take place on the date hereof (the “Closing Date”), at the
offices of Pepper Hamilton LLP, 3000 Two Logan Square, 18th and Arch Streets,
Philadelphia, PA 19103, or remotely via the exchange of documents and
signatures, or such other location or date as the Parties may mutually agree.
The Closing shall be effective as of 11:59 p.m. local time on the Closing Date.

 

6.2.          Closing Deliveries.

 

(a)          Deliveries by the Equityholders and the Company. At or prior to the
Closing, the Equityholders and the Company shall have delivered to Purchaser:

 

(i)          membership interest powers and other instruments as may be
necessary to transfer record ownership of the LLC Equity Interests into
Purchaser’s name on the books of the Company;

 

(ii)         the Books and Records of the Company, including all minute books,
stock books, stock transfer ledgers, employment records, financial and
accounting records and files; provided, that, the Parties acknowledge and agree
that delivery of such Books and Records shall be satisfied by the Company making
the Books and Records available to Purchaser;

 

 -26- 

 

 

(iii)        as to the Legacy Corporation, a certificate dated as of the Closing
Date and signed on its behalf by its secretary to the effect that: (A) the
resolutions of the Legacy Stockholders and the board of directors of the Legacy
Corporation, as applicable, authorizing the actions taken in connection with the
Contemplated Transactions were duly adopted at a duly convened meeting thereof,
at which a quorum was present and acting throughout, or by unanimous written
consent, remain in full force and effect, and have not been amended, rescinded
or modified; (B) each officer or other individual executing this Agreement and
each of the Transaction Documents to which the Legacy Corporation, as
applicable, is a party is an incumbent officer or otherwise duly authorized to
execute such agreements and documents on behalf of the Legacy Corporation, as
applicable, and the specimen signature on such certificate is his or her genuine
signature; and (C) the Legacy Corporation is in good standing in all
jurisdictions in which it is required to be registered. The certificates
referred to in this Section 6.2(a)(iii) shall attach good standing certificates
with respect to the Legacy Corporation in such jurisdictions certified by the
Secretaries of State or other appropriate officials, dated as of a date not more
than ten (10) calendar days prior to the Closing Date;

 

(iv)        as to the Company, a certificate dated as of the Closing Date and
signed on its behalf by its secretary to the effect that: (A) (1) the copies of
Organizational Documents attached to the certificate are true and complete, (2)
such Organizational Documents have been in full force and effect in the form
attached to the certificate since the date of the adoption of the resolutions
referred to in clause (3) below and no amendment to such Organizational
Documents has occurred since the date of the last amendment annexed thereto, (3)
the resolutions of the Equityholders authorizing the actions taken in connection
with the Contemplated Transactions were duly adopted, remain in full force and
effect, and have not been amended, rescinded or modified; (B) each officer or
other individual executing this Agreement and each of the Transaction Documents
to which the Company, as applicable, is a party is an incumbent officer or
otherwise duly authorized to execute such agreements and documents on behalf of
the Company, as applicable, and the specimen signature on such certificate is
his or her genuine signature; and (C) the Company is in good standing in all
jurisdictions in which it is required to be registered. The certificates
referred to in this Section 6.2(a)(iv) shall attach good standing certificates
with respect to the Company in such jurisdictions certified by the Secretaries
of State or other appropriate officials, dated as of a date not more than ten
(10) calendar days prior to the Closing Date;

 

(v)         evidence in form and substance acceptable to Purchaser that all
Transaction Expenses of the Company have been paid in full;

 

(vi)        evidence in form and substance acceptable to Purchaser of the
termination of all Related Party Agreements;

 

(vii)       those Consents in connection with the consummation of the
Contemplated Transactions set forth in Schedule 6.2(a)(vii), in form and
substance acceptable to Purchaser;

 

 -27- 

 

 

(viii)      the written resignations of all of the officers, directors and
managers of the Company (effective as of the Closing Date);

 

(ix)         pay-off letters, in form and substance acceptable to Purchaser from
all holders of any secured Indebtedness of the Legacy Corporation, in each case,
stating (A) the amount as being sufficient to repay in full all such secured
Indebtedness owing to such holder, (B) that, effective upon Purchaser’s tender
to such holder of the pay-off amount, all Encumbrances in favor of such holder
on the Company’s behalf, if applicable, assets shall be terminated, released and
discharged and that such holder shall deliver to Purchaser any instruments,
certificates, statements and other documents necessary to evidence such
termination, release and discharge and (C) authorizing Purchaser to make all
filings necessary or desirable to terminate any financing statement or other
notice or evidence of any such Encumbrance;

 

(x)          evidence in form and substance acceptable to Purchaser that all
existing board resolutions regarding banking of the Company have been revoked
and replaced with the board resolutions regarding banking as set forth in
Schedule 6.2(a)(x);

 

(xi)         evidence in form and substance acceptable to Purchaser that all
Encumbrances (other than Permitted Encumbrances) affecting any assets of the
Business have been released;

 

(xii)        a copy of the CHOP License Agreement, duly executed by the Company
and CHOP; and

 

(xiii)       such other documents, instruments of sale, transfer, conveyance,
and assignment as Purchaser and its counsel may reasonably request in order to
carry out the Contemplated Transactions.

 

(b)          Deliveries by Purchaser. At or prior to the Closing, Purchaser
shall have delivered or shall have caused to be delivered the Base Purchase
Price payable pursuant to Section 2.1 hereof.

 

ARTICLE VII

COVENANTS

 

7.1.          The Legacy Corporation’s Business Following the Closing.

 

(a)          Following the Closing, the Legacy Corporation and the Legacy
Stockholders agree to promptly change the name of the Legacy Corporation so as
not to use (i) the name “neuroFix therapeutics,” (ii) any name that includes
“neuroFix” or (iii) any variation of

(i) or (ii) likely to cause confusion.

 

(b)          The Legacy Stockholders will not dissolve or otherwise liquidate
the Legacy Corporation until, at the earliest, six (6) months from the Closing
Date; provided, that the Legacy Corporation has satisfied its obligations under
Section 7.6 hereof and provided further that any obligation of the Legacy
Corporation under this Agreement shall be treated as an obligation of the Legacy
Stockholders on a joint and several basis after such dissolution or liquidation.
To the extent that the Legacy Stockholders dissolve or otherwise liquidate the
Legacy Corporation, the Parties agree that any shares of Purchaser Common Stock
issued or to be issued to the Legacy Corporation in connection with this
Agreement shall be transferred to, or issued to, as applicable, the Legacy
Stockholders in accordance with their Legacy Pro Rata Amount.

 

 -28- 

 

 

7.2.          Assistance in Defense. If, after the Closing Date, any Party shall
require the participation of officers and employees then employed by any other
Party to aid in the investigation, defense or prosecution of Legal Proceedings,
and so long as there exists no conflict of interest between the Parties, the
Party receiving the request shall make such officers and employees reasonably
available to participate in such Legal Proceeding at the expense of the
requesting Party.

 

7.3.          Public Announcements. No Party shall issue any public report,
statement or press release or similar item or make any other public disclosure
with respect to the substance of this Agreement prior to the consultation with
and written approval of, in the case of such disclosure by Purchaser, the
approval of the Stockholder Representative and CHOP, and in the case of such
disclosure by any Equityholders or the Legacy Stockholders, the approval of
Purchaser, except as may be required by Law or the rules of any applicable stock
exchange or self-regulatory organization, in which case the Parties shall
reasonably cooperate as to the timing and contents of such report, statement or
press release, provided, however, that the Party subject to such required
disclosure shall nonetheless be permitted to make any disclosure necessary to
satisfy the applicable Law or the rule of any applicable stock exchange or
self-regulatory organization without the applicable prior approval required by
this Section 7.3.

 

7.4.          General Release. Effective as of the Closing, each of the Legacy
Stockholders and the Equityholders, on behalf of itself and each of its
Affiliates, voluntarily, knowingly and irrevocably releases and forever
discharges the Company and its Affiliates, and each of their respective
Representatives from any and all actions, agreements, amounts, Claims, damages,
expenses, Liabilities and obligations of every kind, nature or description,
known or unknown, arising or existing prior to the Closing, except for any
rights of the Legacy Stockholders and the Equityholders against the Company
under this Agreement and any other Transaction Document.

 

7.5.          Future Sale of Purchaser. If after the Closing Purchaser intends
to sell all or substantially all of its assets related to this Agreement in any
one or more related transactions, Purchaser must assign this Agreement and the
CHOP License Agreement and all of Purchaser’s rights and obligations thereunder
to the purchaser in such transaction or transactions. Purchaser’s obligations
under this Section 7.5 are in addition to and not in limitation of its
obligations set forth in Section 13.8 hereof.

 

7.6.          Third Party Consents. To the extent that the Legacy Corporation’s
rights with respect to any asset, including Intellectual Property, Contracts or
Permits, relating to the Business may not be assigned by the Legacy Corporation
to the Company without the consent of another Person which has not been
obtained, the Legacy Corporation, at its expense, shall use its best efforts to
obtain any such required consent(s) as promptly as possible. If any such consent
shall not be obtained or if any attempted assignment would be ineffective or
would impair Purchaser’s or the Company’s rights under such asset(s) in question
so that neither the Purchaser nor the Company would in effect acquire the
benefit of all such rights, the Legacy Corporation, to the maximum extent
permitted by law and such asset(s) and Purchaser desires to do so, shall act
after the Closing as the Company’s agent in order to obtain for it and the
Purchaser the benefits thereunder and shall cooperate, to the maximum extent
permitted by Law and such asset(s), with the Purchaser and the Company in any
other reasonable arrangement designed to provide such benefits to the Purchaser
and the Company.

 

 -29- 

 

 

7.7.          Further Assurances. Each Party agrees, without further
consideration, from time to time after the Closing to (a) execute and deliver
further instruments of transfer, assumption and assignment and take such other
actions as the other Party may reasonably require to transfer, assign to and
vest in Purchaser the LLC Equity Interests, including, obtaining the Consents or
waivers identified in the Disclosure Schedule; (b) cooperate with and provide
assistance to the other Parties in transferring possession of the assets to
Purchaser and (c) do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged and delivered all and every further reasonable act, deed,
conveyance, transfer and assurance necessary to assure their compliance with the
terms, provisions, purposes and intents of this Agreement and the effectiveness
of the rights, benefits and remedies provided for hereby; it being understood
that no Party, nor any of their respective Affiliates, shall be required to
expend money, commence any litigation or offer or grant any accommodation
(financial or otherwise) to any Third Party in connection with this Section 7.7.

 

7.8.          Right of First Refusal If Legacy Corporation or CHOP (each a
“Payment Stream Seller”) (i) receives a bona fide offer from a Third Party or
another Party to this Agreement other than Purchaser (a “Payment Stream Buyer”)
to acquire such Payment Stream Seller’s portion of any Earnout Payments (a
“Payment Stream”) or (ii) in good faith determines to offer to sell such Payment
Stream Seller’s portion of a Payment Stream to a Payment Stream Buyer (each of
(i) and (ii) being an “Offer”), such Payment Stream Seller shall provide a
written notice to the Purchaser informing Purchaser of such Payment Stream
Seller’s intention to sell a Payment Stream (a “Payment Stream Sale Notice”).
Purchaser shall have thirty (30) days following the date Purchaser receives the
Payment Stream Sale Notice to decide whether or not it is interested in
participating in the Payment Stream sale process. If Purchaser is interested,
the Payment Stream Seller shall include Purchaser in the Payment Stream sale
process with no less information than provided to any other potential bidder.
Legacy Corporation and the Payment Stream Seller shall again comply with this
Section 7.8 (in all respects) if no definitive agreement for a Payment Stream
sale is entered into by the Payment Stream Seller within 180 days after the
Payment Stream Sale Notice delivery. In the event Legacy Corporation shall have
dissolved or otherwise transferred the right to receive Earnout Payments to
Harper and Hakonarson, Harper and Hakonarson shall be bound by this Section 7.8
as a Payment Stream Seller in the event either one of them receives or
negotiates any Offer(s). Nothing herein shall require any Payment Stream Seller
from completing any sale of the Payment Stream to Purchaser or any Third Party.

 

 -30- 

 

 

 

Article VIII
INDEMNIFICATION

 

8.1.          Survival.

 

(a)          Representations and Warranties. Notwithstanding any investigation
or receipt of information by or on behalf of Purchaser, the Legacy Stockholders,
the Equityholders or any of their respective directors, managers, officers,
employees, Affiliates, agents, equityholders, members, successors and assigns
and Representatives on or before the Closing Date:

 

(i)          representations and warranties made by any Party which were both
(A) not true when made and (B) were made by such Party with intent to defraud or
mislead, shall survive in accordance with the applicable statute of limitations;

 

(ii)         representations and warranties set forth in Sections 3.1
(Authorization and Enforceability), 3.2 (Non-contravention; Consents), 3.3 (The
Legacy Corporation), 3.4 (Title to LLC Equity Interests), 3.5 (Brokers), 3.7
(Representations Regarding Equity Consideration), 4.1 (Organization and Power),
4.2 (Authorization and Enforceability), 4.3 (Non-contravention; Consents), 4.4
(Capitalization; Subsidiaries), 4.5(c) (Indebtedness), 4.10 (Intellectual
Property), 4.13 (Taxes), 4.19 (Brokers), 5.1 (Organization), 5.2 (Authority) and
5.5 (Brokers) (collectively, the “Fundamental Representations”) shall survive
the Closing and continue in full force and effect until thirty (30) calendar
days after the expiration of the applicable statute of limitations (including
any applicable extension thereof); and

 

(iii)        all other representations and warranties of the Legacy Stockholders
and the Equityholders contained in Article III, of the Company contained in
Article IV, and of Purchaser contained in Article V shall survive the Closing
and continue in full force and effect until the date that is twenty-four (24)
months after the Closing Date.

 

Notwithstanding anything to the contrary, all representations and warranties
shall survive after their applicable Survival Date as to any Losses identified
in, or that arise out of, relate to or are based on any Loss Event identified in
an Indemnity Notice or a Third Party Claim Notice (as applicable and defined
below) given prior to the applicable Survival Date.

 

(b)          Covenants and Agreements. All covenants and agreements made by any
Party which are to be performed after the Closing Date shall survive until the
applicable statute of limitations (including any applicable extension thereof)
therefore has expired with respect to any breach thereof or to the extent
necessary to fulfill or satisfy the obligations with respect to such covenant or
agreement in their entirety (each such date set forth in this Section 8.1(a) or
8.1(b), a “Survival Date”).

 

8.2.          The Selling Parties’ Indemnification.

 

(a)          Any obligation of the Legacy Corporation under this Section 8.2 or
otherwise under this Agreement shall be treated as a joint and several
obligation of the Legacy Corporation, on the one hand, and the Legacy
Stockholders, on the other hand. To the extent that the Legacy Stockholders
shall be responsible for any obligation of the Legacy Corporation under this
Section 8.2 or otherwise under this Agreement pursuant to the immediately prior
sentence, such responsibility, as between the two Legacy Stockholders, shall be
treated as a joint and several obligation.

 

 -31- 

 

 

(b)          Subject to the provisions of this Article VIII, regardless of any
investigation undertaken or made or receipt of information by Purchaser, or any
of its directors, managers, officers, employees, Affiliates, agents,
equityholders, members and Representatives prior to the Closing Date, each of
the Equityholders, severally and not jointly, shall defend, indemnify and hold
Purchaser and each of its directors, managers, officers, employees, Affiliates,
agents, equityholders, members, successors and assigns and Representatives and
each Person who controls (within the meaning of the Securities Act) any of them
(the “Purchaser Indemnitees”) harmless from and against any and all Claims or
Losses (including Claims or Losses arising out of facts or circumstances that
have occurred on or prior to the Closing Date, even though such Claim or Loss
may not be filed or come to light until after the Closing Date) that may be
imposed upon, incurred by or asserted against any Purchaser Indemnitee arising
out of, based upon or resulting from:

 

(i)          any inaccuracy or breach of any representation or warranty of the
Company contained in this Agreement, any Transaction Document or in any
certificate, document or instrument delivered by or on behalf of the Company at
the Closing;

 

(ii)         any breach or nonfulfillment of any covenant or agreement of the
Company contained in this Agreement, any Transaction Document or in any
certificate, document or instrument delivered by or on behalf of the Company at
the Closing;

 

(iii)        any breach by any officer or director of the Company of any
fiduciary duty owed by such officer, manager or director to any Equityholder,
which breach occurred prior to, in connection with or as a result of the Closing
and the Contemplated Transactions;

 

(iv)        any Liability or Claim for Taxes imposed on or relating to (A) the
Company with respect to any taxable period or portion thereof ending on or
before the Closing Date, (B) a Person for which the Company has Liability under
Law by reason of the Company’s relationship with such Person on or before the
Closing Date (including any Tax imposed upon the Legacy Corporation or Company
‎pursuant to Sections 1374 or 1375 of the Code (or any corresponding provision
of state, local or non-US Tax law) as a result of the transactions contemplated
by this Agreement), (C) the Company as a transferee or successor, by Contract or
otherwise to the extent the Taxes are with respect to, or the events or
transactions giving rise to the Taxes occur in, a taxable period or portion
thereof ending on or before the Closing Date, and (D) the Legacy Corporation
relating to its status as an S corporation; provided, however, that Legacy
Corporation shall be solely responsible for any Liabilities or Claims for Taxes
arising from any Tax imposed upon the Legacy Corporation or Company ‎pursuant to
Sections 1374 or 1375 of the Code (or any corresponding provision of state,
local or non-US Tax law) as a result of the transactions contemplated by this
Agreement;

 

 -32- 

 

 

(v)         any Liability or Claim relating to the Indebtedness of the Company
to the extent that such Indebtedness was not accounted for in the calculation of
Base Purchase Price at Closing;

 

(vi)        any Liability or Claim relating to the Transaction Expenses of the
Legacy Corporation that the Company is expected to pay;

 

(vii)       any Liability or Claim of the Legacy Corporation (including the
Harper Indebtedness); and

 

(viii)      any Third Party Claim relating to any of the foregoing.

 

(c)          Subject to the provisions of this Article VIII, regardless of any
investigation undertaken or made or receipt of information by Purchaser or any
of its directors, managers, officers, employees, Affiliates, agents,
equityholders, members, successors and assigns and Representatives prior to the
Closing Date, each of the Equityholders and the Legacy Stockholders, severally
and not jointly, shall defend, indemnify and hold the Purchaser Indemnitees
harmless from and against any and all Claims or Losses (including Claims or
Losses arising out of facts or circumstances that have occurred on or prior to
the Closing Date, even though such Claim or Loss may not be filed or come to
light until after the Closing Date) that may be imposed upon, incurred by or
asserted against any Purchaser Indemnitee arising out of, based upon or
resulting from:

 

(i)          any inaccuracy or breach of any representation or warranty of such
Seller, as applicable, contained in Article III, any Transaction Document or in
any certificate, document or instrument delivered by or on behalf of such Seller
at the Closing;

 

(ii)         any breach or nonfulfillment of any covenant or agreement of such
Seller, as applicable, contained in this Agreement, any Transaction Document or
in any certificate, document or instrument delivered by or on behalf of such
Seller at the Closing; and

 

(iii)        any Third Party Claim related to any of the foregoing.

 

8.3.          Purchaser Indemnification. Subject to the provisions of this
Article VIII, regardless of any investigation undertaken or made or receipt of
information by the Equityholders, or any of their respective directors,
managers, officers, employees, Affiliates, agents, equityholders, members and
Representatives prior to the Closing Date, Purchaser shall defend, indemnify and
hold each of the Legacy Stockholders and the Equityholders and each of their
directors, managers, officers, employees, Affiliates, agents, equityholders,
members, successors and assigns and Representatives (the “Equityholder
Indemnitees”), harmless from and against any and all Losses that may be imposed
upon, incurred by or asserted against any the Equityholder Indemnitee arising
out of, based upon or resulting from:

 

(a)          any inaccuracy or breach of any representation or warranty of
Purchaser contained in Article V of this Agreement, any Transaction Document or
in any certificate, document or instrument delivered by or on behalf of
Purchaser at the Closing;

 

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(b)          any breach or nonfulfillment of any covenant or agreement of
Purchaser contained in this Agreement, any Transaction Document or in any
certificate, document or instrument delivered by or on behalf of Purchaser at
the Closing;

 

(c)          any Liability or Claim relating to the operation of the Business
after the Closing; and

 

(d)          any Third Party Claim related to any of the foregoing.

 

8.4.          Payment; Procedure for Indemnification.

 

(a)          Claim or Loss. In the event that a Purchaser Indemnitee or an
Equityholder Indemnitee entitled to indemnification under this Article VIII
(each, an “Indemnified Party”) shall suffer a Loss or identify any Loss Event,
such Indemnified Party shall promptly, after obtaining knowledge of the
incurrence of any such indemnifiable Loss or Loss Event, send a written notice
prior to the applicable Survival Date of its intent to seek indemnity,
describing the Loss or Loss Event in reasonable detail (an “Indemnity Notice”)
to the Party from whom indemnification under this Article VIII is sought (the
“Indemnifying Party”). Provided the Indemnity Notice is given prior to the
applicable Survival Date, the failure of any Indemnified Party to give the
Indemnifying Party the Indemnity Notice shall not release the Indemnifying Party
of Liability under this Article VIII, except to the extent that the Indemnifying
Party’s ability to defend such Loss is actually and materially prejudiced by the
failure to give such Indemnity Notice. Within fifteen (15) calendar days after
the receipt by the Indemnifying Party of the Indemnity Notice, the Indemnifying
Party shall either (i) pay to the Indemnified Party an amount equal to the
indemnifiable Loss, or, if the Indemnity Notice identifies a Loss Event in
respect of which all potential Losses thereunder have not been incurred by the
applicable Indemnified Party, agree in writing that any such prospective Losses
are, when incurred, indemnifiable by such Indemnified Party, or (ii) object to
such Indemnity Notice, in which case the Indemnifying Party shall give written
notice to the Indemnified Party of such objection together with the reasons
therefor, it being understood that the failure of the Indemnifying Party to so
object shall preclude the Indemnifying Party from asserting any Loss, defense or
counterclaim relating to the Indemnifying Party’s failure to pay any
indemnifiable Loss. The Indemnifying Party’s objection shall not, in and of
itself, relieve the Indemnifying Party from its obligations under this Article
VIII. Within fifteen (15) calendar days after the giving of such notice of
objection, the Indemnified Party and the Indemnifying Party shall negotiate in a
bona fide attempt to resolve the subject of the Indemnity Notice. In the event
that the Parties are unable to resolve the subject of the Indemnity Notice,
within fifteen (15) calendar days after the giving of such notice of objection,
the subject of such Indemnity Notice shall be submitted to a court of competent
jurisdiction for resolution as set forth in this Agreement.

 

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(b)          Third Party Claim or Loss.

 

(i)          Notwithstanding anything set forth in Section 8.4(a), in the event
the facts giving rise to the Claim for indemnification under this Article VIII
shall involve any action, or threatened Claim or demand, or other notice of the
commencement of a proceeding, audit, investigation, review, suit or other
action, by any Third Party (each, a “Third Party Claim”), the Indemnified Party
shall, promptly after obtaining knowledge of such Third Party Claim or demand
giving rise to the Claim for indemnification, send written notice prior to the
applicable Survival Date of its intent to seek indemnity, describing such action
or Claim in reasonable detail (a “Third Party Claim Notice”) to the Indemnifying
Party. Provided the Third Party Claim Notice is given prior to the applicable
Survival Date, the failure of the Indemnified Party to give the Indemnifying
Party the Third Party Claim Notice shall not release the Indemnifying Party of
Liability under this Article VIII, except to the extent that the Indemnifying
Party’s ability to defend such Third Party Claim or Loss is actually and
materially prejudiced by the failure to give such Third Party Claim Notice.
Subject to the last sentence of this subparagraph (b)(i), if the Indemnifying
Party shall acknowledge in writing that, subject to the limitations in Section
8.5, it is responsible to indemnify the applicable Indemnified Party for any
Losses arising out of the Third Party Claim identified in such Third Party Claim
Notice, the Indemnifying Party shall be entitled to defend such Third Party
Claim in the name of the Indemnified Party at its own expense and through
counsel of its own choosing that is reasonably acceptable to the Indemnified
Party; provided, that if the applicable Third Party Claim is against, or if the
defendants in any such Legal Proceeding shall include, both the Indemnified
Party and the Indemnifying Party and the Indemnified Party reasonably concludes
that there are defenses available to it that are different or additional to
those available to the Indemnifying Party or if the interests of the Indemnified
Party may be reasonably deemed to conflict with those of the Indemnifying Party,
then the Indemnified Party shall have the right to select separate counsel and
to assume the Indemnified Party’s defense of such Legal Proceeding, with the
fees, expenses and disbursements of such counsel to be reimbursed by the
Indemnifying Party as incurred. The Indemnifying Party shall give the
Indemnified Party notice in writing within ten (10) calendar days after
receiving the Third Party Claim Notice from the Indemnified Party in the event
of Legal Proceeding or otherwise of its intent to exercise its right to assume
the defense of such Third Party Claim together with the requisite acknowledgment
of responsibility for related Losses. If the Indemnified Party has received no
such notice within such time period or in the case of any (A) Claims resulting
from, relating to or arising out of the provisions of (1) Section 4.13 (Taxes),
(2) Section 8.2(b)(iv) with respect to a breach related to Article IX or (3)
Section 8.2(b)(iv); (B) any Third Party Claim which seeks an Order, injunction
or other equitable relief against any Purchaser Indemnitee; and (C) any Third
Party Claim which reasonably could be expected, when aggregated with all other
unresolved indemnifiable Claims, to result in Losses in excess of the
Representation Cap, the Indemnified Party may take control of the defense of
such Third Party Claim but the Indemnifying Party shall pay the costs of such
defense incurred by the Indemnified Party (and all such costs shall be deemed to
be Losses for purposes of this Article VIII).

 

(ii)         Whenever the Indemnifying Party is entitled to defend any Third
Party Claim hereunder, the Indemnified Party may elect, by notice in writing to
the Indemnifying Party, to continue to participate through its own counsel, at
its expense, but the Indemnifying Party shall have the right to control the
defense of the Legal Proceeding; provided, that the Indemnifying Party retains
counsel reasonably acceptable to the Indemnified Party; otherwise, the
Indemnified Party shall have the right to control the defense of the Legal
Proceeding.

 

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(iii)        Notwithstanding any other provision contained in this Agreement,
the party controlling the defense of the Legal Proceeding shall not settle any
such Legal Proceeding without the prior written consent of the other party;
provided, that if the Indemnified Party is controlling the defense of the Legal
Proceeding and shall have, in good faith, negotiated a settlement thereof, which
proposed settlement contains terms that are reasonable under the circumstances,
then the Indemnifying Party shall not withhold, condition or delay the giving of
such consent (and in the event the Indemnifying Party and Indemnified Party are
unable to agree as to whether the proposed settlement terms are reasonable, the
Indemnifying Party and Indemnified Party will submit the disagreement to a court
of competent jurisdiction for resolution as set forth in this Agreement); and
provided further, that the Purchaser Indemnitees shall not be required to
consent to a proposed settlement that could reasonably be expected to affect
Taxes for a taxable period, or portion thereof, beginning after the Closing
Date.

 

(c)          Right of Set-Off. Purchaser may (but is not obligated to) satisfy
any portion of indemnification obligations of the Legacy Stockholders and the
Equityholders by setting off any such Claims against any unpaid Milestone
Payments or Earnout Payments due to such Legacy Stockholders and Equityholders,
as applicable.

 

8.5.          Limitation on Indemnification.

 

(a)          Subject to Section 8.5(c), no Purchaser Indemnitee or Equityholder
Indemnitee shall make a Claim for indemnifiable Losses pursuant to Sections
8.2(b)(i), 8.2(c)(i) or 8.3(a), respectively, unless and until the aggregate
amount of indemnifiable Losses of all Purchaser Indemnitees, on the one hand, or
the Equityholder Indemnitees, on the other hand, as the case may be, under this
Article VIII exceeds Seventy-Five Thousand Dollars ($75,000) (the “Threshold
Amount”), and then, such Party shall be entitled to recover all indemnifiable
Losses in excess of the Losses incurred in achieving the Threshold Amount, and
in no event shall the aggregate amount of the indemnifiable Losses pursuant to
Sections 8.2(b)(i), 8.2(c)(i) or 8.3(a), respectively, for which all Purchaser
Indemnitees, on the one hand, or Equityholder Indemnitees, on the other hand, as
the case may be, shall be indemnified hereunder exceed twenty-five percent (25%)
of the aggregate amount paid by Purchaser to the Equityholders as Base Purchase
Price or Milestone Payments, if any, at Closing or thereafter (the
“Representation Cap”). Subject to Section 8.5(c), in no event shall the
aggregate amount of the indemnifiable Losses for which any Equityholder shall be
liable pursuant to this Agreement exceed the value of cash and Purchaser
securities received by such Equityholder under the terms of this Agreement at
Closing or thereafter (the “Overall Cap”).

 

(b)          Subject to Section 8.5(c), in no event shall the aggregate amount
of the indemnifiable Losses for which Purchaser shall be liable pursuant to this
Agreement to indemnify the Equityholder Indemnitees exceed the Base Purchase
Price.

 

(c)          Notwithstanding the foregoing, neither the Threshold Amount nor the
Representation Cap shall apply to breaches or inaccuracies of any of the
Fundamental Representations (other than with respect to Section 4.10
(Intellectual Property), to which the Threshold Amount shall apply).
Notwithstanding the foregoing, neither the Threshold Amount nor the
Representation Cap nor the Overall Cap shall apply to, or shall in any way limit
or impair the right of any Party to pursue, any rights, remedies or Claims
against any other Party based on fraud by such Party. For purposes only of
calculating the amount of Losses incurred by a Purchaser Indemnified Party
arising out of or resulting from any breach of a representation or warranty,
covenant or agreement (but not for purposes of determining the existence of a
breach), the references to a “Material Adverse Effect” or materiality (or other
correlative terms) shall be disregarded.

 

 -36- 

 

 

(d)          No Claim under this Article VIII shall be made unless an Indemnity
Notice or a Claim Notice (as applicable) has been given prior to the applicable
Survival Date.

 

8.6.          Characterization of Indemnity Payments. Except as otherwise
required by Law, any payment made pursuant to this Article VIII shall be
treated, for financial accounting and Tax purposes, as an adjustment to the
Consideration (except to the extent treated as interest pursuant to Law) and
will be allocated in accordance with GAAP, as consistently applied by the Legacy
Corporation in accordance with past practices.

 

8.7.          Sole Remedy. Notwithstanding anything to the contrary contained in
this Agreement and notwithstanding any otherwise available right or remedy of
the Parties, at Law or in equity, from and after the Closing, the Parties agree
that the sole and exclusive remedy for any breach of this Agreement by another
Party, including any misrepresentation, breach of covenant or warranty, or for
any other Loss, cost damage or expense relating to, arising out of or otherwise
connected with this Agreement or the Contemplated Transactions (other than in
connection with Sections 2.1, 2.2, 2.3, 2.4, 2.5, Article I, Article IX and
Article X), shall be the right of indemnification as and to the extent set forth
in this Article VIII, and in all events subject to all of the limitations
herein, the Parties waiving all and each other remedy available to it at Law or
in equity. This provision is not intended and will not be construed as limiting
in any fashion the right of any of the Parties to assert and pursue any claims
based on fraud.

 

Article IX
TAXES; BULK SALES

 

9.1.          Preparation and Filing of Pre-Closing and Post-Closing Tax Returns
for LLC. Purchaser shall prepare or cause to be prepared and file or cause to be
filed (i) all Tax Returns of the Company for all periods ending on or prior to
the Closing Date, and (ii) all Tax Returns of the Company for all periods
beginning on or before the Closing Date and ending after the Closing Date.
Except as required by Law, such Tax Returns shall be prepared in a manner
consistent with the past custom and practice of the Legacy Corporation and its
Subsidiaries with respect to the preparation of their Tax Returns. Purchaser
shall deliver all such Tax Returns to the Stockholder Representative at least
fifteen (15) days prior to their filing for the Stockholder Representative’s
review and comment. Purchaser shall incorporate all reasonable comments of the
Stockholder Representative therein. The Stockholder Representative (on behalf of
the Equityholders) thereafter shall pay, or cause to be paid, an amount of Taxes
owed with respect to such Tax Returns equal to: (x) in the case of a taxable
period ending on or before the Closing Date, all Taxes owed with respect to such
Tax returns, and (y) in the case of a taxable period beginning on or before the
Closing Date and ending after the Closing Date, the portion of such Taxes which
relates to the portion of such taxable period ending on the Closing Date
determined pursuant to Section 9.2. The Stockholder Representative shall pay or
cause to be paid such amounts of Taxes within ten (10) Business Days of
receiving demand therefor from Purchaser. The Legacy Company shall, to the
extent needed, sign any Tax Return for the Company prepared in accordance with
this section for any period that ends of the Closing Date.

 

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9.2.          Allocation. In the case of any Taxes that are imposed on a
periodic basis and are payable for a taxable period that includes, but does not
end on, the Closing Date, the portion of such Tax which relates to the portion
of such taxable period ending on the Closing Date shall (a) in the case of any
Taxes, other than Taxes based upon or related to income or receipts or expenses
(e.g., payroll Taxes), be deemed to be the amount of such Tax for the entire
taxable period multiplied by a fraction the numerator of which is the number of
days in the taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire taxable period, and (b) in the case of
any Tax based upon or related to income or receipts or expenses, other than as
set forth in Section 9.2, be deemed equal to the amount which would be payable
if the relevant taxable period ended as of the end of the Closing Date.

 

9.3.          Cooperation on Tax Matters. The Parties shall, and shall each
cause its Affiliates to, provide to the other such cooperation and information,
as and to the extent reasonably requested by the other, in connection with the
filing of Tax Returns, determining liability for Taxes, and any audit or other
Legal Proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other Party’s request) the provision of records and
information reasonably relevant to any such Tax Returns, Tax liability, or audit
or other Legal Proceeding. Each Party will retain all Tax Returns and related
records and materials of the Legacy Corporation and the Company for the Tax
periods first ending after the Closing Date and for all prior Tax periods until
the expiration of the applicable statute of limitations (and, to the extent the
other Party reasonably requests, any extensions thereof) for the Tax periods to
which the Tax Returns and other records and materials relate, and abide by any
applicable record retention agreements entered into with any Governmental
Entity. Thereafter, the Party holding such Tax Returns or related records or
materials may dispose of them provided that such Party shall give the other
Party notice in accordance with Section 13.5 prior to doing so, and if the other
Party so requests allow the other Party to take possession or make copies of
such Tax Returns or related records or materials. Each Party shall make its
employees reasonably available on a mutually convenient basis at its cost to
provide explanation of any documents or information so provided.

 

9.4.          Transfer Taxes. All transfer, documentary, sales, use, real
property transfer, recording, stock transfer, stamp, registration and other such
Taxes and fees (including any penalties and interest) incurred in connection
with the Contemplated Transactions shall be paid by Purchaser when due, and
Purchaser shall, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, real
property transfer, recording, stock transfer, stamp, registration and other
Taxes and fees, and, if required by applicable Law, the Equityholders shall, and
shall cause its Affiliates to, join in the execution of any such Tax Returns and
other documentation.

 

9.5.          Tax Advice. The Legacy Stockholders and the Equityholders
acknowledge and agree that none of Purchaser, its Affiliates or Representatives
has provided any advice with respect to Taxes arising out of, related to or in
connection with the Contemplated Transactions to any of the Legacy Stockholders,
the Equityholders, the Stockholder Representative or any of their Affiliates or
Representatives.

 

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Article X
RESTRICTIVE COVENANTS

 

10.1.          Confidentiality. Until the end of the five (5) year period
beginning on the Closing Date (the “Restricted Period”), each of the Legacy
Stockholders and the Equityholders shall, and shall take action to direct their
counsel, accountants, financial advisors and lenders to: (a) keep all
Proprietary Information of the Legacy Corporation, the Company, and Purchaser
and their respective Affiliates confidential and not to disclose or reveal any
such Proprietary Information to any Person other than its Affiliates and
Representatives, including counsel, accountants and financial advisors who
otherwise need to know such Proprietary Information; and (b) not to use such
Proprietary Information for any purpose other than: (i) to the extent necessary
to obtain any of the Consents required hereunder; or (ii) to enforce such
Party’s rights and remedies under this Agreement.

 

10.2.          Restrictive Covenants.

 

(a)          Non-Solicitation/Non-Acceptance. As a material inducement to
Purchaser’s consummation of the Contemplated Transactions, including Purchaser’s
acquisition of the goodwill, the Legacy Corporation and the Legacy Stockholders
shall not, during the Restricted Period, directly or indirectly, without the
prior written consent of Purchaser in each instance in its sole discretion:

 

(i)          solicit, accept, call on, divert, take away, influence, induce or
attempt to do any of the foregoing with respect to the customers or prospective
customers of Purchaser or its Affiliates (including, after the Closing, the
Company); or

 

(ii)         (A) solicit, direct or influence any of the suppliers, vendors,
service providers, insurance carriers, agents, personnel and others having
business relations with the Legacy Corporation or the Company as of the Closing
Date, (B) hire or attempt to hire any of the employees or independent
contractors of the Legacy Corporation or the Company on the Closing Date
subsequently employed or engaged by the Company, Purchaser or any of their
Affiliates or (C) attempt to influence or induce any such employee or
independent contractor to terminate or modify any Contract, arrangement or
relationship with the Company, Purchaser or any of their Affiliates.

 

(b)          Non-Competition. As a material inducement to Purchaser’s
consummation of the Contemplated Transactions, including Purchaser’s acquisition
of the goodwill, the Legacy Corporation and the Legacy Stockholders shall not,
during the Restricted Period, directly or indirectly, do any of the following
without the prior written consent of Purchaser in each instance in its sole
discretion:

 

(i)          participate or engage in, or offer any services related to, any
lines of business in the Territory which use any product to diagnose, treat or
cure any Indication (collectively, the “Restricted Business”); provided,
however, that nothing contained herein shall prevent the Legacy Corporation or
either of the Legacy Stockholders from performing services for the Company,
Purchaser or any of its Affiliates; or

 

 -39- 

 

 

(ii)         become an owner, equityholder, member, lender, partner,
co-venturer, director, manager, officer, employee, agent or consultant, directly
or indirectly, in any Person that engages in the Restricted Business; provided,
that the Legacy Corporation and/or either of the Legacy Stockholders may own, as
a passive investor, and not as part of a group with any other Person, not more
than five percent (5%) of the outstanding Securities of any class of any
publicly traded Securities of such Person.

 

(c)          Notwithstanding the foregoing, nothing herein shall limit
Hakonarson’s ability to perform research and engage in the clinical practice of
medicine at CHOP (or any of its affiliates) or any other academic institution or
research institute.

 

10.3.          Specific Enforcement.

 

(a)          Each of the Legacy Stockholders and the Equityholders acknowledge
that any breach or threatened breach by it of any provision of the Restrictive
Covenants will cause continuing and irreparable injury to Purchaser and its
Affiliates for which monetary damages would not be an adequate remedy.
Accordingly, Purchaser shall be entitled to injunctive relief from any court of
competent jurisdiction, including specific performance, with respect to any such
breach or threatened breach. In connection therewith, no Equityholder shall, in
any Legal Proceeding to so enforce any provisions of this Article X assert the
claim or defense that an adequate remedy at Law exists or that the injunctive
relief is not an appropriate form of relief under the circumstances.

 

(b)          The rights and remedies of Purchaser set forth in this Section 10.3
are in addition to any other rights or remedies to which Purchaser may be
entitled, whether existing under this Agreement, at Law or in equity, all of
which shall be cumulative. Furthermore, notwithstanding anything to the contrary
in this Agreement, the obligations for set-off and the limitations in Article
VIII shall not apply to any Losses resulting from a breach of the obligations
set forth in this Article X.

 

(c)          The periods of time set forth in this Article X shall not include,
and shall be deemed extended by, any time required for litigation to enforce the
relevant covenant periods. The term “time required for litigation” as used in
this Section 10.3(c) shall mean the period of time from the earlier of any
Seller’s first breach of the provisions of Section 10.1 or 10.2 or service of
process upon any such Seller with respect to a Legal Proceeding instituted by
Purchaser through the expiration of all appeals related to such Legal
Proceeding.

 

10.4.          Disclosure. Each of the Sellers acknowledges that Purchaser may
disclose the existence of this Agreement and the Restrictive Covenants to any
Person with, through or on behalf of which the Sellers may, directly or
indirectly, breach or threaten to breach any of the provisions of Sections 10.1
or 10.2.

 

10.5.          Interpretation. It is the desire and intent of the Parties that
the provisions of this Article X shall be enforceable to the fullest extent
permissible under Law and public policy. Accordingly, if any provision of this
Article X shall be determined to be invalid, unenforceable or illegal for any
reason, then the validity and enforceability of all of the remaining provisions
of this Article X shall not be affected thereby. If any particular provision of
this Article X shall be adjudicated to be invalid or unenforceable, then such
provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such amendment to apply only to the
operation of such provision in the particular jurisdiction in which such
adjudication is made; provided, that, if any provision contained in this Article
X shall be adjudicated to be invalid or unenforceable because such provision is
held to be excessively broad as to duration, geographic scope, activity or
subject, then such provision shall be deemed amended by limiting and reducing it
so as to be valid and enforceable to the maximum extent compatible with the Laws
and public policy of such jurisdiction, such amendment only to apply with
respect to the operation of such provision in the applicable jurisdiction in
which the adjudication is made.

 

 -40- 

 

 

10.6.          Acknowledgment. Each of the Legacy Stockholders and the
Equityholders acknowledges that it has carefully read and considered the
provisions of this Article X. Each Legacy Stockholder and Equityholder believes
that he or it has received and will receive sufficient consideration and other
benefits to justify the restrictions in this Article X. Each Legacy Stockholder
and Equityholder also acknowledges and understands that these restrictions are
reasonably necessary to protect interests of Purchaser and its Affiliates and
none of the Legacy Stockholders and the Equityholders believe that such
restrictions will prevent them from conducting businesses that are not excluded
from the Restricted Business during the periods covered by the Restrictive
Covenants.

 

Article XI
REGISTRATION RIGHTS

 

11.1.          Registration. As soon as reasonably practicable, but in no event
later than ninety (90) days after the Offering Date or the Phase III Date, as
applicable, Purchaser shall prepare and file with the SEC, a Registration
Statement covering the resale of all, or such portion as permitted by SEC
Guidance (provided that, Purchaser shall use commercially reasonable efforts to
advocate with the SEC for the registration of the maximum number of the
Registrable Securities permitted by SEC Guidance), of the Registrable Securities
received on the applicable Offering Date or Phase III Date and use commercially
reasonable efforts to cause a Registration Statement to be declared effective
(including, without limitation, the execution of any required undertaking to
file post-effective amendments) as promptly as possible.  The Registration
Statement shall be on Form S-3 (except if Purchaser fails to meet one or more of
the registrant requirements specified in General Instruction I.A. on Form S-3,
such registration shall be on another appropriate form in accordance herewith).

 

11.2.          Expenses of Registration. Purchaser shall pay all fees and
expenses incurred in connection with any registration, qualification, exemption
or compliance by Purchaser in the performance of its obligations pursuant to
this Article XI, whether or not any Registrable Securities are sold pursuant to
a Registration Statement, and including all registration and filing fees,
exchange listing fees, and the fees and expenses of counsel and accountants for
Purchaser.

 

11.3.          Obligations of Purchaser. In the case of registration,
qualification, exemption or compliance effected by Purchaser pursuant to this
Agreement, Purchaser will, upon request of the Stockholder Representative,
inform the Stockholder Representative as to the status of such registration,
qualification, exemption and compliance.  Purchaser shall, at its expense and in
addition to its obligations under Section 11.1, as expeditiously as reasonably
possible:

 

 -41- 

 

 

(a)          except for such times as Purchaser is permitted hereunder to
suspend the use of the prospectus forming part of the Registration Statement,
use its commercially reasonable efforts to keep such registration, and any
required qualification, exemption or compliance under state securities laws
effective until the date all Purchaser Common Stock issued as Milestone
Consideration and held by Purchaser stockholders may be sold during any ninety
(90) day period under Rule 144 and any contractual agreements with Purchaser. 
The period of time during which Purchaser is required hereunder to keep the
Registration Statement effective is referred to herein as the “Registration
Period”;

 

(b)          advise the Stockholder Representative promptly (and, in any event,
within five (5) business days):

 

(i)          when the Registration Statement or any amendment thereto has been
filed with the SEC and when the Registration Statement or any post-effective
amendment thereto has become effective;

 

(ii)         of the receipt by Purchaser of any notification from the SEC of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for such purpose;

 

(iii)        of the receipt by Purchaser of any notification with respect to the
suspension of the qualification of the Registrable Securities included therein
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose; and

 

(iv)        of the occurrence of any event that requires the making of any
changes in the Registration Statement or the prospectus so that, as of such
date, the statements therein are not misleading and do not omit to state a
material fact required to be stated therein or necessary to make the statements
therein (in the case of the prospectus, in the light of the circumstances under
which they were made) not misleading;

 

(c)          use its commercially reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of any Registration Statement as soon as
reasonably practicable;

 

(d)          if the Stockholder Representative so requests in writing, promptly
furnish to the Stockholder Representative, without charge, at least one copy of
such Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if explicitly requested, all exhibits
in the form filed with the SEC;

 

(e)          during the Registration Period, promptly deliver to the Stockholder
Representative, without charge, at least one copy of the prospectus included in
such Registration Statement and any amendment or supplement thereto and as many
additional copies as the Stockholder Representative may reasonably request; and
Purchaser consents to the use, consistent with the provisions hereof, of the
prospectus or any amendment or supplement thereto by the Stockholder
Representative in connection with the offering and sale of the Registrable
Securities covered by the prospectus or any amendment or supplement thereto;

 

 -42- 

 

 

(f)          during the Registration Period, if the Stockholder Representative
so requests in writing, deliver to the Stockholder Representative, without
charge, (i) one copy of the following documents, other than those documents
available via EDGAR (and excluding, in each case, exhibits thereto): (A) its
annual report to its stockholders, if any (which annual report will contain
financial statements audited in accordance with GAAP by a firm of certified
public accountants of recognized standing), (B) if not included in substance in
its annual report to stockholders, its annual report on Form 10-K (or similar
form), (C) its definitive proxy statement with respect to its annual meeting of
stockholders, (D) each of its quarterly reports to its stockholders, and, if not
included in substance in its quarterly reports to stockholders, its quarterly
report on Form 10-Q (or similar form), and (E) a copy of the Registration
Statement; and (ii) if explicitly requested, any exhibits filed with respect to
the foregoing;

 

(g)          upon the occurrence of any event contemplated by Section
11.3(b)(iv) above, except for such times as Purchaser is permitted hereunder to
suspend the use of the prospectus forming part of the Registration Statement,
Purchaser will use its commercially reasonable efforts to as soon as reasonably
practicable prepare a post-effective amendment to the Registration Statement or
a supplement to the related prospectus, or file any other required document so
that, as thereafter delivered to the Stockholder Representative, the prospectus
will not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;

 

(h)          comply in all material respects with all applicable rules and
regulations of the SEC which could affect the sale of the Registrable
Securities;

 

(i)          use its commercially reasonable efforts to cause all Registrable
Securities to be listed on each securities exchange or market, if any, on which
equity securities issued by Purchaser have been listed;

 

(j)          use its commercially reasonable efforts to take all other steps
necessary to effect the registration of the Registrable Securities contemplated
hereby and to enable the Stockholder Representative to sell Registrable
Securities under Rule 144; and

 

(k)          permit counsel for the Stockholder Representative to review the
Registration Statement and all amendments and supplements thereto, within two
(2) business days prior to the filing thereof with the SEC;

 

provided that, in the case of Section 11.3(k) above, Purchaser will not be
required to delay the filing of the Registration Statement or any amendment or
supplement thereto to incorporate any comments to the Registration Statement or
any amendment or supplement thereto by or on behalf of the Stockholder
Representative if such comments would require a delay in the filing of such
Registration Statement, amendment or supplement, as the case may be.

 

 -43- 

 

 

11.4.          Furnishing Information. It shall be a condition precedent to the
obligations of Purchaser to take any action pursuant to Section 11.1 that the
Legacy Corporation and/or the Legacy Stockholders shall furnish to Purchaser
such information regarding themselves, the Registrable Securities held by them
and the intended method of disposition of such securities as shall be legally
required under the Securities Act or otherwise required by the SEC to effect the
registration of their Registrable Securities.

 

11.5.          Indemnification; Contribution.

 

(a)          Purchaser shall indemnify and hold harmless each Equityholder
(including the employees, agents, representatives, officers and directors of the
Equityholder, if applicable, and its Affiliates) and each Person who controls
such Equityholder (within the meaning of the Securities Act and the Exchange
Act) (each a “Registration Holder Indemnitee”) from and against any and all
Losses, claims, damages, Liabilities and expenses (including reasonable costs of
investigation and reasonable legal fees) arising out of or based upon (i) any
untrue, or allegedly untrue, statement of a material fact contained in any
Registration Statement, prospectus or preliminary prospectus or notification or
offering circular prepared by Purchaser in connection with the registration
and/or offering of the Registrable Securities (as amended or supplemented if
Purchaser shall have furnished any amendments or supplements thereto) or arising
out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information concerning such Equityholder furnished in writing to Purchaser
by such Equityholder expressly for use in such document or (ii) any violation or
alleged violation by Purchaser (or any of its agents or Affiliates) of the
Securities Act, the Exchange Act, any state securities law, or any rule or
regulation promulgated under the Securities Act, the Exchange Act, or any state
securities law.

 

(b)          Each Equityholder and Legacy Stockholder, severally and not
jointly, shall indemnify and hold harmless Purchaser, and its directors,
officers, employees and each Person who controls Purchaser (within the meaning
of the Securities Act and the Exchange Act) from and against any and all Losses,
claims, damages, Liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue, or allegedly untrue,
statement of a material fact contained in any Registration Statement, prospectus
or preliminary prospectus or notification or offering circular prepared by
Purchaser in connection with the registration and/or offering of the Registrable
Securities (as amended or supplemented if Purchaser shall have furnished any
amendments or supplements thereto) or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon and in conformity with any
information concerning such Equityholder or Legacy Stockholder or the Company
furnished in writing to Purchaser by such Equityholder or Legacy Stockholder or
the Company specifically for use in the preparation of such document.

 

 -44- 

 

 

(c)          Each Person entitled to indemnification hereunder (the
“Registration Indemnified Party”) agrees to give prompt written notice to the
indemnifying party (the “Registration Indemnifying Party”) after the receipt by
the Registration Indemnified Party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof made in writing
for which the Registration Indemnified Party intends to claim indemnification or
contribution pursuant to this Agreement; provided, however, that the failure to
so notify the Registration Indemnifying Party shall not relieve the Registration
Indemnifying Party of any liability that it may have to the Registration
Indemnified Party hereunder unless, and only to the extent that, such failure
results in the Registration Indemnifying Party’s forfeiture of substantive
rights or defenses.  If notice of commencement of any such action is given to
the Registration Indemnifying Party as above provided, the Registration
Indemnifying Party shall be entitled to participate in and, to the extent it may
wish, jointly with any other Registration Indemnifying Party similarly notified,
to assume the defense of such action at its own expense, with counsel chosen by
it and reasonably satisfactory to such Registration Indemnified Party. The
Registration Indemnified Party shall have the right to employ separate counsel
in any such action and participate in the defense thereof, but the fees and
expenses of such counsel (other than reasonable costs of investigation) shall be
paid by the Registration Indemnified Party unless (i) the Registration
Indemnifying Party agrees to pay the same, (ii) the Registration Indemnifying
Party fails to assume the defense of such action with counsel reasonably
satisfactory to the Registration Indemnified Party in its reasonable judgment or
(iii) the named parties to any such action (including any impleaded parties)
have been advised by such counsel that either (x) representation of such
Registration Indemnified Party and the Registration Indemnifying Party by the
same counsel would be inappropriate under applicable standards of professional
conduct or (y) there may be one or more legal defenses available to it which are
different from or additional to those available to the Registration Indemnifying
Party.  In either of such cases, the Registration Indemnifying Party shall not
have the right to assume the defense of such action on behalf of such
Registration Indemnified Party.  No Registration Indemnifying Party shall be
liable for any settlement entered into without its written consent (other than
in the case where the Registration Indemnifying Party is unconditionally
released from liability and its rights are not adversely effected), which
consent shall not be unreasonably withheld.

 

(d)          If the indemnification provided for in this Section 11.5 from the
Registration Indemnifying Party pursuant to applicable Law is unavailable to a
Registration Indemnified Party hereunder in respect of any Losses, claims,
damages, Liabilities or expenses referred to therein, then the Registration
Indemnifying Party, in lieu of indemnifying such Registration Indemnified Party,
shall contribute to the amount paid or payable by such Registration Indemnified
Party as a result of such Losses, claims, damages, Liabilities or expenses in
such proportion as is appropriate to reflect the relative fault of the
Registration Indemnifying Party and Registration Indemnified Party in connection
with the actions which resulted in such Losses, claims, damages, Liabilities or
expenses, as well as any other relevant equitable considerations.  The relative
faults of such Registration Indemnifying Party and Registration Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, such Registration Indemnifying
Party or Registration Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the Losses, claims,
damages, Liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Sections 11.5(a), (b) and (c), any legal
or other fees, charges or expenses reasonably incurred by such party in
connection with any investigation or proceeding. The parties hereto agree that
it would not be just and equitable if contribution pursuant to this
Section 11.5(d) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person.

 

 -45- 

 

 

Article XII
STOCKHOLDER REPRESENTATIVE

 

12.1.          Appointment of the Stockholder Representative; Duties; and Power
of Attorney.

 

(a)          Harper is hereby appointed to serve as the Stockholder
Representative and attorney-in-fact of the Legacy Corporation and the Legacy
Stockholders with full power and authority to act (including by executing,
delivering and filing documents, agreements and instruments) in the name of, for
and on behalf of the Legacy Corporation and the Legacy Stockholders with respect
to all matters arising in connection with this Agreement and the Contemplated
Transactions, including the power and authority to make all decisions relating
to:

 

(i)          the settlement of the post-Closing adjustments (payments) and the
amounts of the Milestone Payments and Earnout Payments, and adjustments pursuant
to Sections 2.5 and 2.6 of this Agreement;

 

(ii)         the prosecution, defense and/or settlement of any claims for which
any Purchaser Indemnitee or the Equityholder Indemnitee may claim to be entitled
to indemnification pursuant to Article VIII of this Agreement; and

 

(iii)        all decisions in connection with any amendment to this Agreement;

 

provided, however, that the Stockholder Representative will have no obligation
to act except as expressly provided herein. All decisions and actions by the
Stockholder Representative shall be binding upon the Legacy Corporation and each
of the Legacy Stockholders and neither the Legacy Corporation nor either Legacy
Stockholder shall have the right to object to, dissent from, protest or
otherwise contest the same. In the event of the death, incapacity, dissolution,
insolvency or resignation of the Stockholder Representative, the Legacy
Stockholders shall promptly appoint a substitute Stockholder Representative
which shall be reasonably acceptable to Purchaser; provided, however, in no
event shall the Stockholder Representative resign without the Legacy
Stockholders having first appointed a substitute Stockholder Representative who
shall assume such duties immediately upon the resignation of the Stockholder
Representative.

 

(b)          The power of attorney granted in this Article XI and all authority
hereby conferred is granted and shall be irrevocable and shall not be terminated
by any act of the Legacy Corporation or either Legacy Stockholder or by
operation of Law. The Legacy Corporation and each Legacy Stockholder hereby
confirms each and every action to be taken by the Stockholder Representative
pursuant to this power of attorney as if it were its own and waives any right to
make any claim against the Stockholder Representative that may arise, directly
or indirectly, as a result of the Stockholder Representative’s actions by virtue
of this power of attorney.

 

 -46- 

 

 

(c)          For clarity, the Stockholder Representative shall not be considered
the representative or agent of CHOP and CHOP shall have sole authority to make
decisions of CHOP pursuant to this Agreement.

 

12.2.          Reliance.

 

(a)          Any notice or communication delivered by Purchaser to the
Stockholder Representative shall, as between Purchaser, on the one hand, and the
Legacy Corporation and the Legacy Stockholders, on the other hand, be deemed to
have been delivered to all of the Legacy Corporation and the Legacy
Stockholders. Purchaser shall be entitled to rely exclusively upon any
communication or writings given or executed by the Stockholder Representative in
connection with any claims for indemnification and shall not be liable in any
manner whatsoever for any action taken or not taken in reliance upon the actions
taken or not taken or communications or writings given or executed by the
Stockholder Representative. Purchaser shall be entitled to disregard any notices
or communications given or made by the Legacy Corporation or the Legacy
Stockholders in connection with any claims for indemnification unless given or
made through the Stockholder Representative.

 

(b)          The Stockholder Representative shall be entitled to engage such
Representatives as the Stockholder Representative shall deem necessary in
connection with the Stockholder Representative’s exercise of its power and
authority and performance of its duties and obligations under this Agreement
and, in the absence of bad faith on the part of the Stockholder Representative,
shall be entitled to rely conclusively upon the opinions and advice of any of
such Representatives.

 

12.3.          Limitation of Liability; Indemnification.

 

(a)          Neither the Stockholder Representative nor any of his Affiliates,
as the case may be, will have any Liability to the Legacy Corporation or either
Stockholder or to any other Person with respect to actions taken or omitted to
be taken by the Stockholder Representative, except that the foregoing shall not
relieve the Stockholder Representative of any Liability with respect to any
action which is finally determined by a court of competent jurisdiction to
constitute gross negligence, bad faith or willful misconduct on the part of the
Stockholder Representative.

 

(b)          The Legacy Corporation hereby agrees to indemnify and hold harmless
the Stockholder Representative and his Affiliates (the “Stockholder
Representative Parties”), from any Losses that an Stockholder Representative
Party may suffer or incur in connection with the performance of the Stockholder
Representative’s duties and obligations in connection with this Agreement,
except to the extent such actions are finally determined by a court of competent
jurisdiction to constitute gross negligence, bad faith or willful misconduct on
the part of such Stockholder Representative.

 

12.4.          Fees and Expenses. The fees, costs and expenses of the
Stockholder Representative incurred following the Closing Date, including any
fees and expenses incurred by it in connection with the retention of any legal
counsel, experts (including expert witnesses), consultants and other
Representatives engaged by it whether involving a claim for indemnification or
otherwise, shall be borne solely by the Legacy Corporation within ten (10)
Business Days after a written request therefore is made by the Stockholder
Representative.

 

 -47- 

 

 

Article XIII
MISCELLANEOUS

 

13.1.          Severability. Any provision, including any phrase, sentence,
clause, Section or subsection, of this Agreement (other than those contained in
Article X of this Agreement, in which case, Section 10.5 shall govern with
respect to the invalidity, unenforceability, or illegality of any such
provision) that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or such provision, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

13.2.          Amendment and Waivers. No amendment, modification or discharge
(other than by payment or performance) of this Agreement shall be valid and
binding unless signed by all Parties. No waiver hereunder, shall be valid or
binding unless set forth in writing and duly executed by the Party against whom
enforcement of the amendment, modification, discharge or waiver is sought. Any
such waiver shall constitute a waiver only with respect to the specific matter
described in such writing and shall in no way impair the rights of the Party
granting such waiver in any other respect or at any other time. Neither the
waiver by any of the Parties of a breach of or a default under any of the
provisions of this Agreement, nor the failure by any of the Parties, on one (1)
or more occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder, shall be construed as a waiver of any
other breach or default of a similar nature, or as a waiver of any of such
provisions, rights or privileges hereunder. No Party shall take any action, or
fail to take any action, in concert with another Party with the primary bad
faith intent of avoiding the payment right of any other Party under this
Agreement or the License Agreement.

 

13.3.          Entire Agreement.

 

(a)          This Agreement, including the Schedules and Exhibits, and the other
Transaction Documents constitute the entire agreement among the Parties with
respect to the subject matter of this Agreement and supersedes all prior
agreements, understandings, and negotiations, whether written or oral, with
respect to the subject matter of this Agreement.

 

(b)          In the event of any inconsistency between the statements in the
body of this Agreement and those in the Schedules and Exhibits (other than an
exception expressly set forth as such in the Disclosure Schedule with respect to
a representation or warranty), the statements in the body of this Agreement will
control.

 

13.4.          Expenses. Except as otherwise expressly provided in this
Agreement, all expenses incurred by each of the Parties in connection with or
related to the authorization, preparation and execution of this Agreement and
the closing of the Contemplated Transactions, including all fees and expenses of
Representatives employed by any such Party, shall be borne solely by the Party
which has incurred such expense.

 

 -48- 

 

 

13.5.          Notice. All written notices, demands and requests of any kind
which any Party may be required or may desire to serve upon any other Party in
connection with this Agreement shall be in writing and shall be delivered only
by courier or other means of personal service which provides written
verification of receipt or by registered or certified mail return receipt
requested, or by facsimile; provided that the facsimile is promptly followed by
delivery of hard copy of such notice which provides written verification or
receipt (each, a “Notice”). Any such Notice delivered by registered or certified
mail shall be deposited in the United States mail with postage thereon fully
prepaid, or if by courier then deposited prepaid with the courier. All Notices
shall be addressed to the Parties to be served as follows:

 

If to the Legacy Corporation or the Legacy Stockholders, then to the Stockholder
Representative at:

 

Philip Harper
1877 Covered Bridge Road
Malvern, PA 19355
Fax No.: 610.647.5095

 

with a copy to (which shall not constitute notice):

 

Fox Rothschild LLP
747 Constitution Drive, Suite 100
P.O. Box 673
Exton, Pennsylvania 19341
Attention: Michael S. Harrington, Esq.
Fax No.: 610.458.7337

 

If to CHOP, then to:

 

The Children's Hospital of Philadelphia
34th Street and Civic Center Boulevard
Philadelphia, PA 19104
Attention: Steven Biener, Deputy General Counsel
Fax No.: 267.426.6128

 

with a copy to (which shall not constitute notice):

 

Morgan, Lewis & Bockius LLP
502 Carnegie Center
Princeton, NJ 08540-6241
Attention: Steven M. Cohen
Fax No.: 877.432.9652

 

If to Purchaser or the Company after the Closing:

 

Medgenics, Inc.
435 Devon Park Drive, Building 700
Wayne, PA 19087
Attention: Scott Applebaum, Esquire
Fax No.: 610.717.3390

 

 -49- 

 

 

With a copy to (which shall not constitute notice):

 

Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, Pennsylvania 19103
Attention: Brian M. Katz, Esquire
Fax No.: 215.981.4750

 

Service of any such Notice so made shall be deemed complete on the day of actual
delivery thereof as shown by the addressee’s registry or certification receipt
or other evidence of receipt, or refusal of delivery. Any Party may from time to
time by notice in writing served upon the other as aforesaid designate a
different mailing address or a different or additional person to which all such
notices or demands hereafter are to be addressed.

 

13.6.          Governing Law and Jurisdiction. This Agreement shall be governed
by, and construed in accordance with, the Laws of the State of Delaware
applicable to contracts executed in and to be performed in that state without
giving effect to any choice or conflict of law provision or rule that would
cause the application of the Law of any jurisdiction other than the State of
Delaware. All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined exclusively in any Delaware state or
federal court; provided, that venue in any action initiated by Purchaser for
specific performance of any Legacy Stockholder’s or Equityholder’s obligations
and undertakings set forth in Sections 10.1 (Confidentiality) and 10.2
(Restrictive Covenants) may, at Purchaser’s option, be at any court having
jurisdiction over such action. Each Party irrevocably consents to and submits to
(a) the exclusive jurisdiction of any state or federal court sitting in the
above-named venues, and (b) irrevocably waives, and agrees not to assert by way
of motion, defense, or otherwise, in any Legal Proceeding, any claim that it is
not subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that the Legal
Proceeding is brought in an inconvenient forum, that the venue of the Legal
Proceeding is improper, or that this Agreement or the Contemplated Transactions
may not be enforced in or by any of the above-named courts.

 

13.7.          Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE CONTEMPLATED TRANSACTIONS OR THE ACTIONS OF THE PARTIES IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT.

 

 -50- 

 

 

13.8.          Assignment; Binding Effect; No Third Party Rights. None of the
Parties shall have the right to assign this Agreement without the prior written
consent of the other Parties. Notwithstanding the foregoing, (a) Purchaser may
assign its rights and obligations under this Agreement to any Affiliate of
Purchaser; and (b) any or all of the rights and interests of Purchaser under
this Agreement (i) may be assigned to any purchaser of substantially all of the
assets of Purchaser or any of its Affiliates, (ii) may be assigned as a matter
of Law to the surviving entity in any merger, consolidation, equity interest
exchange or reorganization involving Purchaser or any of its Affiliates, and
(iii) may be assigned as collateral security to any lender or lenders (including
any agent for any such lender or lenders) or to any assignee or assignees of
such lender, lenders or agent; provided that in the case of subclause (i),
Purchaser each shall remain responsible for its obligations set forth in this
Agreement, and, in the case of subclause (i) or subclause (ii), Purchaser shall
make proper provision so that the successors and assigns shall assume the
obligations set forth in this Agreement. Subject to the preceding sentences,
this Agreement shall be binding upon and inure to the benefit of each of the
Parties and their respective heirs, successors and permitted assigns. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties hereto any legal or equitable right, remedy or claim
under or with respect to this Agreement or any provision of this Agreement.

 

13.9.          Counterparts; Execution by Electronic Means. This Agreement may
be executed in several counterparts, each of which shall be deemed an original
and all of which shall together constitute one (1) and the same instrument. The
reproduction of signatures by means of facsimile device or other electronic
means shall be treated as though such reproductions are executed originals, and
each Party covenants and agrees to provide the other Party with a copy of this
Agreement bearing original signatures within five (5) Business Days following
transmittal by facsimile or other electronic means.

 

Article XIV
INTERPRETATION; DEFINITIONS

 

14.1.          Rules of Construction. The words “hereby,” “herein,” “hereof;”
“hereunder” and words of similar import refer to this Agreement as a whole
(including any Exhibits and Schedules hereto) and not merely to the specific
section, paragraph or clause in which such word appears. All references herein
to Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement unless
the context shall otherwise require. The words “include,” “includes” and
“including” shall be deemed to be followed by the phrase “without limitation.”
The definitions given for terms in this Article XIV and elsewhere in this
Agreement shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. Except as otherwise
expressly provided herein, all references to “dollars,” “$” or “$” shall be
deemed references to the lawful money of the United States. The use of “or” is
not intended to be exclusive unless expressly indicated otherwise.

 

 -51- 

 

 

14.2.          Certain Terms.

 

(a)          Capitalized terms not defined elsewhere herein shall have the
following meanings ascribed to them below:

 

“Affiliate” means, at the time of determination: (i) any Person that directly or
indirectly through one (1) or more intermediaries controls, is controlled by or
under common control with the Person specified; (ii) any director, manager (to
the extent the Person is a limited liability company), officer or Subsidiary of
the Person specified; and (iii) any spouse, parent, child, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law of the Person specified. The term “control” (including, with
correlative meaning, the terms “controlled by” and “under common control with”),
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to elect a majority of the board of directors (or other
governing body) or to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting Securities, by
Contract or otherwise. In any event and without limiting the generality of the
foregoing, any Person owning 10% or more of the voting Securities of another
Person shall be deemed to control that Person.

 

“Annual Net Sales” means the combined Net Sales that occur within each Annual
Period.

 

“Books and Records” means, with respect to a Person, all records, documents,
lists and files relating to such Person, its assets and properties, and its
business, including executed originals (or copies of executed originals when
executed originals are not available) of all Tax Returns, Contracts, purchase
orders, sales orders, price lists, lists of accounts, customers, suppliers,
employees, contractors, consultants and other personnel, shipping records, all
product, business and marketing plans, sales and product brochures, and catalogs
and other sales literature and materials, historical sales data and all books,
ledgers, files, financial statements and other financial and accounting records
(and related work papers and correspondence from accountants), minute books,
deeds, title policies, computer files, programs and retrieved programs,
environmental studies and plans and business records, in each case, whether in
hard copy, electronic form or otherwise.

 

“Business” means any and all uses of the Product to diagnose, treat or cure any
disease in humans including any conditions involving the central nervous system,
such as Attention Deficit Hyperactivity Disorder, 22q11 deletion or duplication
syndrome, anxiety, schizophrenia, Tourette’s Syndrome, other behavioral
disorders and other cognition-related disorders.

 

“Business Day” means any day that is not a Saturday, a Sunday or other day on
which banks are required or authorized by law to be closed in Philadelphia,
Pennsylvania.

 

“CHOP Patent Rights” has the meaning set forth in the CHOP License Agreement.

 

“Claim” means any written or oral demand, claim, complaint, suit, action, cause
of action, investigation, proceeding or notice by any Person alleging actual or
potential Liability for any Loss, or for any Default under any Law, Contract,
Permit, Employee Benefit Plan or other instrument or agreement, including any
written or oral demand, claim, complaint, suit, action, cause of action,
investigation, proceeding or notice which may be subject to errors and omissions
(or similar) insurance or otherwise relate to the professional competence of the
Company’s employees.

 

 -52- 

 

 

“Code” means the Internal Revenue Code of 1986 and the rules and regulations
promulgated thereunder, as amended and supplemented from time to time, or any
successors thereto.

 

“Commercialize” means activities constituting marketing, promoting,
distributing, offering for sale and selling the Product.

 

“Commercially Reasonable Efforts” means the carrying out of activities in a
sustained and diligent manner and using efforts and resources that are
comparable to the efforts and resources commonly used by a company with similar
resources as the Purchaser, for products or services of similar market potential
at a similar stage of development or product life, based on conditions then
prevailing and taking account of competition, technological relevance or
obsolescence, changes in regulatory status and law and changes in reimbursement
rates, policies and procedures.

 

“Company Patent Rights” means (a) the Patent Rights listed in Section 4.10(a) of
the Disclosure Schedule; (b) any priority documents to which the Patent Rights
of subpart (a) claim priority; (c) any continuations (including
continuations-in-part solely to the extent of claims entirely supported in the
specification and entitled to the priority date of the parent application),
continued prosecution applications, substitutions, divisions, extensions and
term restorations, registrations, confirmations, reexaminations, renewals or
reissues of subpart (a) and (b) above; (d) any corresponding foreign Patent
Rights to the foregoing; (e) any patents issuing on the foregoing; and (f) any
existing or future Intellectual Property owned or controlled by the Company,
whether or not listed in Section 4.10(a) of the Disclosure Schedule.

 

“Computer Software” means all computer software (including source and object
code), owned or licensed, whether for general business usage (e.g., accounting,
word processing, graphics, spreadsheet analysis, etc.) or specific,
unique-to-the-business usage (e.g., order processing, manufacturing, process
control, design, shipping, etc.), all computer operating security or programming
software, owned or licensed, and all documentation relating to any of the
foregoing, excluding COTS Software.

 

“Consent” means any consent, approval, authorization, waiver, grant, franchise,
concession, certificate, exemption, Order, registration, declaration, filing,
report, or notice or exemption with or to any Person.

 

“Consideration Shares” means Purchaser Common Shares, deliverable to the
Equityholders in accordance with their respective Pro Rata Share and the
Equityholder Instructions, based on Milestone Payments or Earnout Payments.

 

“Contemplated Transactions” means the sale and purchase of the LLC Equity
Interests hereunder and all of the transactions ancillary thereto which are
referred to in this Agreement.

 

 -53- 

 

 

“Contract” means, with respect to any Person, any contract, Lease, agreement,
instrument, undertaking or other commitment, whether written or oral, to which
such Person is, or such Person’s properties, operations, business or assets are,
bound.

 

“Copyrights” means registered copyrights, copyright applications, mask works and
unregistered copyrights.

 

“COTS Software” means software that is readily obtainable by the Company under
“shrink wrap,” “click wrap” other “click through” or standard form licensing
agreement without material cost or expense.

 

“DEA” means the U.S. Drug Enforcement Administration.

 

“Default” means, with respect to a Contract, Order, Law, Employee Benefit Plan,
Organizational Document or other instrument or agreement, (i) a violation,
breach or default, (ii) the occurrence of an event that (with or without the
passage of time or the giving of notice or both) would constitute a violation,
breach or default, or (iii) the occurrence of an event, that (with or without
the passage of time or the giving of notice or both) would give rise to a right
of damages, specific performance, termination, renegotiation or acceleration
(including the acceleration of payment).

 

“Develop” means pre-clinical, clinical, CMC and regulatory activities directed
to obtaining the FDA’s approval of a NDA of the Product.

 

“Employee Benefit Plan” means each “employee benefit plan” (as described in
Section 3(3) of ERISA), and any other written or unwritten deferred
compensation, pension, profit sharing, stock option, stock purchase, phantom
stock, restricted stock or other equity-based award, change of control,
severance or termination pay, savings, group insurance or retirement plan,
agreement, arrangement or policy, and all vacation pay, severance pay, incentive
compensation, commission, consulting, bonus and other employee benefit or fringe
benefit plans, policies or arrangements sponsored, maintained by, contributed to
or required to be contributed to by the Company or any ERISA Affiliate or with
respect to which the Company or any ERISA Affiliate has any current or
contingent Liability.

 

“Employees” means all of the following: (i) all persons who are active employees
of the Company on the Closing Date, including such employees who on the Closing
Date are on vacation, on a regularly scheduled day off from work, or on
temporary leave for purposes of jury duty or annual two (2) week national
service/military duty; (ii) employees of the Company who on the Closing Date are
on approved non-medical leaves of absence and for whom one hundred eighty (180)
calendar days or less have elapsed since their last day of active employment;
and (iii) employees of the Company who are on disability or medical leave and
for whom one hundred eighty (180) calendar days or less have elapsed since their
last day of active employment.

 

“Encumbrance” means, with respect to any asset, any security interest, lien,
encumbrance, pledge, mortgage, charge, conditional or installment sales
Contract, title retention Contract, transferability restriction, community
property or other spousal or partner interest or other burden of any nature
whatsoever attached to or adversely affecting such asset.

 

 -54- 

 

 

“Environmental Laws” means all Laws relating to pollution or protection of the
environment (including ambient air, surface water, groundwater, land, or surface
or subsurface strata) including Laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, chemicals, petroleum, or
industrial, toxic or hazardous substances or wastes into the environment and
Laws relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of any of the foregoing including the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
§ 9601 et. seq. (“CERCLA”), the Resource Conservation and Recovery Act, 42
U.S.C. § 6901 et. seq., and the rules and regulations promulgated under any of
the foregoing, all as amended and supplemented from time to time, and together
with any successors thereto.

 

“Equity Interests” means the Legacy Equity Interests and the LLC Equity
Interests.

 

“ERISA” means the Employment Retirement Income Security Act of 1974 and the
rules and regulations promulgated thereunder, as amended and supplemented from
time to time, or any successors thereto.

 

“ERISA Affiliate” means any Person that is included with the Company in a
controlled group or affiliated service group under Sections 414(b), (c), (m) or
(o) of the Code.

 

[ *** ].

 

“FDA” means the United States Food and Drug Administration, or a successor
agency in the United States with responsibilities comparable to those of the
United States Food and Drug Administration.

 

“FDA Regulatory Filings” means all applications, submissions, reports or other
documents, submitted or required to submitted to the FDA, including but not
limited to NDAs, amendments or supplements to any such applications, annual
reports, safety reports, including adverse event reports, establishment
registrations, and listing of drugs reports.

 

“FDC Act” means the Federal Food, Drug and Cosmetic Act, as amended.

 

“First Commercial Sale” means, on a country-by-country basis, the first
commercial transfer or disposition for value of Product, Improved Product, or
NCE, as applicable, in such country to a Third Party by the Company, or any of
its Affiliates or sublicensees.

 

“GAAP” means generally accepted accounting principles in the United States.

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 -55- 

 

 

“Governmental Entity” means any court, tribunal, arbitrator, authority, agency,
commission, official or other instrumentality of the government of the United
States or of any foreign country, any state or any political subdivision of any
such government (whether state, provincial, county, city, municipal or
otherwise).

 

“Harper Indebtedness” means all amounts owed to Harper pursuant to that certain
Promissory Note issued by the Company to Harper and dated January 1, 2014.

 

“Hazardous Materials” means all explosive or regulated radioactive materials or
substances, hazardous or toxic substances, reactive, corrosive, carcinogenic,
flammable or hazardous pollutant or other substance, hazardous wastes or
chemicals, petroleum or petroleum distillates, natural gas or synthetic gas,
asbestos or asbestos containing materials and all other materials or chemicals
regulated pursuant to any Environmental Laws, including any “hazardous
substance” or “hazardous waste” as defined in Environmental Laws, materials
listed in 49 C.F.R. §172.101, materials defined as hazardous pursuant to §
101(14) of CERCLA, special nuclear or by product material, as defined by the
Atomic Energy Act of 1954, 42 U.S.C.A. §3011 et seq. and the rules and
regulations promulgated thereunder.

 

“Improved Product” means [ *** ].

 

“Indebtedness” means, with respect to a Person, any obligations of such Person:
(i) for borrowed money, including related fees and expenses; (ii) evidenced by
notes, bonds, debentures or similar instruments; (iii) for the deferred purchase
price of goods or services (other than trade payables or accruals incurred in
the ordinary course of business consistent with past practices); (iv) all
obligations under terms that are or should be, in accordance with GAAP, as
consistently applied by the Legacy Corporation in accordance with past
practices, recorded as capital leases; (v) Liabilities in respect of unfunded
vested benefits under any Employee Benefit Plan; or (vi) in the nature of
guarantees of the obligations described in clauses (i) through (v) above of any
other Person.

 

“Indication” means (a) ADHD, (b) [ *** ], (c) chromosome 22q11.2 deletion or
duplication, (d) [ *** ], (e) [ *** ], (f) [ *** ], (g) [ *** ], and (h) [ ***
].

 

“Intellectual Property” means, collectively, (i) all inventions (whether
patentable or unpatentable, whether or not reduced to practice, and whether or
not filed with the U.S. Patent and Trademark Office or a non-U.S. patent
office), all improvements thereto, and all Patents, and all foreign counterparts
thereof; (ii) all Trademarks, fictitious names, brand names, brand marks, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof, and all applications, registrations, and renewals in
connection therewith; (iii) all copyrightable works, all Copyrights, and all
applications, registrations, and renewals in connection therewith; (iv) all mask
works and all applications, registrations, and renewals in connection therewith;
(v) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques; technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information,
methods, schematics, technology, discoveries and inventions; any biological,
chemical, biochemical, toxicological, pharmacological and metabolic material and
information relating thereto, formulation, clinical, analytical and stability
information and data; and business and marketing plans and proposals); (vi) all
Computer Software; (vii) all other proprietary rights; (viii) all copies and
tangible embodiments of any of the foregoing (in whatever form of medium); (ix)
any and all rights to sue for Claims and remedies against past, present and
future infringement, dilution or misappropriations of any or all of the
foregoing, and rights for priority and protection of interests therein under the
Laws of any jurisdiction; and (x) goodwill associated with any of the foregoing.

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 -56- 

 

 

“Knowledge” or “to the Knowledge of” and any other similar phrase or variation
thereof means (i) in the case of any Legacy Stockholder, the actual knowledge of
such Legacy Stockholder, (ii) in the case of CHOP, the actual knowledge of Bryan
Wolff, Steve Biener, Andrew Hardy and Stephanie Laste, and (iii) in the case of
either the Legacy Corporation or the Company, the actual knowledge and the
knowledge, following such inquiries and investigations as would be deemed
appropriate by a reasonable businessperson engaged in a business similar to the
Business in the prudent management of his or her business affairs, of Philip
Harper and Hakon Hakonarson.

 

“Law” means, with respect to any Person, any applicable law, statute, treaty,
ordinance, rule, regulation, Order, pronouncement having the effect of law, or
other requirement of any Governmental Entity, including the Foreign Corrupt
Practices Act of 1977, and those covering safety, health, transportation,
bribery, securities regulation, insurance, record keeping, zoning, employment,
Tax, anti-discrimination, antitrust, wage and hour and price and wage control
matters, to which, in each of the foregoing cases, such Person is, or any of
such Person’s properties, operations, business or assets are, bound or subject.

 

“Lease” means any lease, agreement (whether verbal or written) or tenancy for
property or assets, together with all subleases, amendments, extensions,
addenda, assignments, waivers and all other rights of use and/or occupancy, and
Contracts and documents relating to any of the foregoing.

 

“Legacy Pro Rata Amount” means, with respect to each Legacy Stockholder, a
percentage set forth in Exhibit A, which may be updated by the Legacy
Stockholders, in writing, with up to five (5) Business Days’ prior notice.

 

“Legal Proceeding” means any audit, Claim or legal, administrative or other
similar proceeding by or before any Governmental Entity (including any
self-regulating organization) or arbitration or alternative dispute resolution
panel.

 

“Liabilities” means, without limitation, any direct or indirect liability,
Indebtedness, guaranty, endorsement, Claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured
or unsecured.

 

 -57- 

 

 

“Listed Chemical” means any List I Chemical, List II Chemical, and Schedule
Listed Chemical Product as those terms are defined under the Controlled
Substances Act or regulations implemented by the DEA.

 

“Loss” or “Losses” means, with respect to any fact, event or circumstance,
including any Loss Event, any and all Liabilities, Encumbrances, penalties,
fines, settlements, or Claims, including reasonable attorneys’, experts’ and
accountants’ fees, expenses and disbursements, consequential damages and court
costs in connection with any of the foregoing (including any costs of defense
incurred by an Indemnified Party in the event it is required or entitled to
defend a Third Party Claim under Section 8.4(b)(i)), incurred by a Person in
connection with such fact, event or circumstance, including any such Loss Event
(including any of the foregoing arising out of events, facts or circumstances
that have occurred on or prior to the Closing Date, even though the Claim in
connection with such events, facts or circumstances may not be filed or come to
light until after the Closing Date); provided, however, that except in the case
of any Third Party Claims, Losses shall not include any damages based on
punitive or special damages.

 

“Loss Event” means any fact, event or circumstance which has resulted in or is
reasonably likely to result in a Loss or a Third Party Claim.

 

“Material Adverse Effect” means, with respect to any event or circumstance, an
effect caused thereby or resulting change therefrom that is or could be
materially adverse as to, or in respect of, the condition (financial or
otherwise), business, operations, results of operations, prospects, affairs,
assets, capitalization, licenses, permits, rights or privileges (whether
contractual or otherwise) of a specified Person or Persons when taken as a
whole, including, any serious adverse events reported in connection with the
ongoing Phase 1b study of the Product.

 

“NCE” means [ *** ].

 

“NDA” means a New Drug Application or a Biologics License Application, as
applicable, as defined in the FDC Act or United States Public Health Services
Act, as each may be amended from time to time, or any rules, regulations and
requirements promulgated thereunder (including all additions, supplements,
extensions, and modifications thereto) or any similar foreign application.

 

“Net Sales” means the gross amount invoiced or otherwise billed by the Company
or its Affiliates or sublicensees (the “Selling Party”) for sales of Products,
Improved Products, or NCEs, as applicable, to a Third Party purchaser from and
after the Closing Date, less the following to the extent reasonable and
customary (collectively, “Net Sales Deductions”):

 

(a)          [ *** ];

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 -58- 

 

 

(b)          [ *** ];

 

(c)          [ *** ];

 

(d)          [ *** ]; and

 

(e)          [ *** ];

 

provided that all of the foregoing deductions shall be calculated in accordance
with then-current GAAP or international financial reporting standards,
consistently applied during the applicable calculation period throughout the
Selling Party’s organization. To the extent that Net Sales Deductions are based
on estimates, such estimates will be adjusted to actual on a periodic basis.
Notwithstanding the foregoing, the supply of the Products, Improved Products, or
NCEs for (i) samples, (ii) charitable donations or compassionate use, or
(iii) any clinical study materials used in any clinical study shall not be
included within the computation of Net Sales; provided that such supply is
provided at no cost.

 

A sale of Products, Improved Products, or NCEs is deemed to occur in accordance
with GAAP or international reporting standards, consistently applied during the
applicable calculation period throughout the Selling Party’s organization.

 

For sake of clarity and avoidance of doubt, the transfer of Products, Improved
Products, or NCEs by a Selling Party to another Affiliate of such Selling Party
or to a licensee or sublicensee of such Selling Party for resale shall not be
considered a sale; in such cases, Net Sales shall be determined based on the
amount invoiced or otherwise billed by such Affiliate or licensee or sublicensee
to an independent Third Party, less the Net Sales Deductions allowed under this
Section.

 

[ *** ].

 

“Order” means any judgment, order, writ, decree, injunction, award, ruling or
other determination whatsoever of any Governmental Entity or any other entity or
body (including any arbitration or similar panel) whose finding, ruling or
holding is legally binding or is enforceable as a matter of right (in any case,
whether preliminary or final).

 

“Organizational Documents” means, with respect to Person that is an entity, the
articles or certificate of incorporation or formation, bylaws, operating
agreement, certificate of partnership or other governing or constituent
documents of such Person.

 

“Patent Rights” means any of the following, whether existing now or in the
future anywhere in the world: issued patent, including inventor’s certificates,
substitutions, extensions, confirmations, reissues, re-examination, renewal or
any like governmental grant for protection of inventions, and any pending
application for any of the foregoing.

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 -59- 

 

 

“Patents” means all letters patent and pending applications for patents of the
United States and all countries foreign thereto, and all similar instruments,
including any and all substitutions, regional patents, certificates of invention
and utility models, rights of license or otherwise to or under letters patent,
certificates of intention and utility models which have been opened for public
inspection and all reissues, renewals, reexaminations, divisions, continuations,
continuations-in-part, extensions thereof, inventors’ certificates,
supplementary protection certificate (SPCs), and patent term extensions (PTEs)
or the like.

 

“Permit” means, with respect to any Person, any license, permit, authorization,
approval, certificates of authority, registration, qualification, easement,
rights of way or similar consent or certificate granted or issued to such
Person.

 

“Permitted Encumbrance” means: (i) any Encumbrance for Taxes not yet due and
payable; and (ii) any statutory Encumbrance arising in the ordinary course of
business by operation of Law with respect to a Liability that is not yet due and
payable as of the Closing Date.

 

“Person” means any natural person, corporation, general partnership, limited
partnership, limited liability company, proprietorship, joint venture, trust,
association, union, entity, or other form of business organization or any
Governmental Entity whatsoever.

 

“Phase III Clinical Trial” means a human clinical trial of a Product in an
indicated patient population that is designed to establish that such Product is
safe and efficacious for its intended use and to determine the benefit/risk
relationship, warnings, precautions, and adverse reactions that are associated
with such Product, which trial is intended to support marketing approval of such
Product, including all tests and studies that are required by the FDA from time
to time, pursuant to Law or otherwise, including the trials referred to in 21
C.F.R. §312.21(c), as amended, [ *** ].

 

“Primary Indication” means an indication related to the treatment of Attention
Deficit Hyperactivity Disorder or 22q11 deletion or duplication syndrome.

 

“Pro Rata Share” means, with respect to each Equityholder, a percentage set
forth in Exhibit A, which may be updated by the Stockholder Representative and
CHOP, in writing, with up to five (5) Business Days’ prior notice.

 

“Product” means [ *** ].

 

“Proprietary Information” means at any date, any information of a Person, that
is not already generally available to the public (unless such information has
entered the public domain and become available to the public through fault on
the part of the Party to be charged hereunder), which constitute trade secrets,
personally identifiable financial information, or personal health information
under governing law, including: (i) financial information, including information
set forth in internal records, files and ledgers, or incorporated in profit and
loss statements, fiscal reports and business plans; (ii) all financial data,
pricing terms, information memoranda and due diligence reports relating thereto;
(iii) technology and e-commerce strategies, business plans and implementations,
inventions, algorithms, computer hardware, software and applications (including
but not limited to any Computer Software); (iv) all internal memoranda and other
office records, including electronic and data processing files and records; (v)
regulatory data packages including pediatric data package exclusivity extensions
or the like; and (vi) any other information constituting a trade secret under
the governing trade secrets law.

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 -60- 

 

 

“Purchaser Common Shares” means shares of Purchaser Common Stock.

 

“Purchaser Common Stock” means the common stock, par value $0.0001 per share, of
Purchaser.

 

“Purchaser Stock Price” means the lower of (a) the closing price of Purchaser
Common Stock as reported by the NYSE MKT exchange on the Business Day
immediately prior to the issuance of such Purchaser Common Stock, and (b) an
amount equal to the volume weighted average price for Purchaser Common Stock as
reported by the NYSE MKT for the ten (10) Trading Days immediately prior to the
date of the occurrence of the applicable Milestone Event.

 

“Real Property” means any real estate or interest therein, together with all
buildings, improvements, fixtures, easements, options to acquire real estate or
interest therein, rights to unpaid insurance proceeds in respect of losses
related to real estate, rights to unpaid condemnation awards and all other
rights in or appurtenant thereto.

 

“Register,” “Registered,” and “Registration” refer to a registration effected by
preparing and filing a Registration Statement in compliance with the Securities
Act, and the declaration or ordering of effectiveness of such Registration
Statement or document by the SEC.

 

“Registered Intellectual Property” means Patents, patent rights, registrations
for and applications to register, Trademarks, domain names, and Copyrights.

 

“Registrable Securities” means the Purchaser Common Stock issuable as Milestone
Consideration or other securities issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the Purchaser Common Stock by way of stock dividend, stock split or in
connection with a combination of shares, recapitalization or other
reorganization or otherwise.  Notwithstanding the foregoing, as to any
particular Purchaser Common Stock or other securities described above, once
issued they shall cease to be Registrable Securities when (1) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (2) they shall have been
distributed pursuant to Rule 144 (or any successor provision) under the
Securities Act, or (3) such securities may be sold without volume restrictions
pursuant to Rule 144, as determined by the counsel to Purchaser pursuant to a
written opinion letter to such effect, addressed and acceptable to Purchaser’s
transfer agent.

 

 -61- 

 

 

“Registration Holder Indemnitee” is defined in Section 11.5(a).

 

“Registration Indemnified Party” is defined in Section 11.5(c).

 

“Registration Indemnifying Party” is defined in Section 11.5(c).

 

“Registration Period” is defined in Section 11.3(a).

 

“Registration Statement” means a Registration Statement filed pursuant to the
Securities Act.

 

“Regulatory Approval” means the approval of the applicable Regulatory Authority
necessary for the testing, commercial manufacture, distribution, marketing,
promotion, offer for sale, use, import, export and sale of a Product in a
regulatory jurisdiction in the Territory, including, where required, separate
pricing and/or reimbursement approvals.

 

“Regulatory Authority” means any applicable supranational, national, regional,
state or local regulatory agency, department, bureau, commission, council or
other government entity involved in granting of Regulatory Approval for a
Product in a jurisdiction within the Territory, including, without limitation,
the FDA.

 

“Related Party Agreement” means a Contract with any current or former
equityholder, director, manager or officer of the Legacy Corporation, the
Company or any of their respective Affiliates (other than the CHOP License
Agreement).

 

“Relevant Group” means any affiliated, combined, consolidated, unitary or
similar group.

 

“Reporting Period” means each twelve-month period ending December 31.

 

“Representatives” means, as to any Person, such Person’s accountants, counsel,
consultants (including actuarial, environmental and industry consultants),
officers, directors, managers, employees, agents and other advisors and
representatives.

 

“Restrictive Covenants” means the covenants of the Legacy Stockholders and
Equityholders contained in Article X.

 

“SEC Guidance” means (i) any publicly available written guidance, or rule of
general applicability of the SEC staff, or (ii) written comments, requirements
or requests of the SEC staff to Purchaser in connection with the review of a
Registration Statement.

 

“Securities” means, with respect to a Person that is an entity, any shares of
capital stock, membership interests, options, warrants, notes, bonds or other
equity or debt securities of such Person which have ever been offered or sold by
such Person.

 

 -62- 

 

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Stockholder Representative” means Harper.

 

“Subsidiary” means any entity with respect to which a specified Person (or a
subsidiary thereof) owns a majority of the voting Securities or otherwise has
the power to vote or direct the voting of sufficient Securities to elect a
majority of the directors or managers.

 

“Tax Returns” means any return, declaration, report, Claim, or information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.

 

“Taxes” means all federal, state, local, or foreign net or gross income, gross
receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank
shares, withholding, payroll, employment, excise, property, deed, stamp,
alternative or add-on minimum, environmental, profits, windfall profits,
transaction, license, lease, service, use, occupation, severance, energy,
unemployment, social security, worker’s compensation, capital, premium, surplus
lines, unclaimed property, or other taxes, assessments, customs, duties, fees,
levies, or other governmental charges of any nature whatever, whether disputed
or not, together with any interest, penalties, additions to tax, or additional
amounts with respect thereto.

 

“Term” means the Milestone Periods and the Earnout Periods.

 

“Territory” means worldwide, excluding Japan.

 

“Third Party” means any Person other than Purchaser, the Legacy Corporation, the
Company, the Legacy Stockholders, the Equityholders, the Stockholder
Representative, or an Affiliate of any of the foregoing.

 

“Trademarks” means registered and unregistered trademarks and service marks,
trademark and service mark applications, domain names, logos, trade names, and
trade dress.

 

“Transaction Documents” means, collectively, (a) this Agreement; (b) and all
other Contracts, instruments and certificates contemplated hereunder to be
delivered by any Party at or prior to the Closing.

 

“Transaction Expenses” means all of the costs, fees and expenses incurred by a
Party in connection with the investigating, pursuing, negotiating and completing
the Contemplated Transactions.

 

“Valid Claim” means a claim of (a) an issued and unexpired patent in CHOP Patent
Rights or Company Patent Rights, which claim has not been revoked or held
unenforceable, unpatentable or invalid by a decision of a court or other
governmental agency of competent jurisdiction, which is not appealable or has
not been appealed within the time allowed for appeal, and which has not been
abandoned, disclaimed, denied or admitted to be invalid or unenforceable through
reissue, re-examination or disclaimer or otherwise; or (b) a patent application
for a patent included within the CHOP Patent Rights or Company Patent Rights,
which is pending, which is being prosecuted in good faith, and which claim has
not been finally cancelled, withdrawn or abandoned.

 

 -63- 

 

 

(b)          Each of the following terms is defined in the Section of this
Agreement set forth opposite such term in the table below:

 

TERM SECTION AGREEMENT PREAMBLE ANNUAL PERIOD SECTION 2.3(a)(v) AUDITED PARTY
SECTION 2.5(g)(ii) BANKRUPTCY AND EQUITY EXCEPTIONS SECTION 3.1 BASE PURCHASE
PRICE SECTION 2.1 CHOP PREAMBLE CHOP LICENSE AGREEMENT BACKGROUND CLOSING
SECTION 6.1 CLOSING DATE SECTION 6.1 COMPANY PREAMBLE CONSIDERATION SECTION 2.1
DISAGREEING PARTY SECTION 2.5(g) DISCLOSURE SCHEDULE Article III DISPUTED AMOUNT
SECTION 8.4(c) EARNOUT CONSIDERATION SECTION 2.4 EARNOUT PAYMENT SECTION 2.4
EARNOUT PERIOD SECTION 2.4 EQUITYHOLDER INDEMNITEES SECTION 8.3 EQUITYHOLDER
INSTRUCTIONS SECTION 2.1 EQUITYHOLDERS BACKGROUND EXCHANGE ACT SECTION 5.6 FINAL
REPORTS SECTION 2.5(g)(iii) FUNDAMENTAL REPRESENTATIONS SECTION 8.1(a)(ii)
HAKONARSON PREAMBLE HARPER PREAMBLE INDEMNIFIED PARTY SECTION 8.4(a)
INDEMNIFYING PARTY SECTION 8.4(a) INDEMNITY NOTICE SECTION 8.4(a) LEGACY
CORPORATION PREAMBLE LEGACY EQUITY INTERESTS BACKGROUND LEGACY STOCKHOLDERS
BACKGROUND MATERIAL CONTRACT SECTION 4.11(a) M/E DISPUTED ITEMS SECTION 2.5(g)
M/E NOTICE OF DISAGREEMENT SECTION 2.5(g) M/E UNRESOLVED CHANGES SECTION 2.5(g)
MILESTONE CONSIDERATION SECTION 2.3(a) MILESTONE EVENT SECTION 2.3(a)

 

 -64- 

 

 

TERM SECTION MILESTONE PAYMENT SECTION 2.3(a) MILESTONE PERIOD SECTION 2.3(a)
NCE SECTION 2.3(a)(iv) NEGOTIATION PERIOD SECTION 7.8 NOTICE SECTION 13.5 OFFER
SECTION 7.8 OFFERING DATE SECTION 2.3(a)(i) OVERALL CAP SECTION 8.5(a) PAYMENT
STREAM SECTION 7.8 PAYMENT STREAM BUYER SECTION 7.8 PAYMENT STREAM SELLER
SECTION 7.8 PARTY OR PARTIES PREAMBLE [   ***   ] [   ***   ] PRIVACY LAWS
SECTION 4.10(d) PRIVACY POLICIES SECTION 4.10(d) PRODUCT REPORTS SECTION 2.5(b)
PROPERTY SECTION 4.8 PURCHASER PREAMBLE PURCHASER INDEMNITEES SECTION 8.2
PURCHASER SEC DOCUMENTS SECTION 5.6 REGISTRATION HOLDER INDEMNITEE SECTION
11.5(a) REGISTRATION INDEMNIFIED PARTY SECTION 11.5(c) REGISTRATION INDEMNIFYING
PARTY SECTION 11.5(c) REGISTRATION PERIOD SECTION 11.3(a) REORGANIZATION
BACKGROUND REPRESENTATION CAP SECTION 8.5(a) RESTRICTED BUSINESS
SECTION 10.2(b)(i) RESTRICTED PERIOD SECTION 10.1 SARBANES-OXLEY ACT SECTION 5.6
SEC SECTION 5.6 SELLERS Article III SETTLEMENT ARBITRATOR SECTION 2.5(g)(ii)
SURVIVAL DATE SECTION 8.1(b) THIRD PARTY CLAIM SECTION 8.4(b) THIRD PARTY CLAIM
NOTICE SECTION 8.4(b)(i) THRESHOLD AMOUNT SECTION 8.5(a)

 

[SIGNATURE PAGES FOLLOW]

 

 

*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

 -65- 

 

 

IN WITNESS WHEREOF, the Parties have executed this Equity Interest Purchase
Agreement as of the date first written above.

 

  MEDGENICS, INC.         By: /s/ Michael Cola   Print Name: Michael Cola  
Title: Chief Executive Officer       NEUROFIX THERAPEUTICS, INC.         By: /s/
Philip Harper   Print Name: Philip Harper   Title:  President & CEO      
NEUROFIX, LLC         By: /s/ Philip Harper   Print Name:  Philip Harper  
Title:  Manager       /s/ Philip Harper   Philip Harper       /s/ Hakon
Hakonarson   Hakon Hakonarson       THE CHILDREN’S HOSPITAL OF PHILADELPHIA    
    By: /s/ Madeline Bell   Print Name: Madeline Bell   Title: President & CEO

 

- Signature page to Equity Interest Purchase Agreement -

 

 

 

 

exhibit a

 

Allocation; Pro Rata Share

 

Equityholder  Pro Rata Share  The Legacy Corporation   80% CHOP   20%

 

Allocation; Legacy Pro Rata Amount

 

Legacy Stockholder  Legacy Pro Rata Amount  Harper   50% Hakonarson   50%

 

 A-1 

 

 

CHOP License Agreement

 

(Please see attached)

 

 

 

 

Appendix B

 

Equity Issuance Agreement

 

 

 

 

MEMBERSHIP INTEREST ISSUANCE AGREEMENT

 

THIS MEMBERSHIP INTEREST ISSUANCE AGREEMENT (this “Agreement”) is made on this
9th day of September, 2015, by and between neuroFix, LLC, a Delaware limited
liability company (“Company”), and The Children’s Hospital of Philadelphia, a
Pennsylvania

non-profit corporation (“CHOP”).

 

WHEREAS, Company, neuroFix Therapeutics, Inc. (“Parent”), CHOP and Medgenics,
Inc., a Delaware corporation (“Medgenics”), anticipate entering into an Equity
Interest Purchase Agreement (the “Purchase Agreement”) prior to which Parent has
agreed to transfer to Company substantially all of its assets and liabilities,
and Company has agreed to issue to CHOP a 20% membership interest in Company;

 

WHEREAS, immediately prior to the “Effective Time” (as defined below), Parent
contributed substantially all of its assets and liabilities to Company pursuant
to that certain Contribution Agreement between Parent and Company dated as of
even date herewith (the “Contribution Agreement”); and

 

WHEREAS, as of the Effective Time, Company and CHOP are entering into a License
Agreement, and in connection therewith Company desires to issue to CHOP, and
CHOP desires to receive from Company, a 20% membership interest in Assignee
pursuant to the terms of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises and agreements made
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows.

 

1.          Issuance of Membership Interest; Capitalization. Subject to the
terms and conditions hereof, as of the Effective Time, Company hereby issues to
CHOP, and CHOP hereby agrees to accept from Company, a 20% membership interest
in Company (the “Membership Interest”). Immediately following such issuance,
Parent shall own an 80% membership interest in Company.

 

2.          Effective Time. The transactions contemplated by this Agreement
shall become effective immediately after the consummation of the transactions
contemplated by the Contribution Agreement and immediately prior to the closing
of the transactions contemplated by the Purchase Agreement (the “Effective
Time”).

 

3.          No Operating Agreement; Restrictions. The parties acknowledge and
agree that because CHOP will own the Membership Interest for a moment in time
prior to the consummation of the transactions contemplated by the Purchase
Agreement, no Operating Agreement of Company shall be entered into by Parent and
CHOP. Company agrees that it shall not issue any membership interest in Company
other than as contemplated by this Agreement. Parent and CHOP agree to not
transfer their respective membership interests except to Medgenics in connection
with the Purchase Agreement. CHOP acknowledges and agrees that Company is not
making any representations or warranties regarding Company’s business or
otherwise in connection with the issuance set forth herein.

 

 

 

 

4.            CHOP Representations. In connection with the grant of the
Membership Interest hereunder, CHOP represents and warrants to Company as
follows:

 

(a)          CHOP is aware of Company’s financial condition and has acquired
sufficient information about Company to reach an informed and knowledgeable
decision to acquire the Membership Interest.

 

(b)          CHOP understands that the Membership Interest have not been
registered under the Securities Act of 1933, as amended.

 

(c)          CHOP understands that CHOP may suffer tax consequences as a result
of CHOP’s acquisition or disposition of the Membership Interest. CHOP represents
that CHOP has consulted any tax and legal advisors that CHOP deems advisable in
connection with the acquisition or disposition of the Membership Interest and
that CHOP is not relying on Company for any tax advice.

 

5.            Company Representations. In connection with the grant of the
Membership Interest hereunder, Company represents and warrants to CHOP that
Company has no assets or liabilities except for the “Contributed Assets” (as
defined in the Contribution Agreement), the “Assumed Liabilities” (as defined in
the Contribution Agreement), the Contribution Agreement and this Agreement.

 

6.            Miscellaneous.

 

(a)          Assignment; Successors and Assigns. No party may assign any of its
rights under this Agreement to any third party (whether by operation of law or
otherwise) without the prior written consent of the other party. Any assignment
of this Agreement shall not relieve the assigning party of its obligations
hereunder. This Agreement is binding upon and inures to the benefit of the
parties hereto and their respective successors and permitted assigns, and
survives the execution and delivery hereof.

 

(b)          Entire Agreement. This Agreement, the Purchase Agreement and the
documents delivered pursuant hereto and thereto constitute the entire agreement
of the parties with respect to the subject matter hereof.

 

(c)          Notices. Any notices given in connection with this Agreement shall
be in writing and shall be delivered as set forth in Section 13.5 of the
Purchase Agreement.

 

(d)          Amendment; Waiver. This Agreement may be amended or modified only
by an instrument in writing by the parties hereto. Any term or provision of this
Agreement may be waived, or the time for its performance may be extended, by the
party or parties entitled to the benefit thereof. Any such waiver is validly and
sufficiently authorized if, as to any party, it is authorized in writing by an
authorized representative of such party. The failure of any party hereto to
enforce at any time any provision of this Agreement shall not be construed to be
a waiver of such provision, nor in any way to affect the validity of this
Agreement or any part hereof, or the right of any party thereafter to enforce
each and every provision. No waiver of any breach of this Agreement shall be
held to constitute a waiver of any other or subsequent breach.

 

 

 

 

(e)          Partial Invalidity. Wherever possible, each provision hereof is to
be interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein is, for any
reason, held to be invalid, illegal or unenforceable in any respect, such
provision will be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.

 

(f)          Execution in Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed is to be deemed to be an original but all of which
taken together will constitute one and the same instrument.

 

(g)          Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the internal laws (as opposed to the conflicts
of law provisions) of the State of Delaware. The parties hereby consent to the
exclusive jurisdiction and venue of the state courts located in Delaware and the
federal courts of the United States District Court for the District of Delaware
for any claims arising under this Agreement. Under no circumstances will any
party assert any claim or cause of action in any state or federal court outside
of the foregoing.

 

[signature page follows]

 

 

 

 

IN WITNESS WHEREOF, this Membership Interest Issuance Agreement has been
executed by the parties on the date first written above.

 

  NEUROFIX, LLC       By:   Name:   Title:       THE CHILDREN’S HOSPITAL OF
PHILADELPHIA       By:                Name:   Title:

 

 

 

 

Appendix C

 

CHOP IP Policy

 

 

 

  

[tlogo.jpg] THE CHILDREN’S HOSPITAL OF PHILADELPHIA

No. A-3-4

ADMINISTRATIVE Title: Page 1 of 25 POLICY MANUAL   Effective Date:   PATENT AND
INTELLECTUAL PROPERTY POLICY 7/1/09

 

PURPOSE

 

To provide a policy that governs the treatment of Intellectual Property.

 

POLICY

 

The Hospital strives to be a world leader in the advancement of health care for
children by integrating excellent patient care, innovative research, and quality
professional education into all of its programs. Although the Hospital does not
undertake these activities principally for the purpose of developing
Intellectual Property, Intellectual Property may result from these activities.
In promulgating this policy, the Hospital seeks to achieve certain objectives,
including: (a) encouraging research and scholarship by Hospital Personnel; (b)
where appropriate, promoting the protection of Intellectual Property that may
arise in the course of Hospital activities; (c) serving the public interest by
making Intellectual Property available to the public at the earliest appropriate
time; (d) encouraging the earliest possible disclosure of specific Intellectual
Property to the Hospital in order to avoid the unintended forfeiture of rights
and to expedite the public availability of the Intellectual Property; (e)
defining the rights and obligations of Hospital Personnel and of the Hospital
with respect to Intellectual Property; (f) generating funds for scientific
investigation, clinical innovation, and research; and (g) providing an
administrative function that can assist in the administration of this policy,
including evaluating Intellectual Property, appraising and determining the
relative rights and equities of parties involved in the creation of Intellectual
Property, overseeing the filing of Patent and Copyright applications and related
documents, promoting the licensing of Intellectual Property, assisting in
obtaining funds for research that may result in the creation or further
development of Intellectual Property, and otherwise promoting the fair and
uniform application of this policy.

 

SCOPE

 

This policy applies to all Trustees, directors, officers, members of Board
committees, employees, members of the Medical Staff, and Scientists engaged in
research under the auspices, of The Children's Hospital of Philadelphia,
including The Children’s Hospital of Philadelphia Research Institute, the CHOPPA
Practice Plans (currently Children’s Anesthesiology Associates, Children’s
Health Care Associates, Children’s Surgical Associates, Radiology Associates of
Children’s Hospital, and their New Jersey affiliates), and entities controlling,
controlled by or under common control with The Children's Hospital of
Philadelphia, including, without limitation, The Children's Hospital of
Philadelphia Foundation (together, the “Hospital”), and others who conduct
research or develop Intellectual Property using Hospital Facilities, Hospital
Funds, and/or other Hospital Resources, including, without limitation, students,
residents, fellows, post-docs, trainees, technicians, scientists, physicians,
nurses, employees, administrators, occupants of the Hospital laboratories,
volunteers of the Hospital, and all persons whose grants, contracts or other
funds are administered by the Hospital, and/or whose salaries are paid directly,
or indirectly, by the Hospital, including indirectly through a University of
Pennsylvania account (all such persons under referenced Scope, “Hospital
Personnel”).

 

 

 

 

[tlogo.jpg] THE CHILDREN’S HOSPITAL OF PHILADELPHIA

No. A-3-4

ADMINISTRATIVE Title: Page 2 of 25 POLICY MANUAL   Effective Date:   PATENT AND
INTELLECTUAL PROPERTY POLICY 7/1/09

 

RELATED POLICIES                 Administrative Policy Manual   No. A-3-1  
Conflicts of Interest Administrative Policy Manual   No. A-3-5   Confidentiality
of Patient and Institutional Information Administrative Policy Manual   No.
A-3-7   Interactions with Vendors

 

DEFINITIONS

 

A.“2000 Policy” has the meaning set forth in Section II. Q.

 

B."Author" means the creator of a Work, however fixed, including the creator of
a copyrightable Work and/or the creator of Software.

 

C.“Biological Materials” means any and all tissue, fluid, material, matter or
section derived from a biological source, and any part or derivative arising
from or based on any of the foregoing, including, without limitation, amino acid
sequences, antibodies, blood, cells, cell lines, clones, genetic constructs,
germplasm, hybridomas, nucleic and ribonucleic acid sequences, organic reagents,
organisms and recombinant organisms, peptides, plasma, plasmids, proteins,
urine, and vectors).

 

D."Copyright" means the form of protection, ownership and control of the
intellectual property in a Work that is subject to the copyright laws of the
United States (applicable state law and/or Title 17 of the U.S. Code) and/or
foreign jurisdictions.

 

E.“Confidential Information” means any and all information, in whatever form
(regardless of media or format, including without limitation, oral, electronic
or on paper), whether technical or non-technical in nature (whether or not
patentable), that is or relates to, directly or indirectly, non-public Hospital
business information, non-public research information, vendor Trade Secrets or
other confidential Hospital information, including, without limitation, Data and
Inventions.

 

F.“Data” means any and all data, information and results, in whatever form
(regardless of media or format, including without limitation, oral, electronic
or on paper), whether technical or non-technical (whether or not patentable),
and in each case, any records thereof, including, without limitation, protected
health information (PHI), research protocols (clinical and non-clinical),
research plans, statements of work, technical specifications, procedures,
laboratory notebooks, research results, materials, processes, techniques,
methods, know-how, show-how, and collections of materials (such as libraries,
registries and databases).

 

 

 

 

[tlogo.jpg] THE CHILDREN’S HOSPITAL OF PHILADELPHIA

No. A-3-4

ADMINISTRATIVE Title: Page 3 of 25 POLICY MANUAL   Effective Date:   PATENT AND
INTELLECTUAL PROPERTY POLICY 7/1/09

 

G.“Effective Disclosure Date” means for purposes of Section II.Q. the earliest
of the following dates (as supported by contemporaneous written record, fixed in
a tangible or intangible form, regardless of media or format, including without
limitation, oral, electronic or on paper): (i) conception, actual reduction to
practice, creation and/or development of Intellectual Property; (ii) disclosure
of Intellectual Property to the IPA in accordance with Section II.B.; (iii)
protection of Intellectual Property (such as by the filing of a Patent or
Copyright); or (iv) third party licensing or commercialization.

 

H.“Effective Policy Date” has the meaning set forth in Section II. Q.

 

I."Gross Income" means all monies received by the Hospital from its ownership or
administration of Intellectual Property of Hospital Personnel, including
royalties, lump sum payments and milestone payments paid in consideration for
the use of Intellectual Property, but excluding sponsored research or similar
payments and payments intended to reimburse the Hospital for past or future
expenses, less any monies that the Hospital is required to pay to sponsoring
organizations, co-owners of the subject Intellectual Property and others with a
claim of right to such monies.

 

J.“Hospital” means The Children's Hospital of Philadelphia, including The
Children’s Hospital of Philadelphia Research Institute, the CHOPPA Practice
Plans (currently Children’s Anesthesiology Associates, Children’s Health Care
Associates, Children’s Surgical Associates, Radiology Associates of Children’s
Hospital, and their New Jersey affiliates), and entities controlling, controlled
by or under common control with The Children's Hospital of Philadelphia,
including, without limitation, The Children's Hospital of Philadelphia
Foundation.

 

K.““Hospital Facilities” means any facility owned, leased, licensed or otherwise
in the possession of the Hospital.

 

L.“Hospital Funds" means funds that are owned, held in trust by or for, or
administered by the Hospital, regardless of their origin. Such funds include,
but are not limited to, Hospital operating funds, Board-restricted funds,
investment funds, endowments, amounts received by the Hospital from contracts or
grants, including sub-contracts or sub-grants, amounts received by the Hospital
from contributions, gifts or awards and any income resulting from any of them.

 

M.“Hospital Personnel” means Trustees, directors, officers, members of Board
committees, employees, members of the Medical Staff, Scientists engaged in
research under the auspices, of the Hospital and others who conduct research or
develop Intellectual Property using Hospital Facilities, Hospital Funds, and/or
other Hospital Resources, including, without limitation, students, residents,
fellows, post-docs, trainees, technicians, scientists, physicians, nurses,
employees, administrators, occupants of the Hospital laboratories, volunteers of
the Hospital, and all persons whose grants, contracts or other funds are
administered by the Hospital, and/or whose salaries are paid directly, or
indirectly, by the Hospital, including indirectly through a University of
Pennsylvania account.

 

 

 

 

[tlogo.jpg] THE CHILDREN’S HOSPITAL OF PHILADELPHIA

No. A-3-4

ADMINISTRATIVE Title: Page 4 of 25 POLICY MANUAL   Effective Date:   PATENT AND
INTELLECTUAL PROPERTY POLICY 7/1/09

 

N.“Hospital Resources” means Hospital Facilities, Hospital Funds, property or
other tangible or intangible assets or resources of the Hospital, such as
Hospital equipment, inventory, Intellectual Property owned by or licensed to the
Hospital, and/or Hospital Personnel during periods when Hospital Personnel are
acting within the scope of their relationship with the Hospital or are using
Hospital Facilities, Hospital Funds, or other Hospital Resources, including
without limitation other Hospital Personnel.

 

O.“Institutional Work” has the meaning set forth in Section I.E.2.

 

P.“Intellectual Property” means any and all creations of the mind, including,
without limitation, (i) Biological Materials, (ii) Confidential Information,
(iii) Data, (iv) Inventions, (v) Patents, (vi) Works, (vii) Service Marks and
Trademarks, and (viii) Trade Secrets, and for each of the foregoing, any and all
rights that may arise or result from Intellectual Property, including, without
limitation, Patent Rights, Copyright, and any other associated right arising
from or under Intellectual Property.

 

Q.“Invention” means (whether or not patentable) any new and useful idea,
invention, know-how, process, show-how, technology, Software or discovery of any
apparatus, composition of matter, design device, formulation, machine,
manufacture, method of making, method (such as diagnostic or therapeutic),
process, new use, new life forms, or any variety of plant, and for each of the
foregoing, any improvement, enhancement, progeny, product, variant or derivative
thereof or resulting therefrom.

 

R.“Inventor” means an individual who, individually or jointly, conceives of a
definite and permanent idea of the complete and operative Invention such that it
is capable of being reduced to practice, or otherwise inventively contributes to
the conception of an Invention, and in any case, an individual who meets the
criteria for inventorship under United States Patent laws.

 

S.“IPA” means the Institutional Intellectual Property Administrator, as
described more fully in Section IV.

 

T.“IIPAC” means the Internal Intellectual Property Advisory Committee.

 

U."Net Income" means Gross Income minus the total of all costs relating to the
protection and commercialization of Intellectual Property, including without
limitation: (i) the preparation, filing and maintenance fees and costs, legal
fees and other costs relating to the protection of Intellectual Property,
including with respect to Patents or Copyrights, (ii) costs relating to the
enforcement and/or defense of Intellectual Property, including without
limitation, costs associated with litigation, disputes, legal advice and
representation, judgments, settlements, fines, and assessments; (iii) costs
relating to the commercialization of Intellectual Property, including without
limitation, production, advertising, marketing, and marketability search
expenses, and (iv) other costs incurred by the Hospital attributable to
Intellectual Property.

 

 

 

 

[tlogo.jpg] THE CHILDREN’S HOSPITAL OF PHILADELPHIA

No. A-3-4

ADMINISTRATIVE Title: Page 5 of 25 POLICY MANUAL   Effective Date:   PATENT AND
INTELLECTUAL PROPERTY POLICY 7/1/09

 

V.Patent” includes (i) one or more patents, certificates of invention,
registration or other form of protection for an Invention issued by any
government or governmental agency, domestic and foreign, including, without
limitation, re-exams, reissues, corrections and extensions thereof, (ii) all
related patent applications filed, pending and/or published, including, without
limitation, provisionals, continuations, divisions continuations-in-part,
re-examinations, any Patent Cooperation Treaty (PCT) application filed or to be
filed and all national stage applications filed therefrom, (iii) and for each of
(i) and (ii) all Patent Rights therein and thereto. The term "Patent" does not
include Copyrights, photographs or images or textual materials that do not
qualify for Patent protection under United States law.

 

W.“Patent Rights" means all rights, title, and interest in, to and under any
Invention or Patent and associated rights therein and thereto, including,
without limitation, the right to file for any such Patent and to have any such
Patent issued in the name of the owner or assignee, the right to claim any
priority right to which the Inventor, or anyone claiming under him or her, may
be entitled, all rights of a Patent owner under 35 U.S.C. §271, the right of
Patent enforcement and defense, and the right to sue and/or collect for past
damages.

 

X.“Software” means any computer code (such as a source code or object code, open
or closed), program and/or instruction set for computers and the like, in any
computer language, that provides a service or a function. Software includes such
code, program, and set regardless of the manner in which fixed, whether in
hardware, Software, firmware or otherwise. Software may be wholly original, or
be derivative in nature.

 

Y.“Service Mark” means any word, name, nickname, abbreviation, symbol, logo,
insignia, seal, crest, design or any combination thereof adopted and used to
advertise or promote a service and to distinguish that service from that of
another.

 

Z.“Trademark” means any word, name, nickname, abbreviation, symbol, logo,
insignia, seal, crest, design or any combination thereof adopted and used to
identify the source of goods and distinguish them from those manufactured or
sold by others.

 

AA.“Trade Secret” means any type of information that (a) derives independent
economic value, actual or potential, from not being generally known to or not
being readily ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use of the information, and (b) are the
subject of reasonable efforts to maintain its secrecy, including, without
limitation, business plans or strategy, customer lists and information, Data,
formulas for manufacturing a product, manufacturing processes, marketing
techniques or Software.

 

BB.“Work” means any original work of authorship fixed in a tangible or
intangible form of expression, in whatever form (regardless of media or format,
including without limitation, oral, electronic or on paper), and protectable by
Copyright, including, without limitation, abstracts, architectural designs,
articles, audiovisual presentation, dissertation, digital works, images,
Institutional Works, manuscripts, mask works, photographs, research protocols,
scholarly publications, syllabi, textbooks, theses, treatment protocols,
semiconductor chips, Software, web page and web site designs and protocols.

 

 

 

 

[tlogo.jpg] THE CHILDREN’S HOSPITAL OF PHILADELPHIA

No. A-3-4

ADMINISTRATIVE Title: Page 6 of 25 POLICY MANUAL   Effective Date:   PATENT AND
INTELLECTUAL PROPERTY POLICY 7/1/09

 

IMPLEMENTATION

 

I.OWNERSHIP OF INTELLECTUAL PROPERTY

 

A.Ownership of Intellectual Property In General

 

Except as otherwise provided in this policy, the Hospital owns all Intellectual
Property of Hospital Personnel, including any Inventions conceived, reduced to
practice, or developed in whole or in part by Hospital Personnel in the course
of research, teaching, clinical duties, or other Hospital duties or activities
or involving the use of Hospital Facilities, Hospital Funds, and/or other
Hospital Resources.

 

1.It is presumed that Hospital Personnel in conceiving, reducing to practice or
developing any Intellectual Property utilized Hospital Facilities, Hospital
Funds, or other Hospital Resources unless the Hospital Personnel is able to
prove by clear and persuasive evidence to the satisfaction of the Hospital that
(a) the Intellectual Property was conceived and developed entirely outside the
scope of the Hospital Personnel's relationship with the Hospital, entirely on
their own time, and without the use of any Hospital Facilities, Hospital Funds
or other Hospital Resources, and (b) no other Hospital Personnel participated in
the conception or development of the Intellectual Property within the scope of
their relationship with the Hospital, on Hospital time, or using Hospital
Facilities, Hospital Funds, or other Hospital Resources. The Hospital will
exclude as de minimis incidental and limited use of Hospital computers, email
and telephones in determining whether Hospital Resources were used, but such use
may bear on other issues such as whether the Intellectual Property was conceived
and developed entirely outside the scope of the Hospital Personnel's
relationship with the Hospital and entirely on their own time.

 

2.When an Inventor, Author, or other creator of Intellectual Property has
created Intellectual Property and believes that the Intellectual Property was
created wholly outside the scope of this policy, the Inventor, Author, or other
creator must promptly advise the IPA of the creation of the Intellectual
Property and provide the IPA with a written statement of all the relevant
circumstances leading to the creation of the Intellectual Property and any other
pertinent information or documentation and request confirmation that the
Hospital has no interest in the Intellectual Property. The IPA, or his/her
designee, may require additional information from the Inventor, Author, or other
creators and/or may conduct such additional investigation as he/she considers
appropriate. After receiving the requested information and completing any
additional investigation, the IPA, or his/her designee, makes a recommendation
to the IIPAC as to whether the Intellectual Property was created wholly outside
the scope of this policy. The IIPAC may conduct additional investigation if it
desires and then makes a final determination. If it is determined by the IIPAC
that the Intellectual Property was created wholly outside the scope of this
policy, the IPA, or his/her designee, will provide the Inventor, Author, or
other creator with a letter that the Hospital has no right, title or interest in
the Intellectual Property. The IPA, or his/her designee, or the IIPAC may
condition the release of such a letter on all of the Inventors, Authors, or
other creators executing an attestation, in form and substance acceptable to the
IPA, or his/her designee, or the IIPAC with respect to the facts and
acknowledging their obligations under this policy.

 

 

 

 

[tlogo.jpg] THE CHILDREN’S HOSPITAL OF PHILADELPHIA

No. A-3-4

ADMINISTRATIVE Title: Page 7 of 25 POLICY MANUAL   Effective Date:   PATENT AND
INTELLECTUAL PROPERTY POLICY 7/1/09

 

B.Agreements Affecting Ownership

 

It is Hospital policy to avoid entering into agreements with third parties
containing terms that provide to third parties ownership of the Hospital’s
rights in, to or under Intellectual Property developed, in whole or in part, by
Hospital Personnel and/or using Hospital Facilities, Hospital Funds, or other
Hospital Resources. However, where the Hospital enters into an agreement that
affects ownership, including where the Intellectual Property results from
sponsored research or other sponsored work involving agreements or arrangements
that control the Intellectual Property, the terms of the applicable agreements
or arrangements will determine the ownership of, and rights to, affected
Intellectual Property.

 

C.Restriction on Third Party Agreements

 

Certain Hospital Personnel, including Hospital Staff members of the Hospital
Medical Staff (as defined in the Hospital’s Medical Staff Bylaws), Scientists
and other persons who are faculty members at the University of Pennsylvania who
perform some or all of their duties under the auspices of the Hospital, must
obtain advance review and approval and meet other requirements with respect to
consulting relationships. Advance review and approval for other Hospital
Personnel is available on a voluntary basis. See the Hospital’s Conflicts of
Interest Policy (A-3-1). In any event, Hospital Personnel may not enter into any
agreement concerning consulting or other work if such agreement could jeopardize
the Hospital's rights under this policy or is otherwise in conflict with this
policy or the Hospital’s other policies, including the Hospital’s Conflicts of
Interest Policy. The terms of any consulting or other agreement may in no way
abrogate or limit the rights of the Hospital or the obligations of Hospital
Personnel to the Hospital unless the Hospital is a party to the agreement and an
authorized administrative signatory of the Hospital who holds the title of Vice
President or above has executed the agreement on behalf of the Hospital. Vendor
support for research also is governed by the Interactions with Vendors Policy
(A-3-7).

 

D.Freedom from Third Party Claims

 

It is the responsibility of Hospital Personnel prior to engaging in research to
ensure that the Intellectual Property generated by such research, including the
rights to any Invention conceived or reduced to practice during such research,
is free of claims of third parties. As set forth in “C” above, certain Hospital
Personnel must obtain advance review and approval and meet other requirements
with respect to consulting relationships and advance review for others is
available on a voluntary basis. In any event, where any Hospital Personnel (i)
intends to engage in research funded by entities other than Hospital, (ii)
intends to collaborate, with investigators from corporations or institutions
other than Hospital, or (iii) has any reason to believe that others may make a
claim of ownership to Intellectual Property stemming from their research, then
such Hospital Personnel must assure that the IPA is aware of such circumstances
at the earliest feasible time and far enough in advance so that potential issues
concerning the rights to such Intellectual Property can be resolved before their
conception or reduction to practice or other creation.

 

 

 

 

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E.Ownership of Copyrights In General

 

As more fully described in Sections I.E.1. through I.E.4. below, all rights in
Copyright generally remain with the Author(s) unless the Work is an
Institutional Work.

 

1.Books, Articles, and Similar Works

 

In keeping with academic tradition, the Hospital does not claim ownership of
books, articles, and similar works that otherwise contain no Intellectual
Property owned by the Hospital, where the intended purpose is to disseminate the
results of academic or scholarly activities by students, residents, fellows,
post-docs, trainees, and faculty members. Such works include those of students
created in the course of their educations, such as dissertations, papers, and
articles. By way of example, Copyright in an article submitted to a scholarly or
professional journal normally vests in the Author(s) of the contribution
initially, and may be transferred to the publisher by express agreement.
Similarly, the Hospital claims no ownership of popular nonfiction, novels,
poems, musical compositions, or other works of artistic imagination that are not
Institutional Works.

 

2.Institutional Works Protectable By Copyright

 

The Hospital retains ownership of all Institutional Works and resulting
Intellectual Property therein and thereto. Institutional Works means all works
of authorship (i) commissioned by the Hospital, created for Hospital purposes or
supported by a direct allocation of funds through the Hospital for the pursuit
of a specific project, including without limitation, “works made for hire,”
which includes work assigned to Hospital Personnel or developed by Hospital
Personnel during or within the scope or performance of their Hospital employment
or engagement (regardless of whether the work is in the course of sponsored
research, unsponsored research, or non-research activities), including without
limitation, a computer program developed by employed or contracted staff in
Hospital’s Information Systems Department for the Hospital’s use; a web-based
application, service or tool, a toolkit that is written by physicians, nurses
and social workers in one of Hospital’s disease centers for parents of children
with that disease, that includes, with Hospital permission, Hospital-developed
protocols; a book written by a Hospital faculty physician that would have met
the requirements of Section I.E.1. except that it was written with more than
insubstantial assistance from Hospital nurses and administrators during periods
when they were acting within the scope of their relationship with the Hospital;
(ii) created using Hospital Facilities, Hospital Funds, or other Hospital
Resources; (iii) created by Hospital Personnel at the Hospital that would
otherwise be of the type included in Section I.E.1., but are created during
periods they are supposed to be performing their assigned Hospital duties (i.e.,
in dereliction of their Hospital duties) or utilize Hospital Facilities,
Hospital Funds, or other Hospital Resources (faculty may make insubstantial use
of their secretaries, computers, etc.), including without limitation, a musical
composition written by a salaried employee who composed the work during work
hours in lieu of providing the specific services at the Hospital the employee
was required to provide; or (iv) otherwise subject to third party contractual
obligations, (collectively, “Institutional Works”). With respect to Works
commissioned directly or indirectly by the Hospital, it is the responsibility of
all Hospital Personnel to ensure that all non-Hospital Personnel sign an
appropriate written agreement conveying ownership of Institutional Works and
Copyrights therein and thereto to the Hospital; however, failure to obtain such
agreement does not adversely impact any rights the Hospital has in such
Institutional Works and Copyrights.

 

 

 

 

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3.Determination of Equities in Copyright

 

As set forth in Sections I.E.2., the Hospital asserts the Copyright interest in
materials generated as a result of assigned Hospital duty or using Hospital
Facilities, Hospital Funds, or other Hospital Resources. Accordingly, the
Copyright should be secured in the name of The Children's Hospital of
Philadelphia. Federal Copyright registration should not be sought without
informing and obtaining advice from the IPA or the Office of General Counsel.

 

4.Sponsor’s Rights to Income From Copyright

 

Where the Hospital entered into an agreement or arrangement that supported all
or part of the development of the copyrightable materials, the Hospital and the
Author(s), Inventor(s), creator(s) or other participant(s) in the project may be
obliged to adhere to the conditions of the grant or contract as stipulated by
the sponsor. For example, the sponsor may have a right to part, or all, of the
income derived from the sale of sponsor-supported materials that are
copyrighted.

 

F.Software

 

Software, to the extent not protectable by Patent law, generally is governed by
the provisions in Section 1.E. relating to Copyright; provided, however, in
those situations where the Copyright remains with the Author(s) and does not
vest in the Hospital, the Hospital enjoys the rights set forth in Sections
I.F.1. and I.F.2. Software protectable by Patent law is not subject to the
provisions of this policy relating to Copyright or Software, but is subject to
the other provisions of this policy.

 

 

 

 

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1.Hospital Royalty Free Right to Use Software

 

In recognition of the special relationship between the Hospital and Hospital
Personnel, and the practical difficulty of defining the equities in the various
circumstances under which Software may emerge, the Hospital has the absolute,
unrestricted right to use without charge, for any purpose, any Software created
by, or through, the efforts of Hospital Personnel developed within the scope of
the Hospital Personnel's relationship with the Hospital or using Hospital
Facilities, Hospital Funds or other Hospital Resources.

 

2.Hospital Non-Exclusive Right To Market Software

 

In addition to Section I.F.1., the Hospital has a non-exclusive right to market
or license any Software created by Hospital Personnel within the scope of
Hospital Personnel's relationship with the Hospital or using Hospital
Facilities, Hospital Funds or any other Hospital Resources. If the Hospital
exercises its marketing right, whether acting alone or in concert with an
external developer, its revenues will be allocated in accordance with Section
III hereof.

 

3.Request to Waive Non-Exclusive Marketing Rights To Software

 

The Author(s) of any item of Software subject to Section I.F.2. may request in
writing to the IPA that the Hospital waive its non-exclusive marketing rights.
Such request should include a description of the Software sufficient to
determine whether commercial potential exists. The IPA, or his/her designee, may
require additional information from the Author(s) and/or may conduct such
additional investigation as he/she considers appropriate. After receiving the
requested information and completing any additional investigation, the IPA, or
his/her designee, makes a recommendation to the IIPAC as to whether to the
Hospital should waive its non-exclusive marketing rights. The IIPAC may conduct
additional investigation if it desires and then makes a final determination in
its sole discretion whether to grant or deny this request.

 

4.Hospital Retention of Commissioned Software

 

In the case of Software that vests in the Hospital, all Authors, Inventors,
creators, or other participants in the project are required, upon the request of
the Hospital, to waive in writing any intellectual and/or financial interest in
the product they might otherwise enjoy.

 

5.Sponsor’s Rights To Income From Software

 

Where the Hospital entered into an agreement or arrangement that supported all
or part of the development of Software, the Hospital and the Author(s),
Inventor(s), creator(s) or other participant(s) in the project may be obliged to
adhere to the conditions of the grant or contract as stipulated by the sponsor.
For example, the sponsor may have a right to part, or all, of the income derived
from the sale of sponsor-supported Software.

 

 

 

 

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II.ADMINISTRATION OF INTELLECTUAL PROPERTY

 

A.Implementation of Procedures

 

The IPA and/or the Translational Medicine & Science Board Committee may, from
time to time, establish procedures relating to the disclosure to the Hospital
and administration of Intellectual Property, including without limitation,
Inventions and Copyrights. These procedures may require the submission of
manuscripts, papers, grants, notes, workpapers, summaries of oral presentations,
and other information designed to facilitate the disclosure, evaluation, and/or
protection of Intellectual Property.

 

B.Disclosure Requirement

 

In order to preserve the Hospital's rights to Intellectual Property, including,
without limitation, Inventions and Copyrights, and assure compliance with the
relevant Patent and Copyright laws, all Intellectual Property and supporting or
underlying Data relating to Intellectual Property are to be disclosed fully and
as promptly as feasible by each Inventor, Author, or other creator to the IPA or
the Department of Technology Transfer by completing a Technology Disclosure Form
available from the Department of Technology Transfer and/or online on the
Hospital’s intranet (in The Children’s Hospital of Philadelphia Research
Institute section under Tech Transfer). Disclosure is required of all
Intellectual Property conceived, reduced to practice or developed by Hospital
Personnel while they are Hospital Personnel, even if the Hospital Personnel
believes that the Hospital does not have rights to the Intellectual Property;
provided, however that disclosure is not required for Books, Articles, and
Similar Works to which the Hospital claims no rights, as described above in
I.E.1.

 

C.Invention Disclosure Necessary to Avoid Forfeiture

 

Disclosure of an Invention to the IPA or Department of Technology Transfer must
substantially precede the first occasion of an Inventor's publicly disclosing
(orally, in a poster, in an abstract, or otherwise), publishing (in print or
on-line), commercially using, publicly using, or offering the Invention for
sale. Failure to disclose such Inventions in advance of public disclosure may
result in the irrevocable loss of rights to the Invention in the United States
or in various foreign countries pursuant to their respective Patent laws.

 

D.Intellectual Property Assignment Agreement

 

All Hospital Personnel agree and are required to execute an Intellectual
Property assignment agreement or such other forms acknowledging the Hospital’s
rights pursuant to this policy, when requested by the Hospital to do so, and
further agree that such execution may be a condition precedent to beginning or
continuing employment, membership on the Hospital Medical and Research Staffs,
participation in research, applying or receiving research grants, contracts or
awards, or use of Hospital Facilities, Hospital Funds or other Hospital
Resources. Notwithstanding the above, all Hospital Personnel agree to be and are
bound by this policy, as it may be amended from time to time, irrespective of
whether they have signed such an agreement and the absence of a signed agreement
does not adversely impact any rights the Hospital has in Intellectual Property.
The Intellectual Property Assignment Agreement is available from the Department
of Technology Transfer and/or online on the Hospital’s intranet (in The
Children’s Hospital of Philadelphia Research Institute section under Tech
Transfer).

 

 

 

 

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E.Assistance and Cooperation in Protecting Intellectual Property

 

Where the Hospital is entitled to own Intellectual Property, including without
limitation, Inventions and Works, pursuant to this policy, each Inventor,
Author, or other creator will: (a) assign to the Hospital his/her right, title,
and interest in, to and under Intellectual Property, including Patent Rights
and/or Copyrights; (b) execute Patent and Copyright applications and related
documents relating to the Intellectual Property when requested by the Hospital;
(c) execute such other agreements and undertakings as the Hospital believes to
be reasonably necessary or appropriate to protect Intellectual Property; (d)
give all reasonable help in the procurement, maintenance, and enforcement of the
Patents and Copyrights; and (e) otherwise reasonably assist the Hospital and/or
its assignee(s) in securing and maintaining of all Intellectual Property in the
name of the Hospital (or its assignee).

 

F.Evaluation of Disclosures

 

Upon receipt of a disclosure relating to Intellectual Property, the Hospital
will, in its sole discretion, decide upon the method for evaluating and
administering the subject Intellectual Property.

 

G.Procedures For Protection of Inventions

 

With respect to Inventions, the Hospital may elect in its sole discretion
whether or not to seek Patent protection, or pursue any other alternative
procedures intended to protect, maintain, and best fulfill the objectives of
this policy. In most instances where the Hospital elects to seek Patent
protection, the Hospital's primary interest will be in obtaining United States
Patent protection, if available. The Hospital will not normally file Patent
applications in all countries in which Patents might be granted, but may, at its
discretion, file for Patents in certain foreign countries. If an Inventor is
interested in personally funding all, or part, of the expense of foreign filing
for an application the Hospital would not otherwise file, he/she should so
notify the IPA in writing within six (6) months from the filing of the Patent
application in the United States, whereupon the Inventor and IPA, or his/her
designee, will discuss the terms upon which such foreign filing should be
undertaken. The IPA, or his/her designee, will then determine whether the
Inventor should be permitted to do so. Factors to be considered include whether
there is more than one Inventor and, if so, whether all co-Inventors are in
agreement with respect to the proposed course of action, whether there is
agreement as to how royalties relating to the foreign filing will be shared; and
whether the Inventor is willing and able to bear the full cost of the foreign
filing. If the Inventor is permitted to fund all, or part, of the expense of
foreign filing for an application the Hospital would not otherwise file, the
Hospital and all Inventors will enter into a written agreement with respect to
the terms and conditions that apply (such as requiring that the Inventor advance
funds on a schedule that will assure that the Hospital has no liability). The
IPA, or his/her designee, will make all decisions with respect to the
preparation and filing, prosecution, reexamination, reissue, licensing, and/or
enforcement of Patent applications and/or Patents that are the subject of this
policy, and has the right to make the final decision whether or not, and upon
what terms, to begin, settle, or terminate any dispute, litigation, or other
matter arising pursuant to this policy.

  

 

 

  

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H.Inventor’s Right To Request Release of a Patentable Invention

 

If the Hospital does not apply for a Patent within one (1) year of the full and
complete disclosure (as determined by the IPA) of an Invention to the Hospital,
or if, after the Hospital has filed a Patent application, the Hospital decides
to abandon Patent prosecution, an Inventor may request in writing, directed to
the IPA, that the Hospital release the Inventor's rights to his/her Invention to
the Inventor. The IPA, or his/her designee, will review the request and make a
recommendation to the IIPAC, which will make the determination. Unless the
Hospital has reasonable grounds for refusing a release, such as an agency
funding the research must agree and refuses or the Invention is not patentable,
the Hospital will release its interest in the subject Invention and the Inventor
will be free to apply for a Patent in his/her own name at his/her own expense.

 

1.The release of an Invention is not a release of improvements, enhancements or
derivatives of the Invention; and the Inventor is obligated to disclose and
assign such improvements, enhancements and derivatives and any other Inventions
as new Inventions pursuant to this policy.

 

2.If the Hospital releases the Inventor’s rights to his/her Invention and the
Inventor subsequently licenses or otherwise commercializes the Invention, the
Inventor is required to distribute to the Hospital ten (10) percent of the Net
Income and ten (10) percent of any equity or other thing of value received (or
receivable) by the Inventor for so long as the Inventor receives (or is able to
receive) Gross Income, equity or other value for the Invention.

 

3.If the Hospital releases the Inventor’s rights to his/her Invention, the
Inventor is required to grant, and is deemed to have granted, to the Hospital a
royalty-free, irrevocable, non-exclusive license to make or use the Invention
for the purposes of the Hospital.

 

4.If the Hospital releases an Inventor’s rights, but there is more than one
Inventor, the Hospital will release an undivided interest, as defined by United
States Patent laws, to each Inventor unless directed otherwise in writing by all
the Inventors prior to such release.

 

 

 

 

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I.License Agreements Favored

 

In those cases in which the Hospital expects to obtain or has obtained Patent
protection, the Hospital normally will seek to license or otherwise arrange for
the commercial development of the Invention. In those cases in which the
Hospital does not expect to obtain Patent protection, the IPA will determine on
a case-by-case basis whether to seek to license or otherwise arrange for the
commercial development of the Intellectual Property.

 

1.The Department of Technology Transfer will notify Inventors of prospective
licensees in an early stage of the negotiation process. If the Inventor objects
to the prospective licensee, he/she may, within thirty (30) days of such
notification, file a written protest with the IPA, or his/her designee, who will
render a written decision within thirty (30) days thereafter.

 

2.In the event that an arrangement for commercial development is not made within
a reasonable period (a reasonable period where the Hospital expects to obtain or
has obtained Patent protection, is a reasonable period after the date of
issuance of a Patent), an Inventor may request in writing, directed to the IPA,
that the Inventor be allowed independently to pursue commercial development on
the Hospital's behalf. The IPA, or his/her designee, will consider the request
and make a recommendation to the IIPAC, which may in its sole discretion grant
(with or without conditions) or deny this request.

 

3.Inventors or Hospital Personnel involved in the potential licensing or other
commercialization of an Invention or otherwise Intellectual Property, whether
assisting the Department of Technology Transfer, acting independently as set
forth in Section II.I.2. or otherwise, are required to disclose to the Conflicts
of Interest Committee any relationship with a prospective licensee or other
party and are required to otherwise comply with the Hospital’s Conflicts of
Interest Policy (A-3-1).

 

J.Release of Intellectual Property Other Than Patentable Inventions

 

There may be situations with Intellectual Property, other than patentable
Inventions, where the Hospital has determined it has no interest, or where the
Hospital fails in a reasonable time to protect the Intellectual Property or to
license or commercialize the Intellectual Property. In such situations, a
creator of the Intellectual Property may request in writing, directed to the
IPA, that the Hospital release to the creator rights in his/her Intellectual
Property or allow the creator independently to pursue commercial development on
the Hospital's behalf. The IPA, or his/her designee, will review the request and
make a recommendation to the IIPAC, which will make the determination. Because
these situations can vary significantly, the IIPAC will determine if and under
what conditions such action is appropriate.

 

1.The release of such Intellectual Property is not a release of improvements,
enhancements or derivatives of the Intellectual Property and the creator is
obligated to disclose and assign such improvements, enhancements and derivatives
and any other Intellectual Property as new Intellectual Property pursuant to
this policy.

 

 

 

  

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2.If the Hospital releases the creator’s rights to his/her Intellectual Property
and the creator subsequently licenses or otherwise commercializes the
Intellectual Property, the creator is required to distribute to the Hospital ten
(10) percent of the Net Income and ten (10) percent of any equity or other thing
of value received (or receivable) by the creator for so long as the Inventor
receives (or is able to receive) Gross Income, equity or other value for the
Intellectual Property.

 

3.If the Intellectual Property is released, the creator will grant to the
Hospital a royalty-free, irrevocable, non-exclusive license to make or use the
Intellectual Property for the purposes of the Hospital.

 

4.If the Hospital releases a creator’s rights, but there is more than one
creator, the Hospital will release an undivided interest, as defined by United
States Patent laws, to each creator unless directed otherwise in writing by all
the creators prior to such release.

 

K.Resolution of Questions and Disputes

 

1.All questions or disputes concerning the interpretation and application of
this policy will be submitted in writing to the IPA for resolution.

 

2.Any person whose rights are affected by any decision, action, or failure to
timely act of the IPA, or his/her designee, Chief Scientific Officer of the
Hospital, or his/her designee, or IIPAC pursuant to this policy may appeal in
writing, within thirty (30) days (or such shorter period as may be set forth in
this policy) of such decision, action, or failure to timely act, to the
President & Chief Executive Officer of The Children's Hospital of Philadelphia.
The President & CEO, or his/her designee, will review the appeal, conduct any
additional investigation he/she considers appropriate, and, within a reasonable
time after receiving the appeal, render a final, binding, and non-appealable
decision. The President & CEO, or his/her designee, may, but is not required to,
consult with the Translational Medicine & Science Board Committee, or a
subcommittee thereof appointed by its Board Chair, in reaching a decision. The
President & CEO, or his/her designee, will report the decisions from appeals to
the Translational Medicine & Science Board Committee. A failure to timely appeal
or to cooperate in connection with an appeal will result in the affected person
losing his/her right to appeal and the decision, action, or failure to timely
act standing.

 

 

 

  

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L.Limitation of Hospital Liability

 

The Hospital will not be liable for any damages resulting from any acts or
omissions relating to any Intellectual Property, including administrative and/or
legal errors in its assessment of Intellectual Property, the failure to properly
protect Intellectual Property (including with respect to prosecuting Patents,
Trademarks, Service Marks and Copyrights), agreements entered into or that are
not entered into with respect to sponsored research, licensing or other matters,
failure to notify an Inventor of decisions such as not to seek patent or other
protection, failure to notify an Inventor of licensing negotiations, failure to
release rights in Intellectual Property on a timely basis to an Inventor or any
other matter relating to the subject matter of this policy or to Intellectual
Property of the Hospital or Hospital Personnel.

 

M.Use of Hospital Name, etc.

 

Nothing in this policy is intended to confer rights in or authorize the use of
the name, Trademarks, or Service Marks of the Hospital, or of other Intellectual
Property of the Hospital except as specifically allowed pursuant to this policy.
Any commercial use of the name, nickname, abbreviation, logo, Trademarks,
Service Marks or other identifying terms, symbols or marks of the Hospital, or
of other Intellectual Property of the Hospital except as specifically allowed
pursuant to this policy, without prior written consent is strictly prohibited.

 

N.Other Situations

 

This policy applies to all Hospital Personnel. It does not attempt to deal in
detail with every possible situation that might arise, but rather to provide
general guidelines that will be supplemented and interpreted on a case by case
basis by the IPA, or his/her designee, in a manner consistent with the
objectives of this policy.

 

O.Notebooks, etc.

 

Laboratory notebooks and other documents, in whatever form (regardless of media
or format, including without limitation, oral, electronic or on paper),
pertaining to Hospital research activities are the property of the Hospital and
are required to be available to the Hospital at all times and may be copied
and/or used by the Hospital without limitation for the purposes of this policy
and for other appropriate purposes. Hospital Personnel who leave the Hospital
must make arrangements, prior to leaving, with the IPA, or his/her designee,
that assure the continued availability of laboratory notebooks and other
documents to the Hospital as the Hospital considers appropriate. Where the
Hospital requires the original materials, copies will be made available to
Hospital Personnel.

 

 

 

 

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P.Failure to Cooperate

 

All Hospital Personnel are required to cooperate fully and honestly with respect
to all matters that are included in this policy, including those involving the
disclosure, evaluation, protection, and commercialization of Intellectual
Property, determining the relative rights and equities of parties, and disputes
relating to Intellectual Property. Failure to so cooperate may result in a loss
of rights, including the loss of right to share income from Intellectual
Property, and can result in the termination of employment, termination of
membership on the Hospital Medical and Research Staffs, and/or loss of the right
to participate in research, apply or receive research grants, contracts or
awards, or use Hospital Facilities, Hospital Funds or other Hospital Resources

 

Q.2000 Patent Policy

 

Revisions in this policy from the version effective November 1, 2006 (“2006
Policy”) are relatively minor. However the policy promulgated effective November
1, 2006 made substantial changes to the Patent Policy effective July 20, 2000
(“2000 Policy”). Intellectual Property having an Effective Disclosure Date prior
to November 1, 2006 and on or after July 20, 2000, and certain Intellectual
Property prior to that date, is subject to the 2000 Policy. For Intellectual
Property having an Effective Disclosure Date between July 1, 2005 and October
31, 2006, inclusive, Hospital Personnel were given the opportunity to
irrevocably elect to have the Intellectual Property subject to the 2006 Policy
in lieu of the 2000 Policy, subject to a process set forth in the 2006 Policy.

 

III.DISTRIBUTION OF INCOME

 

A.Right to Share Income

 

Income from the licensing or other commercialization of Intellectual Property
will be distributed as set forth in this Section III; provided, however, (i)
Program Income, as defined by the Hospital’s Policy on Program Income as in
effect from time to time (available from the Department of Technology Transfer
or online on the Hospital’s intranet in The Children’s Hospital of Philadelphia
Research Institute section under Tech Transfer), is not subject to distribution
pursuant to this Section III and any distribution of income from Program Income
is governed by that policy. All Income distributed pursuant to this Section III,
other than the Inventor Share, is to be used in support of research activities;
and (ii) vendors and other third parties have no right to any income under this
policy.

 

 

 

  

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B.Distribution of Net Income

 

Net Income will be distributed as follows:

 

  1.   Inventor Share (see Section III.C.) 30.0 %                   2.  
Inventor Laboratory Share (see Section III.D.) 12.5 %                   3.  
Inventor Department Share (see Section III.E.) 12.5 %                   4.  
Hospital Research Share (see Section III.F.) 45.0 %  

 

This Net Income sharing schedule pertains to amounts stemming from each item of
Intellectual Property or collection of related Intellectual Property (such as
from each Invention or collection of related Inventions). Where such
Intellectual Property is licensed pursuant to a single licensing or
commercialization agreement, whether prospectively or retrospectively, this
schedule applies once as to income stemming from such agreement (and not
successively as later improvements or enhancements may occur).

 

C.Inventor Share

 

The Inventor Share, as set forth in Section III.B., is the total amount payable
to all Hospital Personnel who are Inventors, Authors, or other creators of the
Intellectual Property generating the Net Income.

 

1.If there is only one such Inventor, Author, or other creator, the total
Inventor Share is payable to that person.

 

2.Where there is more than one such Inventor, Author, or other creator, and all
such persons unanimously agree in writing how the Net Income should be
distributed among them (by executing, and submitting to the IPA, the Hospital’s
Inventors Agreement for Distribution of Net Income), prior to the Hospital
entering into a licensing or other agreement that may result in Gross Income,
then the Net Income will distributed in accordance with such agreement.

 

3.Where there is more than one such Inventor, Author, or other creator, and all
such persons have not unanimously agreed on the distribution by executing and
submitting the Hospital’s Inventors Agreement for Distribution of Net Income
prior to the Hospital entering into a licensing or other agreement that may
result in Gross Income, then the IPA, or his/her designee, will determine an
appropriate allocation of Net Income among the Inventors, Authors, or other
creators. Any affected Inventor, Author, or other creator may appeal the
allocation to the President & CEO in accordance with Section II.K.2.

 

 

 

  

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4.Each Inventor, Author, or other creator will be entitled to receive his/her
Inventor Share of Net Income in accordance with this policy whether or not
he/she remains Hospital Personnel. In the event of the death of an Inventor,
Author, or other creator, such Net Income will be paid to his/her estate.

 

D.Inventor Laboratory Share

 

The Inventor Laboratory Share of Net Income, as set forth in Section III.B., is
the total amount that may be available to the principal Hospital laboratory or
laboratories of the Inventors, Authors, or other creators of the Intellectual
Property generating the Net Income.

 

1.The total Inventor Laboratory Share is limited to a maximum of Three Hundred
and Fifty Thousand Dollars ($350,000) available for any given July 1 fiscal
year, irrespective of the number of principal Hospital laboratories involved.
Half of any excess above the maximum with respect to any fiscal year is added to
the Inventor Department Share and the other half is added to the Hospital
Research Share.

 

2.If there is only one Inventor, Author, or other creator, or if there is more
than one such Inventor, Author, or other creator and they share the same
principal Hospital laboratory, then the total Inventor Laboratory Share is
available to that principal Hospital laboratory. If there is only one Inventor,
Author, or other creator and such person leaves the Hospital, or if all of the
Inventors, Authors, or other creators share the same principal Hospital
laboratory and all such persons leave the Hospital, the Inventor Laboratory
Share is added to the Inventor Department Share.

 

3.Where there is more than one Inventor, Author, or other creator and they do
not share the same principal Hospital laboratory, then the Inventor Laboratory
Share is available to their respective principal Hospital laboratories in the
same proportion that the Inventor Share is allocated among them. In the event
that one or more of the Inventors, Authors, or other creators leave the
Hospital, but at least one Inventor, Author, or other creator remains, then the
Inventor Laboratory Share is available to the principal Hospital laboratories of
the remaining Inventors, Authors, or other creators in the same proportion that
the Inventor Share is allocated among them without regard to the Inventor Share
of the leaving Inventor(s), Author(s), or other creator(s). If all of the
Inventors, Authors, or other creators leave the Hospital, the Inventor
Laboratory Share is added to the Inventor Department Share.

 

4.Where an Inventor, Author, or other creator does not have a principal Hospital
laboratory, or remains at the Hospital but ceases to have a principal Hospital
laboratory, the Inventor Laboratory Share attributable to such person is added
to the Inventor Department Share.

 

 

 

  

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5.In the event that Inventors are students, residents, fellows, post-docs,
trainees, technicians, occupants of the Hospital laboratories, volunteers of the
Hospital, their principal Hospital laboratory is the laboratory, if any, in
which they worked resulting in their becoming Inventors. Where they do not have
a principal Hospital laboratory, the Inventor Laboratory Share attributable to
such person is added to the Inventor Department Share.

 

6.The Hospital will advise the Inventor’s Laboratory (or Inventors’
Laboratories, if applicable) on or about January 31 of each year of the amount
of Inventor Laboratory Share received by the Hospital in the immediately prior
calendar year and available to the Inventor’s Laboratory for research purposes
in the upcoming July 1 fiscal year. The Inventor’s Laboratory may submit a
proposal, including a budget, with respect to how it proposes to spend all or
part of the available Inventor Laboratory Share for research purposes in the
upcoming fiscal year beginning July 1. The proposal must be approved by the
applicable Division Chief and Department Chair and submitted to the Chief
Scientific Officer for his/her approval no later than March 31. If the Chief
Scientific Officer, or his/her designee, approves the proposal, then the amounts
will be available for expenditure in accordance with the budget, which will be
administered by the Vice President - Research Administration. If the Chief
Scientific Officer, or his/her designee, does not approve the proposal, or all
of the proposal, then the Inventor’s Laboratory may appeal the decision to the
President & CEO within two weeks after the decision of the Chief Scientific
Officer, or his/her designee, in accordance with Section II.K.2.

 

7.Any portion of the Inventor Laboratory Share not approved for expenditure for
the upcoming fiscal year beginning July 1, or not expended in such upcoming
fiscal year in accordance with the approved budget, will be added to the
Hospital Research Share.

 

8.The principal Hospital laboratory of an Inventor, Author, or other creator is
determined as of March 31 with respect to of the amount of Inventor Laboratory
Share received by the Hospital in the immediately prior calendar year. If an
Inventor, Author, or other creator changes principal Hospital laboratories after
March 31, the principal Hospital Laboratory for purposes of the Inventory
Laboratory Share for the upcoming July 1 fiscal year remains that in effect on
March 31, but the succeeding year’s principal Hospital Laboratory for purposes
of the Inventory Laboratory Share is determined based on the principal Hospital
Laboratory of the Inventor, Author, or other creator as of the succeeding March
31.

 

 

 

  

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E.Inventor Department Share

 

The Inventor Department Share of Net Income, as set forth in Section III.B.,
together with any amounts added to the Inventor Department Share in accordance
with Section III.D., is the total amount that may be available for research
purposes to the primary Hospital Department or Departments of the Inventors,
Authors, or other creators of the Intellectual Property generating the Net
Income. For purposes of the Inventor Department Share, a Department is a
clinical department of the Hospital, currently the Departments of Anesthesiology
& Critical Care Medicine, Child & Adolescent Psychiatry; Pathology & Clinical
Laboratories, Pediatrics, Radiology, and Surgery.

 

1.The total Inventor Department Share, including any amounts added to the
Inventor Department Share in accordance with Section III.D, is limited to a
maximum of Five Hundred Thousand Dollars ($500,000) available for any given July
1 fiscal year, irrespective of the number of primary Hospital Departments
involved. Any excess above the maximum with respect to any fiscal year is added
to the Hospital Research Share.

 

2.If there is only one Inventor, Author, or other creator, or if there is more
than one such Inventor, Author, or other creator and they share the same primary
Hospital Department, then the total Inventor Department Share is available to
that primary Hospital Department. If there is only one Inventor, Author, or
other creator and such person leaves the Hospital, or if all of the Inventors,
Authors, or other creators share the same primary Hospital Department and all
such persons leave the Hospital, the Inventor Department Share remains with the
Inventor Hospital Department.

 

3.Where there is more than one Inventor, Author, or other creator and they do
not share the same primary Hospital Department, then the Inventor Department
Share is available to their respective primary Hospital Departments in the same
proportion that the Inventor Share is allocated among them. In the event that
one or more of the Inventors, Authors, or other creators leave the Hospital, the
Inventor Department Share remains with the Inventor Hospital Departments.

 

4.Where an Inventor, Author, or other creator does not have a primary Hospital
Department, the Inventor Department Share attributable to such person is added
to the Hospital Research Share.

 

5.In the event that Inventors are students, residents, fellows, post-docs,
trainees, technicians, occupants of the Hospital laboratories, volunteers of the
Hospital, their primary Hospital Department is the Department to which they are
assigned, if any. Where they do not have a primary Hospital Department, the
Inventor Department Share attributable to such person is added to the Hospital
Research Share.

 

 

 

  

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6.The Hospital will advise the Inventor’s Department (or Inventors’ Departments,
if applicable) on or about January 31 of each year of the amount of Inventor
Department Share received by the Hospital in the immediately prior calendar year
and available to the Inventor’s Department for research purposes in the upcoming
July 1 fiscal year. The Inventor’s Department may submit a proposal, including a
budget, with respect to how it proposes to spend all or part of the available
Inventor Department Share for research purposes in the upcoming fiscal year
beginning July 1. The proposal must be submitted to the Chief Scientific Officer
for his/her approval no later than March 31. If the Chief Scientific Officer, or
his/he designee, approves the proposal, then the amounts will be available for
expenditure in accordance with the budget, which will be administered by the
Vice President - Research Administration. If the Chief Scientific Officer, or
his/her designee, does not approve the proposal, or all of the proposal, then
the Inventor’s Department may appeal the decision to the President & CEO within
two weeks after the decision of the Chief Scientific Officer, or his/her
designee, in accordance with Section II.K.2.

 

7.Any portion of the Inventor Department Share not approved for expenditure for
the upcoming fiscal year beginning July 1, or not expended in such upcoming
fiscal year in accordance with the approved budget, will be added to the
Hospital Research Share.

 

8.The primary Hospital Department of an Inventor, Author, or other creator does
not change for purposes of the Inventor Department Share even if an Inventor,
Author, or other creator changes primary Hospital Departments.

 

  F. Hospital Research Share

 

The Hospital Research Share of Net Income, as set forth in Section III.B.,
together with any amounts added from the Inventor Laboratory Share, as set forth
in Section III.D., and from the Inventor Department Share, as set forth in
Section III.E., is the amount available to the Hospital for research purposes,
to be expended as determined by the President & CEO, or his/her designee. The
President & CEO may, at his option, choose to establish a hospital fund that
includes the Hospital Research Share to the extent it exceeds Two Million
Dollars ($2,000,000) in any calendar year, If established, such fund will not
constitute an endowment and is available to be used for research purposes as
determined by the President & CEO, or his/her designee.

 

  G. Sale of Revenue Stream

 

Should the Hospital decide to sell the revenue expected to be generated from the
licensing or other commercialization of Intellectual Property, or otherwise
monetize the value of Intellectual Property, the Inventor Share of Net Income
will be based on the monies received, and the President & CEO, or his/her
designee, will determine, in his/her absolute discretion, how the Hospital will
calculate the Inventor Laboratory Share and the Inventor Department Share.

 

 

 

 

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H.Equity

 

The Hospital will consider, in appropriate cases, whether to accept, and/or
whether to allow Inventors, Authors, or other creators to accept, equity in lieu
of, or in addition to, other compensation for Intellectual Property, and, if so,
under what terms and conditions. In such situations, the President & CEO, or
his/her designee, will determine how such equity will be treated in calculating
and distributing Net Income in accordance with this policy.

 

I.Timing of Distribution of Net Income

 

Upon receipt of Gross Revenues, the Department of Technology Transfer, or
his/her designee, will initiate distribution of Net Income. Net Income will be
distributed on a quarterly basis, with amounts received by the end of the second
month of a calendar quarter distributed on or about the end of that quarter. The
IPA, or his/her designee, will inform Inventors, Authors, or other creators and
other interested parties of any exceptional circumstances that may result in a
delay in distribution.

 

IVTHE INSTITUTIONAL INTELLECTUAL PROPERTY ADMINISTRATOR

 

A.Intellectual Property Administrator

 

The Institutional Intellectual Property Administrator, or the IPA, is the
Director of the Department of Technology Transfer or such other person
designated by the Chief Scientific Officer of the Hospital.

 

B.Duties of IPA

 

The IPA has the following responsibilities with respect to Intellectual
Property, including without limitation, Inventions and Copyrights, and the
administration of this policy:

 

1.To administer this policy, provide general guidance regarding the policy, and
promote the fair and uniform application of this policy;

 

2.To establish liaison with appropriate investigators and staff to monitor
research and to assist in the identification of Intellectual Property developed
by Hospital Personnel, including Inventions.

 

3.To receive all disclosures of Intellectual Property, including Inventions;

 

4.To determine, in accordance with this policy, the ownership of Intellectual
Property developed by Hospital Personnel or involving the use of Hospital
Facilities, Hospital Funds, and/or other Hospital Resources, the date that
specific Intellectual Property within the scope of this policy is conceived,
disclosed, and reduced to practice, and the relative rights and equities of
parties involved in the creation of Intellectual Property;

 

 

 

  

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5.In consultation with the Inventor(s), Author(s), or other creator(s), and with
the IIPAC, to evaluate Intellectual Property in which the Hospital has an
interest, including possible commercial uses and potential marketing
opportunities;

 

6.To seek to license or otherwise commercialize Intellectual Property in which
the Hospital has an interest, as appropriate, including the negotiation of
licenses and agreements;

 

7.To establish liaisons with governmental and private sponsors of research to
ensure compliance with provisions in sponsored research and other sponsored
agreements regarding Intellectual Property;

 

8.To work with the IIPAC to determine whether, the extent to which, and the
manner in which the Hospital, through the Office of General Counsel, should
attempt to protect specific Intellectual Property in which the Hospital has an
interest, including the filing of Patents and Copyrights;

 

9.To determine the sharing of Net Revenue in accordance with this policy with
respect to specific Intellectual Property subject to this policy;

 

10.To recommend when Intellectual Property should be returned to the
Inventor(s), Author(s), and other creator(s);

 

11.To assist in obtaining funds for research that may result in the creation or
further development of Intellectual Property;

 

12.To maintain complete records regarding disclosures of Intellectual Property,
actions taken with respect to the protection of Intellectual Property, the dates
that specific Intellectual Property within the scope of this policy is
conceived, disclosed, and reduced to practice, the appropriate distribution of
Net Income from Intellectual Property in which the Hospital has an interest, the
resolution of contested matters, and other matters relating to this policy;

 

13.To review this policy periodically with the Office of General Counsel to
determine whether changes should be made;

 

14.To report to the Hospital, including the Translational Medicine & Science
Board Committee, on matters bearing on Intellectual Property and this policy;

 

15.To seek counsel, as appropriate, from the IIPAC on the prioritization of
investments in the Hospital’s technology portfolio, licensing strategies, and
other matters.

 

16.To assure that Intellectual Property administration complies with Bayh-Dole
and other legal requirements; and.

 

 

 

  

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17.To seek legal advice and counsel from the Hospital’s Office of General
Counsel, and when it is agreed that the assistance of outside counsel is
desirable, to ask the General Counsel of the Hospital, or his/her designee
attorney in the Office of General Counsel, to select patent, licensing, and/or
other counsel to assist the Hospital’s research enterprise, including the
Department of Technology Transfer.

 

C.Accountability of the IPA

 

In fulfillment of his/her responsibilities, the IPA is accountable to the Chief
Scientific Officer and to the President & Chief Executive Officer of The
Children's Hospital of Philadelphia.

 

RESPONSIBILITY FOR MAINTENANCE OF THIS POLICY:

 

VICE PRESIDENT - RESEARCH ADMINISTRATION

 

Supersedes Approved by:         11/1/2006 Signature:       Steven M. Altschuler,
MD – President and Chief Executive Officer

 

This Administrative Policy is the property of The Children's Hospital of
Philadelphia and is protected by U.S. and international copyright laws and may
not be used or reproduced without the prior written consent of The Children's
Hospital of Philadelphia. This Policy is to be used solely by employees of the
Hospital, the Hospital Medical Staff and those acting on the Hospital's behalf
in connection with Hospital matters or in their Hospital duties. This Policy may
not be copied, photocopied, reproduced, entered into a computer database or
otherwise duplicated, in whole or in part in any format. Any personal or other
use is strictly prohibited.

 

The Children's Hospital of Philadelphia © 2009 All Rights Reserved

 

 

 

 

Patent and Intellectual Property Policy No. A-3-4 (Effective Date: 7/1/09)

 

INDEX

 

Section Titles   Page       PURPOSE   1       POLICY   1       SCOPE   1      
RELATED POLICIES   2       DEFINITIONS   2       IMPLEMENTATION   6

 

  I. OWNERSHIP OF INTELLECTUAL PROPERTY   6                 A. Ownership of
Intellectual Property in General   6     B. Agreements Affecting Ownership   7  
  C. Restriction on Third Party Agreement   7     D. Freedom from Third Party
Claims   7     E. Ownership of Copyrights in General   8     F. Software   9    
          II. ADMINISTRATION OF INTELLECTUAL PROPERTY   11                 A.
Implementation of Procedures   11     B. Disclosure Requirement   11     C.
Invention Disclosure Necessary to Avoid Forfeiture   11     D. Intellectual
Property Assignment Agreement   11     E. Assistance and Cooperation in
Protecting Intellectual Property   12     F. Evaluation of Disclosures   12    
G. Procedures for Protection of Inventions   12     H. Inventor’s Right to
Request Release of a Patentable Inventions   13     I. License Agreements
Favored   14     J. Release of Intellectual Property Other Than Patentable
Inventions   14     K. Resolution of Questions and Disputes   15     L.
Limitation of Hospital Liability   16     M. Use of Hospital Name, etc   16    
N. Other Situations   16     O. Notebooks, etc.   16     P. Failure to Cooperate
  17     Q. 2000 Patent Policy   17

 

 

 

  

Section Titles   Page              III. DISTRIBUTION OF INCOME   17            
    A. Right to Share Income   17     B. Distribution of Net Income   18     C.
Inventor Share   18     D. Inventor Laboratory Share   19     E. Inventor
Department Share   21     F. Hospital Research Share   22     G. Sale of Revenue
Stream   22     H. Equity   23     I. Timing of Distribution of Net Income   23
              IV. THE INSTITUTIONAL INTELLECTUAL PROPERTY ADMINISTRATOR   23    
            A. Intellectual Property Administrator   23     B. Duties of IPA  
23     C. Accountability of the IPA   25