Exhibit 10.3

 

***Certain identified information has been omitted from this exhibit because it
is both (i) not material and (ii) would likely cause competitive harm to the
Registrant if publicly disclosed. Such omitted information is indicated by
brackets (“[...***...]”) in this exhibit. ***

 

MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH

PATENT AND KNOW-HOW LICENSE AGREEMENT

 

This Patent and Know-How License Agreement (“Agreement”) is by and between Mayo
Foundation for Medical Education and Research, a Minnesota charitable
corporation, located at 200 First Street SW, Rochester, Minnesota 55905-0001
(“MAYO”), and Sorrento Therapeutics, Inc. (“SORRENTO”), a for-profit
corporation, having a place of business at4955 Directors Place, San Diego, CA
92121, each a “Party”, and collectively “Parties”.

 

WHEREAS, MAYO desires to make its intellectual and tangible property rights
available for the development and commercialization of products, methods and
processes for public use and benefit;  

 

WHEREAS, SORRENTO represents itself as being knowledgeable in developing and
commercializing nanoparticle therapeutics and antibody drug conjugates; and

 

WHEREAS, MAYO is willing to grant and SORRENTO is willing to accept a
royalty-bearing license under such rights for the purpose of developing such
technology.

 

NOW THEREFORE, in consideration of the foregoing and the terms and conditions
set forth below, the Parties hereby agree as follows:

 

Article 1.00 – Definitions

 

For purposes of this Agreement, the terms defined in this Article will have the
meaning specified and will be applicable both to the singular and plural forms:

 

1.01For MAYO, “Affiliate” means any corporation or other entity within the same
“controlled group of corporations” as MAYO or its parent MAYO Clinic.  For
purposes of this definition, the term “controlled group of corporations” will
have the same definition as Section 1563 of the Internal Revenue Code as of
November 10, 1998, but will include corporations or other entities which if not
a stock corporation, more than fifty percent (50%) of the board of directors or
other governing body of such corporation or other entity is controlled by a
corporation within the controlled group of corporations of MAYO or Mayo
Clinic.  MAYO’s Affiliates include, but are not limited to: Mayo Clinic; Mayo
Collaborative Services, LLC; Mayo Clinic Hospital, Rochester; Mayo Clinic
Florida; Mayo Clinic Arizona; and its Mayo Clinic Health System entities.

 

For SORRENTO, “Affiliate” means any corporation or other entity that controls,
is controlled by, or is under common control with, SORRENTO. For purposes of
this definition, “control” means ownership of: (a) at least fifty percent (50%)
of the outstanding voting securities of such entity; or (b) at least fifty
percent (50%) of the decision-making authority of such entity.

 

 

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1.02 “Applicable Law” means all federal, state, local, national and
supra-national laws, statutes, rules and regulations, including any rules,
regulations, guidelines or requirements of Regulatory Authorities, national
securities exchanges or securities listing organizations that may be in effect
from time to time during the Term and applicable to a particular activity
hereunder.

 

1.03 “Combination Product” means a Royalty-Bearing Product that includes one or
more pharmaceutically active ingredients, components, delivery devices or
products in addition to the product or component that would otherwise qualify as
a Royalty-Bearing Product.  For the avoidance of doubt, a Combination Product
does not include an antibody drug conjugate or nanoparticle therapeutic.

 

1.04 “Commercially Reasonable Efforts” means efforts and the deployment of a
quantity and quality of resources consistent with the exercise of diligent
efforts and reasonable and prudent scientific and business judgment, as applied
to other pharmaceutical products of similar potential, characteristics, and
market size by the pharmaceutical industry.

 

1.05 “Completion” means, with respect to any Clinical Study, the final review by
a Regulatory Authority for a given clinical trial for each Licensed Product.

 

1.06“Confidential Information” means all proprietary unpublished or nonpublic
information or materials including, but not limited to, written, oral or
virtually presented information and such items as electronic media products,
trade secrets, financial information, equipment, databases and the like provided
by one Party to the other under this Agreement, or which is observed by a Party
while on the other Party’s premises.  Confidential Information does not include
any information or material that receiving party evidences is or becomes: (a)
already known to the receiving party at the time of disclosure (other than from
the disclosing party); (b) publicly known other than through acts or omissions
of the receiving party; (c) disclosed to the receiving party by a third party
who was not and is not under any obligation of confidentiality; or (d)
independently developed by employees of the receiving party without knowledge of
or access to the Confidential Information. Confidential Information shall
include, but is not limited to, the data room and unpublished patent
applications related to this Agreement and provided to SORRENTO by MAYO prior to
the Effective Date.

 

1.07“Effective Date”: September 8, 2020.

 

1.08“Exploit and/or Exploitation” means, with respect to an item of intellectual
property, to (a) reproduce, create derivative works of, distribute, publicly
perform, publicly display, digitally transmit, and otherwise commercialize and
exploit such intellectual property in any medium or format, whether now known or
hereafter discovered; (b) use, make, have made, sell, offer to sell, import, and
otherwise commercialize and exploit any product or service based on, embodying,
incorporating or derived from such intellectual property; and/or (c) subject to
the terms and conditions of this Agreement, to exercise any and all other
present or future rights in such intellectual property.

 

1.09“Field” means for the prevention, diagnosis and/or treatment of human
diseases and conditions.

 

 

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1.10“First Commercial Sale” means with respect to a given Royalty-Bearing
Product in a particular country, means the first sale to a third party of such
Royalty-Bearing Product in such country, after obtaining all required Regulatory
Approvals in such country. For the avoidance of doubt, “First Commercial Sale”
shall not include the supply of any unreimbursed Royalty-Bearing Product in
reasonable quantities taking all relevant factors into consideration for use in
research or development (including clinical trials), donated for promotional,
advertising or other purposes or for compassionate use.

 

1.11 “Initiation” means, with respect to any clinical trial, the date of the
first dosing of a human subject of a given clinical trial for a Licensed
Product.

 

1.12“Know-How” means research and development information, written materials,
unpatented inventions, trade secrets, know-how, data (whether pre-clinical,
clinical or otherwise), specifications, compositions, formulae, compounds,
protocols, and any other supportive information or technology of any Mayo
Investigator or Dr. Markovic’s laboratory related to targeted nanoparticle
therapeutics and/or antibody drug conjugates, owned or controlled by MAYO or any
of its Affiliates as of the Effective Date, including any of the foregoing (i)
that is reasonably necessary or useful for the development or Exploitation of
any Licensed Products or (ii) described in Mayo disclosures listed in Exhibit A.

 

1.13“Licensed IP” means Know-How, Patent Rights and Materials.

 

1.14“Licensed Product” means any product or process or related service:  (a)
described by a pending claim of the Patent Rights; (b) the Exploitation of which
is covered by an issued claim of the Patent Rights or Regulatory Exclusivity; or
(c) the development or Exploitation of which incorporates, uses, was derived
from, identified by, validated or developed in whole or in part using the
Know-How or Materials.

 

1.15“Mayo Investigator(s)” means [...***...].  

 

1.16“Materials” means all tangible property provided by Mayo to Sorrento, which
shall include cell lines, antibodies, abraxane (nab) materials, proteins, and
other materials developed in the laboratory of Dr. Markovic related to the
technologies listed in Exhibit A or developed through future funding by Sorrento
or any of its Affiliates.

 

1.17“Net Sales” means the gross amount actually received by SORRENTO, its
Affiliates or, in the case of a permitted sublicense, a Sublicensee (each, a
“Selling Party”) for the sale or transfer of a Royalty-Bearing Product to a
third party customer, less [...***...].  Each of the foregoing deductions shall
be determined as occurred in the ordinary course of business in accordance with
GAAP.

 

Except as provided herein, [...***...] shall be deemed a transfer for the
purpose of determining Net Sales.  Net Sales on Royalty-Bearing Products
transferred as part of a non-cash exchange shall be calculated at
[...***...].  In the event that SORRENTO transfers Royalty-Bearing Products to
an Affiliate, and the Affiliate retransfers the Royalty-Bearing Products to
third-party customers, then Net Sales shall be [...***...]. Royalty-Bearing
Products transferred to MAYO or its Affiliates or for [...***...] are not
considered for purposes of determining Net Sales or for calculating Earned
Royalties.  In addition, Royalty-Bearing Products [...***...] shall not be
included in Net Sales.  

 

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page 4 of 37

 

 

For the avoidance of doubt, amounts received by a Selling Party [...***...]
shall not constitute amounts received by a Selling Party for the sale of
Royalty-Bearing Product and shall not be included in any calculation of Net
Sales hereunder. For the avoidance of doubt, upon an assignment of this
Agreement by SORRENTO, any modifications to this Agreement would require MAYO
approval.

 

If, on a country-by-country basis, a Royalty-Bearing Product is sold in the form
of a Combination Product, the Net Sales for such Royalty-Bearing Product in the
Combination Product will be calculated by [...***...].

 

1.18“Patent Rights” means those patent and patent applications listed on Exhibit
B, and provisionals, divisionals, continuations, and continuations-in-part (but
only for subject matter supported pursuant to 35 U.S.C. §112 by the foregoing)
therefrom, patents issuing thereon, re-examinations and re-issues thereof, as
well as extensions and supplementary protection certificates and any foreign
counterpart of any of the foregoing.

 

1.19“Person” means any individual, person, entity, general partnership, limited
partnership, limited liability partnership, limited liability company,
corporation, joint venture, trust, business trust, cooperative, association,
foreign trust, foreign business organization or a governmental entity.

 

1.20“Phase I Clinical Study” means the first human clinical trial phase I study
of a Licensed Product, sponsored by SORRENTO, the principal purpose of which is
preliminary determination of safety in healthy individuals or patients to
satisfy the requirements of 21 C.F.R. §312.21(a), or any other requirements, or
a similar clinical study prescribed by the Regulatory Authorities in a country
other than the United States. Such phase I clinical trial shall be deemed to
have commenced when such Licensed Product is first administered to any patient
enrolled in such phase I clinical trial.

 

1.21“Phase II Clinical Trial” means the first human clinical trial phase II
study, including the phase II portion of a phase I/II trial, of a Licensed
Product, sponsored by SORRENTO, the principal purpose of which is preliminary
evaluation of clinical efficacy and safety, and/or to obtain an indication of
the dosage regimen required as more fully defined in 21 C.F.R. §312.21(b), or a
similar clinical study prescribed by the Regulatory Authorities in a country
other than the United States. Such phase II clinical trial shall be deemed to
have commenced when such Licensed Product is first administered to any patient
enrolled in such phase II clinical trial.

 

1.22“Phase III Clinical Study” means the first human clinical trial phase III
study, including the phase III portion of a phase II/III, of a Licensed Product,
sponsored by SORRENTO, the principal purpose of which is to establish safety and
efficacy in patients with the disease being studied in a manner sufficient to
file for Regulatory Approval of such product and would satisfy the requirements
of 21 C.F.R. §312.21(c), or a similar clinical study prescribed by the
Regulatory Authorities in a country other than the United States. Such phase III
clinical trial shall be deemed to have commenced when such Licensed Product is
first administered to any patient enrolled in such phase III clinical trial.

 

 

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page 5 of 37

 

1.23“Regulatory Approval” means, in any given country, the granting by the
Regulatory Authorities in that country of all approvals that are necessary for
the manufacturing, distributing, marketing, sale, pricing and reimbursement of a
drug product.

 

1.24“Regulatory Authority(ies)” means any federal, state or local regulatory
agency, department, bureau or other government entity, including without
limitation the FDA, EMEA or PMDA, which has responsibility for granting any
licenses or approvals or granting pricing and/or reimbursement approvals
necessary for the marketing and sale of a Licensed Product in any country.

 

1.25“Regulatory Exclusivity”  means, with respect to any country in the
Territory, an additional market protection, other than those covered under the
Patent Rights, granted by a Regulatory Authority in such country which confers
an exclusive commercialization period during which SORRENTO or its Affiliates or
any Sublicensees have the exclusive right to market and sell a Licensed Product
in such country on an exclusive basis, including, but not limited to: new
chemical entity exclusivity, new use or indication exclusivity, new formulation
exclusivity, orphan drug exclusivity, pediatric exclusivity, or any applicable
data exclusivity and any international equivalents.

 

1.26“Royalty-Bearing Product” means any Licensed Product in the Field sold by
SORRENTO or its Affiliates or Sublicensees to an unrelated third party on an
arms-length basis.

 

1.27“Royalty Term” means, on a Royalty-Bearing Product-by-Royalty-Bearing
Product and country-by-country basis, the period beginning on the First
Commercial Sale of a Royalty-Bearing Product in a given country and ending upon
the later of (a) the expiration date of the last to expire of the valid claim in
any issued Patent Rights or Regulatory Exclusivity that cover such
Royalty-Bearing Product in such country; or (b) the tenth anniversary of the
First Commercial Sale of such Royalty-Bearing Product in such country.

 

1.28“Sublicensee” means any third party to whom SORRENTO has granted a
sublicense of the licensed rights granted to SORRENTO pursuant to Section 2.01
or conveyed the forbearance of suit under the Patent Rights, Know-How or
Materials.

 

1.29“Sublicense Income” means consideration in any form received by SORRENTO
from each Sublicensee for the express sublicense of or a covenant not to sue the
rights granted under Section 2.01, excluding any royalties based on the sale of
Royalty-Bearing Products.  Sublicense Income shall include all fees, payments,
equity, research and development funding in excess of SORRENTO’s reasonable and
documented costs of performing such research and development, and any
consideration received for an equity interest in, extension of credit to, or
other investment in SORRENTO, to the extent such consideration is expressly
attributable to the grant of any sublicense of or a covenant not to sue the
rights granted under Section 2.01 to a Sublicensee.

 

1.30“Territory” means Worldwide.

 

 

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Article 2.00 – Grant of Rights

 

2.0lGRANT.  Subject to the terms and conditions of this Agreement, MAYO grants
to SORRENTO: (a) an exclusive (even as to MAYO and its Affiliates, subject to
Section 2.02) license with the right to sublicense (through multiple tiers),
within the Field and Territory, under the Patent Rights and Materials to Exploit
Licensed Products; and (b) a nonexclusive license, with the right to sublicense,
within the Field and Territory, to use the Know-How to Exploit Licensed
Products.  The foregoing licenses and rights shall be irrevocable (except as
otherwise provided herein), transferrable (subject to Section 11.11 hereof or as
permitted or required under any Applicable Law), and include the right of any
third party to exercise the foregoing rights and licenses for, on behalf of, or
for the benefit of SORRENTO.  

 

During the thirty (30) days following the last signature hereto, MAYO will
provide reasonable assistance to SORRENTO, including access to necessary
personnel to transfer Know-How and Materials, but in no event shall MAYO be
required to provide any Know-How or Materials in tangible form if it does not
exist in tangible form as of the Effective Date.  After such thirty (30) day
period if SORRENTO requires any additional transfer of Know-How or Materials
then the Parties will enter into a mutually acceptable agreement for such
transfer. For avoidance of any doubt, all costs and expenses related to such
transfer assistance, including the cost and time Mayo Investigator(s) incur
transferring the Know-How and/or Materials, will be borne solely by MAYO and not
SORRENTO up to twenty four (24) hours. Any such reasonable costs or expenses in
excess of such number of hours that are pre-approved by SORRENTO shall be borne
by SORRENTO.

 

2.02RESERVATION OF RIGHTS.  All rights herein are subject to: (a) the rights and
obligations to and requirements of the U.S. government, if any have arisen or
may arise, regarding the Patent Rights, including as set forth in 35 U.S.C.
§§200 et al., 37 C.F.R. Part 401 et al. (“Bayh-Dole Act”); and (b) MAYO’s and
its Affiliates’ reserved, irrevocable right to practice and have practiced the
Patent Rights and Materials for non-commercial purposes in connection with the
educational, research and clinical programs of MAYO, Mayo Clinic Platform,
MAYO’s Affiliates, including MAYO’s reference laboratory and Mayo Collaborative
Services, LLC, and the Mayo Clinic Care Network.  SORRENTO agrees to comply with
the provisions of the Bayh-Dole Act, including promptly providing to MAYO with
information requested to enable MAYO to meet its compliance requirements and
substantially manufacturing Licensed Product in the U.S.

 

2.03NO OTHER RIGHTS GRANTED.  This Agreement does not grant any right, title or
interest outside the Field or Territory or any right, title or interest in or to
any tangible or intangible property right of MAYO or its Affiliates, including
but not limited to any patent rights, know-how or material or any improvements
thereon, which is not expressly stated herein, including pursuant to Sections
2.01 (Grant) and 2.04(a) (Additional Rights, Sponsored Research).  All such
other rights, titles and interests are expressly reserved by MAYO and SORRENTO
agrees that in no event will this Agreement (i) exhaust any MAYO patent rights,
or (ii) be construed as a sale, an assignment or an implied license by MAYO or
its Affiliates to SORRENTO of any tangible or intangible property rights.

 

 

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2.04 ADDITIONAL RIGHTS.

 

a)Sponsored Research.  Notwithstanding anything to the contrary contained herein
(including Section 2.03), the Parties agree that the licenses and rights under
this Agreement shall cover all improvements to the Licensed IP and any other
intellectual property (including patent rights, know-how, data, materials and
any improvements thereon) developed in connection with or otherwise arising from
any sponsored research funded by SORRENTO or any of its Affiliates, pursuant to
any separate sponsored research agreement(s) as contemplated in Section 3.07
hereof.

 

b)Other Research.  Subject to any third party rights and solely during the
Royalty Term, MAYO shall make best efforts to make SORRENTO aware of any
intellectual property that is targeted nanoparticle therapeutics and/or antibody
drug conjugates that are developed without funding by SORRENTO and not by Mayo
Investigators funded by SORRENTO, to allow SORRENTO a reasonable opportunity to
negotiate a license to such intellectual property on commercially reasonable
terms and, upon request by SORRENTO, MAYO shall (or shall cause its
Affiliate(s), as applicable to) negotiate in good faith with SORRENTO to effect
such license(s).  

 

c)Other IP Rights.  MAYO agrees not to assert against SORRENTO or its Affiliates
any other intellectual property rights owned and controlled by MAYO as of the
Effective Date based on SORRENTO’s or its Affiliates’ use of the Materials
solely in the form provided by MAYO to SORRENTO listed in Exhibit A as of the
Effective Date, if and to the extent such Materials infringes or misappropriates
such other intellectual property rights of MAYO. For the avoidance of doubt,
such forbearance is not transferrable without Mayo’s prior written consent.

 

2.05SUBLICENSES.  Any sublicense by SORRENTO, other than to an Affiliate shall
be to a Sublicensee that agrees in writing to be bound by substantially similar
terms and conditions as SORRENTO herein, as applicable (for clarity, excluding
financial terms and conditions), or such sublicense shall be null and
void.  Sublicenses granted hereunder shall not be assignable without the prior
written approval of MAYO consistent with the terms and conditions of Section
11.11 hereof; provided, that any such assignation assignment in violation of
such terms and conditions shall be null and void.  SORRENTO will provide MAYO
with an un-redacted copy of each sublicense agreement (including those through
multiple tiers) promptly after execution, which shall be deemed and treated as
the Confidential Information of SORRENTO.  As between the Parties, SORRENTO
shall be responsible for the performance of all Affiliates and Sublicensees as
if such performance were carried out by SORRENTO itself, including the payment
of any royalties or other payments provided for and due to MAYO hereunder
triggered by such Sublicense, regardless of whether the terms of any sublicense
require that Sublicensee pay such amounts (such as in a fully paid-up license)
to SORRENTO or that such amounts be paid by the Sublicensee directly to
MAYO.  Each sublicense agreement with a Sublicensee shall name MAYO as a third
party beneficiary and, unless MAYO has provided written consent, all rights of
Sublicensees shall terminate when SORRENTO’s rights terminate.  For the
avoidance of doubt, the granting by SORRENTO of any fully-paid up or
royalty-free sublicenses will not alleviate the obligation of SORRENTO to pay
the Earned Royalty based on Net Sales of Royalty-Bearing Products made by such
applicable Sublicensee.  

 

 

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Article 3.00 – Up-Front, Milestone and Royalties Payments; Registration

 

3.01UP-FRONT.  

 

a)In consideration for the rights granted herein, SORRENTO shall, within six (6)
trading days of the Effective Date, pay to MAYO NINE MILLION THREE HUNDRED
THOUSAND DOLLARS (US $9,300,000)  (the “Upfront Payment Amount”), which payment
shall be comprised (A) solely of shares of restricted SORRENTO common stock (the
“Shares”) (with the number of Shares calculated in accordance with the next
sentence), or (B) any combination of cash paid in immediately available funds
via wire transfer to an account designated by MAYO in writing and Shares (with
the number of Shares calculated in accordance with the next sentence), in any
case as determined by SORRENTO in its sole and absolute discretion; provided
that the portion of the Upfront Payment Amount comprised of cash shall not
exceed 25% of the Upfront Payment Amount.  The Shares shall be issued to MAYO in
the name of Mayo Clinic and the number of Shares issuable shall be equal to the
quotient obtained by dividing (i) the dollar amount of the Upfront Payment
Amount to be paid in Shares by (ii) the weighted average closing price of
SORRENTO’s common stock, as reported on The Nasdaq Stock Market LLC, for the 11
consecutive trading days beginning on the 5th trading day prior to the date of
this Agreement; provided that in no event shall the value in clause (ii) be less
than FOUR DOLLARS AND NINETY SIX CENTS (US $4.96) nor greater than SEVEN DOLLARS
AND FORTY FOUR CENTS (US $7.44). In addition, in no event shall the number of
Shares equal more than FIFTY ONE MILLION EIGHT HUNDRED AND ONE THOUNSAND ONE
HUNDRED AND SIXTY TWO (51,801,162) shares of SORRENTO’s common stock. As of the
Effective Date of this Agreement, SORRENTO has TWO HUNDRED AND FIFTY NINE
MILLION ONE HUNDRED AND THIRTY FIVE THOUSAND THREE HUNDRED AND EIGHTY
(259,135,380) shares of common stock outstanding. [...***...]. [...***...].

 

All Shares issued to MAYO shall be duly authorized, validly issued, fully paid,
non-assessable and unencumbered, and any associated agreements MAYO shall be
required to enter into related to such issuance shall only contain reasonable
and customary terms and conditions.

 

b)SORRENTO will also reimburse MAYO all reasonable, documented unreimbursed
preclinical and clinical research expenses at MAYO associated with the Licensed
IP arising before the Effective Date of this Agreement in an amount of no more
than THREE MILLION FOUR HUNDRED THOUSAND DOLLARS (US $3,400,000), within 30 days
of receipt of invoice and supporting documentation for entering into this
Agreement.

 

c)SORRENTO will reimburse MAYO all documented and unreimbursed expenses related
to the development and manufacturing of the Materials arising before the
Effective Date of this Agreement in an amount of TWO MILLION TWENTY TWO THOUSAND
SEVEN HUNDRED SEVENTY EIGHT DOLLARS AND THIRTY FIVE CENTS (US $2,022,778.35),
within 30 days of receipt of invoice and supporting documentation for entering
into this Agreement.

 

 

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3.02MILESTONE FEES.  SORRENTO will pay MAYO the following nonrefundable and
noncreditable milestone fees for each Licensed Product developed by SORRENTO
within sixty (60) days following achievement of the following events during the
Term of this Agreement:

 

 

Event

Milestone Payment

1

Initiation of the 1st [...***...] for each Licensed Product

US $[...***...]

2

Initiation of the 1st [...***...] for each Licensed Product

US $[...***...]

3

Market approval by [...***...] for each Licensed Product

US $[...***...]

4

Market approval by [...***...] for each Licensed Product

US $[...***...]

5

Upon achieving a cumulative gross sales of $[...***...] of a Licensed Product
(payable for each such Licensed Product to reach such milestone)

US $[...***...]

6

Upon achieving a cumulative gross sales of $[...***...] of a Licensed Product
(payable for each such Licensed Product to reach such milestone)

US $[...***...]

7

Upon achieving a cumulative gross sales of $[...***...] of a Licensed Product
(payable for each such Licensed Product to reach such milestone)

US $[...***...]

8

Upon achieving a cumulative gross sales of $[...***...] of a Licensed Product
(payable for each such Licensed Product to reach such milestone)

US $[...***...]

 

3.03EARNED ROYALTIES.  On a Royalty-Bearing Product-by-Royalty-Bearing Product
and country-by-country basis, during the Royalty Term, SORRENTO will make
nonrefundable and noncreditable earned royalty payments (“Earned Royalties”) to
MAYO of:

 

a)[...***...] percent ([...***...]%) of Net Sales of Royalty-Bearing Products
that[...***...]; or

 

b)[...***...] percent ([...***...]%) of Net Sales of Royalty-Bearing Products
that [...***...].

 

The Earned Royalties are payable as described in Section 4.01 (Reports and
Payment).   No Earned Royalties are due MAYO on transfers to MAYO or MAYO
Affiliates. For the avoidance of doubt, only one Earned Royalty shall be payable
for any given Royalty-Bearing Product (it being understood that no
Royalty-Bearing Product will be subject to both subsection (i) and subsection
(ii) above, but if a Royalty-Bearing Product is subject to both subsection (i)
and subsection (ii), the higher of the two Earned Royalties shall be paid).

 

3.04ROYALTY STACKING.  If SORRENTO is a party to a license agreement with any
third party under which SORRENTO obtains a license for technology reasonable
required for the manufacture, use, sale, import, export, or other Exploitation
of a Royalty-Bearing Product then SORRENTO may reduce the Earned Royalties due
to MAYO on such Royalty-Bearing Product

 

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page 10 of 37

 

(on a product-by-product basis) by [...***...] percent ([...***...]%) of the
royalties that are payable to such third party; provided, however, that in no
event will the Earned Royalties be reduced to less than [...***...] percent
([...***...]%) of the Earned Royalties that would otherwise be payable under
Section 3.03 (Earned Royalties).   For the avoidance of doubt, the Earned
Royalties otherwise due may not be reduced to more than [...***...] percent
([...***...]%) regardless of the number of additional licenses to which SORRENTO
is a party.  SORRENTO agrees to notify MAYO immediately if SORRENTO enters into
any additional license(s) with a third party or parties that would affect the
Earned Royalty amount received by MAYO.

 

3.05RESERVED  

 

3.06SUBLICENSE INCOME ROYALTY.  SORRENTO will make nonrefundable and
noncreditable payments to MAYO of Sublicense Income as follows:

  

a)If the Licensed IP or Licensed Product is sublicensed by SORRENTO prior to the
successful Completion of [...***...], SORRENTO shall pay MAYO [...***...]
percent ([...***...]%) of all Sublicense Income for such Licensed IP or Licensed
Product obtained by SORRENTO from the applicable Sublicensee.

 

b)If the Licensed IP or Licensed Product is sublicensed by SORRENTO after
successful Completion of [...***...] and prior to the successful Completion of
[...***...], SORRENTO shall pay MAYO [...***...] percent ([...***...]%) of all
Sublicense Income for such Licensed IP or Licensed Product obtained by SORRENTO
from the applicable Sublicensee.

 

c)If the Licensed IP or Licensed Product is sublicensed by SORRENTO after the
successful Completion of [...***...], SORRENTO shall pay MAYO [...***...]
percent ([...***...]%) of all Sublicense Income for such Licensed IP or Licensed
Product obtained by SORRENTO from the applicable Sublicensee.

 

The Sublicense Income is payable as described in Section 4.01 (Reports and
Payment).  

 

3.07Sponsored Research Funding. Promptly following execution of this Agreement
the Parties agree to negotiate in good faith and enter into a sponsored research
agreement, which agreement will provide that, during the [...***...] after the
Effective Date, SORRENTO shall [...***...] from the Effective Date, in research
funding for work to be done at MAYO to develop the Licensed Product(s), subject
to mutually agreed upon work plans and budgets, and subject to MAYO policies and
the approval of MAYO’s Institutional Review Board and Conflict of Interest
Committee.  Such sponsored research activities may include basic research
projects, as well as toxicology, GMP manufacturing or additional Phase I or
Phase II clinical trials of the Licensed IP.  The Parties shall mutually agree
upon any additional research funding for work to be done at MAYO in subsequent
years.  Any sponsored research shall be outlined and agreed upon in a separate
research agreement between MAYO and SORRENTO.

 

3.08PRIORITY REVIEW. In the event that SORRENTO receives an FDA priority review
voucher or similar transferrable asset based on a submission relating to a
Licensed Product and elects to sell or otherwise transfer such asset to a third
party, SORRENTO will share [...***...] ([...***...]%) of any consideration in
any form received by SORRENTO in exchange. Such consideration shall payable as
described in Section 4.01 (Reports and Payment).

 

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3.09PRICE.  Subject to SORRENTO’s or its designee’s manufacturing and supply
capacity, availability of the given Licensed Product and any obligations or
commitments to third parties, the Parties intend that MAYO may, at its sole
option, submit orders to purchase the Licensed Product for use within MAYO’s and
its Affiliates’ clinical programs and non-commercial educational and research
programs in such quantity that SORRENTO can reasonably accommodate at
[...***...].

 

3.10TAXES.  SORRENTO is responsible for all taxes, duties, import duties,
assessments and other governmental charges, however designated, which are now or
hereafter imposed by any authority on SORRENTO: (a) by reason of the performance
by MAYO of its obligations under this Agreement, or the payment of any amounts
by SORRENTO to MAYO under this Agreement; (b) based on the rights granted
herein; or (c) related to use, sale or importation of the Licensed Product. In
the event there is any withholding tax that SORRENTO has to withhold during the
Term of this Agreement, SORRENTO will inform MAYO in advance. If necessary,
SORRENTO will obtain, or assist MAYO in obtaining, any tax reduction (including
avoidance of double taxation), tax refund or tax exemption available to MAYO by
treaty or otherwise.

 

3.11U.S. CURRENCY.  All payments to MAYO under this Agreement will be made by
draft drawn on a U.S. bank, and payable in U.S. dollars.  In the event that
conversion from foreign currency is required in calculating a payment under this
Agreement, the exchange rate used shall be the Interbank rate quoted by US Bank
at the end of the last business day of the quarter in which the payment
accrued.  

 

3.12OVERDUE PAYMENTS.  If overdue, the payments due under this Agreement shall
bear interest until paid at a per annum rate of [...***...] percent
([...***...]%) above the prime rate in effect at US Bank on the due date. MAYO
shall be entitled to recover, in addition to all other remedies, reasonable
attorneys’ fees and costs related to the administration or enforcement of this
Agreement, including collection of payments, following SORRENTO’s such failure
to pay.  The acceptance of any payment, including such interest, shall not
foreclose MAYO from exercising any other right or seeking any other remedy that
it may have as a consequence of the failure of SORRENTO to make any payment when
due.

 

3.13Resale Registration Rights.

 

a)Within 30 days following the issuance of the Shares, SORRENTO shall (i) file
with the Securities and Exchange Commission (the “SEC”), or (ii) have filed with
the SEC, a resale registration statement (together with any New Resale
Registration Statement (as defined below), the “Resale Registration Statement”)
pursuant to Rule 415 under the Securities Act of 1933, as amended (the
“Securities Act”), pursuant to which all of the Shares (the “Registrable
Securities”) shall be included (on the initial filing or by supplement or
amendment thereto) to enable the public resale on a delayed or continuous basis
of the Registrable Securities by MAYO. SORRENTO shall file the Resale
Registration Statement on such form as SORRENTO may then utilize under the rules
of the SEC and use its commercially reasonable efforts to have the Resale
Registration Statement declared effective under the Securities Act as soon as
practicable, but in no event more than the earlier of: (A) 90 days following the
issuance of the Shares, and (B) four business days after the date SORRENTO
receives written notification from the SEC that the Resale Registration
Statement will not be reviewed. SORRENTO agrees to use

 

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its commercially reasonable efforts to maintain the effectiveness of the Resale
Registration Statement, including by filing any necessary post-effective
amendments and prospectus supplements, or, alternatively, by filing one or more
new registration statements (each, a “New Resale Registration Statement”)
relating to the Registrable Securities as required by Rule 415 under the
Securities Act, continuously until the date that is the earlier of (i) three (3)
years following the date of effectiveness of the Resale Registration Statement,
(ii) the date on which MAYO no longer holds any Registrable Securities covered
by such Resale Registration Statement, or (iii) the date that the Registrable
Securities can be sold under Rule 144 without restriction.

 

3.14Provisions Relating to Registration.

 

a)Notwithstanding any other provisions of this Agreement to the contrary,
SORRENTO shall cause (i) the Resale Registration Statement (as of the effective
date of the Resale Registration Statement), any amendment thereof (as of the
effective date thereof) or supplement thereto (as of its date), (A) to comply in
all material respects with the applicable requirements of the Securities Act and
the rules and regulations of the SEC, and (B) not to contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, and (ii) any related prospectus, preliminary prospectus and any
amendment thereof or supplement thereto, as of its date, (1) to comply in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations of the SEC, and (2) not to contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
SORRENTO shall have no such obligations or liabilities with respect to any
written information pertaining to MAYO and furnished to SORRENTO by or on behalf
of MAYO specifically for inclusion therein.

 

b)SORRENTO shall notify MAYO: (i) when the Resale Registration Statement, or any
amendment thereto has been filed with the SEC and when the Resale Registration
Statement or any post-effective amendment thereto has become effective; (ii) of
any request by the SEC for amendments or supplements to the Resale Registration
Statement or the prospectus included therein or for additional information;
(iii) of the issuance by the SEC of any stop order suspending the effectiveness
of the Resale Registration Statement or the initiation of any proceedings for
that purpose and of any other action, event or failure to act that would cause
the Resale Registration Statement not to remain effective; and (iv) of the
receipt by SORRENTO of any notification with respect to the suspension of the
qualification or exemption from qualification of any Registrable Securities for
sale in any jurisdiction or the initiation of any proceeding for such purpose.

 

c)As promptly as practicable after becoming aware of such event, SORRENTO shall
notify MAYO of the happening of any event (a “Suspension Event”), of which
SORRENTO has knowledge, as a result of which the prospectus included in the
Resale Registration Statement as then in effect, includes an untrue statement of
a material fact or omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and use its
best efforts promptly to prepare a supplement or amendment to the Resale
Registration Statement to correct such untrue statement or omission, and deliver
such number of copies of such supplement or amendment to MAYO as MAYO may
reasonably

 

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request; provided, however, that, for not more than 30 consecutive trading days
(or a total of not more than 90 trading days in any 12 month period), SORRENTO
may delay, to the extent permitted by and in a manner not in violation of
applicable securities laws, the disclosure of material non-public information
concerning SORRENTO (as well as prospectus or Resale Registration Statement
updating), the disclosure of which at the time is not, in the good faith opinion
of SORRENTO, in the best interests of SORRENTO; provided, further, that, if the
Resale Registration Statement was not filed on Form S-3, such number of days
shall not include the 15 calendar days following the filing of any Current
Report on Form 8-K, Quarterly Report on Form 10-Q or Annual Report on Form 10-K,
or other comparable form, for purposes of filing a post-effective amendment to
the Resale Registration Statement.

 

d)Upon a Suspension Event, SORRENTO shall give written notice (a “Suspension
Notice”) to MAYO to suspend sales of the affected Registrable Securities, and
such notice shall state that such suspension shall continue only for so long as
the Suspension Event or its effect is continuing and SORRENTO is pursuing with
reasonable diligence the completion of the matter giving rise to the Suspension
Event or otherwise taking all reasonable steps to terminate suspension of the
effectiveness or use of the Resale Registration Statement provided, however,
that the Suspension shall not be for more than 30 consecutive trading days (or a
total of not more than 90 trading days in any 12 month period). In no event
shall SORRENTO, without the prior written consent of MAYO, disclose to MAYO any
of the facts or circumstances giving rise to the Suspension Event. MAYO shall
not effect any sales of the Registrable Securities pursuant to such Resale
Registration Statement (or such filings), at any time after it has received a
Suspension Notice and prior to receipt of an End of Suspension Notice. MAYO may
resume effecting sales of the Registrable Securities under the Resale
Registration Statement (or such filings), following further notice to such
effect (an “End of Suspension Notice”) from SORRENTO. This End of Suspension
Notice shall be given by SORRENTO to MAYO in the manner described above promptly
following the conclusion of any Suspension Event and its effect. For the
avoidance of doubt, a Suspension Notice shall not affect or otherwise limit
sales of affected Registrable Securities under Rule 144 or otherwise outside of
the Resale Registration Statement.

 

e)Notwithstanding any provision herein to the contrary, if SORRENTO gives a
Suspension Notice pursuant to this Section 3.14 with respect to the Resale
Registration Statement, SORRENTO shall extend the period during which the Resale
Registration Statement shall be maintained effective under this Agreement by the
number of days during the period from the date of the giving of the Suspension
Notice to and including the date when MAYO shall have received the End of
Suspension Notice and copies of the supplemented or amended prospectus necessary
to resume sales; provided however, such period of time shall not be extended
beyond the date that the Registrable Securities can be sold under Rule 144
without restriction.

 

f)SORRENTO shall bear all Registration Expenses incurred in connection with the
registration of the Registrable Securities pursuant to this Agreement.
“Registration Expenses” shall mean any and all expenses incident to the
performance of or compliance with this Agreement, including without limitation:
(i) all registration and filing fees; (ii) all fees and expenses associated with
a required listing of the Registrable Securities on any securities exchange;
(iii) fees and expenses with respect to filings required to be made with an
exchange or any securities industry self-regulatory body; (iv) fees and expenses
of compliance with securities or “blue sky” laws (including reasonable fees and
disbursements of counsel for the underwriters

 

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or holders of securities in connection with blue sky qualifications of the
securities and determination of their eligibility for investment under the laws
of such jurisdictions); (v) printing, messenger, telephone and delivery expenses
of SORRENTO; (vi) fees and disbursements of counsel for SORRENTO and customary
fees and expenses for independent certified public accountants retained by
SORRENTO (including the expenses of any comfort letters, or costs associated
with the delivery by independent certified public accountants of a comfort
letter or comfort letters, if such comfort letter or comfort letters is required
by the managing underwriter); (vii) securities acts liability insurance, if
SORRENTO so desires; (viii) all internal expenses of SORRENTO (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties); (ix) the expense of any annual audit;
and (x) the fees and expenses of any Person, including special experts, retained
by SORRENTO; provided, however that “Registration Expenses” shall not include
underwriting fees, discounts or commissions attributable to the sale of the
Registrable Securities or any legal fees and expenses of counsel to MAYO.

 

g)Notwithstanding anything to the contrary contained in this Agreement, SORRENTO
shall not be required to include Registrable Securities in the Resale
Registration Statement unless MAYO, following reasonable advance written request
by SORRENTO, furnishes to SORRENTO, at least 10 business days prior to the
scheduled filing date of the Resale Registration Statement, an executed
stockholder questionnaire in the form attached hereto as Exhibit C.  

 

3.15Indemnification with Respect to Registration.

 

a)In the event of the offer and sale of the Registrable Securities held by MAYO
under the Securities Act, SORRENTO agrees to indemnify and hold harmless MAYO
and its directors, officers, employees, affiliates and agents and each Person
who controls MAYO within the meaning of the Securities Act or the Exchange Act
of 1934, as amended (the “Exchange Act”), (collectively, the “MAYO Indemnified
Parties”) from and against any losses, claims, damages or liabilities, joint or
several, or any actions in respect thereof to which each MAYO Indemnified Party
may become subject under the Securities Act or the Exchange Act, insofar as such
losses, claims, damages, liabilities or actions arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Resale Registration Statement or in any amendment thereof, in
each case at the time such became effective under the Securities Act, or in the
preliminary prospectus or other information that is deemed, under Rule 159
promulgated under the Securities Act to have been conveyed to purchasers of
securities at the time of sale of such securities (“Disclosure Package”), in the
prospectus or in any amendment thereof or supplement thereto, or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
Disclosure Package or any prospectus, in the light of the circumstances under
which they were made) not misleading, and shall reimburse, as incurred, the MAYO
Indemnified Parties for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof; provided, however, that SORRENTO shall
not be liable in any such case to the extent that such loss, claim, damage or
liability arises out of or is based upon any untrue statement or omission made
in the Resale Registration Statement, the Disclosure Package, any prospectus or
in any amendment thereof or supplement thereto in reliance upon and in
conformity with written information pertaining to MAYO and furnished to SORRENTO
by or on behalf of such MAYO

 

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Indemnified Party specifically for inclusion therein; provided further, however,
that SORRENTO shall not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in the
Disclosure Package, where (A) such statement or omission had been eliminated or
remedied in any subsequently filed amended prospectus or prospectus supplement
(the Disclosure Package, together with such updated documents, the “Updated
Disclosure Package”), the filing of which MAYO had been notified in accordance
with the terms of this Agreement, (B) such Updated Disclosure Package was
available at the time MAYO sold Registrable Securities under the Resale
Registration Statement, (C) such Updated Disclosure Package was not furnished by
MAYO to the Person asserting the loss, liability, claim, damage or liability, or
an underwriter involved in the distribution of such Registrable Securities, at
or prior to the time such furnishing is required by the Securities Act, and
(D) the Updated Disclosure Package would have cured the defect giving rise to
such loss, liability, claim, damage or action; and provided further, however,
that this indemnity agreement will be in addition to any liability that SORRENTO
may otherwise have to such MAYO Indemnified Party. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
any MAYO Indemnified Parties and shall survive the transfer of the Registrable
Securities by MAYO.

 

b)As a condition to including any Registrable Securities to be offered by MAYO
in any registration statement filed pursuant to this Agreement, MAYO agrees to
indemnify and hold harmless SORRENTO, each of its directors, each of its
officers who signs the Resale Registration Statement, as well as any officers,
employees, affiliates and agents of SORRENTO, and each Person, if any, who
controls SORRENTO within the meaning of the Securities Act or the Exchange Act
(a “SORRENTO Indemnified Party”) from and against any losses, claims, damages or
liabilities or any actions in respect thereof, to which a SORRENTO Indemnified
Party may become subject under the Securities Act or the Exchange Act, insofar
as such losses, claims, damages, liabilities or actions arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Resale Registration Statement or in any amendment thereof,
in each case at the time such became effective under the Securities Act, or in
any Disclosure Package, prospectus or in any amendment thereof or supplement
thereto, or (ii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
(in the case of the Disclosure Package or any prospectus, in the light of the
circumstances under which they were made) not misleading, but in each case only
to the extent that the untrue statement or omission or alleged untrue statement
or omission was made in reliance upon and in conformity with written information
pertaining to MAYO and furnished to SORRENTO by or on behalf of MAYO
specifically for inclusion therein; and, subject to the limitation immediately
preceding this clause, shall reimburse, as incurred, the SORRENTO Indemnified
Parties for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any loss, claim, damage, liability or
action in respect thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of MAYO, or any such
director, officer, employees, affiliates and agents and shall survive the
transfer of such Registrable Securities by MAYO, and MAYO shall reimburse
SORRENTO, and each such director, officer, employees, affiliates and agents for
any legal or other expenses reasonably incurred by them in connection with
investigating, defending, or settling and such loss, claim, damage, liability,
action, or proceeding; provided, however, that the indemnity amount contained in
this Section 3.15(b) shall in no event exceed the gross proceeds from the
offering received by MAYO. Such indemnity shall remain in full

 

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force and effect, regardless of any investigation made by or on behalf of
SORRENTO or any such director, officer, employees, affiliates and agents and
shall survive the transfer by MAYO of such Registrable Securities.

 

c)Promptly after receipt by a MAYO Indemnified Party or a Company Indemnified
Party (each, an “Indemnified Party”) of notice of the commencement of any action
or proceeding (including a governmental investigation), such Indemnified Party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 3.15, notify the indemnifying party of the commencement
thereof; but the omission to so notify the indemnifying party will not relieve
the indemnifying party from liability under Sections 3.15 (a) or 3.15 (b) unless
and to the extent it did not otherwise learn of such action and the indemnifying
party has been materially prejudiced by such failure. In case any such action is
brought against any Indemnified Party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party (who shall not, except with the consent
of the Indemnified Party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such Indemnified Party of its election so
to assume the defense thereof the indemnifying party will not be liable to such
Indemnified Party under this Section 3.15 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
Indemnified Party in connection with the defense thereof; provided, however, if
such Indemnified Party shall have been advised by counsel that there are one or
more defenses available to it that are in conflict with those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to direct the defense of such action on behalf of the Indemnified Party),
the reasonable fees and expenses of such Indemnified Party’s counsel shall be
borne by the indemnifying party. In no event shall the indemnifying party be
liable for the fees and expenses of more than one counsel (together with
appropriate local counsel) at any time for any Indemnified Party in connection
with any one action or separate but substantially similar or related actions
arising in the same jurisdiction out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent of
the Indemnified Party (not to be unreasonably withheld or delayed), effect any
settlement of any pending or threatened action in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party unless such settlement (i) includes
an unconditional release of such Indemnified Party from all liability on any
claims that are the subject matter of such action, and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any Indemnified Party. If the indemnification provided for in this
Section 3.15 is unavailable or insufficient to hold harmless an Indemnified
Party under Sections 3.15(a) or 3.15(b), then each indemnifying party shall
contribute to the amount paid or payable by such Indemnified Party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to in Sections 3.15(a) or 3.15(b) in such proportion as is appropriate
to reflect the relative fault of the indemnifying party or parties on the one
hand and the Indemnified Party on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof) as well as any other relevant equitable
considerations. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by SORRENTO on the one hand or MAYO or MAYO
Indemnified Party, as the case may be, on the other, and the parties’ relative
intent, knowledge,

 

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access to information and opportunity to correct or prevent such statement or
omission. The amount paid by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this Section
3.15(c) shall be deemed to include any legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any action or claim that is the subject of this Section 3.15(c). The parties
agree that it would not be just and equitable if contributions were determined
by pro rata allocation (even if MAYO was treated as one entity for such purpose)
or any other method of allocation that does not take account of the equitable
considerations referred to above. Notwithstanding any other provision of this
Section 3.15(c), MAYO shall not be required to contribute any amount in excess
of the amount by which the net proceeds received by MAYO from the sale of the
Registrable Securities pursuant to the Resale Registration Statement exceeds the
amount of damages that MAYO has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. 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 who was
not guilty of such fraudulent misrepresentation.

 

d)The agreements contained in this Section 3.15 shall survive the sale of the
Registrable Securities pursuant to the Resale Registration Statement, and shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement or any investigation made by or on behalf of any Indemnified
Party.

 

Article 4.00 – Accounting and Reports

 

4.01REPORTS AND PAYMENT.  SORRENTO will deliver to MAYO on or before the
following dates: 1 February, 1 May, 1 August and 1 November, a written report
setting forth a full accounting showing how any amounts due to MAYO for the
preceding calendar quarter have been calculated as provided in this Agreement,
including an accounting of total Net Sales with a reporting of any applicable
foreign exchange rates, deductions, allowances, and charges and any payments due
from Sublicensees.  Each report will include product names, part numbers and
quantity sold for each country in which the Licensed Product was
sold.  Furthermore, the report will include detailed information about Licensed
Products sold to MAYO or MAYO Affiliates.  If no Licensed Product transfers have
occurred and no other amounts are due to MAYO, SORRENTO will submit a report so
stating. Each such report will be accompanied by the payment of all amounts due
for such reporting period.  The first report and payment due each calendar year
shall also be accompanied by a reporting of the prior year’s best net price for
each Licensed Product, per Section 3.09.

 

4.02ACCOUNTING.  SORRENTO will, and shall require its Affiliates and
Sublicensees to keep, throughout the Term, keep complete, continuous, true and
accurate books of accounts and records sufficient to support and verify the
calculation of Net Sales, all royalties and any other amount believed due and
payable to MAYO under this Agreement.  Such books and records may be audited no
more than once in any calendar year by an independent third party auditor
reasonably acceptable to SORRENTO and MAYO solely for audit and verification of
royalty statements and the other amounts owed to MAYO hereunder.  The MAYO
representative will treat as confidential all relevant matters and will be a
person or firm reasonably acceptable to SORRENTO.  In the event such audit
reveals an underpayment by SORRENTO, SORRENTO will within thirty (30) days pay
the royalty due in excess of the royalty actually paid.  In the event the audit
reveals an underpayment by SORRENTO of more than [...***...] percent

 

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([...***...]%) of the amount due, SORRENTO will pay interest on the royalty due
in excess of the royalty actually paid at the highest rate then permitted by
law.  In either event, SORRENTO will pay all of MAYO’s costs in conducting the
audit.

 

Article 5.00 – Diligence

 

5.01DEVELOPMENT PLAN.  SORRENTO will make Commercially Reasonable Efforts to
bring Licensed Products to market in the Field in the Territory.  Within three
months of the Effective Date and annually thereafter, SORRENTO will provide to
MAYO a development plan, and the Parties shall discuss in good faith to mutually
agree upon the Licensed Products being brought forth as well as target
milestones that describes how SORRENTO intends to bring Licensed Products to
market, which shall be attached hereto as Exhibit D, Development Plan,
incorporated herein by reference.  

 

5.02DILIGENCE REPORTS.  SORRENTO will provide MAYO with annual reports within
thirty (30) days of each anniversary of the Effective Date describing in detail:
(a) as of that reporting period, all development and marketing activities for
each Licensed Product and the names of all Sublicensees, including which of the
Sublicensees are Affiliates; and (b) an updated development plan for the next
annual period.  MAYO shall have the right, no more than once annually, to
reasonably audit SORRENTO’s and Sublicensees’ records relating to development of
Licensed Products.  

 

Article 6.00 – Intellectual Property Management

 

6.01CONTROL. SORRENTO will have the first right to prepare, file, prosecute,
abandon, or otherwise handle the Patent Rights, using counsel of SORRENTO’s
selection, with prior advice and comment from MAYO.  SORRENTO shall pay all
reasonable, documented unreimbursed costs and expenses associated with the
filing, prosecution and maintenance of the Patent Rights, whether arising before
or during the Term. [...***...].  In the event that SORRENTO decides not to (i)
prosecute or maintain an application or patent within the Patent Rights; or (ii)
pursue claims suggested by MAYO, SORRENTO shall inform MAYO of such decision at
least thirty (30) days prior to the relevant deadline.  Should MAYO then choose
to (a) continue the prosecution or maintenance of an application or patent
abandoned by SORRENTO; or (b) file a patent application pursuing claims not
pursued by SORRENTO, MAYO shall pay the cost of such activity, and any license
to the SORRENTO for such patent rights shall terminate.  MAYO shall have sole
control over the protection, defense, enforcement, maintenance, abandonment and
other handling of the Know-How and Materials.  MAYO will have no liability to
SORRENTO for any act or omission in the preparation, filing, prosecution,
maintenance, abandonment, or other handling of the Patent Rights and Know-How
and Materials.

 

6.02ENFORCEMENT. The Parties shall promptly notify each other of any suspected
infringement of any Patent Rights.  

 

a)During the Term, SORRENTO shall, at its expense, have the first right to
enforce any Patent Rights against such infringer. SORRENTO agrees to defend MAYO
against any counterclaim brought against it in such action.  MAYO shall
reasonably cooperate with SORRENTO in such effort, at SORRENTO‘s expense,
including being joined as a party to such

 

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action, if deemed by a court with competent jurisdiction as a necessary party.
SORRENTO shall reimburse MAYO for any reasonable costs incurred, including
reasonable attorneys’ fees, as part of any action brought by SORRENTO.

 

b)SORRENTO shall have the right to enter into any settlement agreement,
voluntary dismissal, consent judgment or other voluntary final disposition in
any action regarding the Patent Rights, provided that SORRENTO will give MAYO a
reasonable opportunity to review and comment on any such proposed settlement
agreement, voluntary dismissal, consent judgment, or other voluntary final
dismissal and SORRENTO will not enter into such proposed settlement agreement,
voluntary dismissal, consent judgment, or other voluntary final dismissal if
MAYO reasonably objects to the same (and in which case the Parties will promptly
work together to identify a mutually acceptable resolution to such action).  Any
amounts received for punitive or exemplary damages shall be shared equally
between MAYO and SORRENTO and any other amounts received, including compensatory
damages or damages based on a loss of revenues which exceed the out-of-pocket
costs and expenses incurred by SORRENTO, shall be deemed to be Net Sales of
Royalty-Bearing Products in the fiscal quarter received.

 

c) If SORRENTO fails, within one hundred twenty (120) days after receiving
notice of a potential infringement, to institute an action against such
infringer or notifies MAYO that it does not plan to institute such action, then
MAYO shall have the right to do so at its own expense. SORRENTO shall cooperate
with MAYO in such effort including being joined as a party to such action if
necessary.  MAYO shall be entitled to retain all damages or costs awarded in
such action.  Should either MAYO or SORRENTO be a party to a suit under the
provisions of this Article and thereafter elect to abandon such suit, the
abandoning party shall give timely notice to the other party who may, at its
discretion, continue prosecution of such suit.

 

6.03PATENT TERM EXTENSION.  SORRENTO shall consult with MAYO in selecting the
patent covering each Licensed Product for patent term extension for or
supplementary protection certificate in accordance with the Applicable Laws of
any country.  Each Party agrees to execute any documents and to take any
additional actions as the other Party may reasonably request in connection
therewith.

 

6.04PATENT MARKING.  To the extent commercially feasible, SORRENTO will mark all
Licensed Products that are manufactured or sold under this Agreement with the
number of each issued patent within the Patent Rights that cover such Licensed
Product(s).  Any such marking will be in conformance with the patent laws and
other laws of the country of manufacture or sale.  

 

6.05DEFENSE.  MAYO will have the first right, but not the obligation, to take
any measures deemed appropriate by MAYO, regarding (a) challenges to the Patent
Rights (including interferences, inter partes review, post grant review, cover
business method, ex parte examination, or derivation proceedings in the U.S.
Patent and Trademark Office and oppositions in foreign jurisdictions) and (b)
defense of the Patent Rights (including declaratory judgment actions). SORRENTO
shall have the right to comment and participate in any such challenge or action
at its request and expense, and will reasonably cooperate in any such measures
if requested to do so by MAYO. Should MAYO choose not to defend that Patent
Rights against any such challenges or actions then SORRENTO may do so at its own
expense [...***...].

 

 

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6.06THIRD PARTY LITIGATION.  In the event a third party institutes a suit
against SORRENTO for infringement of intellectual property involving a Licensed
Product, SORRENTO will promptly inform MAYO and keep MAYO regularly informed of
the proceedings. SORRENTO agrees to indemnify, defend and hold harmless MAYO for
any claims, demands or law suits related thereto in accordance with Article
9.    

 

Article 7.00 – Use of Name

 

7.01USE OF NAME AND LOGO.  Except to the extent required by Applicable Law
(including reporting obligations with respect to public filings), neither Party
will use for publicity, promotion or otherwise, any logo, name, trade name,
service mark or trademark of the other Party or its Affiliates, or any
simulation, abbreviation or adaptation of the same, or the name of any employee
or agent of the other Party, without that Party’s prior, written, express
consent.  A Party may withhold such consent in that Party’s absolute
discretion.  MAYO’s marks include, but are not limited to the terms “MAYO®,”
“MAYO Clinic®” and the triple shield MAYO logo.  With regard to the use of
MAYO’s name, all requests for approval pursuant to this Section must be
submitted to the Mayo Clinic Public Affairs Business Relations Group, at the
e-mail address [...***...] at least ten (10) business days prior to the date on
which a response is needed (which time period may be waived in MAYO’s sole
discretion).

 

Article 8.00 – Confidentiality

 

8.01TREATMENT OF CONFIDENTIAL INFORMATION.  Except as provided for in Section
8.02 (Right to Disclose), neither Party will disclose, use or otherwise make
available the other’s Confidential Information during the Term and for three (3)
years thereafter and will use at least the same degree of care it employs to
protect its own confidential information.      

 

8.02RIGHT TO USE AND DISCLOSE.  

 

(a)To the extent it is reasonably necessary or appropriate to fulfill its
obligations or exercise its rights under this Agreement, SORRENTO may use and
disclose Confidential Information of MAYO to its Sublicensees, consultants, and
outside contractors on the condition that each such entity or person agrees to
obligations of confidentiality and non-use at least as stringent as those
herein.  

 

(a)To the extent it is reasonably necessary or appropriate to fulfill its
obligations or exercise its rights under this Agreement, MAYO may disclose
Confidential Information of SORRENTO to its consultants and outside contractors
on the condition that each such entity agrees to obligations of confidentiality
and non-use at least as stringent as those herein.  

 

(b)If a Party is required by law, regulation or court order to disclose any of
the Confidential Information, it will have the right to do so, provided it: (i)
promptly notifies the disclosing Party; and (ii) reasonably assists the
disclosing Party to obtain a protective order or other remedy of disclosing
Party’s election and at disclosing Party’s expense, and only disclose the
minimum amount necessary to satisfy such obligation.  

 

8.03CONFIDENTIALITY OF AGREEMENTS.  Except as otherwise required by law, the
specific terms and conditions of this Agreement shall be Confidential
Information but the

 

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existence and Field of this Agreement will not be Confidential Information and
the Parties may state that SORRENTO is licensed under the Licensed IP.

 

Article 9.00 – Warranties, Representations, Disclaimers and Indemnification

 

9.01REPRESENTATIONS AND WARRANTIES.  

 

a)By All Parties. Each Party represents, warrants and covenants to the other
that:

 

(i)it is duly organized and validly existing under the laws of its state of
formation and has full authority to enter into this Agreement;

 

(ii)the execution and performance of this Agreement does not conflict with any
other agreement, oral or written, to which it is a Party;

 

(iii)it will perform its obligations under this Agreement in compliance with all
Applicable Laws; and

 

(iv)this Agreement is its legal, valid and binding obligation, enforceable
against such Party in accordance with the terms and conditions hereof, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
or by the principles governing the availability of equitable remedies.

 

b)By SORRENTO. SORRENTO warrants and represents to MAYO that:

 

(i)it is experienced in the development, production, quality control, service,
manufacture, marketing and sales of products similar to the subject matter of
the Licensed IP and it will commit itself to a diligent program of developing
and marketing the Licensed Products in accordance with each years development
plan;

 

(ii)it has independently evaluated the Licensed IP and their applicability or
utility in SORRENTO’s activities, and is entering into this Agreement on the
basis of its own evaluation and not in reliance of any representation by MAYO,
and, except to the extent arising out of or related to a breach of this
Agreement by MAYO or MAYO’s gross negligence or willful misconduct, assumes all
risk and liability in connection with such determination;

 

(iii) it now maintains and will continue to maintain throughout the Term and
beyond (to the extent required in Section 9.03) insurance coverage as set forth
in Section 9.03 (Indemnification and Insurance); and

 

(iv) it shall comply and shall use Commercially Reasonable Efforts to require
its Sublicensees to comply with all applicable international, national and state
laws, ordinances and regulations in its performance under this Agreement.

 

 

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c)By MAYO. MAYO warrants and represents to SORRENTO that:

 

(i)[...***...];

 

(ii)[...***...];

 

(iii)[...***...];

 

(iv)[...***...];

 

(v)[...***...]; and

 

(vi)[...***...].

 

9.02DISCLAIMERS.  

 

(a)EACH PARTY AGREES AND ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT OR ANY SPONSORED RESEARCH AGREEMENT ENTERED INTO BY THE PARTIES:
(i) NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND
WHATSOEVER, IMPLIED OR STATUTORY WITH RESPECT TO THE SUBJECT MATTER OF THIS
AGREEMENT, AND EACH PARTY HEREBY EXPRESSLY DISCLAIMS ALL SUCH REPRESENTATIONS
AND WARRANTIES, IMPLIED OR STATUTORY, AND FOR MAYO, INCLUDING ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AGAINST
NON-INFRINGEMENT OR THE LIKE, OR ARISING FROM COURSE OF PERFORMANCE, AND (ii)
MAYO HAS NOT MADE AND DOES NOT MAKE ANY PROMISES, COVENANTS, GUARANTEES,
REPRESENTATIONS OR WARRANTIES OF ANY NATURE, DIRECTLY OR INDIRECTLY, EXPRESS,
STATUTORY OR IMPLIED, INCLUDING WITHOUT LIMITATION, MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE, SUITABILITY, DURABILITY, CONDITION, QUALITY OR ANY
OTHER CHARACTERISTIC OF THE LICENSED IP OR CONFIDENTIAL INFORMATION.  

 

(b)WITHOUT LIMITING SECTION 9.02 AND EXCEPT AS EXPRESSLY PROVIDED HEREIN: (i)
THE LICENSED IP AND CONFIDENTIAL INFORMATION IS PROVIDED “AS IS,” “WITH ALL
FAULTS” AND “WITH ALL DEFECTS,” (ii) EXCEPT FOR CLAIMS ARISING OUT OF OR RELATED
TO A BREACH OF THIS AGREEMENT BY MAYO, OR MAYO’S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, SORRENTO EXPRESSLY WAIVES ALL RIGHTS TO MAKE ANY CLAIM WHATSOEVER
AGAINST MAYO FOR MISREPRESENTATION OR FOR BREACH OF PROMISE, GUARANTEE, OR
IMPLIED REPRESENTATION OR WARRANTY OF ANY KIND, IN ALL CASES RELATING TO THE
LICENSED IP AND THE CONFIDENTIAL INFORMATION PROVIDED BY MAYO TO SORRENTO
HEREUNDER; (iii) MAYO EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES ARISING FROM
ANY COURSE OF DEALING, USAGE OR TRADE PRACTICE, WITH RESPECT TO: THE SCOPE,
VALIDITY OR ENFORCEABILITY OF THE LICENSED IP; THAT ANY PATENT WILL ISSUE BASED
UPON ANY PENDING PATENT APPLICATION; OR THAT THE USE, SALE, OFFER FOR SALE OR
IMPORTATION OF THE LICENSED PRODUCTS WILL

 

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NOT INFRINGE OTHER INTELLECTUAL PROPERTY RIGHTS.  NOTHING IN THIS AGREEMENT WILL
BE CONSTRUED AS AN OBLIGATION FOR MAYO TO BRING, PROSECUTE OR DEFEND ACTIONS
REGARDING THE LICENSED IP.

 

(c)EXCEPT FOR CLAIMS ARISING OUT OF OR RELATED TO A BREACH OF THIS AGREEMENT BY
MAYO, OR MAYO’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, SORRENTO AGREES THAT
MAYO AND ITS AFFILIATES WILL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY OR
ARISING OUT OF ANY RIGHTS GRANTED OR PERFORMANCE MADE UNDER THIS AGREEMENT,
WHETHER TO OR BY SORRENTO, SUBLICENSEE OR A THIRD PARTY.  EXCEPT WITH RESPECT TO
ANY BREACH OF ARTICLE 8, A PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR
FOR MAYO’S WILLFUL BREACH OF SECTION 2.01, OR AS MAY BE PAYABLE PURSUANT TO THE
APPLICABLE PARTY’S INDEMNIFICATION OBLIGATIONS UNDER THIS AGREEMENT, TO THE
MAXIMUM EXTENT PERMITTED BY LAW AND NOTWITHSTANDING ANY PROVISION IN THIS
AGREEMENT TO THE CONTRARY, IN NO EVENT WILL EITHER PARTY’S LIABILITY OF ANY KIND
INCLUDE ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE LOSSES OR
DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
EXCEPT FOR MAYO’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR MAYO’S WILLFUL
BREACH OF SECTION 2.01, MAYO’S TOTAL LIABILITY SHALL NOT EXCEED THE TOTAL AMOUNT
OF ROYALTIES AND OTHER CONSIDERATION (OTHER THAN REIMBURSEMENTS) THAT HAVE
ACTUALLY BEEN PAID TO MAYO BY SORRENTO UNDER THIS AGREEMENT WITHIN THE PRIOR
TWELVE MONTHS AS OF THE DATE OF FILING AN ACTION AGAINST MAYO THAT RESULTS IN
THE SETTLEMENT OR AWARD OF DAMAGES TO SORRENTO.

 

9.03INDEMNIFICATION AND INSURANCE.  

 

a)SORRENTO will defend, indemnify and hold harmless MAYO, MAYO’s Affiliates and
their respective trustees, officers, agents, independent contractors and
employees (“MAYO Indemnitees”) from any and all judgments, costs, expenses,
damages and liabilities (including reasonable attorneys’ fees, court costs and
other reasonable expenses of litigation) (collectively, “Liabilities”) resulting
from suits, claims, actions and demands, in each case brought by a third party
(each, a “Third-Party Claim”), regardless of the legal theory asserted, arising
out of or connected with: (i) the practice or exercise of any rights granted
hereunder by or on behalf of SORRENTO or any Sublicensee; (ii) research,
development, design, manufacture, distribution, use, sale, importation,
exportation or other disposition of Licensed Products by or on behalf of
SORRENTO or any Sublicensee; (iii) any material breach of any of SORRENTO’s
obligations, representations, warranties or covenants under this Agreement; or
(iv) act or omission of SORRENTO or any Sublicensee in the performance under
this Agreement, including the negligence or willful misconduct of a SORRENTO
Indemnitee under this Agreement.  SORRENTO’s obligation to indemnify the MAYO
Indemnitees pursuant to this Section 9.03(a) shall not apply to the extent that
any such Liabilities are the result of a material breach by MAYO of its
obligations, representations, warranties or covenants under this Agreement or
MAYO’s gross negligence or willful misconduct.

 

 

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b)MAYO will defend, indemnify and hold harmless SORRENTO, SORRENTO’s Affiliates
and their respective trustees, officers, agents, independent contractors and
employees (“SORRENTO Indemnitees”) from any and all Liabilities resulting from
Third-Party Claims arising out of or occurring as a result of: (i) any material
breach of any of MAYO’s obligations, representations, warranties, or covenants
under this Agreement; or (ii) the gross negligence or willful misconduct of a
MAYO Indemnitee under this Agreement. MAYO’s obligation to indemnify the
SORRENTO Indemnitees pursuant to this Section 9.03(b) shall not apply to the
extent that any such Liabilities are the result of a material breach by SORRENTO
of its obligations, representations, warranties or covenants under this
Agreement or SORRENTO’s gross negligence or willful misconduct.

 

(c) To be eligible to be Indemnified pursuant to this Section 9.03, the
indemnified Person shall provide the indemnifying Party with prompt written
notice of the Third-Party Claim giving rise to the indemnification obligation
pursuant to this Section 9.03 and the right to control the defense (with the
reasonable cooperation of the indemnified Person) or settlement any such claim;
provided, however, that the indemnifying Party shall not enter into any
settlement that admits fault, wrongdoing or damages without the indemnified
Person’s written consent, such consent not to be unreasonably withheld or
delayed.  The indemnified Person shall have the right to join, but not to
control, at its own expense and with counsel of its choice, the defense of any
claim or suit that has been assumed by the indemnifying Party.  

 

(d)SORRENTO will continuously carry occurrence-based liability insurance,
including products liability and contractual liability, in an amount and for a
time period sufficient to cover the liability assumed by SORRENTO hereunder
during the Term and after, such amount being at least Five Millions Dollars (USD
$5,000,000).  In addition, such policy will name MAYO and its Affiliates as
additional-named insureds up to the policy limit.  The minimum limits of any
insurance coverage required herein shall not limit SORRENTO’s liability.
SORRENTO acknowledges and agrees that the rights and remedies available to MAYO
hereunder shall not be limited by the amounts of SORRENTO’s insurance coverage.

 

(e)SORRENTO expressly waives any right of subrogation that it may have against
MAYO Indemnitees resulting from any claim, demand, liability, judgment,
settlement, costs, fees (including attorneys’ fees) and expenses for which
SORRENTO is obligated to indemnify, defend and hold MAYO Indemnitees harmless
under this Agreement.  

 

9.04PROHIBITION AGAINST INCONSISTENT STATEMENTS.  SORRENTO shall not make any
statements, representations or warranties on behalf of MAYO, nor purport to
accept any liabilities or responsibilities on behalf of MAYO whatsoever that are
inconsistent with any disclaimer or limitation included in this section or any
other provision of this Agreement.  

 

 

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Article 10.00 – Term and Termination

 

10.01TERM.  This Agreement shall become effective as of the Effective Date, and
will continue in full force and effect unless and until (a) mutually terminated
in writing by the Parties, or (b) otherwise terminated pursuant to and in
accordance with the terms of this Agreement (the “Term”).   

 

10.02TERMINATION FOR BREACH.

 

(a)Subject to Section 11.17 (Force Majeure) and Section 10.06, if SORRENTO
commits a material breach of this Agreement, including without limitation, the
failure to make any required and undisputed royalty or fee payments hereunder,
MAYO may notify SORRENTO in writing of such breach specifying the nature of the
breach, requiring SORRENTO to cure such breach, and stating its intention to
terminate this Agreement if such breach is not cured, and SORRENTO will have (a)
in the event of a material payment breach, sixty (60) days after such notice to
cure such breach or (b) in the event of any other material breach (including any
material breach of any diligence, milestone or similar obligation hereunder),
one hundred and twenty (120) days after such notice to cure such breach. If
SORRENTO fails to cure such breach within the applicable aforementioned cure
period, MAYO may, at its sole discretion, terminate this Agreement by sending
SORRENTO written notice of termination.  

 

(b)Subject to Section 11.17 (Force Majeure), if MAYO commits a material breach
of this Agreement, SORRENTO may notify MAYO in writing of such breach specifying
the nature of the breach, requiring MAYO to make good or otherwise cure such
breach, and stating its intention to terminate this Agreement if such breach is
not cured, and MAYO will have sixty (60) days after such notice to cure such
breach.   If MAYO fails to cure such breach within the applicable aforementioned
cure period, SORRENTO may, at its sole discretion, terminate this Agreement by
sending MAYO written notice of termination.

 

10.03TERMINATION FOR SUIT. MAYO does not license entities that bring suit
against MAYO or its Affiliates and as such, MAYO may immediately terminate this
Agreement if SORRENTO or any Sublicensee directly or indirectly brings any
action or proceeding against MAYO or its Affiliates relating to the subject
matter of this Agreement, except for any suit, action or claim relating to an
uncured material breach of this Agreement by MAYO or its Affiliates or otherwise
to enforce or affirm the terms and conditions of this Agreement or any sponsored
research agreements contemplated herein.  

 

10.04INSOLVENCY OF SORRENTO.  This Agreement terminates immediately without an
obligation of notice of termination to SORRENTO in the event SORRENTO ceases
conducting business in the normal course, becomes insolvent or bankrupt, makes a
general assignment for the benefit of creditors, admits in writing its inability
to pay its debts as they are due, permits the appointment of a receiver for its
business or assets or avails itself of or becomes subject to any proceeding
under any statute of any governing authority relating to insolvency or the
protection of rights of creditors.

 

 

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10.05TERMINATION FOR CONVENIENCE BY SORRENTO.  SORRENTO may, during the Royalty
Term, terminate this Agreement for no reason or for any reasons upon six (6)
months’ written notice to MAYO.

 

10.06TERMINATION OF A LICENSED PRODUCT DUE TO ABANDONMENT OR FAILURE TO EXERCISE
COMMERCIALLY REASONABLE EFFORTS.  If SORRENTO and its Affiliates and
Sublicensees have not undertaken any development, commercialization, or other
Exploitation of a particular Licensed Product in accordance with the then
current Development Plan, or otherwise have failed to exercise their required
Commercially Reasonable Efforts with respect to a particular Licensed Product
set forth on the then current Development Plan in accordance with the then
current Development Plan, and, in either case, have failed to remedy such breach
within sixty (60) days of receiving notice thereof by MAYO then, in either case,
and as MAYO’s exclusive remedy and as SORRENTO’s sole liability, MAYO may, at
its sole discretion, but only with respect to such Licensed Product, terminate
SORRENTO’s rights to such Licensed Product or convert SORRENTO’s license to such
Licensed Product to non-exclusive, in either case by providing SORRENTO written
notice of such termination or conversion. For the avoidance of doubt, exercise
of the foregoing rights by MAYO will not terminate or amend any other rights
SORRENTO has to any other Licensed Products.

 

10.07RETURN/DESTRUCTION OF CONFIDENTIAL INFORMATION / MATERIALS / LICENSED
PRODUCT.  Subject to Section 10.08 (Effect of Termination) below (including the
sell off period set forth therein), in the event of termination of this
Agreement by MAYO pursuant to Sections 10.02(a), 10.03, 10.04, or 10.06, and at
MAYO’s sole discretion, SORRENTO shall either return the Confidential
Information, Materials and Licensed Product to MAYO or destroy it.  If SORRENTO
is instructed to destroy the Confidential Information, Materials and Licensed
Product, SORRENTO shall provide MAYO certification of action within thirty (30)
days from the date of destruction.

 

10.08EFFECT OF TERMINATION. 

 

a)By MAYO for Cause or Abandonment or by SORRENTO without Cause. Without
limiting SORRENTO’s rights under any sponsored research agreement(s)
contemplated herein, termination of this Agreement (i) by MAYO under Sections
10.02(a), 10.03, 10.04, or 10.06, or (ii) by SORRENTO under Section 10.05 will
result in termination of SORRENTO’s license rights under Section 2.01 (provided
that, in the case of termination by MAYO under Section 10.06, only SORRENTO’s
rights with respect to the terminated Licensed Product shall be so terminated),
subject to SORRENTO’s rights under the following paragraph.

 

Without limiting SORRENTO’s rights under any sponsored research agreement(s)
contemplated herein, upon termination of this Agreement (i) by MAYO under
Sections 10.02(a), 10.03, 10.04, or 10.06, or (ii) by SORRENTO under Section
10.05, in the event MAYO provides notice to SORRENTO, SORRENTO shall assign to
MAYO all right, title and interest in and to all development information to the
extent solely relating to SORRENTO’s or anyone acting on their behalf, exercise
of the licenses granted and subsequently hereunder, including but not limited
to, any such information in vitro studies, toxicology, pharmacokinetic,
efficacy, clinical and other technical data and all correspondence to and from
regulatory agencies to the extent solely relating to approval of terminated
Licensed Products generated by SORRENTO and/or its

 

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Affiliates, contractors and agents hereunder (hereinafter “Development
Information”).  If so required hereunder, SORRENTO shall use Commercially
Reasonable Efforts to provide any such Development Information to MAYO within
thirty (30) days of the date of termination.  Upon termination of this Agreement
by MAYO under Sections 10.02(a), 10.03 or 10.04 or by SORRENTO under Section
10.05, SORRENTO shall cease manufacturing, processing, producing, using,
importing or selling all terminated Licensed Products; provided, however, that
SORRENTO and its Affiliates and Sublicensees may (i) finish manufacturing
terminated Licensed Products that are in the process of being manufactured at
the time of termination, and (ii) continue to sell in the ordinary course of
business for a period of one year (1) year those quantities of terminated
Licensed Products which are fully manufactured and in SORRENTO’s normal
inventory at the date of termination (or for which manufacture is completed in
accordance with subclause (i) hereof), if (a) all monetary obligations of
SORRENTO to MAYO have been satisfied and (b) royalties on such sales are paid to
MAYO in the amounts and in the manner provided in this Agreement.

 

b)By SORRENTO for Cause. Termination of this Agreement by SORRENTO under Section
10.02(b) for material breach of this Agreement by MAYO, will result in the
voiding of Section 3.02, licenses in Section 2.01 and the covenant set forth in
Section 2.04 becoming irrevocable subject to all other applicable terms and
conditions of this Agreement remaining in effect to the extent necessary for the
continued payment of royalties by SORRENTO for Net Sales of Royalty Bearing
Products. For the avoidance of doubt, any royalties that would be due
notwithstanding SORRENTO’s termination pursuant to this Section 10.08(b), will
continue to accrue and be payable to MAYO in accordance with the terms and
conditions of this Agreement.

 

c)Expiration. Upon expiration of the Royalty Term with respect to a particular
country, all rights and licenses granted to SORRENTO under this Agreement and
the covenant set forth in Section 2.04, in each case with respect to such
country, will become fully paid, irrevocable (except otherwise provided herein),
and royalty free. For the avoidance of doubt, milestone payments due under
Section 3.02 shall still remain in effect after the Royalty Term.

 

10.09SURVIVAL.  The termination or expiration of this Agreement does not relieve
either Party of its rights and obligations that have previously accrued. Subject
to Sections 10.08(a) and 10.08(b), all rights granted immediately revert to MAYO
after the Term. Rights and obligations that by their nature prescribe continuing
rights and obligations shall survive the termination or expiration of this
Agreement including Sections 4.02 (Accounting), 9.03 (Indemnification and
Insurance), 10.07 (Return/Destruction of Material/Licensed Product), 10.08
(Effect of Termination), 10.09 (Survival) and Articles 1 (Definitions), 7 (Use
of Name), 8 (Confidentiality) and 11 (General Provisions).  SORRENTO, on behalf
of itself and its Sublicensees, shall provide an accounting for and pay, within
thirty (30) days of termination or expiration, all amounts due hereunder.

 

 

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Article 11.00 – General Provisions

 

11.01Amendments.  This Agreement may not be amended or modified except by a
writing signed by both Parties and identified as an amendment to this Agreement.

 

11.02CONSTRUCTION.  Each Party acknowledges that it was provided an opportunity
to seek advice of counsel and as such this Agreement shall not be construed for
or against either Party.  References to “including” in this Agreement shall mean
“including, without limitation,” whether or not so specified.

 

11.03ENTIRE AGREEMENT.  This Agreement constitutes the final, complete and
exclusive agreement between the Parties with respect to its subject matter and
supersedes all past and contemporaneous agreements, promises, and
understandings, whether oral or written, between the Parties.

 

11.04EXPORT CONTROL.  The Parties agree not to use or otherwise export or
re-export anything exchanged or transferred between them pursuant to this
agreement except as authorized by United States law and the laws of the
jurisdiction in which it was obtained.  In particular, but without limitation,
items exchanged may not be exported or re-exported (a) into any U.S. embargoed
countries or (b) to anyone on the U.S. Treasury Department's list of Specially
Designated Nationals or the U.S. Department of Commerce Denied Person’s List or
Entity List.  By entering into this Agreement, each Party represents and
warrants that they are not located in any such country or on any such
list.  Each Party also agrees that they will not use any item exchanged for any
purposes prohibited by United States law, including, without limitation, the
development, design, manufacture or production of missiles, or nuclear, chemical
or biological weapons.  In the event either Party becomes aware of any suspected
violations of this paragraph that Party will promptly inform the other Party of
such suspected violations, and cooperate with one another in any subsequent
investigation and defense, be they civil or criminal.

 

11.05ANTI-CORRUPTION COMPLIANCE.  The Parties, their Affiliates, and any
Sublicensee, shall conduct themselves in an ethical, lawful, businesslike and
professional manner in performance of this Agreement and shall comply with all
Applicable Laws, regulations and directives that may apply to them in the United
States or elsewhere.  Without limiting the foregoing and for avoidance of doubt,
SORRENTO, its Affiliates and any Sublicensee, shall obey all Applicable Laws or
regulations in SORRENTO’s applicable jurisdictions and shall also obey the U.S.
Foreign Corrupt Practices Act (“FCPA”) (15 USC §§ 78dd-1, et seq.) and any
similar applicable anti-bribery provisions, laws or regulations.  Each Party
shall reasonably assist the other Party(ies) to assure such compliance at all
times during the term of this Agreement. SORRENTO’s, its Affiliates’, or any
Sublicensees’ failure to adhere to the requirements of this section shall be
grounds for Mayo to terminate this Agreement for cause pursuant to Section
10.02.  

 

 

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11.06GOVERNING LAW AND JURISDICTION. The terms and conditions of this Agreement,
as well as all disputes arising under or relating to this Agreement, shall be
governed by New York law, specifically excluding its choice-of-law principles,
except that the interpretation, validity and enforceability of the Patent Rights
will be governed by the patent laws of the country in which the patent
application is pending or issued.  This is not an Agreement for the sale of
goods and as such Article 2 of the Uniform Commercial Code as enacted in New
York does not apply.    

 

11.07HEADINGS. The headings of articles and sections used in this document are
for convenience of reference only.

 

11.08INDEPENDENT CONTRACTORS.  It is mutually understood and agreed that the
relationship between the Parties is that of independent contractors.  Neither
Party is the agent, employee, or servant of the other.  Except as specifically
set forth herein, neither Party shall have nor exercise any control or direction
over the methods by which the other Party performs work or obligations under
this Agreement.  Further, nothing in this Agreement is intended to create any
partnership, joint venture, lease or equity relationship, expressly or by
implication, between the Parties.

 

11.09INDUCEMENT OF REFERRALS.  It is not the purpose of this Agreement or the
intent of the Parties to induce or encourage the referral of patients, and there
is no requirement under this Agreement or under any other Agreement between the
Parties that SORRENTO or its staff refer patients to MAYO for products or
services.  No payment made under this Agreement is made in return for the
referral of patients, or is made in return for the purchasing, leasing, or
ordering of any products or services.

 

11.10LIMITATION OF RIGHTS CREATED.  This Agreement is personal to the Parties
and shall be binding on and inure to the sole benefit of the Parties and their
permitted successors and assigns and shall not be construed as conferring any
rights to any third party except as expressly stated herein.  Specifically, no
interests are intended to be created for any customer, patient, research
subjects, or other persons (or their relatives, heirs, dependents, or personal
representatives) by or upon whom the Licensed Products may be used.

 

11.11No Assignment.  Sorrento may not assign its rights under this Agreement to
any third party without the prior written consent of Mayo; provided, that
Sorrento may assign any or all of its rights without the prior written consent
of Mayo to an Affiliate of Sorrento or to a third party in connection with a
sale of all or substantially all of a business or assets of Sorrento related to
this Agreement to such third party, provided notice is promptly given to Mayo
within thirty (30) days following such occurrence. In either case, Sorrento and
the applicable s Affiliate or third party will agree that such Affiliate or
third party will be treated as the direct licensee for all obligations and
payments under this Agreement.  For the avoidance of doubt, should Sorrento
assign this Agreement to an Affiliate or third party, Mayo agrees that such
Affiliate or third party will not be considered a sublicense as defined herein.
Any purported assignment in violation of this clause is void.  

 

 

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11.12NOTICES.  All notices and other business communications between the Parties
related to this Agreement shall be in writing, sent by certified mail, addressed
as follows:

 

To MAYO:Mayo Foundation for Medical Education and Research

Mayo Clinic Ventures – BB4

200 First Street SW

Rochester, Minnesota 55905-0001

Attn:  Ventures Operations

Phone: [...***...]

Facsimile: [...***...]

Email: [...***...]

Fed Tax ID: 41-1506440

 

To SORRENTO:

 

Sorrento Therapeutics, Inc.

4955 Directors Place

San Diego, CA 92121

Facsimile: [...***...]

Attention:  Henry Ji, Ph.D., President & Chief Executive Officer

 

with copies, which shall not constitute notice to Sorrento, to:

 

Sorrento Therapeutics, Inc.

4955 Directors Place

Facsimile: [...***...]

Attention: Legal Department

 

and

 

Paul Hastings LLP

1117 S. California Avenue

Palo Alto, CA 94304

Facsimile: (650) 320-1904

Attention: Jeffrey Hartlin, Esq.

 

Fed Tax ID: 33-0344842

 

Invoicing Contact:

Janie Shi c/o Accounts Payable

Sorrento Therapeutics, Inc.

4955 Directors Place

San Diego, CA 92121

Phone: [...***...]

Email: [...***...]

 

 

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Expense Reimbursement Contact:

Janie Shi c/o Accounts Payable

Sorrento Therapeutics, Inc.

4955 Directors Place

San Diego, CA 92121

Phone: [...***...]

Email: [...***...]

 

Notices sent by certified mail shall be deemed delivered on the third day
following the date of mailing.  Either Party may change its address or facsimile
number by giving written notice in compliance with this section.

 

11.13REGISTRATION OF LICENSES.  As between the Parties, SORRENTO will have the
right, to register and give any required notice concerning this Agreement, at
its expense, in each country in the Territory where an obligation under law
exists to so register or give notice.

 

11.14RESEARCH AND CLINICAL TRIALS.  The Parties acknowledge that any SORRENTO
sponsored research or clinical trial at MAYO related to this Agreement will be
subject to a separate agreement consisting of a defined protocol, associated
budget and any terms and conditions that may be required by law or MAYO policy,
in each case as mutually agreed between the Parties.  

 

11.15SEVERABILITY.  In the event any provision of this Agreement is held to be
invalid or unenforceable, the remainder of this Agreement shall remain in full
force and effect as if the invalid or unenforceable provision had never been a
part of the Agreement.

 

11.16WAIVER.  The failure of either Party to complain of any default by the
other Party or to enforce any of such Party’s rights, no matter how long such
failure may continue, will not constitute a waiver of the Party’s rights under
this Agreement.  The waiver by either Party of any breach of any provision of
this Agreement shall not be construed as a waiver of any subsequent breach of
the same or any other provision.  No part of this Agreement may be waived except
by the further written agreement of the Parties.

 

11.17FORCE MAJEURE. No Party shall be liable for a failure or delay in
performing any of its obligations under this Agreement to the extent that such
failure or delay is due to causes beyond the reasonable control of the affected
Party, including: (a) acts of God; (b) fire, explosion, or unusually severe
weather; (c) war, invasion, riot, terrorism, or other civil unrest; (d)
governmental laws, orders, restrictions, actions, embargo or blockages; (e)
national or regional emergency; (f) strikes or industrial disputes at a national
level which directly impact the affected Party’s performance under this
Agreement; (g) epidemics, pandemics, or disease outbreak (including the novel
coronavirus (COVID-19) pandemic) and steps required under Applicable Law in
light of any such epidemic, pandemic, or disease outbreak; (h) regulatory
delays, including any delay or inaction by a Regulatory Authority; or (i) other
similar cause outside of the reasonable control of such Party (“Force Majeure”);
provided that the Party affected shall promptly notify the other of the Force
Majeure condition and shall eliminate, cure or overcome any such causes and to
resume performance of its obligations as soon as possible.

 

 

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11.18COMPLIANCE WITH LAWS.  Both SORRENTO and MAYO shall perform their
obligations under this Agreement in accordance with Applicable Law and each
Party shall bear its own costs in ensuring compliance therewith.  No Party
shall, or shall be required to, undertake any activity under or in connection
with this Agreement that violates, or which it reasonably believes may violate,
any Applicable Law.  

 

11.19COUNTERPARTS.  This Agreement may be executed in any number of counterparts
which, when taken together, will constitute an original, and photocopy,
facsimile, electronic or other copies shall have the same effect for all
purposes as an ink-signed original.  Each Party hereto consents to be bound by
photocopy, facsimile, or electronic signatures of such Party’s authorized
representative hereto.

 

Mayo Foundation for Medical

Education and Research

 

SORRENTO Therapeutics, Inc.

 

 

 

 

 

 

 

By

 

/s/ James A. Rogers III

 

By

 

/s/ Henry Ji, Ph.D.

Name:

 

James A. Rogers III

 

Name:

 

Henry Ji, Ph.D.

Title:

 

Assistant Secretary

 

Title:

 

President and CEO

 

 

 

 

 

 

 

Date:

 

9/8/2020

 

Date:

 

9/8/2020

 

 

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page 33 of 37

 

Exhibit C

Form of Selling Stockholder Questionnaire

 

SORRENTO THERAPEUTICS, INC.

 

SELLING STOCKHOLDER NOTICE AND QUESTIONNAIRE

The undersigned holder of shares of Common Stock issued by SORRENTO
Therapeutics, Inc. (the “Company”) understands that the Company intends to file
with the Securities and Exchange Commission a registration statement on Form S-3
(the “Resale Registration Statement”) for the registration and the resale under
Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of
the Registrable Securities in accordance with the terms of the Patent and
Know-How License Agreement, dated September 8, 2020, by and between the Company
and MAYO Foundation for Medical Education and Research thereto (the
“Agreement”). All capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Agreement.

In order to sell or otherwise dispose of any Registrable Securities pursuant to
the Resale Registration Statement, a holder of Registrable Securities generally
will be required to be named as a selling stockholder in the related prospectus
or a supplement thereto (as so supplemented, the “Prospectus”), deliver the
Prospectus to purchasers of Registrable Securities (including pursuant to Rule
172 under the Securities Act) and be bound by the provisions of the Agreement.
Holders must complete and deliver this notice and questionnaire (“Notice and
Questionnaire”) in order to be named as selling stockholders in the Prospectus.
Certain legal consequences arise from being named as a selling stockholder in
the Resale Registration Statement and the Prospectus. Holders of Registrable
Securities are advised to consult their own securities law counsel regarding the
consequences of being named or not named as a selling stockholder in the Resale
Registration Statement and the Prospectus.

NOTICE

The undersigned holder (the “Selling Stockholder”) of Registrable Securities
hereby gives notice to the Company of its intention to sell or otherwise dispose
of Registrable Securities owned by it and listed below in Part III(b) pursuant
to the Resale Registration Statement. The undersigned, by signing and returning
this Notice and Questionnaire, understands and agrees that it will be bound by
the terms and conditions of this Notice and Questionnaire and the Agreement.

The undersigned hereby provides the following information to the Company and
represents and warrants that such information is materially accurate and
complete:

 

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QUESTIONNAIRE

PART 1.  Name:

1.1Full legal name of the Selling Stockholder:

 

 

 

1.2Full legal name of the registered holder (if not the same as Part I(a) above)
through which the Registrable Securities listed in Part III below are held:

 

 

 

1.3Full legal name of any natural control person (which means a natural person
who directly or indirectly alone or with others has power to vote or dispose of
the Registrable Securities listed in Part III below):

 

 

 

PART II.  Notices to Selling Stockholder:

(a)Address:

 

 

(b)Telephone:

 

 

(c)Fax:

 

 

(d)Contact person:

 

 

(e)E-mail address of contact person:

 

 

 

 

 

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PART III.  Beneficial Ownership of Registrable Securities:

(a)Type and number of Registrable Securities beneficially owned:

 

 

 

 

(b)Number of shares of Common Stock to be registered for resale pursuant to this
Notice and Questionnaire:

 

 

 

 

 

PART IV.  Broker-Dealer Status:

(a)Are you a broker-dealer?

Yes ☐No ☐

(b)If you answered “yes” to Part IV(a) above, did you receive your Registrable
Securities as compensation for investment banking services provided to the
Company?

Yes ☐No ☐

Note:If you answered “no”, the SEC’s staff has indicated that you should be
identified as an underwriter in the Resale Registration Statement.

(c)Are you an affiliate of a broker-dealer?

Yes ☐No ☐

If you answered “yes”, provide a narrative explanation below:

 

 

 

 

(d)If you are an affiliate of a broker-dealer, do you certify that you bought
the Registrable Securities in the ordinary course of business, and at the time
of the purchase of the Registrable Securities to be resold, you had no
agreements or understandings, directly or indirectly, with any Person to
distribute the Registrable Securities?

Yes ☐No ☐

 

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page 36 of 37

 

Note:If you answered “no”, the SEC’s staff has indicated that you should be
identified as an underwriter in the Resale Registration Statement.

PART V.  Beneficial Ownership of Other Securities of the Company Owned by the
Selling Stockholder:

Except as set forth below in this Part V, the undersigned is not the beneficial
or registered owner of any securities of the Company, other than the Registrable
Securities listed above in Part III.

Type and amount of other securities beneficially owned:

 

 

 

 

PART VI.  Relationships with the Company:

(a)Have you or any of your affiliates, officers, directors or principal equity
holders (owners of 5% or more of the equity securities of the undersigned) held
any position or office or have you had any other material relationship with the
Company (or its predecessors or affiliates) within the past three years?

Yes ☐No ☐

(b)If your response to Part VI(a) above is “yes”, please state the nature and
duration of your relationship with the Company:

 

 

 

 

 

PART VII.  Plan of Distribution:

The undersigned has reviewed the form of Plan of Distribution attached as Annex
A hereto, and hereby confirms that, except as set forth below, the information
contained therein regarding the undersigned and its plan of distribution is
correct and complete.

State any exceptions here:

 

 

 

 

 

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page 37 of 37

 

The undersigned agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein that may occur subsequent to the date
hereof and prior to the effective date of any applicable Resale Registration
Statement. All notices hereunder shall be delivered as set forth in the
Agreement. In the absence of any such notification, the Company shall be
entitled to continue to rely on the accuracy of the information in this Notice
and Questionnaire.

By signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Parts I through VII above and the inclusion
of such information in the Resale Registration Statement and the Prospectus. The
undersigned understands that such information will be relied upon by the Company
in connection with the preparation or amendment of any such Resale Registration
Statement and Prospectus.

By signing below, the undersigned acknowledges that it understands its
obligation to comply, and agrees that it will comply, with the provisions of the
Exchange Act and the rules and regulations thereunder, particularly Regulation M
in connection with any offering of Registrable Securities pursuant to the Resale
Registration Statement. The undersigned also acknowledges that it understands
that the answers to this Notice and Questionnaire are furnished for use in
connection with registration statements filed pursuant to the Agreement and any
amendments or supplements thereto filed with the SEC pursuant to the Securities
Act.

The undersigned confirms that, to the best of his/her knowledge and belief, the
foregoing answers to this Notice and Questionnaire are correct.

IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.

 

Dated:

 

 

Selling Stockholder:

 

Name of Entity or Individual

 

By:

 

Name:

 

Title: