# EDGAR Filing Document

**Accession Number:** 0001919246
**File Stem:** 0001753926-25-001500
**Filing Date:** 2025-9
**Character Count:** 1672566
**Document Hash:** 0c92d7541ac4d0fdcb60b1dc1138c1cc
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001753926-25-001500.hdr.sgml**: 20250916

**ACCESSION NUMBER**: 0001753926-25-001500

**CONFORMED SUBMISSION TYPE**: 8-K/A

**PUBLIC DOCUMENT COUNT**: 41

**CONFORMED PERIOD OF REPORT**: 20250916

**ITEM INFORMATION**: Completion of Acquisition or Disposition of Assets

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20250916

**DATE AS OF CHANGE**: 20250916

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Pelthos Therapeutics Inc.
- **CENTRAL INDEX KEY:** 0001919246
- **STANDARD INDUSTRIAL CLASSIFICATION:** BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836]
- **ORGANIZATION NAME:** 03 Life Sciences
- **EIN:** 863335449
- **STATE OF INCORPORATION:** NV
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K/A
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-41964
- **FILM NUMBER:** 251317440

**BUSINESS ADDRESS:**
- **STREET 1:** 4020 STIRRUP CREEK DRIVE
- **STREET 2:** SUITE 110
- **CITY:** DURHAM
- **STATE:** NC
- **ZIP:** 27703
- **BUSINESS PHONE:** 919-908-2422

**MAIL ADDRESS:**
- **STREET 1:** 4020 STIRRUP CREEK DRIVE
- **STREET 2:** SUITE 110
- **CITY:** DURHAM
- **STATE:** NC
- **ZIP:** 27703

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Channel Therapeutics Corp
- **DATE OF NAME CHANGE:** 20241118

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Chromocell Therapeutics Corp
- **DATE OF NAME CHANGE:** 20220323

?xml version='1.0' encoding='ASCII'?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 8-K/A**

**(Amendment No. 1)**

**CURRENT REPORT**

**Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

Date of Report (Date of earliest event reported): **September 16, 2025 (July 1, 2025)**

**Pelthos Therapeutics Inc.**

(Exact name of registrant as specified in its charter)

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| | | |
|:---|:---|:---|
| **Nevada** | **001-41964** | **86-3335449** |
| (State or other jurisdiction<br> of incorporation) | (Commission File Number) | (IRS Employer<br> Identification No.) |

---

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| | |
|:---|:---|
| **4020 Stirrup Creek Drive, Suite 110**<br> **Durham, NC** | **27703** |
| (Address of registrant's principal executive office) | (Zip code) |

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Registrant's telephone number, including area code: **(919) 908-2400**

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

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| | | |
|:---|:---|:---|
| **Title of each class** | **Trading Symbol(s)** | **Name of each exchange on which registered** |
| Common Stock, par value $0.0001 per share | PTHS | The NYSE American LLC |

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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 **EXPLANATORY NOTE**

On July 2, 2025, Pelthos Therapeutics Inc., a Nevada corporation (the "Company") filed a Current Report on Form 8-K (the "Original Filing") with the Securities and Exchange Commission (the "SEC") disclosing the consummation, on July 1, 2025, of the previously announced merger transaction contemplated by that certain Agreement and Plan of Merger, dated as of April 16, 2025 (the "Merger Agreement"), by and among the Company, CHRO Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company ("Merger Sub"), LNHC, Inc., a Delaware corporation ("LNHC"), and solely for the purposes of Article III thereof, Ligand Pharmaceuticals Incorporated, a Delaware corporation and the parent of LNHC ("Ligand"). Pursuant to the Merger Agreement, (i) Merger Sub merged with and into LNHC, with LNHC as the surviving company in the merger and, after giving effect to such merger, continuing as a wholly-owned subsidiary of the Company (the "Merger") and (ii) the Company's name was changed from Channel Therapeutics Corporation ("Channel") to Pelthos Therapeutics Inc. (the "Combined Company").

The Company is filing this Current Report on Form 8-K/A (the "Form 8-K/A") to amend the Original Filing to provide unaudited condensed financial statements of LNHC as of June 30, 2025 and 2024 and for the three and six months ended June 30, 2025 and June 30, 2024 and the pro forma financial information required by Item 9.01(b) of Form 8-K in connection with the Merger. In addition, the Company is filing this Form 8-K/A to provide updated disclosure regarding the Combined Company's operations upon consummation of the Merger and to file certain material agreements of LNHC that have become material agreements of the Combined Company upon consummation of the Merger.

**SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS**

This Form 8-K/A and the information incorporated by reference in this Form 8-K/A contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), which represent our expectations or beliefs concerning future events. Forward-looking statements include statements that are predictive in nature, which depend upon or refer to future events or conditions, and/or which include words such as "believes," "plans," "intends," "anticipates," "estimates," "expects," "may," "will" or similar expressions. In addition, any statements concerning future financial performance, ongoing strategies or prospects, and possible future actions, which may be provided by our management, are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about our company, economic and market factors, and the industry in which we do business, among other things. These statements are not guarantees of future performance, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. Factors that could cause our actual performance, future results and actions to differ materially from any forward-looking statements include, but are not limited to, those discussed under the heading "Risk Factors" in any of our filings with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. The forward-looking statements in this Form 8-K/A, and the information incorporated by reference herein or therein represent our views as of the date such statements are made. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date such statements are made.

**BACKGROUND**

On July 1, 2025 (the "Closing Date"), the Company consummated the Merger with LNHC, pursuant to which Merger Sub merged with and into LNHC, with LNHC surviving the Merger and continuing as a wholly-owned subsidiary of the Company.

Pursuant to the terms of the Merger Agreement, executed by and among the Company, Merger Sub, LNHC and Ligand, the Merger closed on July 1, 2025. Such date is referred to as the "Effective Time." At the Effective Time, the Company issued an aggregate of approximately 31,278 shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the "Series A Preferred Stock") to Ligand, based on the exchange ratio set forth in the Merger Agreement. Immediately following the Effective Time, approximately 57,568 shares of Series A Preferred Stock were issued and outstanding. Following the Merger, LNHC became a wholly-owned subsidiary of the Company, and the Company adopted the business plan of LNHC. LNHC is a biopharmaceutical company committed to commercializing innovative, safe, and efficacious therapeutic products to help patients with unmet treatment burdens.

In conjunction with the consummation of the Merger, the Company closed a private placement transaction (the "PIPE Financing") pursuant to a securities purchase agreement (the "Securities Purchase Agreement") executed concurrently with the Merger Agreement, by and among the Company, LNHC and certain investors, including Ligand (collectively, the "PIPE Investors"). At the closing of the PIPE Financing, which occurred immediately prior to the Effective Time, the Company issued an aggregate of 50,100 shares of Series A Preferred Stock to the PIPE Investors for gross proceeds of approximately $50.1 million, consisting of approximately $50.0 million in cash and the conversion of approximately $0.1 million of principal and interest under an outstanding convertible note.

Each share of Series A Preferred Stock is convertible into shares of the Company's common stock, par value $0.0001 per share (the "Common Stock"), subject to certain beneficial ownership limitations, including a 49.9% cap for Ligand and a 4.99% cap for other PIPE Investors. Immediately following the PIPE Financing, certain PIPE Investors converted 23,810 shares of Series A Preferred Stock into an aggregate of 2,381,000 shares of Common Stock (after giving effect to the Reverse Stock Split).

The Securities Purchase Agreement also provides the PIPE Investors with customary rights, including participation rights in future financings, anti-dilution protections, and registration rights pursuant to a Registration Rights Agreement entered into on the Closing Date. The Company is obligated to file a resale registration statement with the SEC covering the shares of Common Stock issuable upon conversion of the Series A Preferred Stock.

On the Closing Date, the Company effected a one-for-ten reverse stock split of its Common Stock (the "Reverse Stock Split") and changed its name from Channel Therapeutics Corporation to Pelthos Therapeutics Inc. The Common Stock commenced trading on the NYSE American (the "NYSE American") under the symbol "PTHS" on July 2, 2025. Unless specifically provided otherwise herein, share numbers and prices above and used elsewhere assume the effectiveness of the Reverse Stock Split.

**Item 2.01. Completion of Acquisition or Disposition of Assets.**

The "Background" section above is incorporated by reference to this Item 2.01.

**DESCRIPTION OF BUSINESS OF PELTHOS THERAPEUTICS INC.**

**Overview** 

The Company is a biopharmaceutical company committed to commercializing innovative, safe, and efficacious therapeutic products to help patients with significant unmet medical needs.

LNHC, Inc. was incorporated in the state of Delaware in September 2023 and was initially formed to facilitate a transaction with Novan, Inc. ("Novan"). On September 27, 2023, Ligand acquired certain assets of Novan, after providing debtor in possession financing and acquiring specific assets from Novan, under Section 363 of the U.S. Bankruptcy Code. Novan was a medical dermatology company focused on developing and commercializing innovative therapeutic products for skin diseases. Through its NITRICIL technology platform, Novan had concentrated on developing ZELSUVMI formerly named SB206 (berdazimer gel, 10.3%) as a topical prescription gel for the treatment of viral skin infections, with a focus on molluscum contagiosum. As of the acquisition, all assets and liabilities acquired by Ligand in the Novan acquisition were held by LNHC, which was a wholly owned subsidiary of Ligand.

In January 2023, Novan submitted a New Drug Application to the U.S. Food and Drug Administration (the "FDA") for berdazimer gel, 10.3% as a topical treatment for molluscum contagiosum. ZELSUVMI (berdazimer) topical gel, 10.3%, was approved by the FDA on January 5, 2024.

ZELSUVMI is a nitric oxide (NO) releasing agent indicated for the topical treatment of molluscum contagiosum in adults and pediatric patients 1 year of age and older. ZELSUVMI is the first FDA approved topically applied nitric oxide releasing agent indicated for the treatment of molluscum contagiosum in people ages one year and older and the first and only prescription medication FDA approved for use in non-medical settings that can be safely applied by patients, parents and caregivers. Molluscum contagiosum is a highly contagious viral skin infection that primarily affects children, immunocompromised adults and sexually active persons. The Company estimates that molluscum contagiosum infections afflict an approximately 17 million people of all ages in the United States.

Chromocell Therapeutics Corporation was incorporated in Delaware on March 19, 2021. On November 18, 2024, Chromocell Therapeutics Corporation merged with and into its wholly-owned subsidiary, Channel Therapeutics Corporation, a Nevada corporation. On July 1, 2025, Channel Therapeutics Corporation, Merger Sub, LNHC, and solely for the purposes of Article III thereof, Ligand consummated the Merger, pursuant to which, (i) Merger Sub merged with and into LNHC, with LNHC as the surviving company in the merger and, after giving effect to such merger, continuing as a wholly-owned subsidiary of the Company and (ii) the Company's name was changed from Channel Therapeutics Corporation to Pelthos Therapeutics Inc.

The Company has launched and is focused on the commercialization of ZELSUVMI and is continuing to build its sales, marketing and commercial team to detail ZELSUVMI. The Company expects pediatricians, pediatric dermatologists, dermatologists and infectious disease specialists will be the target prescribers.

**Molluscum Contagiosum**

Molluscum contagiosum is caused by a poxvirus and is a common skin infection seen by dermatologists, pediatric dermatologists, and pediatricians, with a prevalence estimated by management to be 17 million people in the United States and an annual incidence estimated by management to be 3-6 million. According to the Centers for Disease Control and Prevention ("CDC"), molluscum contagiosum infections are contagious and spread to others through contact with infected persons or contaminated objects such as towels, toys, furniture, swimming pools, and other surfaces. Children are the most vulnerable to molluscum contagiosum infections as are adults with weakened immune systems. In addition, molluscum contagiosum can be sexually transmitted.

Molluscum contagiosum infections present with raised, skin-colored or red bumps that can appear anywhere on the body, including the face, hands, trunk, genitals, back of the knees, armpits, and other sensitive areas. People with molluscum contagiosum may suffer discomfort from itching, secondary bacterial infections, as well as immense social stigma from having visible molluscum contagiosum lesions which typically last for months or for years. Left untreated, molluscum contagiosum lesions may persist an average of 13 months, with reports of cases remaining unresolved for up to five years. The symptoms of molluscum contagiosum can cause anxiety, and parents frequently seek treatment due to its highly contagious nature and its impact on physical appearance.

**ZELSUVMI** 

ZELSUVMI (berdazimer) topical gel, 10.3% is a nitric oxide (NO) releasing agent indicated for the topical treatment of molluscum contagiosum in adults and pediatric patients one year of age and older. ZELSUVMI was developed using the proprietary nitric oxide-based technology platform, NITRICIL. ZELSUVMI's mechanism of action against molluscum contagiosum is unknown. In vitro studies of ZELSUVMI's active ingredient, berdazimer sodium, have demonstrated (i) anti-pox virus activity on vaccinia virus, which is often used as a surrogate for molluscum contagiosum virus; and (ii) reduced early gene expression of molluscum contagiosum virus proteins. ZELSUVMI's final Phase 3 clinical study included 891 enrolled patients treated with ZELSUVMI and demonstrated statistically significant and clinically meaningful efficacy results on both primary and secondary endpoints, a greater reduction in lesions at every measurement point, and favorable safety results during the 12-week duration. The Company's market research indicates physicians have highly favorable opinions about ZELSUVMI's clinical efficacy, safety, and practicality as the first and only topical medication indicated for molluscum contagiosum that does not require in office administration by a healthcare provider. The Company believes that ZELSUVMI is likely to complement or represent a differing treatment regimen of current procedural treatments administered in medical settings such as cryosurgery, cantharidin application and curettage.

**Proprietary NITRICIL™ Technology Platform Overview** 

The NITRICIL proprietary technology platform leverages nitric oxide's naturally occurring anti-viral, anti-bacterial, anti-fungal, and immunomodulatory potential mechanisms of action in an effort to treat a range of diseases. Nitric oxide plays a vital role in the natural immune system response against microbial pathogens and is a critical regulator of inflammation. The technology's ability to harness nitric oxide and its multiple potential mechanisms of action has enabled the creation of a platform with the potential to generate differentiated product candidates. The two key components of the nitric oxide platform are the proprietary NITRICIL technology, which drives the creation of macromolecular New Chemical Entities, and formulation science, both of which are used to tune product candidates for specific targeted indications.

The Company believes that the NITRICIL platform's ability to deploy nitric oxide in a solid form, on demand and in localized formulations allows the potential to improve patient outcomes in a variety of diseases. The Company's achievement of an FDA approval for ZELSUVMI has validated the NITRICIL technology platform's ability to achieve stable, tunable and druggable delivery of nitric oxide on therapeutically and commercially important targets such as molluscum contagiosum. The Company has an exclusive license to use the NITRICIL Technology Platform as necessary to manufacture ZELSUVMI, as set forth in the license agreement between the Company and Ligand.

Berdazimer sodium is the Active Pharmaceutical Ingredient ("API") that is the backbone of the NITRICIL platform technology, including ZELSUVMI. Different concentrations of berdazimer sodium and different formulations of the finished drug product are what differentiates potential treatment options for various indications. The Company believes the NITIRCIL technology platform has many other potential product candidates that could be further developed. To date, clinical work has been performed in various indications, including, but not limited to, acne (SB204), atopic dermatitis and psoriasis (SB414), tinea pedis and onychomycosis (SB208) and external genital warts (SB207), the rights to which are owned by Ligand.

**Licensing and Other Agreements** 

*Ligand* 

On March 24, 2025, the Company assigned its IP portfolio related to the Novan acquisition, including the NITRICIL technology, to Ligand and entered into an exclusive license and sublicense agreement with Ligand, pursuant to which Ligand licensed to the Company the intellectual property rights necessary to make, use, sell or offer to sell ZELSUVMI for the treatment of molluscum contagiosum in humans worldwide, except for Japan. Under the terms of the license agreement, Ligand is entitled to a 13% royalty on worldwide sales of ZELSUVMI, and $10 million in commercialization and sales-based milestones.

On March 24, 2025, the Company and Ligand also entered into a master services agreement (the "Master Services Agreement") under which Ligand, or related parties, may contract with the Company to provide active pharmaceutical ingredients for clinical or commercial use related to the NITRICIL technology. In addition, the agreement also allows Ligand to require the Company to provide manufacturing technology transfer services, if requested, for products other than ZELSUVMI for the treatment of molluscum contagiosum in humans, to a potential third-party manufacturer (the "MSA").

*Nomis RoyaltyVest*

As an inducement to enter into the Securities Purchase Agreement, the Company and Nomis RoyaltyVest LLC ("NRV") entered into a Purchase and Sale Agreement, dated as of July 1, 2025, pursuant to which the Company sold to NRV, and NRV purchased, all of the Company's rights, title and interest in and to a portion of the Company's revenue payments for ZELSUVMI and all accounts with respect thereto. In addition, prior to the expiration of the Initial Royalty Term (as defined in the ZELSUVMI Royalty Agreement), NRV will receive a 1.5% royalty on net sales of ZELSUVMI worldwide, other than in Japan, and 3.46% of non-royalty sublicensing payments received by LNHC for its sublicensing of rights to ZELSUVMI, and (ii) after the expiration of the Initial Royalty Term, NRV will receive a 1.2% royalty on net sales of ZELSUVMI worldwide, other than in Japan, and 3.46% of non-royalty sublicensing payments received by LNHC for its sublicensing of rights to ZELSUVMI.

*NRV, Ligand, and Madison*

On July 1, 2025, the Company and NRV, Ligand, and Madison Royalty LLC, a Colorado limited liability company, on behalf of certain of the Company's management team and other assignees ("Madison") entered into a Purchase and Sale Agreement, pursuant to which the Company sold to each of NRV, Ligand, and Madison, and each of NRV, Ligand, and Madison purchased, all of the Company's rights, title and interest in and to a portion of the Company's revenue payments and all accounts related to or utilizing the covered products, as defined within that agreement (the "Channel Covered Products"). In addition, (A) prior to the expiration of the initial royalty term, (i) NRV will receive a 5.3% royalty, Ligand will receive a 1.7% royalty and Madison will receive a 1.5% royalty on Net Sales of the Channel Covered Products worldwide, and (ii) NRV will receive 12.23%, Ligand will receive 3.92% and Madison will receive 3.46% of non-royalty sublicensing payments received by Pharmaceutical Sub for its sublicensing of rights to the Channel Covered Products worldwide; and (B) after the expiration of the initial royalty term, (i) NRV will receive a 4.24% royalty, Ligand will receive a 1.36% royalty and Madison will receive a 1.2% royalty on Net Sales of the Channel Covered Products worldwide, and (ii) NRV will receive 12.23%, Ligand will receive 3.92% and Madison will receive 3.46% of non-royalty sublicensing payments received by Pharmaceutical Sub for its sublicensing of rights to the Channel Covered Products worldwide.

*UNC License Agreement*

The Company acquired exclusive rights to intellectual property, including those that were ultimately developed by the Company into the specific library of NITRICIL compounds, pursuant to license agreements with the University of North Carolina at Chapel Hill ("UNC"), entered into in July 2007 and October 2009, which were subsequently amended, restated and consolidated in June 2012 (the "UNC License Agreement"). Under the UNC License Agreement, the Company was granted an exclusive, worldwide license, with the ability to sublicense, to develop and commercialize products utilizing the licensed intellectual property. The Company has amended the UNC License Agreement multiple times since June 2012 to both expand the scope of licensed patents to cover additional nitric oxide technologies and to modify certain regulatory and/or commercial milestones under the UNC License Agreement.

The UNC License Agreement currently requires the Company to pay UNC up to $250,000 in regulatory and commercial milestones on a licensed product by licensed product basis and a running royalty percentage in the low single digits on net sales of licensed products. Licensed products include any products being developed by the Company or by its sublicensees. In addition, under the UNC License Agreement, the Company is obligated to reimburse UNC for reasonable prosecution and maintenance costs related to intellectual property. Pursuant to the UNC License Agreement, the Company has the first right to defend against third-party claims of patent infringement with respect to the licensed products and to enforce the licensed patents against third-party infringers.

On March 24, 2025, LNHC assigned the UNC License Agreement to Ligand, however, LNHC is subject to the obligation related to certain aspects of the UNC License Agreement, including applicable milestone and royalty payments.

*Sato Agreement* 

On January 12, 2017, the Company entered into a license agreement, and related first amendment, with Sato Pharmaceutical Co., Ltd. ("Sato"), relating to SB204, a drug candidate for the treatment of acne vulgaris in Japan (the "Sato Agreement"). Pursuant to the Sato Agreement, the Company granted to Sato an exclusive, royalty-bearing, non-transferable right and license under certain of the Company's intellectual property rights, with the right to sublicense with the Company's prior written consent, to develop, use and sell products in Japan that incorporate SB204 in certain topical dosage forms for the treatment of acne vulgaris, and to make the finished form of such products.

On October 5, 2018, the Company and Sato entered into the second amendment (the "Sato Amendment") to the Sato Agreement (collectively, the "Amended Sato Agreement"). The Sato Amendment expanded the Sato Agreement to include SB206, a drug candidate for the treatment of viral skin infections. Pursuant to the Amended Sato Agreement, the Company granted to Sato an exclusive, royalty-bearing, non-transferable license under certain of its intellectual property rights, with the right to sublicense with the Company's prior written consent, to develop, use and sell products in Japan that incorporate SB204 or SB206 in certain topical dosage forms for the treatment of acne vulgaris or viral skin infections, respectively, and to make the finished form of such products.

The agreement stipulated that the Company or its designated contract manufacturer will supply study materials to Sato for use in the development of SB204 and SB206 in the licensed territory. The rights granted to Sato do not include the right to manufacture the API of SB204 or SB206; rather, the parties agreed to negotiate a commercial supply agreement pursuant to which the Company or its designated contract manufacturer would be the exclusive supplier to Sato of the API for the commercial manufacture of licensed products in the licensed territory. Under the terms of the Amended Sato Agreement, the Company also has exclusive rights to certain intellectual property that may be developed by Sato in the future, which the Company could choose to use for its own development and commercialization of SB204 or SB206 outside of Japan.

The term of the Amended Sato Agreement (and the period during which Sato must pay royalties under the amended license agreement) expires on the twentieth anniversary of the first commercial sale of a licensed product in the licensed field in the licensed territory (adjusted from the tenth anniversary of the first commercial sale in the Sato Agreement). The term of the Amended Sato Agreement may be renewed with respect to a licensed product by mutual written agreement of the parties for additional two-year periods following expiration of the initial term. All other material terms of the Sato Agreement remain unchanged by the Sato Amendment.

The Sato Agreement was assigned to Ligand on March 24, 2025, however, the Company agreed to assume all contractual liabilities under the Sato Agreement and certain agreements related to the Sato Agreement, and Ligand is obligated to pass through all future payments received from Sato to LNHC. In addition, pursuant to the license agreement between the Company and Ligand, the Company agrees to supply clinical and commercial quantities of the API to Sato on a cost-plus basis.

*International Opportunities* 

The Company, through its exclusive license of ZELSUVMI from Ligand, has the ability to further seek approval for and commercialize ZELSUVMI through the rest of the world, except for Japan. The Company estimates molluscum contagiosum incidence and prevalence rates in the European Union and Asia to be comparable to the United States. The Company has engaged in several international discussions with distributors seeking supply or license agreements for ZELSUVMI in multiple ex-U.S. territories. Many countries are able to leverage a U.S. FDA approved product in terms of successfully navigating the local regulatory registration process or where U.S. FDA products are available for prescription by the local medical community. The Company is in the initial stages of exploring ex-U.S. distribution opportunities and indicative distribution offers from distributors seeking FDA approved products for their territories.

*Reedy Creek* 

On April 29, 2019, the Company entered into a royalty and milestone payments purchase agreement (the "Reedy Creek Purchase Agreement") with Reedy Creek Investments LLC ("Reedy Creek"), pursuant to which Reedy Creek provided funding to the Company in an amount of $25.0 million for the Company to pursue the development, regulatory approval and commercialization activities (including out-license agreements and other third-party arrangements) for SB206, a topical gel with anti-viral properties being developed as a treatment for molluscum contagiosum, and advancing programmatically such activities with respect to SB204, a once-daily, topical monotherapy being developed for the treatment of acne vulgaris, and SB414, a topical cream-based product candidate being developed for the treatment of atopic dermatitis.

If the Company successfully commercializes any such product, including ZELSUVMI, following regulatory approval, the Company will be obligated to pay Reedy Creek a low single digit royalty on net sales of such products in the United States, Mexico or Canada.

**Manufacturing and Supply Chain** 

*Background* 

The Company currently leases its primary operating facility, including 19,265 square feet of laboratory, cGMP manufacturing, warehouse, storage and office space in Durham, North Carolina. The lease, dated January 18, 2021, as amended, has an initial term expiring in 2032, with an option to extend the term of the lease for a period of 5 years. The Company constructed this bespoke purpose-built facility to serve as the primary berdazimer sodium active pharmaceutical ingredient manufacturing site.

Berdazimer sodium is the API that is the critical component of the NITRICIL platform technology. The Company believes different concentrations of berdazimer sodium and different formulations of the finished drug product may be used to develop additional product candidates for other diseases or conditions. For example, ZELSUVMI (berdazimer) topical gel, 10.3%, which has been approved by the FDA, is one product and indication that has met the regulatory requirements for commercialization. The Company believes the NITIRCIL technology platform could generate other potential product candidates that could be further developed, and, pursuant to the MSA with Ligand, the Company may produce API for such other uses.

The supply chain includes the procurement of raw materials, the conversion of raw materials into API, and the conversion of API to finished product. The Company's process, as described in more detail below, is effectively as follows:

&nbsp;&nbsp;&nbsp;&nbsp;• Procurement
of underlying raw materials, such as nitric oxide gas;

&nbsp;&nbsp;&nbsp;&nbsp;• Conversion
of raw materials into API, including allocated overhead, fixed and variable costs;

&nbsp;&nbsp;&nbsp;&nbsp;• Shipment of API to a third-party contract manufacturing organization ("CMO");

&nbsp;&nbsp;&nbsp;&nbsp;• Conversion
of API into finished product, ZELSUVMI, at the third party CMO; and

&nbsp;&nbsp;&nbsp;&nbsp;• Shipment
of finished product from CMO to a third-party logistics provider for distribution.

The Company uses various qualified vendors to source raw materials. The conversion of the API and manufacture occurs at its primary operating facility in North Carolina. The API is then shipped to a third-party fill/finish CMO who converts the API into finished products, including ancillary/supportive manufacturing, filling and packaging. The finished product is then shipped back to the U.S. domiciled third-party logistics provider for distribution.

The ZELSUVMI manufacturing process is effectively comprised of four key components: raw materials, supply chain, drug substance (API), and drug product (finished product).

*Raw Materials* 

The Company currently relies on third-party suppliers to provide the raw materials that are used by it and its third-party manufacturers in the manufacture of ZELSUVMI. There are a limited number of suppliers for raw materials, including nitric oxide, that are used to manufacture the product candidates and commercial products.

*Supply Chain* 

The Company also relies on third-party logistics vendors to transport raw materials, API, and drug products through our supply chain. Certain materials, including the API, have designated hazard classifications that limit available transportation modes or quantities. Third-party logistics vendors may choose to delay or defer transportation of materials from time to time, which could adversely impact the timing or cost of our manufacturing supply chain activities or other associated development activities.

*Drug Substance (Active Pharmaceutical Ingredient)* 

Due to the complexity of the proprietary manufacturing technology related to the NITRICIL platform, including intellectual property, know-how, trade secrets, production techniques, and the related physical manufacturing requirements and characteristics, the Company previously determined that constructing its custom manufacturing facility was the most effective way to mitigate risk associated with API production. To date, the facility and production process has been fully validated and qualified. Currently, the facility has an operational and integrated QMS (Quality Management System) and ERP governing the operations of the facility.

The Company has manufactured numerous API batches in its facility since becoming operative, including site registration batches, project validation batches, and commercial batches. In preparing for the commercial launch of ZELSUVMI, the Company has stockpiled numerous batches of commercial API. The operational API manufacturing strategy incorporates redundancy planning, including maintaining a certain API MOH (months-on-hand) quantity to mitigate potential risk, both "upside" and "downside", related to potential future commercial demand of ZELSUVMI. Manufacturing ZELSUVMI API at its own, U.S.-based facility provides the Company with critical control over the longest lead time and the most complex component of ZELSUVMI's supply chain.

The Company currently has sufficient API manufacturing capacity within its facility, as it is configured, to comfortably meet its current sales forecasts to supply API for ZELSUVMI. In its current configuration, the Company has excess capacity to increase utilization for additional API demand. Furthermore, the Company also has the ability to add additional manufacturing shifts and team members to manufacture even greater quantities of API, if needed, for current and potential future partners or customers of the NITRICIL technology. Effectively, the Company believes the current API theoretical manufacturing capacity could be roughly doubled, if needed due to one or more of the following: a higher than expected sales demand for ZELSUVMI, demand from current partnerships such as Sato and Ligand, and potential future partnerships for ZELSUVMI and/or the NITRICIL platform. The Company does not expect to need to invest in material or significant capital expenditures and other fixed costs to bring more manufacturing capacity on-line in the foreseeable future. The Company does expect to incur certain levels of capital expenditures for on-going operations, maintenance and improvements.

*Drug Product (ZELSUVMI)* 

The Company has a long-standing strategic alliance with Orion Corporation ("Orion"), a Finnish full-scale pharmaceutical company with broad experience in cGMP drug manufacturing. Orion manufactures the Company's commercial supply of its ZELSUVMI finished product. The drug product manufacturing and fill/finish process at Orion has been fully validated and qualified including site registration batches, project validation batches, and commercial batches. Through its contractual relationship with Orion, the Company has manufactured initial commercial launch quantities of ZELSUVMI. In addition, the Company has entered into a multi-year supply agreement and provides monthly estimates and forecasts for on-going production runs of finished products. The Company's supply forecast is informed by the expected sales forecast, with adjustments such as MOH, safety stock, shelf life, and product dating.

**ZELSUVMI Commercial Strategy** 

*Commercial Background* 

ZELSUVMI is the first FDA-approved at-home prescription medication indicated for the treatment of molluscum contagiosum in patients one year of age and older that can administered by patients, parents and caregivers. As a prescription, ZELSUVMI will generally be covered under patients' pharmacy benefit, differentiating it from procedural reimbursement for cantharidin and cryotherapy. Pediatricians, pediatric dermatologists, dermatologists and infectious disease specialists will be the target prescribers.

Pediatricians diagnose the majority of molluscum contagiosum infections, and the Company believes many patients have not been treated due, in part, to a lack of FDA approved prescription treatment options that can be administered outside of medical settings. The Company believes that pediatricians will be key to expanding the market, increasing peak sales, and sales and marketing efficiency. The Company will seek to position ZELSUVMI as the preferred first line therapy among pediatricians. The Company believes ZELSUVMI will enhance and complement current non-prescription treatment options and referral patterns. Based on the Company's interactions with healthcare professionals ("HCPs") to date, the Company believes HCPs would welcome this positioning of ZELSUVMI.

The Company believes that ZELSUVMI fills a medical need in the market as the first safe and efficacious prescription medication for molluscum contagiosum that can be administered outside of medical settings. Based on 2023 data from Veeva Compass, on an annual basis, greater than 390,000 unique patients are affected by molluscum contagiosum and greater than 100,000 unique HCPs are treating the disease in the United States. However, we believe this number underestimates the true number of cases due to a lack of treatment options.

*Sales and Distribution Strategy* 

The Company plans to market ZELSUVMI primarily to physicians with personal promotion and direct sales efforts with a dedicated sales force supported by a product management team and critical support staff. The sales and marketing effort will focus on increasing awareness, trial, adoption and usage of ZELSUVMI to targeted pediatricians, pediatric dermatologists and dermatologists. The Company plans to distribute ZELSUVMI via standard retail pharmacy chains, mail order and Amazon pharmacy utilizing a third-party logistics provider. Based on the Company's conversations with HCPs, the Company believes these distribution channels are the most preferred by patients and HCPs. Critical to the launch of ZELSUVMI will be co-pay assistance and managing co-pay and patient out-of-pocket costs as well as prescription "pull-through" strategies and tactics to ensure patient access and utilization of ZELSUVMI. The Company's launch plans incorporate these strategies and has been on-boarding the appropriate personnel to execute the launch of ZELSUVMI.

*Marketing Strategy* 

The Company plans to focus sales and marketing efforts and investment on expanding product awareness and trial of ZELSUVMI initially by means of personal promotion by sales representatives to pediatric, pediatric dermatologist and dermatologist HCPs who have repeatedly included diagnosis codes for molluscum contagiosum infection as part of their claims for reimbursement by health insurers for outpatient visits. The Company also intends to expand its marketing strategies to include more non-personal promotion strategies and tactics focused on patients and eventually to consumer segments. HCP marketing initiatives focus on driving adoption through targeted initiatives like peer-to-peer education, data-driven digital advertising, and customized sales representative programs tailored to practice needs such as understanding insurance coverage and product acquisition. Consumer marketing initiatives focus on expanding both diagnosed and treated patient populations through strategic social media advertising, sharing impactful patient testimonials, and leveraging trusted influence partnerships.

*Market Access Strategy* 

The Company's cross functional, payer and reimbursement account team will prioritize ensuring that the process of accessing ZELSUVMI will be seamless, affordable, and easy with everything our patient customers will need, from step-by-step instructions to co-pay cards for eligible patients, to maximize the probability of having a positive outcome from using the Company's product on their child or family member regardless of whatever distributor they prefer to access ZELSUVMI. The Company's team will focus on certain channels, including commercial, Medicaid and Managed Medicaid and the use of co-pay cards and coupons for eligible patients for commercially insured patients to ease access regardless of the channel utilized.

**Competition** 

The pharmaceutical industry is subject to rapidly advancing technologies, intense competition, and a strong emphasis on proprietary products. We face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, compounding facilities, academic institutions, governmental agencies, and public and private research institutions.

ZELSUVMI is the first and only FDA-approved prescription pharmaceutical therapy for the treatment of molluscum contagiosum that can be administered by patients or caregivers outside of a medical setting. The Company believes the key competitive factors affecting the success of ZELSUVMI are likely to be its efficacy, safety, convenience, pricing, and stability. With respect to ZELSUVMI for the treatment of molluscum contagiosum, the Company will be primarily competing with therapies such as other topical products, curettage, cryotherapy, laser surgery, natural oils, off-label drugs, natural remedies, and cantharidin.

**Intellectual Property** 

Under the Exclusive License and Sublicense Agreement with Ligand, dated March 24, 2025, the Company acquired exclusive rights to a robust IP portfolio that provides material coverage for ZELSUVMI, which includes patents and patent applications covering the ZELSUVMI product and its use for treating molluscum contagiosum; trademarks; and know-how and trade secrets covering various aspects of the nitric oxide NITRICIL Technology Platform in addition to manufacturing, research, development, formulation, analytical chemistry and analytical science know-how.

There are 14 issued U.S. patents covering ZELSUVMI which are listed in the Orange Book and which are expected to expire during the time period beginning in 2026 and ending in 2035. Upon the initial approval of ZELSUVMI, we applied for 1,280 days of patent term extension ("PTE") for the U.S. patent covering ZELSUVMI compositions. Assuming grant of the PTE application, the term of this patent may be extended from February 27, 2034, to August 30, 2037.

**Other Patent Data** 

*Patent Term* 

Individual patents extend for varying periods depending on the date of filing of the patent application or the date of patent issuance and the legal term of patents in the countries, in which they are obtained. Generally, utility patents issued from applications in the United States are granted for a term of 20 years from the earliest effective non-provisional filing date. In addition, in certain instances, a patent's term can be adjusted to recapture a portion of the USPTO's delay in examining and issuing the patent, and extended to recapture a portion of the patent term effectively lost as a result of the FDA regulatory review period of the drug covered by the patent. However, as to the FDA component, the restoration period cannot be longer than five years, the total patent term including the restoration period must not exceed 14 years following FDA approval of the drug, and the extension may only apply to one patent that covers the approved drug (and to only those patent claims covering the approved drug or a method for using it). There can be no assurance that any such patent term adjustment or extension will be obtained. The duration of foreign patents varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective non-provisional filing date. However, the actual protection afforded by a patent varies on a product-by-product basis, from country to country and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country, and the validity and enforceability of the patent. See the section titled "Risk Factors-Risks Related to the Company's Intellectual Property" for a more comprehensive description of risks related to our intellectual property.

*Confidentiality* 

The Company relies upon trade secrets, know-how, and continuing technological innovation to develop and maintain the Company's competitive position. The Company protects its proprietary information, in part, using confidentiality agreements with commercial partners, collaborators, employees, and consultants and invention assignment agreements with our employees. The Company also has confidentiality agreements and/or invention assignment agreements with our commercial partners and selected consultants. These agreements are designed to protect the Company's proprietary information and, in the case of the invention assignment agreements, to grant the Company ownership of technologies that are developed through a relationship with a third party. These agreements may be breached, and the Company's may not have adequate remedies for any such breach. In addition, trade secrets may otherwise become known or be independently discovered by competitors. To the extent that commercial partners, collaborators, employees, and consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

*Trademarks* 

Further, we have and will continue to pursue trademark protection for our company name and brand. As of March 24, 2025, we in-license pending trademark applications from Ligand, including the ZELSUVMI and NITRICIL marks both of which are allowed by the United States Patent and Trademark Office ("USPTO"). Additionally, we own 4 pending trademark applications covering the Company and Pelthos names, all of which are allowed by the USPTO.

**Data Privacy and Security Laws**

Numerous state, federal and foreign laws, regulations and standards govern the collection, use, access to, confidentiality and security of health-related and other personal information, and could apply now or in the future to our operations or the operations of our partners. In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws, and consumer protection laws and regulations govern the collection, use, disclosure, and protection of health-related and other personal information. In addition, certain foreign laws govern the privacy and security of personal data, including health-related data. Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing.

**Government Regulation and Product Approval** 

Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, marketing and export and import of products such as those we are developing. A new drug must be approved by the FDA through the new drug application ("NDA") process before it may be legally marketed in the United States.

*U.S. drug development process* 

In the United States, the FDA regulates drugs under the federal Food, Drug, and Cosmetic Act (the "FDCA") and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state and local statutes and regulations require the expenditure of substantial time and financial resources. The process required by the FDA before a drug may be marketed in the United States generally involves the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• completion of certain preclinical laboratory tests, animal studies and formulation studies in accordance with good laboratory practice ("GLP") regulations and other applicable regulations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• submission to the FDA of an IND, which must become effective before human clinical trials may begin;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• approval by an IRB, or ethics committee at each clinical site before each trial may be initiated;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• performance of adequate and well-controlled human clinical trials in accordance with good clinical practices ("GCPs") to evaluate the safety and efficacy of the product candidate for its intended use;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• submission to the FDA of an NDA after completion of all pivotal trials;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• satisfactory completion of an FDA advisory committee review, if applicable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with cGMPs to assure that the facilities, methods and controls are adequate to preserve the drug's identity, strength, quality and purity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• satisfactory
completion of potential inspection of selected clinical investigation sites to assess compliance with GCPs; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• FDA
review and approval of the NDA to permit commercial marketing of the product for particular indications for use in the United
States.

Once a product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of an IND. An IND is a request for allowance from the FDA to administer an investigational drug product to humans. An IND will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the trial includes an efficacy evaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during clinical trials due to safety concerns about on-going or proposed clinical trials or non-compliance with specific FDA requirements, and the trials may not begin or continue until the FDA notifies the sponsor that the hold has been lifted.

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCPs, which include, among other things, the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials must be conducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND, and a separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. While the IND is active, progress reports summarizing the results of the clinical trials and nonclinical studies performed since the last progress report, among other information, must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important increased incidence of a serious suspected adverse reaction compared to that listed in the protocol or investigator brochure.

Furthermore, an independent IRB at each institution participating in the clinical trial must review and approve each protocol before a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trial subject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations. The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB's requirements or if the drug has been associated with unexpected serious harm to patients. In addition, some clinical trials are overseen by an independent group of qualified experts organized by the sponsor, known as a data safety monitoring board or committee. Depending on its charter, this group may determine whether a trial may move forward at designated check points based on access to certain data from the trial. There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries, including clinicaltrials.gov.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Phase
1: The product candidate is initially introduced into healthy human subjects, or in some cases, patients with the target disease
or condition, and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion and, if possible, to
gain an early indication of its effectiveness.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Phase
2: The product candidate is administered to a limited patient population with a specified disease or condition to identify possible
adverse effects and safety risks, to preliminarily evaluate the efficacy of the product candidate for specific targeted diseases
and to determine dosage tolerance and appropriate dosage.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Phase
3: The product candidate is administered to an expanded patient population to further evaluate dosage, to provide substantial
evidence of efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These
clinical trials are intended to establish the overall risk-benefit ratio of the product candidate and provide an adequate basis
for product labeling.

Post-approval trials, sometimes referred to as Phase 4 studies, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA.

Concurrently with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in commercial quantities in accordance with cGMPs. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug. In addition, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

*U.S. review and approval process* 

The results of product development, including results from preclinical and other non-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. The submission of an NDA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances.

In addition, the Pediatric Research Equity Act ("PREA") requires a sponsor to conduct pediatric clinical trials for most drugs, for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, NDAs and certain supplements must contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must evaluate the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product is deemed safe and effective. The sponsor or FDA may request a deferral of pediatric clinical trials for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that the drug is ready for approval for use in adults before pediatric clinical trials are complete or that additional safety or effectiveness data needs to be collected before the pediatric clinical trials begin. The FDA must send a non-compliance letter to any sponsor that fails to submit the required assessment, keep a deferral current or fails to submit a request for approval of a pediatric formulation.

Once an NDA has been submitted, the FDA conducts a preliminary review of the application within the first 60 days after submission, before accepting it for filing, to determine whether it is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once filed, the FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product's identity, strength, quality and purity. Under the Prescription Drug User Fee Act ("PDUFA") guidelines that are currently in effect, the FDA has a goal of ten months from the date of "filing" of a standard NDA for a new molecular entity to review and act on the submission. This review typically takes twelve months from the date the NDA is submitted to FDA because the FDA has approximately two months to make a "filing" decision after it the application is submitted.

The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. Before approving an NDA, the FDA will typically inspect the facility or facilities where the product is manufactured. Additionally, before approving an NDA, the FDA may inspect one or more clinical trial sites to assure compliance with GCPs.

After the FDA evaluates an NDA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter ("CRL"). An approval letter authorizes commercial marketing of the drug with prescribing information for specific indications. A CRL indicates that the review cycle of the application is complete, and the application will not be approved in its present form. A CRL usually describes the specific deficiencies in the NDA identified by the FDA and may require additional clinical data, including additional clinical trials, or other significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing. If a CRL is issued, the sponsor must resubmit the NDA or, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA does not satisfy the criteria for approval.

If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct clinical trials designed to further assess a drug's safety and/or effectiveness following NDA approval, and may require additional testing and surveillance programs to monitor the safety of approved products which have been commercialized. The FDA may also place other conditions on approval, including the requirement for a risk evaluation and mitigation strategy ("REMS"), to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS, which could include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA will not approve the NDA without an approved REMS, if required. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products.

*Post-approval requirements* 

Any products manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications, certain manufacturing changes and additional labeling claims, are subject to further FDA review and approval.

Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMPs and other laws and regulations. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMPs and other aspects of regulatory compliance.

The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of requirements for post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• restrictions
on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• fines,
warning letters, or untitled letters;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• clinical
holds on ongoing or planned clinical studies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• refusal
of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of approvals;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• product
seizure or detention, or refusal to permit the import or export of products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• consent
decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• mandated
modification of promotional materials and labeling and the issuance of corrective information;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the
issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other
safety information about the product; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• injunctions
or the imposition of civil or criminal penalties.

In addition, the FDA closely regulates the marketing, labeling, advertising and promotion of drug products. A company can make only those claims relating to safety and efficacy that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product's labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer's communications on the subject of off-label use of their products.

*Marketing exclusivity* 

Market exclusivity provisions under the FDCA can delay the submission or the approval of certain marketing applications. The FDCA provides a five-year period of non-patent data exclusivity within the United States to the first applicant to obtain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application ("ANDA"), or an NDA submitted under Section 505(b)(2) ("505(b)(2) NDA") submitted by another sponsor for another drug based on the same active moiety, regardless of whether the drug is intended for the same indication as the original innovative drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder.

The FDCA alternatively provides three years of non-patent exclusivity for an NDA, or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for drugs containing the active agent for the original indication or condition of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct, or obtain a right of reference to, all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Pediatric exclusivity is another type of marketing exclusivity available in the United States. Pediatric exclusivity provides for an additional six months of exclusivity attached to another period of existing non-patent regulatory exclusivity or an available patent term if a sponsor conducts clinical trials in children in response to a "written request" from the FDA. The issuance of a written request does not require the sponsor to undertake the described clinical trials, and the FDA's grant of pediatric exclusivity does not require the FDA to approve labeling containing information on pediatric use based on the studies conducted.

***Federal and State Fraud and Abuse and Transparency Laws and Regulations***

In addition to FDA restrictions on marketing of pharmaceutical products, federal and state healthcare laws and regulations restrict business practices in the biopharmaceutical industry. These laws may impact, among other things, our current and future business operations, including our clinical research activities, and proposed sales, marketing and education programs and constrain the business or financial arrangements and relationships with healthcare providers and other parties through which we market, sell and distribute our products for which we obtain marketing approval. These laws include anti-kickback and false claims laws and regulations, and transparency laws and regulations, including, without limitation, those laws described below.

The federal Anti-Kickback Statute prohibits, among other things, individuals or entities from knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term "remuneration" has been broadly interpreted to include anything of value. The federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, formulary managers, and other individuals and entities on the other hand. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly and require strict compliance to offer protection. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. In addition, a person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. The majority of states also have anti-kickback laws which establish similar prohibitions and in some cases may apply to items or services reimbursed by any third-party payor, including commercial insurers.

The federal civil and criminal false claims laws, including the False Claims Act ("FCA"), prohibit, among other things, any individual or entity from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. A claim includes "any request or demand" for money or property presented to the U.S. government. Several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies' marketing of products for unapproved, and thus non-reimbursable, uses. Further, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA.

HIPAA created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

In addition, a person who offers or transfers to a Medicare or Medicaid beneficiary any remuneration, including waivers of co-payments and deductible amounts (or any part thereof), that the person knows or should know is likely to influence the beneficiary's selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services may be liable for civil monetary penalties for each wrongful act. Moreover, in certain cases, providers who routinely waive copayments and deductibles for Medicare and Medicaid beneficiaries can also be held liable under the Anti-Kickback Statute and civil FCA, which can impose additional penalties associated with the wrongful act. One of the statutory exceptions to the prohibition is non-routine, unadvertised waivers of copayments or deductible amounts based on individualized determinations of financial need or exhaustion of reasonable collection efforts. The Office of Inspector General of the Department of Health and Human Services emphasizes, however, that this exception should only be used occasionally to address special financial needs of a particular patient. Although this prohibition applies only to federal healthcare program beneficiaries, the routine waivers of copayments and deductibles offered to patients covered by commercial payers may implicate applicable state laws related to, among other things, unlawful schemes to defraud, excessive fees for services, tortious interference with patient contracts and statutory or common law fraud. To the extent our patient assistance programs are found to be inconsistent with applicable laws, we may be required to restructure or discontinue such programs, or be subject to other significant penalties.

The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services ("CMS") information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), teaching hospitals, and other health care professionals (such as physician assistants and nurse practitioners), as well as information regarding ownership and investment interests held by physicians and their immediate family members.

We may also be subject to state and foreign law equivalents of each of the above federal laws; state laws that require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws that require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or that otherwise restrict payments that may be made to healthcare providers; and state laws that require reporting of information related to drug pricing; state and local laws that require the registration of pharmaceutical sales representatives.

Violations of any of these laws or any other governmental regulations that may apply to us can result in significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participating in government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm and the curtailment or restructuring of our operations. To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.

***Coverage and Reimbursement***

The commercial success of ZELSUVMI and our drug candidates, if approved, and our ability to commercialize those products successfully will depend in part on the extent to which governmental payor programs at the federal and state levels, including Medicaid, private health insurers and other third-party payors provide adequate coverage and reimbursement. These third-party payors generally develop their own policies as to which drugs they will pay for and the reimbursement levels for the drugs. For example, governmental programs in the United States often require manufacturers to pay certain rebates or otherwise provide discounts to secure coverage of drug products. To control healthcare expenditures generally, in the United States, the EU and other potentially significant markets for ZELSUVMI and our drug candidates, if approved, government authorities and third party payors are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies. The measures taken often have resulted in lower average selling prices. Further, the increased emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls in the EU places additional pressure on product pricing, reimbursement and usage, which may adversely affect our future product sales and results of operations. These pressures can arise from rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and healthcare reform, as well as drug coverage and reimbursement policies and pricing in general.

Some of the additional requirements and restrictions on coverage and reimbursement levels imposed by third-party payors influence the purchase of healthcare services and products. For example, there may be limited coverage to specific drug products on an approved list, or formulary, which might not include all of the FDA-approved drug products for a particular indication. There may also be formulary placements that result in lower reimbursement levels and higher cost-sharing borne by patients. Further, third-party payors are increasingly examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals. Our products may not be considered medically necessary or cost-effective. Even if a third-party payor determines to provide coverage for a drug product, adequate reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in drug development.

Healthcare legislative proposals to reform healthcare or reduce costs under government insurance programs may also result in lower reimbursement for our drugs and drug candidates or exclusion of our drugs and drug candidates from coverage altogether. The cost containment measures that healthcare payors and providers are instituting and any healthcare reform could significantly reduce our revenues from the sale of ZELSUVMI and any of our approved drug candidates. We cannot provide any assurances that we will be able to obtain and maintain third party coverage or adequate reimbursement for ZELSUVMI or any of our approved drug candidates in whole or in part.

***Impact of Healthcare Reform on our Business***

In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of drug product candidates, restrict or regulate post-approval activities, and affect the profitable sale of drug product candidates.

Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, "ACA") was passed, which substantially changed the way healthcare is financed by both the government and private insurers and significantly impacts the U.S. pharmaceutical industry. The ACA, among other things: (i) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations; (ii) established an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs; (iii) expanded the availability of lower pricing under the 340B drug pricing program by adding new entities to the program; (iv) increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively; (v) expanded the eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals, thereby potentially increasing manufacturers' Medicaid rebate liability; (vi) created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and (vii) established a Center for Medicare and Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include the American Rescue Plan Act of 2021, which eliminated the statutory Medicaid drug rebate cap, previously set at 100% of a drug's average manufacturer price, for single source and innovator multiple source drugs, effective January 1, 2024. In addition, the Inflation Reduction Act of 2022 ("IRA") which among other things, extended enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminated the "donut hole" under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and creating a new manufacturer discount program. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have an adverse effect on customers for ZELSUVMI and our product candidates, if approved, and, accordingly, our financial operations.

Additionally, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries, presidential executive orders and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. For example, the IRA, among other things, (1) directs the Department of Health and Human Services, or HHS, to negotiate the price of certain single-source drugs and biologics that have been on the market at least 7 years covered under Medicare, or the Medicare Drug Price Negotiation Program, and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. The IRA permits HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. These provisions took effect progressively starting in fiscal year 2023. On August 15, 2024, HHS announced the agreed-upon price of the first ten drugs that were subject to price negotiations, although the Medicare Drug Price Negotiation Program is currently subject to legal challenges. On January 17, 2025, HHS selected fifteen additional products covered under Part D for price negotiation in 2025. Each year thereafter more Part B and Part D products will become subject to the Medicare Drug Price Negotiation Program.

Further, on December 7, 2023, an initiative to control the price of prescription drugs through the use of march-in rights under the Bayh-Dole Act was announced. On December 8, 2023, the National Institute of Standards and Technology published for comment a Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights which for the first time includes the price of a product as one factor an agency can use when deciding to exercise march-in rights. While march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework.

At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure, drug price reporting and other transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. For example, on January 5, 2024, the FDA approved Florida's Section 804 Importation Program (SIP) proposal to import certain drugs from Canada for specific state healthcare programs. It is unclear how this program will be implemented, including which drugs will be chosen, and whether it will be subject to legal challenges in the United States or Canada. Other states have also submitted SIP proposals that are pending review by the FDA. Any such approved importation plans, when implemented, may result in lower drug prices for products covered by those programs. Some states have also enacted legislation creating so-called prescription drug affordability boards, which ultimately may attempt to impose price limits on certain drugs in these states.

We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for ZELSUVMI or our approved product candidates or additional pricing pressures. We cannot predict with certainty what impact any federal or state health reforms will have on us, but such changes could impose new or more stringent regulatory requirements on our activities or result in reduced reimbursement for our products, any of which could adversely affect our business, results of operations and financial condition.

**Human Capital** 

As of September 15, 2025, the Company had approximately 93 full-time employees, all located in the United States. None of our employees are represented by a labor union or covered by a collective bargaining agreement. The Company has recently completed its initial process of hiring a sales, marketing and commercialization team for the launch of ZELSUVMI.

The Company's human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.

**Insurance** 

We currently maintain product liability insurance coverage for our products and clinical trials, if applicable, in amounts consistent with industry standards. However, insurance coverage is becoming increasingly expensive, and we may not be able to obtain or maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability.

**Corporate Information** 

Pelthos Therapeutics Inc. is incorporated under the laws of the State of Nevada. The Company's principal executive offices are located at:

Pelthos Therapeutics Inc.

4020 Stirrup Creek Drive, Suite 110

Durham, NC 27703

Phone: 1-919-908-2400

Email: contact@pelthos.com

**RISK FACTORS**

*Investing in our securities involves significant risk. Prior to investing in our securities, you should carefully consider the specific factors discussed under the heading "Risk Factors" in this Form 8-K/A, and in the documents incorporated by reference herein, including the Company's most recent Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, and any other filings we make with the SEC under the Exchange Act that are incorporated by reference together with all of the other information contained or incorporated by reference herein or therein. The risks and uncertainties we have described are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our operations. The occurrence of any of these risks might cause you to lose all or part of your investment in the offered securities.*

**Risks Related to Our Financial Position and Capital Needs** 

***The report of the independent registered public accounting firm on our 2024 and 2023 financial statements contains a going concern qualification.***

The report of the independent registered public accounting firm covering our consolidated financial statements for the years ended December 31, 2024 and 2023 stated that certain factors, including that we have suffered recurring losses from operations and have an accumulated deficit at December 31, 2024, raised substantial doubt as to our ability to continue as a going concern. Because we are not yet producing sufficient revenue to sustain our operating costs, we are dependent upon raising capital to continue our business. If we are unable to raise capital, we may be unable to continue as a going concern.

***We have incurred significant losses since our inception. We expect to incur losses until revenue from ZELSUVMI is sufficient to fund our operations, if ever, and may never achieve or maintain profitability. If we do not achieve or maintain profitability, we may need additional funding to continue our business operations.***

Since the Merger, we have devoted substantially all of our financial resources and efforts to the development and commercialization of ZELSUVMI, our product for the topical treatment of molluscum contagiosum. ZELSUVMI was approved by the FDA for the treatment of molluscum contagiosum in adults and pediatric patients one year of age and older in January 2024.

Channel has had net losses since inception, and Channel has had an accumulated deficit of approximately $26.9 million and $17.9 million as of June 30, 2025 and June 30, 2024, respectively, which includes a net loss of approximately $3.4 million for the three months ended June 30, 2025, and approximately $1.8 million for the three months ended June 30, 2024, respectively, and includes a net loss of approximately $5.4 million for the six months ended June 30, 2025, and approximately $4.3 million the six months ended June 30, 2024, respectively.

LNHC has also had net losses since inception, and LNHC has had a total parent company net investment balance of approximately $(9.0) million and $10.6 million as of June 30, 2025 and June 30, 2024, respectively, which includes a net loss of approximately $17.0 million for the three months ended June 30, 2025, and approximately $5.7 million for the three months ended June 30, 2024, respectively, and includes a net loss of approximately $24.5 million for the six months ended June 30, 2025, and approximately $13.2 million the six months ended June 30, 2024, respectively.

Overall, these conditions have raised substantial doubt regarding our ability to continue as a going concern beyond one year of the filing of our consolidated financial statements. Our ability to continue as a going concern is dependent upon the ability to complete clinical studies and implement our business plan, raise capital, generate sufficient revenues and to control operating expenses.

We expect to continue to incur significant expenses and operating losses until revenue from ZELSUVMI is sufficient to fund our operations, if ever. Our net losses may fluctuate significantly from quarter to quarter and year to year. Our expenses may increase substantially, as we:

● commercialize ZELSUVMI;

● operate our manufacturing facility, at which we create the API for ZELSUVMI;

● work with third-party contract manufacturers to produce the ZELSUVMI finished product;

● maintain or expand a sales, commercial and distribution infrastructure and manufacturing and logistics capabilities to commercialize currently approved products as well as any future products that receive regulatory approval;

● seek to in-license or acquire additional products or programs;

● develop our regulatory compliance efforts to address requirements applicable to marketed products;

● maintain, expand and protect our intellectual property portfolio;

● hire and retain sales, marketing, manufacturing, commercial and scientific personnel;

● incur additional legal, accounting and other expenses in operating as a public company; and

● incur additional legal expenses associated with managing the regulatory environment or any litigations that may arise.

To become and remain profitable, we must succeed in commercializing ZELSUVMI and/or develop and potentially commercialize future product candidates that generate significant revenue. This will require us to be successful in a range of challenging activities, including commercialization of ZELSUVMI, completing preclinical testing and clinical trials of any of our potential future product candidates, acquiring and integrating product candidates, obtaining regulatory approval, and manufacturing, marketing and selling any future product candidates for which we may obtain regulatory approval, as well as discovering and developing additional product candidates. We may never succeed in these activities and, even if we do, may never generate revenue that is significant enough to achieve profitability.

Our revenue will be dependent, in part, upon the size of the markets in the territories for which we have gained or may gain regulatory approval, the accepted price for the product, the ability to obtain coverage and reimbursement and whether we own the commercial rights for that territory. If the number of our addressable patients is not as significant as we estimate, if any indication approved by regulatory authorities is narrower than we expect, or any targeted treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products.

Because of the numerous risks and uncertainties associated with commercialization and product development, we may not achieve profitability in the time frame we currently expect, or at all. If we are required by regulatory authorities to perform additional post-approval studies, or if there are any delays in the adoption of ZELSUVMI or the development of any of our future product candidates, our expenses could increase, and we may never reach profitability.

Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable could depress our value and could impair our ability to raise capital, diversify our offerings or continue our operations.

***Our executive officers, directors and principal stockholder, Ligand, will have the ability to control or significantly influence all matters submitted to our stockholders for approval.***

Since the Merger, our executive officers, directors and principal stockholder, Ligand, in the aggregate, beneficially own a substantial portion of our outstanding shares of capital stock, on a fully diluted basis, subject to certain assumptions. As a result, if these stockholders were to choose to act together, they would be able to control or significantly influence all matters submitted to the combined company's stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control or significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of the combined company's assets. This concentration of voting power could delay or prevent an acquisition of the combined company on terms that other stockholders may desire.

***We have a limited operating history and history of commercializing products, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.***

Since the Merger, our operations to date have been largely focused on developing and commercializing ZELSUVMI, which was approved by the FDA for the treatment of molluscum contagiosum in adult and pediatric patients one year of age and older in January 2024. We hold a worldwide license to commercialize ZELSUVMI, subject to an out license for Japan, and recently launched the product, but our commercialization efforts are in early stages. We have limited experience in demonstrating the ability to successfully complete clinical trials, obtain regulatory approval for a product, manufacture a product on a commercial scale, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercial launch and commercialization over time. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully commercializing products.

We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives.

**Risks Related to the Commercialization of Our Product and any Future Product Candidates**

***We depend heavily on the commercial success of ZELSUVMI, which was approved by the FDA in January 2024, which we have only recently launched in the United States. There is no assurance that our commercialization efforts in the United States with respect to ZELSUVMI will be successful or that we will be able to generate profit at the levels or within the timing we expect.***

Our business currently depends heavily on our ability to successfully commercialize ZELSUVMI in the United States. We may never be able to successfully commercialize ZELSUVMI or reach our expectations with respect to revenue or profit. There is no guarantee that the infrastructure, systems, processes, policies, personnel, relationships and materials we built in preparation for the launch and commercialization of ZELSUVMI in the United States will be sufficient for us to achieve success at the levels we expect. Additionally, healthcare providers may not accept a new treatment for the treatment of molluscum contagiosum. We may also encounter challenges related to reimbursement of ZELSUVMI, even if we have positive early indications from payors, including potential limitations in the scope, breadth, availability, or amount of reimbursement covering ZELSUVMI. Similarly, healthcare settings or patients may determine that the financial burdens of treatment are not acceptable. Our results may also be negatively impacted if we encounter deficiencies or inefficiencies in our infrastructure or processes. Any of these issues could impair our ability to successfully commercialize ZELSUVMI or to generate substantial profit or to meet our expectations with respect to the amount or timing of profit. Any issues or hurdles related to our commercialization efforts for ZELSUVMI may materially adversely affect our business, results of operations, financial condition and prospects. There is no guarantee that we will be successful in our commercialization efforts with respect to ZELSUVMI, or that we will generate significant profit from ZELSUVMI or any product candidate or become profitable.

***ZELSUVMI and any of our product candidates that receive regulatory approval, may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.***

ZELSUVMI and any of our product candidates that receive regulatory approval may fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If ZELSUVMI or our potential product candidates, if approved, do not achieve an adequate level of acceptance, we may not generate sufficient revenue, and we may not become profitable. The degree of market acceptance of ZELSUVMI and our product candidates, if approved for commercial sale, will depend on a number of factors, including:

● the efficacy, safety and potential advantages compared to alternative treatments;

● our ability to offer our products for sale at competitive prices;

● the convenience and ease of administration compared to alternative treatments;

● the willingness of the target patient population to try new treatments and of physicians to prescribe these treatments;

● our ability to hire and retain a sales force in the United States;

● the strength of marketing and distribution support;

● the availability of third-party coverage and adequate reimbursement for ZELSUVMI and any product candidates that receive regulatory approval;

● the prevalence and severity of any side effects; and

● any restrictions on the use of our products together with other medications.

The failure of healthcare professionals or patients to perceive the benefits of using ZELSUVMI for the treatment of molluscum contagiosum instead of other alternative therapies, such as curettage, cantharidin application or cryotherapy, would adversely affect the commercial success of ZELSUVMI.

***If we are unable to establish effective sales, marketing and distribution capabilities for ZELSUVMI or any product candidate that may receive regulatory approval, we may not be successful in commercializing ZELSUVMI or our other product candidates if and when they are approved.***

We have only recently commercially launched ZELSUVMI and to achieve commercial success for it and any other product candidate for which we may obtain regulatory approval, we will need to establish an effective sales and marketing organization. We have built a focused sales and marketing organization to launch ZELSUVMI in the United States, but it may not be large enough to support the market acceptance and revenue growth of ZELSUVMI that we expect and may need to expand if we receive approval of other product candidates. There are inherent risks to establishing and maintaining a standalone commercial organization, which is also time-consuming and requires significant financial resources.

Factors that create risk and may inhibit our efforts to commercialize our products on our own include:

● our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;

● the inability of sales personnel to obtain access to physicians or educate adequate numbers of physicians on the benefits of prescribing ZELSUVMI or any potential future products;

● inability to obtain favorable insurance coverage of any approved product;

● the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

● unforeseen costs and expenses associated with creating an independent sales and marketing organization.

If we are unable to maintain our own sales, marketing and distribution capabilities and are forced to enter into arrangements with, and rely on, third parties to perform these services, our revenue and our profitability, if any, is likely to be lower than if we had maintained such capabilities internally. In addition, in the event we proceed with engaging third parties for sales and marketing services, we may not be successful in entering into arrangements with third parties to sell, market and distribute our products or may be unable to do so on terms that are favorable to it. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish and maintain sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our products.

***ZELSUVMI or our product candidates may cause undesirable side effects or have other properties that could limit their commercial profile, expose us to product liability claims, delay or prevent regulatory approval of our product candidates or additional indications, or result in significant negative consequences following any additional marketing approval, any of which may adversely impact our business, financial condition, operating results and prospects.***

As is the case with biopharmaceuticals generally, it is likely that there may be side effects and adverse events ("AEs") associated with use of ZELSUVMI or our product candidates. Results of our preclinical testing and clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval of our product candidates by the FDA. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.

Additionally, with respect to ZELSUVMI or any of our product candidates that receive marketing approval, if we or the FDA later identify undesirable side effects caused by ZELSUVMI or such product candidates or other products with the same or related active ingredients, a number of potentially significant negative consequences could result, including, among other things:

● regulatory authorities may withdraw, suspend, or vary approvals of such product, including the FDA, withdrawing approval for the affected medicine;

● regulatory authorities may require additional warnings on the label;

● regulatory authorities may require a recall or we or our potential partners may voluntarily recall such product;

● we may be required to create a medication guide outlining the risks of such side effects for distribution to patients at significant cost or instate a Risk Evaluation and Mitigation Strategies ("REMS") or Risk Management Plan ("RMP");

● regulatory authorities may require the addition of warnings, such as black box or other warnings, or contraindications in the product labeling that could diminish the usage of the product or otherwise limit the commercial success of the affected product;

● our ability to promote our approved medicines may be limited and we could be required to change administration of, or modify, such product in some other way;

● regulatory authorities may require us to modify, suspend or terminate our clinical trials, conduct additional clinical trials or engage in costly post-marketing testing and surveillance to monitor the safety or efficacy of such product;

● undesirable side effects may limit physicians' or patients' willingness to initiate or continue therapy with such product;

● sales may decrease significantly;

● we could be sued and held liable for harm caused to patients; and

● our corporate brand and reputation or the reputation of our approved medicines may suffer.

Such events could prevent us from achieving or maintaining market acceptance of ZELSUVMI or our product candidates, and could significantly harm our business, results of operations and prospects.

***We face substantial competition, which may result in a smaller than expected commercial opportunity and/or other firms may discover, develop or commercialize products before or more successfully than we do.***

The development and commercialization of new products is highly competitive. We face competition with respect to ZELSUVMI and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from many different sources, including major pharmaceutical and specialty pharmaceutical companies, compounding facilities, academic institutions and governmental agencies and public and private research institutions.

ZELSUVMI may compete with other procedure-based treatment regimens currently available for molluscum contagiosum such as curettage, cantharidin application or cryotherapy. In addition, other drugs have been and may continue to be used off label as treatment for molluscum contagiosum.

In addition, our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than ZELSUVMI or any other product that we may develop.

Many of the companies against which we are competing, or against which we may compete in the future, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or that may be necessary for, our programs.

***The commercial success of our products and product candidates will depend upon the degree of market acceptance by physicians, patients, third-party payers and others in the medical community.***

The commercial success of our products, including ZELSUVMI and any other products for which we may obtain regulatory approval, will depend in part on the medical community, patients and third-party payers accepting our products and product candidates as effective and safe. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptance of our products will depend on a number of factors, including:

● the safety and efficacy of the products, and advantages over alternative treatments;

● the labeling of any approved product;

● the prevalence and severity of any side effects, including any limitations or warnings contained in a product's approved labeling;

● the prevalence of the disease or condition for which the product is approved;

● the emergence, and timing of market introduction, of competitive products;

● the effectiveness of our and our collaboration partners' marketing strategy;

● obtaining and maintaining adequate pricing and reimbursement; and

● sufficient third-party insurance coverage or governmental reimbursement, which may depend on our ability to provide compelling evidence that a product meaningfully improves health outcomes to support such insurance coverage or reimbursement.

Even if a product candidate displays a favorable efficacy and safety profile in preclinical studies and clinical trials, market acceptance of the product will not be known until after it is launched. Any failure to achieve market acceptance of our products will harm our business, results and financial condition.

Furthermore, government agencies, as well as private organizations involved in healthcare, from time to time publish guidelines or recommendations to healthcare providers and patients. Such guidelines or recommendations can be very influential and may adversely affect product usage directly (for example, by recommending a decreased dosage of a product in conjunction with a concomitant therapy) or indirectly (for example, by recommending a competitive product over a product of ours). Consequently, we do not know if physicians or patients will adopt or use our products for their approved indications.

***Our products may become subject to unfavorable third-party coverage or reimbursement policies, which would harm our business.***

Market acceptance and sales of ZELSUVMI and any product candidates that we may develop will depend in large part on third-party payor coverage and reimbursement policies and may be affected by future healthcare reform measures in the U.S. as well as the EEA countries and other key international markets. The continuing efforts of governmental and other third-party payors to contain, reduce or shift the costs of healthcare through various means, including an increased emphasis on managed care and attempts to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies, may result in downward pressure on pricing, reimbursement and utilization, which may adversely affect our product sales and results of operations. Moreover, because private health insurers and other third-party payors in the U.S. often follow the coverage and reimbursement policies of government payors, including the Medicare and Medicaid programs, cost-containment measures under these programs play a particularly significant role in the reimbursement landscape. The government programs relevant to our products include, without limitation, the following:

● the Medicaid Drug Rebate Program, under which manufacturers must report pricing information and pay rebates in order for their drug products to be covered under state Medicaid programs;

● the Public Health Service's 340B Drug Pricing Program, under which manufacturers must offer discounts to certain health care organizations that care for underserved populations; and

● the Tricare Retail Pharmacy Program, under which manufacturers must agree to honor certain discounted prices, specifically Federal Ceiling Prices under the Veterans Health Care Act, as a condition for placement in the Department of Defense uniform formulary.

In addition, in the U.S., third-party payors often develop cost containment measures using policies that specifically target specialty products and high-cost drugs. For example, formulary placements may be less favorable for brand and higher-costing drugs, resulting in, among other things, greater out-of-pocket costs to patients. ZELSUVMI may be subject to such measures and may be impacted by similar future policies addressing such cost-containment measures.

Further, payors also are increasingly considering new metrics as the basis for reimbursement rates, such as average sales price, or ASP, average manufacturer price, or AMP, or actual acquisition cost, or AAC. Although the intent of the changes to reimbursement methodologies generally is to limit payment increases, it is difficult to project the impact of these and other alternative reimbursement methodologies on the willingness of payors to reimburse ZELSUVMI and any product candidates that we may develop. We cannot provide any assurances that ZELSUVMI and any future products, if approved, will be covered and reimbursed in the U.S. and if we do receive coverage and reimbursement, that we will continue over time to receive such coverage and reimbursement. If coverage and reimbursement are not available or available only to limited levels, we may not be able to generate sufficient revenue to meet our operating costs or to achieve our revenue, cash flow breakeven or profitability goals in the timeframe that it expects, or at all.

***The market for ZELSUVMI and our future product candidates may not be as large as we expect.***

Molluscum contagiosum is a skin disease that is currently undertreated. Even with approval of ZELSUVMI in adult and pediatric patients one year and older, individuals may continue to decline treatment for molluscum contagiosum as, if left untreated, the diseases will eventually be resolved by the body's immune system.

In addition, our estimates of the potential market opportunity for ZELSUVMI include several key assumptions based on our industry knowledge, industry publications, third-party research reports, ICD-10 claims data, and surveys of dermatologists commissioned by us. These assumptions include the current treatment rates and/or prevalence of molluscum contagiosum and other skin diseases as well as the estimated coverage levels for ZELSUVMI. However, there can be no assurance that any of these assumptions are, or will remain, accurate. Furthermore, even if our estimates relating to claims data and/or the prevalence of molluscum contagiosum and other skin diseases as well as the estimated coverage levels for ZELSUVMI or any future product candidate we may develop, as applicable, are accurate, the degree of market acceptance by the medical community and those infected by such skin diseases following regulatory approval could impact our assumptions and reduce the market size for ZELSUVMI and any other product that may be approved. Furthermore, the market research study we commissioned surveying payor organizations has no bearing on the payors, and any assumptions or interpretations based on the results of this study, may ultimately be inaccurate. If the actual markets for ZELSUVMI or any future product candidates are smaller than we expect, our revenues, if any, may be limited and it may be more difficult for us to achieve or maintain profitability.

***The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.***

The FDA strictly regulates marketing, labeling, advertising and promotion of prescription drugs. These regulations include standards and restrictions for direct-to-consumer advertising, industry-sponsored scientific and educational activities, promotional activities involving the internet and off-label promotion. Any regulatory approval that the FDA grants, including the approval of ZELSUVMI, is limited to those specific diseases and indications for which a product is deemed to be safe and effective by FDA. While physicians in the United States may choose, and are generally permitted, to prescribe drugs for uses that are not described in the product's labeling and for uses that differ from those tested in clinical trials and approved by the regulatory authorities, our ability to promote ZELSUVMI or any future products will be narrowly limited to those indications that are specifically approved by the FDA. ZELSUVMI has been approved by the FDA for the treatment of molluscum contagiosum in adults and pediatric patients one year of age and older, and we are not permitted to promote ZELSUVMI for other uses.

If we are found to have promoted such off-label uses, we may become subject to significant liability. The U.S. federal government has levied large civil and criminal fines against companies for alleged improper promotion of off-label use and has enjoined several companies from engaging in off-label promotion. The FDA has also required that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage the promotion of ZELSUVMI or any future product candidates, if approved, we could become subject to significant liability, which would materially adversely affect our business and financial condition.

***Product liability lawsuits could cause us to incur substantial liabilities and limit commercialization of any products that we may develop.***

We face an inherent risk of product liability exposure related to the commercial sales of ZELSUVMI, as well as the testing of our potential future product candidates in human clinical trials. If we cannot successfully defend ourselves against claims that ZELSUVMI or such product candidates caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

● decreased demand for ZELSUVMI and any product candidates that we may develop;

● injury to our reputation and significant negative media attention;

● loss of revenue;

● withdrawal of clinical trial participants;

● significant costs to defend the related litigation;

● substantial monetary awards paid to trial participants or patients;

● reduced resources of management to pursue our business strategy; and

● the inability to commercialize any products that we may develop.

We currently hold product liability insurance that covers damages up to a $15 million annual limit. We may need to secure additional product liability insurance coverage if and when sales of ZELSUVMI grow and may need to further increase our insurance coverage if we initiate clinical trials or expand commercialization activities for our other product candidates that obtain regulatory approval. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

**Risks Related to Our Operations and Manufacturing**

***Delays or disruptions in our supply chain and manufacturing of our products, including ZELSUVMI, and potential product candidates could adversely affect our sales and marketing efforts and our development and commercialization timelines and could result in increased costs or in our breaching our obligations to others.***

Our ability to make, move, and sell our products is critical to our success. Damage or disruption to our supply chain, including third-party manufacturing, assembly or transportation and distribution capabilities, due to weather, including any potential effects of climate change, natural disaster, fire or explosion, terrorism, pandemics (such as the COVID-19 pandemic), strikes, tariffs, government action, inflation, war or other reasons beyond our control or the control of our suppliers and business partners, could impair our ability to manufacture or sell our products. Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, particularly where our product is sourced from a single supplier or location, could adversely affect our business or financial results. Any interruption or failure by our suppliers, distributors and other partners to meet their obligations on schedule or in accordance with our expectations, misappropriation of our proprietary information, including trade secrets and know-how, or any termination by these third parties of their arrangements with us, which, in each case, could be the result of one or many factors outside of our control, could delay or prevent the manufacture or commercialization of our products, disrupt our operations or cause reputational harm to us. In addition, except for the terms and conditions specified in our contractual arrangements with our contract manufacturers, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our API or drug products or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for, market and sell our products and potential product candidates.

We are required to identify the supplier(s) of all the raw materials for our products, including ZELSUVMI, in our applications with the FDA. To the extent practicable, our attempts were to identify more than one supplier in each drug application. However, some products and raw materials are available only from a single source and, in some of our drug applications, only one supplier of products and raw materials has been identified, even in instances where multiple sources exist. To the extent any difficulties experienced by our suppliers cannot be resolved within a reasonable time and at reasonable cost, or if raw materials for a particular product become unavailable from an approved supplier and we are required to qualify a new supplier with the FDA, our profit margins and market share for the affected product could decrease and our development and sales and marketing efforts could be delayed or negatively impacted.

***We have limited experience in producing commercial scale products that utilize the NITRICIL technology, which was assigned to Ligand in March 2024, including the API, berdazimer sodium, used in the ZELSUVMI product. Any delay or disruptions in the on-going qualification of manufacturing facilities and process or in the manufacture of our (i) API, including berdazimer sodium, or (ii) potential future clinical trial materials or commercial supplies of any other potentially approved product candidates utilizing the NITRICIL technology, could adversely affect our development and commercialization timelines and results or result in increased costs or in our breaching our obligations to others.***

We internally manufacture the berdazimer sodium API that is utilized in our ZELSUVMI commercial product. Any delays or disruptions in our manufacturing processes and analytical methods for API testing and commercial manufacturing under cGMP guidelines and regulations, or our inability to execute such activities, could impact the commercialization efforts for ZELSUVMI and/or any future product candidate, as well as increase costs. Further, if we do not appropriately coordinate with, project manage or provide adequate internal expertise, resources and documentation with our third-party drug product manufacturer, we may not be successful, or may be delayed, in the commercialization of ZELSUVMI. We have a limited number of personnel who have experience in drug substance manufacturing and possess the expertise necessary to manufacture berdazimer sodium.

Orion, with whom we have formed a relationship to manufacture the commercial drug product for ZELSUVMI, including final fill/finish and packaging, must be successful in our execution of our commercial production strategy. For instance, we may not be successful in realizing the intended operating goals from this arrangements based on a number of factors, including, among other things, (i) delays or failures, including delays in our ability to transition applicable technology and processes to our vendors or partners, (ii) reduced quality, (iii) delayed receipt of goods or services, (iv) increased and unexpected costs on the part of the third-party vendors or strategic partners, and (v) certain incremental and discrete costs to effect this strategy. If we are unsuccessful in partnering with third-party manufacturers, we could experience delays in the development and commercialization timelines of our product candidates, as well as increased costs.

We will also have no direct control over the ability of third-party manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or any comparable foreign regulatory authority does not approve these facilities for the manufacture of our products, or if such authorities withdraw any such approval in the future, we may be required to find alternative manufacturing facilities, which would significantly impact our ability to obtain approval of and commercialize any product candidates, if approved. our failure, or the failure of any of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, seizures or recalls, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our financial position.

Our or a third party's failure to execute on our manufacturing requirements on commercially reasonable terms and in compliance with cGMP or other regulatory requirements could adversely affect our business in a number of ways, including:

● an inability to meet commercial demands;

● an inability to initiate or complete clinical trials in a timely manner;

● delays in submitting regulatory applications, or receiving regulatory approvals;

● subjecting third-party manufacturing facilities to additional inspections by regulatory authorities; and

● requirements to cease development or to recall product batches.

In addition, we may be unable to establish additional long-term supply agreements with third-party manufacturers or to do so on acceptable terms, which increases the risk of failing to timely obtain sufficient quantities of our products or any future product candidates or such quantities at an acceptable cost, which would have a material adverse impact on our financial position. There are risks associated with scaling up manufacturing to commercial volumes including, among others, cost overruns, technical or other problems with process scale-up, process reproducibility, stability issues, lot consistency and timely availability of raw materials. There is no assurance that our manufacturers will be successful in establishing a larger-scale commercial manufacturing process for ZELSUVMI that achieves our objectives for manufacturing capacity and cost of goods, in a timely manner, or at all.

***Unexpected results in the analysis of raw materials, the API or drug product or problems with the execution of or quality systems supporting the analytical testing work, whether conducted internally or by third-party service providers, could adversely affect our development and commercialization timelines and result in increased costs of potential development programs initiated by us.***

Third parties engaged directly by us or by our API and drug product CMOs, test all of the raw materials and finished API and drug products. It is a regulatory requirement that raw materials are tested and there are a limited number of suppliers for testing these raw materials. There may be a need to assess alternate suppliers to prevent a possible disruption of the supply of these raw materials for the manufacture of API or drug product. Additionally, the analytical equipment used by these third parties must be maintained and operational. Except for the terms established within our or our CMOs' contracts with the third parties responsible for testing raw materials and finished API and drug products, we have limited ability to control the process or timing of their testing work. Additionally, if the results do not meet specifications, then obtaining additional raw materials may jeopardize our or our CMOs' ability to manufacture API and/or drug product, the start or overall conduct of preclinical studies and clinical trials, the timing of regulatory submissions, or the commercialization of our products and any future product candidates, if approved. We and our CMOs currently engage third parties to perform analytical tests to ensure the API and drug product meets quality specifications. The analytical equipment used by us or our CMOs to perform these tests must be maintained, qualified, calibrated and operational. If there are testing execution delays, equipment problems or if the results of the analytical testing do not meet our quality specifications, then manufacturing additional API or drug product may increase costs and may jeopardize our or our CMOs' ability to manufacture API and/or drug product, which may cause delays in the start or overall conduct of preclinical studies and clinical trials, the submission of regulatory filings, or the commercialization of our products and any future product candidates.

***Our business involves the use of hazardous materials and we and our third-party suppliers and manufacturers must comply with environmental laws and regulations, which can be expensive and restrict how we do business.***

Our manufacturing activities and the manufacturing activities of our third-party suppliers and manufacturers, involve the controlled storage, use and disposal of hazardous materials. Further, our manufactured drug substances and drug products may be considered hazardous materials under applicable laws and regulations. Our manufacturing activities, whether conducted by us or our third-party suppliers and manufacturers, like all manufacturing processes that utilize hazardous materials, including those under high pressures, must be properly controlled to avoid unintended reactions or other accidents that could cause injury or damage to personnel, equipment or property. We and our manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage, transportation, handling and disposal of these hazardous materials, and our failure to manage the use, manufacture, storage, transportation, handling or disposal of hazardous materials could subject us to significant costs or future liabilities. In some cases, these hazardous materials and various wastes resulting from their use are transported and stored at our suppliers' or manufacturers' facilities pending use and disposal. We and our suppliers and manufacturers cannot completely eliminate the risk of contamination, which could cause an interruption of our commercialization efforts, research and development efforts and business operations, injury to our service providers and others and environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. Although we believe that the manufacturing controls and safety procedures utilized by us and our third-party suppliers and manufacturers for handling, transporting and disposing of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate the risk (i) that the laws and regulations will not restrict our or our third-party suppliers' or manufacturers' ability to use, manufacture, store, transport, handle or dispose of such materials or (ii) of accidental contamination or injury from these hazardous materials and processes. If these risks were to materialize, we could experience an interruption of our business operations, and we may be held liable for any resulting damages, and such liability could exceed our financial resources.

***We may be adversely affected by the effects of inflation or trade tariffs.***

We have been impacted, and may continue to be impacted, by inflation and/or trade tariffs which have the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing our overall cost structure. The existence of inflation and the recent uncertainty in the levying of certain trade tariffs by the U.S. government, has resulted in, and may continue to result in, higher interest rates and capital costs, supply shortages, increased costs of labor, components, manufacturing and shipping, as well as weakening exchange rates and other similar effects. As a result of inflation and tariffs, we have experienced and may continue to experience cost increases. Although we may take measures to mitigate the effects of inflation and tariffs, if these measures are not effective and if the inflationary and tariff pressure is sustained or increased, our business, financial condition, results of operations and liquidity could be negatively affected. Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation and/or tariffs are incurred.

**Risks Related to Our Dependence on Third Parties**

***We will rely on third parties to conduct any preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize any of our future product candidates.***

We currently do not have the ability to conduct in-house preclinical studies that comply with the regulatory requirements known as GLP, requirements. We also do not currently have the ability to conduct any clinical trials in-house. The FDA and regulatory authorities in other jurisdictions require us to comply with regulations and standards, commonly referred to as GCPs for conducting, monitoring, recording and reporting the results of clinical trials, in order to ensure that the data and results are scientifically credible and accurate and that the trial subjects are adequately informed of the potential risks of participating in clinical trials. We will be required to rely on medical institutions, clinical investigators, contract laboratories and other third parties, such as CROs, to conduct GLP-compliant preclinical studies and GCP-compliant clinical trials on any future product candidates properly and on time. While we will have agreements governing our activities, we will control only certain aspects of our activities and will have limited influence over their actual performance. The third parties with whom we may contract for execution of our GLP preclinical studies and our GCP clinical trials play a significant role in the conduct of these studies and trials and the subsequent collection and analysis of data. These third parties will not be our employees and, except for restrictions imposed by our contracts with such third parties, we will have limited ability to control the amount or timing of resources that they devote to our programs. Although we plan to rely on these third parties to conduct GLP-compliant preclinical studies and GCP-compliant clinical trials, we will remain responsible for ensuring that each of these studies and clinical trials is conducted in accordance with our investigational plan and protocol and applicable laws and regulations, and our reliance on the third parties will not relieve us of our regulatory responsibilities. In addition, if any of our third parties terminate their involvement with us for any reason, we may not be able to enter into similar arrangements with alternative third parties within a short period of time or do so on commercially reasonable terms.

Many of the third parties with whom we may contract may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. If the third parties conducting our preclinical studies or clinical trials do not perform their contractual duties or obligations, experience work stoppages, do not meet expected deadlines, terminate their agreements with us or need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical trial protocols, GLPs or GCPs, or for any other reason, we may need to enter into new arrangements with alternative third parties. This could be difficult, costly or impossible, and our preclinical studies or clinical trials may need to be extended, delayed, terminated or repeated. As a result, we may not be able to obtain regulatory approval in a timely fashion, or at all, for the applicable future product candidate, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenues could be delayed.

***Our employees, independent contractors, principal investigators, CMOs, CROs, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could expose us to liability and hurt our reputation.***

We are exposed to the risk that our employees, independent contractors, principal investigators, CMOs, CROs, consultants, commercial partners and vendors may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless or negligent conduct or disclosure of unauthorized activities to us that violates: (i) FDA laws and regulations, including those laws that require the reporting of true, complete and accurate information to the FDA, (ii) manufacturing standards, (iii) federal, state and foreign data privacy, security, fraud and abuse and other healthcare laws, or (iv) laws that require the true, complete and accurate reporting of financial information or data. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creating fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending itself or asserting our rights, those actions could have a significant impact on our business and financial results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, reputational harm, diminished profits and future earnings, and curtailment of our operations.

**Risks Related to Intellectual Property**

***We rely on in-licenses from third parties. If we lose these rights, our business will be materially and adversely affected, our ability to develop improvements to our technology platform may be negatively and substantially impacted, and if disputes arise, we may be subjected to future litigation, as well as the potential loss of or limitations on our ability to incorporate the technology covered by these license agreements.***

On March 24, 2025, LNHC assigned its IP portfolio related to the Novan acquisition, including the NITRICIL technology, to Ligand and entered into an exclusive license and sublicense agreement with Ligand, pursuant to which Ligand licensed to LNHC the intellectual property rights necessary to make, use, sell or offer to sell ZELSUVMI for the treatment of molluscum contagiosum in humans worldwide, except for Japan. This license agreement imposes various diligence, milestone payment, royalty, insurance, and other obligations on us, while also granting us the rights to certain patents related to our products. We are substantially dependent on the in-licenses of ZELSUVMI and other intellectual property to conduct our business.

In spite of our efforts to comply with our obligations under our in-license agreements, our licensors might conclude that we have materially breached our obligations under our license agreements and might therefore, including in connection with any aforementioned disputes, terminate the relevant license agreement, thereby removing or limiting our ability to develop and commercialize technology covered by these license agreements. If any such in-license is terminated, or if the licensed patents fail to provide the intended exclusivity, competitors or other third parties might have the freedom to market or develop technologies similar to ours.

In some circumstances, we may not have the right to control the preparation, filing, prosecution, maintenance and defense of patent applications or patents covering technology that we license from third parties. In such circumstances, our licensors generally have rights to file, prosecute, and maintain the licensed patents in their name, generally with our right to comment on such filing, prosecution, and maintenance, with some obligation for the licensor to consider or incorporate our comments. If our licensors having rights to file, prosecute and maintain our patent rights fail to conduct these activities for patents or patent applications covering any of our product candidates, our ability to develop and commercialize those product candidates may be adversely affected and we may not be able to prevent competitors from making, using or selling competing products. Additionally, there could also be delays at the USPTO caused by staffing cuts and other U.S. government actions as a result of the Department of Government Efficiency or other executive actions to reduce the size of the U.S. government, which may adversely affect us or our licensors. We cannot be certain that such activities by our licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents or other intellectual property rights.

In addition, absent the rights granted to us under our license agreements, we may infringe the intellectual property rights that are the subject of those agreements, we may be subject to litigation by the licensor, and if such litigation by the licensor is successful we may be required to pay damages to our licensor, or we may be required to cease our development and commercialization activities that are deemed infringing, and in such event we may ultimately need to modify its activities or technologies to design around such infringement, which may be time- and resource-consuming, and which ultimately may not be successful. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

We may ultimately need to modify our activities or technologies to design around such infringement, which may be time- and resource-consuming, and which ultimately may not be successful. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, our rights to certain components of our technology platform may be licensed to us on a non-exclusive basis. The owners of these non-exclusively licensed technologies are therefore free to license them to third parties, including our competitors, on terms that may be superior to those offered to us, which could place us at a competitive disadvantage.

Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor's rights. In addition, certain of our agreements with third parties may provide that intellectual property arising under these agreements, such as data that could be valuable to our business, will be owned by the third party, in which case, we may not have adequate rights to use such data or have exclusivity with respect to the use of such data, which could result in third parties, including our competitors, being able to use such data to compete with us.

***Third party intellectual property may prevent us from developing our potential products; our intellectual property may not prevent competition; and any intellectual property issues may be expensive and time consuming to resolve.***

The manufacture, use or sale of our potential products may infringe the patent rights of others. If others obtain patents with conflicting claims, we may be required to obtain licenses to those patents or to develop or obtain alternative technology. We may not be able to obtain any such licenses on acceptable terms, or at all. Any failure to obtain such licenses could delay or prevent us from pursuing the development or commercialization of our potential products, platform and technology.

Generally, our success will depend on our and our licensors' ability to obtain and maintain patents and other intellectual property rights for our potential products and technologies. our patent position is uncertain and involves complex legal and technical questions for which legal principles are unresolved. Even if we do obtain patents, such patents may not adequately protect the technology we own or have licensed.

The patents that cover our branded products are listed in the Orange Book. If a third party submits a NDA or ANDA for a generic drug product that relies in whole or in part on studies contained in the NDA for one of our branded products, the third party will have the option to certify to the FDA that, in the opinion of that third party, the patents listed in the Orange Book for our branded product are invalid, unenforceable, or will not be infringed by the manufacture, use or sale of the third party's generic drug product. A third-party certification that a new product will not infringe Orange Book-listed patents, or that such patents are invalid, is called a paragraph IV patent certification. If the third party submits a paragraph IV patent certification to the FDA, a notice of the paragraph IV patent certification must be sent to the NDA owner and the owner of the patents that are subject to the paragraph IV patent certification notice once the third-party's NDA or ANDA is accepted for filing by the FDA. A lawsuit may then be initiated to defend the patents identified in the notice. The filing of a patent infringement lawsuit within 45 days of the receipt of notice of a paragraph IV patent certification automatically prevents the FDA from approving the generic NDA or ANDA until the earlier of the expiration of a 30-month period, the expiration of the patents, the entry of a settlement order stating that the patents are invalid or not infringed, a decision in the infringement case that is favorable to the NDA or ANDA applicant, or such shorter or longer period as the court may order. If a patent infringement lawsuit is not initiated within the required 45-day period, the third-party's NDA or ANDA will not be subject to the 30-month stay. Third parties may challenge the patents covering our branded products. We may from time to time become party to litigation or other proceedings as a result of paragraph IV patent certifications.

In addition, we cannot assure you that all of the potentially relevant prior art information that was or is deemed available to a person of skill in the relevant art prior to the priority date of the claimed invention-relating to our patents and patent applications has been found. If such prior art exists, it can invalidate a patent or prevent a patent from issuing from a pending patent application (whether owned by us or in-licensed from Ligand or another third party), and we may be subject to a third-party pre-issuance submission of prior art to the USPTO. Even if our patent applications (whether owned by us or in-licensed from Ligand or another third party) do successfully issue and even if such patents cover our products or potential products, third parties may initiate litigation or opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices, or similar proceedings challenging the validity, enforceability or scope of such patents, which may result in the patent claims being narrowed or invalidated and may allow third parties to commercialize our products and compete directly with us, without payment to us, or limit the duration of the patent protection of our technology and products.

In addition, similar to what other companies in our industry have experienced, we expect our competitors and others may have patents or may in the future obtain patents and claim that making, having made, using, selling, offering to sell or importing our technologies infringes these patents. Defense of infringement and other claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and employee resources from our business. Parties making claims against us may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources, or may be able to obtain injunctive or other relief, which could block our ability to develop, commercialize, and sell products or services and could result in the award of substantial damages against us, including treble damages, attorney's fees, costs and expenses if we are found to have willfully infringed. In the event of a successful claim of infringement against us, we may be required to pay damages and ongoing royalties and obtain one or more licenses from third parties or be prohibited from selling certain products or services. As discussed above, we may not be able to obtain these licenses on acceptable or commercially reasonable terms, if at all, or these licenses may be non-exclusive, which could result in our competitors gaining access to the same intellectual property. In addition, we could encounter delays in product or service introductions while we attempt to develop alternative products or services to avoid infringing third-party patents or proprietary rights. Defense of any lawsuit or failure to obtain any of these licenses could prevent us from commercializing products or services, and the prohibition of sale of any of our technologies could materially affect our business and our ability to gain market acceptance for our technology.

Litigation or other proceedings to enforce or defend intellectual property rights are often very complex in nature, may be very expensive and time-consuming, may divert our management's attention from our core business, and may result in unfavorable results that could adversely impact our ability to prevent third parties from competing with our products or technologies. Any adverse outcome of such litigation or other proceedings could result in one or more of our patents (whether owned by us or in-licensed from Ligand or another third party) being held invalid or unenforceable, which could adversely affect our ability to successfully execute our business strategy and negatively impact our financial condition and results of operations. However, given the unpredictability inherent in litigation, we cannot predict or guarantee the outcome of these matters or any other litigation. Regardless of how these matters are ultimately resolved, these matters may be costly, time-consuming and distracting to our management, which could have a material adverse effect on our business. It may be necessary for us or our licensors to pursue litigation or adversarial proceedings before the patent office in order to enforce their patent and proprietary rights or to determine the scope, coverage and validity of the proprietary rights of others. The outcome of any such litigation might not be favorable, and even if we or our licensors were to prevail, such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our business, operating results or financial condition.

In addition, periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to the U.S. and various foreign patent offices at various points over the lifetime of our and our licensors' patents and/or applications. We will rely on Ligand to pay these fees with respect to the patents covering ZELSUVMI and cannot ensure Ligand will pay these fees in a timely manner. Additionally, the U.S. and various foreign patent offices require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We will rely on Ligand to comply with these requirements. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with rules applicable to the particular jurisdiction. However, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If such an event were to occur, it could have a material adverse effect on our business.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our Common Stock.

Any conflicts with the patent rights of others could significantly reduce the coverage of our patents (whether owned by us or in-licensed from Ligand or another third party) or limit our ability to obtain meaningful patent protection. In addition, any determination that our patent rights are invalid may result in early termination of our agreements with our license partners and could adversely affect our ability to enter into new license agreements. We also rely on unpatented trade secrets and know-how to protect and maintain our competitive position. We require our employees, consultants, licensees, and others to sign confidentiality agreements when they begin their relationship with us. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our competitors may independently discover our trade secrets.

We may also need to initiate litigation, which could be time-consuming and expensive, to enforce our proprietary rights or to determine the scope and validity of others' rights. If this occurs, a court may find our patents or those of our licensors invalid or may find that we have infringed on a competitor's rights. In addition, if any of our competitors have filed patent applications in the United States prior to March 2013 which claim technology we also have invented, the USPTO may require us or our licensors to participate in expensive interference proceedings to determine who has the right to a patent for the technology.

In addition, our agreements with some of our suppliers or other entities with whom we do business require us to defend or indemnify these parties to the extent they become involved in infringement claims, including the types of claims described above. We could also voluntarily agree to defend or indemnify third parties in instances where we are not obligated to do so if we determine it would be important to our business relationships. If we are required or agrees to defend or indemnify third parties in connection with any infringement claims, we could incur significant costs and expenses that could adversely affect our business, financial condition, results of operations, and prospects. The occurrence of any of the foregoing problems could be time-consuming and expensive and could adversely affect our financial position, liquidity and results of operations.

***If we are unable to obtain and maintain sufficient intellectual property protection for our products and technology, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technologies similar to ours, and our ability to successfully sell our products and services may be impaired.***

Our success depends in part on our and our licensor's ability to obtain and maintain adequate protection of the intellectual property we may own solely and jointly with others or otherwise have rights to, particularly patents, in the United States and in other countries with respect to our platform, our software and our technologies, without infringing the intellectual property rights of others.

We strive to protect and enhance the proprietary technologies that we believe are important to our business, including seeking patents intended to cover our platform and related technologies and uses thereof, as we deem appropriate. However, obtaining and enforcing patents in our industry is costly, time-consuming and complex, and we may fail to apply for patents on important products and technologies in a timely fashion or at all, or we may fail to apply for patents in potentially relevant jurisdictions. There can be no assurance that the claims of our patents or any patent application that issues as a patent (whether owned by us or in-licensed from Ligand or another third party) will exclude others from making, using, importing, offering for sale, or selling products or services that are substantially similar to ours. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. In countries where we have not sought and do not seek patent protection, third parties may be able to manufacture and sell our technology without our permission, and we may not be able to stop them from doing so. We may not be able to file and prosecute all necessary or desirable patent applications, or maintain, enforce and license any patents that may issue from such patent applications, at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. We may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the rights to patents licensed to third parties. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.

It is possible that none of our pending patent applications (whether owned by us or in-licensed from Ligand or another third party) will result in issued patents in a timely fashion or at all, and even if patents are granted, they may not provide a basis for intellectual property protection of commercially viable products or services, may not provide us with any competitive advantages, or may be challenged and invalidated by third parties or deemed unenforceable by a court. It is possible that others will design around our current or future patented technologies. As a result, our owned and licensed patents and patent applications comprising our patent portfolio may not provide us with sufficient rights to exclude others from commercializing technology and products similar to any of our products, platform and technology.

In addition, we may identify third party intellectual property and technology we may need to acquire or license in order to engage in our business, including to develop or commercialize new technologies. However, such licenses may not be available to us on acceptable terms or at all. Furthermore, geopolitical actions in the United States and in foreign countries could increase the uncertainties and costs surrounding the prosecution or maintenance of our patent applications or those of any current or future license partners and the maintenance, enforcement or defense of our issued patents or those of any current or future license partners. For example, the United States and foreign government actions related to Russia's conflict in Ukraine may limit or prevent filing, prosecution, and maintenance of patent applications in Russia. Government actions may also prevent maintenance of issued patents in Russia. These actions could result in abandonment or lapse of our or our license partners' patents or patent applications, resulting in partial or complete loss of patent rights in Russia. If such an event were to occur, it could have a material adverse effect on our business. In addition, a decree was adopted by the Russian government in March 2022, allowing Russian companies and individuals to exploit inventions owned by patentees from the United States without consent or compensation. Consequently, we or our license partners would not be able to prevent third parties from practicing our or our inventions in Russia or from selling or importing products made using our inventions in and into Russia. Accordingly, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.

***Issued patents directed to the NITRICIL platform and technology could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad.***

The issuance of a patent is not conclusive as to our inventorship, scope, validity or enforceability. Some of our patents or patent applications (whether owned by us or in-licensed from Ligand or another third party) may be challenged at a future point in time in opposition, derivation, reexamination, inter partes review, post-grant review or interference. Any successful third-party challenge to our patents in this or any other proceeding could result in the unenforceability or invalidity of such patents or amendment to our patents in such a way that any resulting protection may lead to increased competition to our business, which could harm our business. In addition, in patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on certain aspects of our platform technologies. In addition, if the breadth or strength of protection provided by our patents and patent applications (whether owned by us or in-licensed from Ligand or another third party) is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future products, platform and technology.

We may not be aware of all third-party intellectual property rights potentially relating to our products, platform and technology. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until approximately 18 months after filing or, in some cases, not until such patent applications issue as patents. We or our licensors might not have been the first to make the inventions included in each of our pending patent applications and we or our licensors might not have been the first to file patent applications for these inventions. There is also no assurance that all of the potentially relevant prior art relating to our patents and patent applications or licensed patents and patent applications have been found, which could be used by a third party to challenge their validity or prevent a patent from issuing from a pending patent application.

To determine the priority of these inventions, we may have to participate in interference proceedings (with respect to patent applications filed prior to March 2013), derivation proceedings or other post-grant proceedings declared by the USPTO that could result in substantial cost to us. The outcome of such proceedings is uncertain. No assurance can be given that other patent applications will not have priority over our patent applications (whether owned by us or in-licensed from Ligand or another third party). In addition, changes to the patent laws of the United States allow for various post-grant opposition proceedings that have not been extensively tested, and their outcome is therefore uncertain. Furthermore, if third parties bring these proceedings against our patents (whether owned by us or in-licensed from Ligand or another third party), we could experience significant costs and management distraction.

***Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing Ligand's ability to protect our products, platform and technology on which we rely.***

Changes in either the patent laws or interpretation of the patent laws in the United States could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents, and may diminish our ability to protect our inventions, obtain, maintain, enforce and protect our intellectual property rights and, more generally, could affect the value of our intellectual property or narrow the scope of our future owned and licensed patents. Depending on future actions by the United States Congress, the United States courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that would weaken our or our license partners' ability to obtain new patents and patents that we or our license partners might obtain in the future. For example, on June 1, 2023, the European Union Patent Package ("EU Patent Package") regulations were implemented with the goal of providing a single pan-European Unitary Patent and a new European Unified Patent Court ("UPC") for litigation involving European patents. As a result, all European patents, including those issued prior to ratification of the EU Patent Package, now by default automatically fall under the jurisdiction of the UPC. It is uncertain how the UPC will impact granted European patents in the biotechnology and pharmaceutical industries. Our or our license partners' European patent applications, if issued, could be challenged in the UPC. During the first seven years of the UPC's existence, the UPC legislation allows a patent owner to opt our European patents out of the jurisdiction of the UPC. We or our license partners may decide to opt out future European patents from the UPC, but doing so may preclude we or our license partners from realizing the benefits of the UPC. Moreover, if we or our license partners do not meet all of the formalities and requirements for opt-out under the UPC, our or our license partners' future European patents could remain under the jurisdiction of the UPC. The UPC will provide our and our license partners' competitors with a new forum to centrally revoke our European patents and allow for the possibility of a competitor to obtain pan-European injunction. Such a loss of patent protection could have a material adverse impact on our or our license partners' business and ability to commercialize our technology and product candidates and, resultantly, on our business, financial condition, prospects and results of operations.

In addition, the U.S. federal government retains certain rights in inventions produced with our financial assistance under the Patent and Trademark Law Amendments Act (Bayh-Dole Act). For example, certain patents and patent applications licensed from the University of North Carolina at Chapel Hill (through Ligand) were made with financial assistance from the federal government. The federal government retains a "nonexclusive, nontransferable, irrevocable, paid-up license" for our own benefit. The Bayh-Dole Act also provides federal agencies with "march-in rights." March-in rights allow the government, in specified circumstances, to require the contractor or successors in title to the patent to grant a "nonexclusive, partially exclusive, or exclusive license" to a "responsible applicant or applicants." If the patent owner refuses to do so, the government may grant the license itself. If we choose to collaborate with academic institutions for our research or development, we cannot be sure that any co-developed intellectual property will be free from government rights pursuant to the Bayh-Dole Act. If, in the future, we co-own or license in technology which is critical to our business that is developed in whole or in part with federal funds subject to the Bayh-Dole Act, our ability to enforce or otherwise exploit patents covering such technology may be adversely affected.

***We may be subject to claims challenging the inventorship of the patents and other intellectual property on which we rely.***

We or our licensors may be subject to claims that former employees or other third parties have an interest in our or our in-licensed patents, trade secrets or other intellectual property as an inventor or co-inventor. Litigation may be necessary to defend against these and other claims challenging inventorship of our or our licensors' ownership of our owned or in-licensed patents, trade secrets or other intellectual property. If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our systems, including our software, workflows, consumables and reagents. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees, and certain partners may defer engaging with us until the particular dispute is resolved. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

***If we are unable to protect the confidentiality of our information and our trade secrets, the value of our technology could be materially and adversely affected and our business could be harmed.***

We rely on trade secrets and confidentiality agreements to protect our unpatented know-how, technology and other proprietary information, including parts of our technology platform, and to maintain our competitive position. However, trade secrets and know-how can be difficult to protect. In addition to pursuing patents on our technology, we take steps to protect our intellectual property and proprietary technology by entering into agreements, including confidentiality agreements, non-disclosure agreements and intellectual property assignment agreements, with our employees, consultants, academic institutions, corporate partners and, when needed, our advisers. However, we cannot be certain that such agreements have been entered into with all relevant parties, and we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. For example, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Such agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements, and we may not be able to prevent such unauthorized disclosure, which could adversely impact our ability to establish or maintain a competitive advantage in the market. If we are required to assert our rights against such party, it could result in significant cost and distraction.

Monitoring unauthorized disclosure and detection of unauthorized disclosure is difficult, and we do not know whether the steps we have taken to prevent such disclosure are, or will be, adequate. If we were to enforce a claim that a third party had illegally obtained and was using our trade secrets, it would be expensive and time-consuming, and the outcome would be unpredictable. In addition, some courts both within and outside the United States may be less willing, or unwilling, to protect trade secrets. Further, we may need to share our trade secrets and confidential know-how with current or future partners, collaborators, contractors and others located in countries at heightened risk of theft of trade secrets, including through direct intrusion by private parties or foreign actors, and those affiliated with or controlled by state actors.

We also seek to preserve the integrity and confidentiality of our confidential proprietary information by maintaining physical security of our premises and physical and electronic security of our information technology systems, but it is possible that these security measures could be breached. If any of our confidential proprietary information were to be lawfully obtained or independently developed by a competitor or other third party, absent patent protection, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position. If any of our trade secrets were to be disclosed to or independently discovered by a competitor or other third party, it could harm our business, financial condition, results of operations and prospects.

***If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our competitive position may be harmed.***

We rely on our trademarks, trade names and brand names to distinguish our products from the products of our competitors and have registered or applied to register many of these trademarks. We cannot guarantee that our trademark applications will be approved. Third parties may also oppose our trademark applications or otherwise challenge our use of the trademarks. our registered and unregistered trademarks, trade names, and brand names may be challenged, infringed, circumvented, declared generic or determined to be violating or infringing on other marks. We may not be able to protect our rights to these trademarks, trade names, and brand names which we rely upon to build name recognition among potential partners and customers in our markets of interest. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. Further, there can be no assurance that competitors will not infringe our trademarks or that we will have adequate resources to enforce our trademarks.

**Risks Related to Legal and Regulatory Compliance Matters**

***Current and future healthcare reform legislation or regulation may increase the difficulty and cost for us to commercialize ZELSUVMI and may adversely affect the prices we may obtain and may have a negative impact on our business and results of operations.***

In the United States and some foreign jurisdictions there have been, and continue to be, a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, restrict or regulate post-approval activities with respect to ZELSUVMI and affect our ability to profitably sell our products. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States and elsewhere, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative and regulatory initiatives. We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we may receive for ZELSUVMI or any product candidates approved for sale. New and changing laws and regulations may also create uncertainty about how such laws and regulations will be interpreted and applied. If we are found to have violated laws and regulations, it could materially adversely affect our business, results of operations and financial condition.

The ACA was signed into law in 2010. The ACA substantially changed the way healthcare is financed by both governmental and private insurers and significantly affects the U.S. pharmaceutical industry. Among the provisions of the ACA of importance to our business, including, without limitation, our ability to commercialize and the prices we may obtain for any product candidates that are approved for sale, are the following:

● an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, although this fee does not apply to sales of certain products approved exclusively for orphan indications;

● expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer's Medicaid rebate liability;

● expansion of manufacturers' rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs, revising the "average manufacturer price" definition, and extending rebate liability from fee-for-service Medicaid utilization to include the utilization of Medicaid managed care organizations as well;

● expansion of the list of entity types eligible for participation in the Public Health Service 340B drug pricing program, or the 340B program, to include certain free-standing cancer hospitals, critical access hospitals, rural referral centers, and sole community hospitals, but exempting "orphan drugs" from the 340B ceiling price requirements for these covered entities;

● a Patient Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and

● establishment of the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, including prescription drug spending.

Since its enactment, certain provisions of the ACA have been subject to judicial, executive, and legislative challenges and may be subject to additional challenges in the future. In addition, other legislative changes have been proposed and adopted since the ACA was enacted. For example, on March 11, 2021, the American Rescue Plan Act of 2021 was signed into law, which eliminated the statutory Medicaid drug rebate cap, beginning January 1, 2024. Previously, the Medicaid rebate was capped at 100% of a drug's average manufacturer price.

The cost of prescription pharmaceuticals in the United States has also been the subject of considerable discussion in the United States. There have been several Congressional inquiries, as well as legislative and regulatory initiatives and executive orders designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.

Most significantly, in August 2022, the Inflation Reduction Act of 2022 ("IRA") was signed into law. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare, with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); redesigns the Medicare Part D benefit (which began in 2024); and replaces the Part D coverage gap discount program with a new manufacturer discount program (which began in 2025). CMS has published the negotiated prices for the initial ten drugs, which will first be effective in 2026, and the list of the subsequent 15 drugs that will be subject to negotiation. The IRA permits the Secretary of the Department of Health and Human Services ("HHS") to implement many of these provisions through guidance, as opposed to regulation, for the initial years. HHS has and will continue to issue and update guidance as these programs are implemented, although the Medicare drug price negotiation program is currently subject to legal challenges. The impact of the IRA on us and the pharmaceutical industry cannot yet be fully determined but is likely to be significant.

Congress and the Trump administration are considering significant reductions in the funding of the Medicaid program. If such reductions are adopted and decrease the number of persons enrolled in Medicaid or reduce the services covered by Medicaid, our sales of ZELSUVMI could be adversely affected.

Moreover, the federal government and the individual states in the United States have become increasingly active in developing proposals, passing legislation and implementing regulations designed to control drug pricing, including price or patient reimbursement constraints, discounts, formulary flexibility, marketing cost disclosure, drug price reporting, and other transparency measures. Some states have enacted legislation creating so-called prescription drug affordability boards, which ultimately may attempt to impose price limits on certain drugs in these states. These types of initiatives may result in additional reductions in Medicare, Medicaid, and other healthcare funding, and may otherwise affect the prices we may obtain for ZELSUVMI or the frequency with which ZELSUVMI is prescribed or used.

We expect that these and other healthcare reform measures that may be adopted in the future may result in more rigorous coverage and payment criteria and in additional downward pressure on the price that we receive for any approved drug. Any reduction in reimbursement from Medicaid or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our drugs. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures. We cannot predict with certainty what impact any federal or state health reforms will have on us, but such changes could impose new or more stringent regulatory requirements on our activities or result in reduced reimbursement for our products, any of which could adversely affect our business, results of operations and financial condition.

The pricing of prescription pharmaceuticals is also subject to governmental control outside the United States. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of ZELSUVMI to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our ability to generate revenues and become profitable could be impaired.

***If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs in which we participate, we could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.***

Medicaid is a joint federal and state program administered by the states for low income and disabled beneficiaries. We intend to participate in and will have certain price reporting obligations under the Medicaid Drug Rebate Program ("MDRP") as a condition of having covered outpatient drugs payable under Medicaid. The MDRP requires us to pay a rebate to state Medicaid programs every quarter for each unit of our covered outpatient drugs dispensed to Medicaid beneficiaries and paid for by a state Medicaid program. The rebate is based on pricing data that we must report on a monthly and quarterly basis to CMS, the federal agency that administers the MDRP and other governmental healthcare programs. These data include the average manufacturer price ("AMP") for each drug and, in the case of innovator products, the best price, which in general represents the lowest price available from the manufacturer to certain entities in the United States in any pricing structure, calculated to include all sales and associated rebates, discounts and other price concessions. The Medicaid rebate consists of two components, the basic rebate and the additional rebate, which is triggered if the AMP for a drug increases faster than inflation. If we become aware that our MDRP government price reporting submission for a prior quarter was incorrect or has changed as a result of recalculation of the pricing data, we must resubmit the corrected data for up to three years after those data originally were due. If we fail to provide information timely or are found to have knowingly submitted false information to the government, we may be subject to civil monetary penalties and other sanctions, including termination from the MDRP. In the event that CMS terminates our rebate agreement pursuant to which we participate in the MDRP, no federal payments would be available under Medicaid for our covered outpatient drugs. Our failure to comply with our MDRP price reporting and rebate payment obligations could negatively impact our financial results.

Federal law requires that any company that participates in the MDRP also participate in the Public Health Service's 340B drug pricing program in order for federal funds to be available for the manufacturer's drugs under Medicaid. We intend to participate in the 340B program, which is administered by the Health Resources and Services Administration ("HRSA") and requires us to charge statutorily defined covered entities no more than the 340B "ceiling price" for our covered outpatient drugs. These 340B covered entities include a variety of community health clinics and other entities that receive health services grants from the Public Health Service, as well as hospitals that serve a disproportionate share of low-income patients. The ACA expanded the list of covered entities to include certain free-standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals, but exempts "orphan drugs" from the ceiling price requirements for these covered entities. The 340B ceiling price is calculated using a statutory formula based on the AMP and rebate amount for the covered outpatient drug as calculated under the MDRP, and in general, products subject to Medicaid price reporting and rebate liability are also subject to the 340B ceiling price calculation and discount requirement. We will be required to report 340B ceiling prices to HRSA on a quarterly basis, and HRSA publishes those prices to 340B covered entities. In addition, HRSA has finalized regulations regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and intentionally overcharge covered entities for 340B-eligible drugs. HRSA has also finalized a revised regulation implementing an administrative dispute resolution process through which 340B covered entities may pursue claims against participating manufacturers for overcharges, and through which manufacturers may pursue claims against 340B covered entities for engaging in unlawful diversion or duplicate discounting of 340B drugs. Our failure to comply with 340B program requirements could negatively impact our financial results. Any additional future changes to the definition of average manufacturer price and the Medicaid rebate amount under legislation or regulation could affect our 340B ceiling price calculations and also negatively impact our financial results.

In order for ZELSUVMI or any product candidates, if approved, to be paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by certain federal agencies and grantees, we also participate in the U.S. Department of Veterans Affairs ("VA") Federal Supply Schedule ("FSS") pricing program. As part of this program, we are required to make our products available for procurement on an FSS contract under which we must comply with standard government terms and conditions and charge a price that is no higher than the statutory Federal Ceiling Price ("FCP") to four federal agencies (VA, U.S. Department of Defense ("DOD"), Public Health Service, and U.S. Coast Guard). The FCP is based on the Non-Federal Average Manufacturer Price, or Non-FAMP, which we must calculate and report to the VA on a quarterly and annual basis. Pursuant to applicable law, knowing provision of false information in connection with a Non-FAMP filing can subject a manufacturer to significant civil monetary penalties for each item of false information. The FSS pricing and contracting obligations also contain extensive disclosure and certification requirements.

We also intend to participate in the Tricare Retail Pharmacy program, under which we will be required to pay quarterly rebates on utilization of innovator products that are dispensed through the Tricare Retail Pharmacy network to Tricare beneficiaries. The rebates are calculated as the difference between the annual Non-FAMP and FCP. We are required to list our innovator products on a Tricare Agreement in order for them to be eligible for DOD formulary inclusion. If we overcharge the government in connection with our FSS contract or Tricare Agreement, whether due to a misstated FCP or otherwise, we are required to refund the difference to the government. Failure to make necessary disclosures and/or to identify contract overcharges could result in allegations against us under the False Claims Act ("FCA") and other laws and regulations. Unexpected refunds to the government, and responding to a government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Individual states continue to consider and have enacted legislation to limit the growth of healthcare costs, including the cost of prescription drugs and combination products. A number of states have either implemented or are considering implementation of drug price transparency legislation. Requirements of pharmaceutical manufacturers under such laws include advance notice of planned price increases, reporting price increase amounts and factors considered in taking such increases, wholesale acquisition cost information disclosure to prescribers, purchasers, and state agencies, and new product notice and reporting. Such legislation could limit the price or payment for certain drugs, and a number of states are authorized to impose civil monetary penalties or pursue other enforcement mechanisms against manufacturers who fail to comply with drug price transparency requirements, including the untimely, inaccurate, or incomplete reporting of drug pricing information.

Pricing and rebate calculations vary among products and programs. The calculations are complex and are often subject to interpretation by us, governmental or regulatory agencies, and the courts. CMS, the Department of Health & Human Services Office of Inspector General, and other governmental agencies have pursued manufacturers that were alleged to have failed to report these data to the government in a timely or accurate manner. Governmental agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid. We cannot assure you that any submissions we are required to make under the MDRP, the 340B program, the VA/FSS program, the Tricare Retail Pharmacy Program, and other governmental drug pricing programs will not be found to be incomplete or incorrect.

***We are subject to federal, state and foreign healthcare laws and regulations, including fraud and abuse laws. If we are unable to comply or have not fully complied with such laws and regulations, we could face criminal sanctions, damages, substantial civil penalties, reputational harm and diminished profits and future earnings.***

Healthcare providers, physicians and others will play a primary role in the recommendation and prescription of ZELSUVMI, and other product candidates, if approved. Our arrangements and interactions with healthcare professionals, third-party payors, patients and others will expose us to broadly applicable fraud and abuse, antikickback, false claims and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute ZELSUVMI and other product candidates, if we obtain regulatory approval. The U.S. federal healthcare laws and regulations that may affect our ability to operate include, but are not limited to:

● the federal healthcare Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, paying, or receiving remuneration, (anything of value), directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease order or arranging for or recommending the purchase, lease or order of any good or service for which payment may be made, in whole or in part, by federal healthcare programs such as Medicare and Medicaid. This statute has been interpreted to apply to arrangements between pharmaceutical companies on one hand and prescribers, purchasers, formulary managers, and patients on the other. Liability under the Anti-Kickback Statute may be established without proving actual knowledge of the statute or specific intent to violate it;

● the federal civil FCA, which prohibits individuals or entities from, among other things, knowingly presenting, or causing to be presented a false or fraudulent claim for payment of government funds, or knowingly making, using or causing to made or used a false record or statement material to an obligation to pay money to the government or knowingly concealing or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the federal government. Actions under the FCA may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Such private individuals may share in amounts paid by the entity to the government in recovery or settlement. The government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil FCA;

● the federal civil monetary penalties laws, which impose civil fines for, among other things, the offering or transfer or remuneration to a Medicare or state healthcare program beneficiary, if the person knows or should know it is likely to influence the beneficiary's selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state health care program, unless an exception applies;

● the federal HIPAA imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program, including private third-party payors, or for knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal healthcare Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;

● the federal Physician Payments Sunshine Act, implemented as the Open Payments Program, requires certain manufacturers of drugs, devices, biologics and medical supplies to report payments and other transfers of value to physicians for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions) to report annually to CMS information related to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), certain non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiology assistants and certified nurse-midwives) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Manufacturers must submit reports on or before the 90th day of each calendar year disclosing reportable payments made in the previous calendar year;

● analogous state laws and regulations, such as state anti-kickback and false claims laws, which may apply to items or services reimbursed under Medicaid and other state programs or, in several states, regardless of the payer, including private insurers. Some state laws require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products and to report gifts and payments to individual health care providers in those states. Some of these states also prohibit certain marketing- related activities including the provision of gifts, meals, or other items to certain health care providers. Some states restrict the ability of manufacturers to offer co-pay support to patients for certain prescription drugs. Some states require the posting of information relating to clinical studies and their outcomes. Other states and cities require identification or licensing of sales representatives. In addition, several states require pharmaceutical companies to implement compliance programs or marketing codes of conduct; and

● analogous foreign laws and regulations, including restrictions imposed on the promotion and marketing of medicinal products in the EU member states and other countries, restrictions on interactions with healthcare professionals and requirements for public disclosure of payments made to physicians. Laws (including those governing promotion, marketing and anti-kickback provisions), industry regulations and professional codes of conduct often are strictly enforced. Even in those countries where we may decide not to directly promote or market our products, inappropriate activity by our international distribution partners could have implications for us.

Ensuring that our business arrangements and interactions with healthcare professionals, third-party payors, patients and others comply with applicable healthcare laws and regulations will require substantial resources. Various state, federal and foreign regulatory and enforcement agencies continue actively to investigate violations of healthcare laws and regulations, and the United States Congress continues to strengthen the arsenal of enforcement tools.

It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to costly investigations, significant civil, criminal and administrative monetary penalties, imprisonment, damages, fines, disgorgement, exclusion from government funded healthcare programs, such as Medicare and Medicaid, contractual damages, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could substantially disrupt our operations or financial results. Any action against us for violation of these laws or regulations, even if we successfully defend against us, could cause us to incur significant legal expenses and generate negative publicity, which could harm our financial condition and divert our management's attention from the operation of our business.

***Changes in and actual or perceived failures to comply with applicable data privacy, security and protection laws, regulations, standards and contractual obligations may adversely affect our business, operations and financial performance.***

We and our partners are or may become subject to federal, state, and foreign laws, requirements and regulations that govern data privacy and security. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues. Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact of future laws, regulations, standards, or perception of their requirements may have on our business. This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer, use, and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability, or impose additional costs on us. The cost of compliance with these laws, regulations, and standards is high and likely to increase in the future.

In the United States, numerous federal and state laws and regulations govern the collection, use, disclosure, and protection of personal information, including state data breach notification laws, federal and state health information privacy laws, and federal and state consumer protection laws. Each of these laws is subject to varying interpretations by courts and government agencies, creating complex compliance issues. If we fail to comply with applicable laws and regulations, we could be subject to penalties or sanctions, including criminal penalties if we knowingly obtain or disclose individually identifiable health information from a covered entity in a manner that is not authorized or permitted by HIPAA or applicable state laws. HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission, and breach reporting of individually identifiable health information. We may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA. Depending on the facts and circumstances, we could be subject to significant penalties if we violate HIPAA.

Certain states have also adopted comparable privacy and security laws and regulations, which govern the privacy, processing and protection of health-related and other personal information. Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic partners. For example, the California Consumer Privacy Act of as amended by the California Privacy Rights Act (collectively, the "CCPA") requires covered businesses that process the personal information of California residents to, among other things: (i) provide certain disclosures to California residents regarding the business's collection, use, and disclosure of their personal information; (ii) receive and respond to requests from California residents to access, delete, and correct their personal information, or to opt out of certain disclosures of their personal information; and (iii) enter into specific contractual provisions with service providers that process California resident personal information on the business's behalf. Additional compliance investment and potential business process changes may be required. Similar laws have passed in other states and are continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy legislation in the United States. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging. In the event that we are subject to or affected by HIPAA, the CCPA or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.

We also may become subject to rapidly evolving data protection laws, rules and regulations in foreign jurisdictions. For example, the European Union General Data Protection Regulation ("GDPR") went into effect in May 2018 and imposes strict requirements for processing the personal data of individuals within the European Economic Area ("EEA") or in the context of our activities within the EEA. Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. In addition to fines, a breach of the GDPR may result in regulatory investigations, reputational damage, orders to cease/change our data processing activities, enforcement notices, assessment notices (for a compulsory audit) and/or civil claims (including class actions). Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms between the EEA and the United States remains uncertain. Case law from the Court of Justice of the European Union ("CJEU") states that reliance on the standard contractual clauses - a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism - alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis. On July 10, 2023, the European Commission adopted our Adequacy Decision in relation to the new EU-US Data Privacy Framework ("DPF"), rendering the DPF effective as a GDPR transfer mechanism to U.S. entities self-certified under the DPF. We expect the existing legal complexity and uncertainty regarding international personal data transfers to continue. In particular, we expect the DPF Adequacy Decision to be challenged and international transfers to the United States and to other jurisdictions more generally to continue to be subject to enhanced scrutiny by regulators. As a result, we may have to make certain operational changes, and we will have to implement revised standard contractual clauses and other relevant documentation for existing data transfers within required time frames. Further, the U.S. Department of Justice recently issued a final rule that went into effect in April 2025, known as the "Data Security Program," (the "DSP Rule"), which regulates data transactions that could grant access to US sensitive personal data to certain foreign actors with connections to "countries of concern," such as China, which the DSP refers to as "covered persons." As supervisory authorities issue further guidance on personal data export mechanisms, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

Since the beginning of 2021, after the end of the transition period following the United Kingdom's departure from the European Union, we are also subject to the United Kingdom General Data Protection Regulation and Data Protection Act 2018 (collectively, the "UK GDPR"), which imposes separate but similar obligations to those under the GDPR and comparable penalties, including fines of up to £17.5 million or 4% of a noncompliant company's global annual revenue for the preceding financial year, whichever is greater. On October 12, 2023, the UK Extension to the DPF came into effect (as approved by the UK Government), as a data transfer mechanism to U.S. entities self-certified under the DPF. As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business. Failure or perceived failure to comply with the GDPR, the UK GDPR, and other countries' privacy or data security-related laws, rules, or regulations could result in significant regulatory penalties and fines, affect our compliance with contracts entered into with our partners, collaborators and other third-party payors, and could have an adverse effect on our reputation, business, and financial condition.

Furthermore, the Federal Trade Commission ("FTC") also has authority to initiate enforcement actions against entities that make deceptive statements about privacy and data sharing in privacy policies, fail to limit third-party use of personal health information, fail to implement policies to protect personal health information or engage in other unfair practices that harm customers or that may violate Section 5 of the Federal Trade Commission Act. Failing to take appropriate steps to keep consumers' personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. The FTC expects a company's data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information we hold, the size and complexity of our business, and the cost of available tools to improve security and reduce vulnerabilities. Additionally, federal and state consumer protection laws are increasingly being applied by FTC and states' attorneys general to regulate the collection, use, storage, and disclosure of personal or personally identifiable information, through websites or otherwise, and to regulate the presentation of website content.

Compliance with applicable data privacy and security laws, rules and regulations could require us to take on more onerous obligations in our contracts, require us to engage in costly compliance exercises, restrict our ability to collect, use and disclose data, or in some cases, impact our or our partners' ability to operate in certain jurisdictions. Each of these constantly evolving laws can be subject to varying interpretations and may conflict with one another or other legal obligations with which we must comply. Any failure or perceived failure by us or our employees, representatives, contractors, consultants, collaborators, or other third parties comply with any such laws, rules, or regulations, or adequately address privacy and security concerns, even if unfounded, could result in government investigations and/or enforcement actions, fines, civil or criminal penalties, private litigation or adverse publicity that could adversely affect our business, financial condition and results of operations.

***If plaintiffs bring product liability lawsuits against us or our partners, we or our partners may incur substantial liabilities and may be required to limit commercialization of our approved products and product candidates.***

As is common in our industry, we and our partners face an inherent risk of product liability as a result of the clinical testing of our product candidates in clinical trials and face an even greater risk for commercialized products. Although we are not currently a party to product liability litigation, if we are sued, we may be held liable if any product or product candidate we develop causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing or sale. Regardless of merit or eventual outcome, liability claims may result in decreased demand for any product candidates, partnered products or products that we may develop, injury to our reputation, discontinuation of clinical trials, costs to defend litigation, substantial monetary awards to clinical trial participants or patients, loss of revenue and product recall or withdrawal from the market and the inability to commercialize any products that we develop. We have product liability insurance that covers up to a $15 million annual limit. Our insurance coverage may not be sufficient to cover all of our product liability-related expenses or losses and may not cover us for any expenses or losses we may suffer. If we are sued for any injury caused by our product candidates, partnered products or any future products, our liability could exceed our total assets.

***We face risks related to handling of hazardous materials and other regulations governing environmental safety.***

Our operations are subject to complex and stringent environmental, health, safety and other governmental laws and regulations that both public officials and private individuals may seek to enforce. Our activities that are subject to these regulations include, among other things, our use of hazardous materials and the generation, transportation and storage of waste. Although we have secured clearance from the EPA historically, and while we are currently operating in material compliance with applicable EPA rules and regulations, our business could be adversely affected if the EPA discovers that we or an acquired business is not in material compliance with these rules and regulations.

In the future, we may pursue the use of other surfactant substances that will require clearance from the EPA, and we may fail to obtain such clearance. Existing laws and regulations may also be revised or reinterpreted, or new laws and regulations may become applicable to us, whether retroactively or prospectively, that may have a negative effect on our business and results of operations. It is also impossible to eliminate completely the risk of accidental environmental contamination or injury to individuals. In such an event, we could be liable for any damages that result, which could adversely affect our business.

***We may also be subject to other laws and regulations not specifically targeting the healthcare industry.***

Certain regulations not specifically targeting the healthcare industry also could have material effects on our operations. For example, the California Financing Law ("CFL"), Division 9, Sections 22000-22780.1 of the California Financial Code, could be applied to us as a result of loans or similar arrangements we enter into with partners. If a regulator were to take the position that such loans were covered by the California Financing Law, we could be subject to regulatory action that could impair our ability to continue to operate and may have a material adverse effect on our profitability and business as we currently do not hold a CFL finance lenders license. Pursuant to an exemption under the CFL, a person may make five or fewer commercial loans with a California nexus in a 12-month period without a CFL finance lenders license if such loans are "incidental" to the business of the person making the loan. This exemption, however, creates some uncertainty as to which loans could be deemed as incidental to our business. In addition, there is another exemption that would allow a person without a CFL finance lenders license to make a single commercial loan with a California nexus in a 12-month period.

**Other Risks and Uncertainties Affecting Our Business**

***The occurrence of a catastrophic disaster could disrupt our business, damage our facilities beyond insurance limits, increase our costs and expenses, or we could lose key data which could cause us to curtail or cease operations.***

We are vulnerable to damage, business disruptions and/or loss of vital data from natural or man-made disasters, such as earthquakes, tornadoes, severe weather conditions, power loss, fire, floods and similar events, as well as from accidental loss or destruction. If any disaster were to occur, our ability to operate our business could be seriously impaired. We maintain property, liability, and business interruption insurance which may not be adequate to cover our losses resulting from disasters or other similar significant business interruptions, and we do not plan to purchase additional insurance to cover such losses due to the cost of obtaining such coverage. Any significant losses that are not recoverable under our insurance policies could seriously impair our business, financial condition and prospects.

***Impairment charges pertaining to goodwill, identifiable intangible assets or other long-lived assets from our mergers and acquisitions could have an adverse impact on our results of operations and our market value.***

The total purchase price pertaining to transactions that result in the fair valuing of assets and liabilities, may be allocated to net tangible assets, identifiable intangible assets, in-process research and development and goodwill. To the extent the value of goodwill or identifiable intangible assets or other long-lived assets become impaired, we will be required to incur material charges relating to the impairment. Any impairment charges could have a material adverse impact on our results of operations and our market value.

***Our results of operations and liquidity needs could be materially negatively affected by market fluctuations and economic downturn.***

Our results of operations could be materially negatively affected by economic conditions generally, both in the United States and elsewhere around the world. Concerns over inflation, energy costs, geopolitical issues, military conflicts, including the wars between Russia and Ukraine and Israel and Hamas, terrorism, public health emergencies or pandemics, the availability and cost of credit, and the U.S. financial markets have in the past contributed to, and may continue in the future to contribute to, increased volatility and diminished expectations for the economy and the markets. Sanctions imposed by the United States and other countries in response to military conflicts, including the wars between Russia and Ukraine and Israel and Hamas, may also adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. Domestic and international equity markets periodically experience heightened volatility and turmoil. These events may have an adverse effect on us. In the event of a market downturn, our results of operations could be adversely affected by those factors in many ways, including making it more difficult for us to raise funds if necessary, and our value may decline. We cannot provide assurance that our investments are not subject to adverse changes in market value. If our investments experience adverse changes in market value, we may have less capital to fund our operations.

***Our business is subject to risks arising from pandemic and epidemic diseases.***

Future pandemics, including the residual effects of the COVID-19 pandemic, or other public health epidemics, pose the risk that we or our employees, contractors, including our CROs, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. Although we currently do not believe the COVID-19 pandemic is having a material impact on our business, we cannot guarantee that pandemics, such as COVID-19 or the emergence of variants thereof, or a similar event, will not impact our operations in the future.

Although we believe that we and our partners have adjusted their business practices to the impacts of the COVID-19 pandemic, in the future, we may experience similar pandemics or epidemic diseases that could severely impact our business, drug manufacturing and supply chain, nonclinical activities and clinical trials, including due to delays or difficulties in enrolling patients in clinical trials, diversion of healthcare resources away from the conduct of clinical trials, interruption of, or delays in receiving, supplies of product or product candidates from contract manufacturing organizations due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems, interruption or delays to discovery and development pipelines and difficulties launching or commercializing products, including due to reduced access to doctors as a result of social distancing protocols.

The extent to which the emergence of new variants of COVID-19, or any other outbreak of a pandemic or epidemic disease, impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain our impact. Further, to the extent any pandemic or epidemic disease adversely affects our business and financial results, we may also have the effect of heightening many of the other risks described in this section.

***The biopharmaceutical industry may be negatively affected by federal government deficit reduction policies, which could reduce the value of ZELSUVMI.***

In an effort to contain the U.S. federal deficit, the biopharmaceutical industry could be considered a potential source of savings and could be the target of legislative proposals aimed at reducing federal expenditures. Government action to reduce U.S. federal spending on entitlement programs, including Medicare, Medicaid or other publicly funded or subsidized health programs, or to lower drug spending, may affect payment for ZELSUVMI. These and any other cost controls or any significant additional taxes or fees that may be imposed on the biopharmaceutical industry as part of deficit reduction efforts could reduce cash flows and adversely affect our business, financial condition or results of operations.

**SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE COMBINED COMPANY**

The following table sets forth certain information as of September 15, 2025 regarding beneficial ownership of the Common Stock by: (i) each person known to us who beneficially owns more than five percent of our Common Stock; (ii) each of our directors; (iii) each of our executive officers; and (iv) all of our directors and executive officers as a group.

Beneficial ownership in accordance with the rules of the SEC, and thus it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable. The information does not necessarily indicate beneficial ownership for any other purpose, including for purposes of Sections 13(d) and 13(g) of the Exchange Act.

The percentage of beneficial ownership is calculated based on 3,061,474 shares of Common Stock outstanding as of September 15, 2025. The number of shares beneficially owned includes shares of Common Stock that each person has the right to acquire within 60 days of September 15, 2025, including upon the exercise of stock options or conversion of restricted stock units ("RSU"). These stock options shall be deemed to be outstanding for the purpose of computing the percentage of outstanding shares of Common Stock expected to be owned by such person but shall not be deemed to be outstanding for the purpose of computing the percentage of outstanding shares of the combined organization's Common Stock expected to be owned by any other person.

Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Pelthos Therapeutics Inc., 4020 Stirrup Creek Drive, Suite 110, Durham, NC 27703.

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| | | |
|:---|:---|:---|
| **Name of Beneficial Owner** | **Number of** <br> **Shares** <br> **Beneficially** <br> **Owned** | **Percentage of** <br> **Shares** <br> **Beneficially** <br> **Owned (%)**  |
| ***5% stockholders:*** |  |  |
| 3i LP<sup>(1)</sup> | 500000 | 9.8% |
| Ligand Pharmaceuticals Incorporated<sup>(2)</sup> | 4927800 | 49.0% |
| ***Directors and Named Executive Officers:*** |  |  |
| Scott Plesha |  | \* |
| Sai Rangarao |  | \* |
| Francis Knuettel II<sup>(3)</sup> | 65894 | 2.1% |
| Peter Greenleaf<sup>(4)</sup> | 42966 | 1.4% |
| Richard Baxter<sup>(5)</sup> | 6445 | \* |
| Todd Davis<sup>(6)</sup> | 26289 | \* |
| Ezra Friedberg<sup>(7)</sup> | 145851 | 4.5% |
| Dr. Richard Malamut<sup>(8)</sup> | 14189 | \* |
| Matt Pauls<sup>(9)</sup> | 42966 | 1.4% |
| **All current executive officers and directors as a group 8 individuals** | **345229** | **11.3%** |

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\* Less than 1%.

&nbsp;&nbsp;&nbsp;&nbsp;(1) Includes 200,000 shares of Common Stock issuable upon conversion of Series A Preferred Stock held by 3i. Pursuant to the terms of the Series A Certificate of Designations, 3i may not exercise any portion of the Series A Preferred Stock which would result in the aggregate number of shares of Common Stock held by 3i to exceed 9.99% of the total number of issued and outstanding shares of Common Stock. The business address for 3i is 2 Wooster Street, 2<sup>nd</sup> Floor, New York, NY 10013.

(2) Includes 3,427,800 shares of Common Stock issuable upon conversion of Series A Preferred Stock held by Ligand. Pursuant to the terms of the Series A Certificate of Designations, Ligand may not exercise any portion of the Series A Preferred Stock which would result in the aggregate number of shares of Common Stock held by Ligand to exceed 49.9% of the total number of issued and outstanding shares of Common Stock. The business address for Ligand is 555 Heritage Drive, Suite 200, Jupiter, Florida 33458.

&nbsp;&nbsp;&nbsp;&nbsp;(3) For Mr. Knuettel, includes 2,223 shares of Common Stock issuable upon the exercise of stock options which are exercisable for shares of Common Stock at a price of $226.80 per share, 278 shares of Common Stock issuable upon the exercise of stock options which are exercisable for shares of Common Stock at a price of $226.80 per share, 2,778 shares of Common Stock issuable upon the exercise of stock options which are exercisable for shares of Common Stock at a price of $226.80 per share, 32,400 shares of Common Stock issuable upon the exercise of stock options which are exercisable for shares of Common Stock at a price of $13.00 per share, 5,399 shares of Common Stock issuable upon the exercise of stock options which are exercisable for shares of Common Stock at a price of $13.00 per share and 12,816 shares held by the Lara Knuettel Revocable Trust and 10,000 shares held by Camden. The option for 32,400 shares is owned by Mr. Knuettel directly and all other stock options are held of record by Camden. Mr. Knuettel serves as Managing Member of Camden and co-trustee, with individual dispositive power of the Lara Knuettel Revocable Trust, and accordingly, may be deemed to beneficially own the shares of Common Stock owned directly by Camden and the Lara Knuettel Revocable Trust.

&nbsp;&nbsp;&nbsp;&nbsp;(4) For Mr. Greenleaf, includes 32,350 shares of Common Stock issuable upon the exercise of stock options held by Mr. Greenleaf, which are exercisable for shares of Common Stock at a price of $13.50 per share and an RSU for 10,616 shares.

(5) For Mr. Baxter, includes 4,853 shares of Common Stock issuable upon the exercise of stock options held by Mr. Baxter, which are exercisable for shares of Common Stock at a price of $13.50 per share and an RSU for 1,592 shares.

(6) For Mr. Davis, includes 3,334 shares of Common Stock issuable upon the exercise of stock options held by Mr. Davis, which are exercisable for shares of Common Stock at a price of $226.80 per share, 2,223 shares of Common Stock issuable upon the exercise of stock options held by Mr. Davis, which are exercisable for shares of Common Stock at a price of $226.80 per share, 4,853 shares of Common Stock issuable upon the exercise of a stock option held by Mr. Davis, which are exercisable for shares of Common Stock at a price of $13.50 per share, an RSU for 11,370 shares, an RSU for 1,592 shares and an additional 29,167 shares of Common Stock issued in a private placement in full satisfaction of Channel's obligations under the Director Note.

&nbsp;&nbsp;&nbsp;&nbsp;(7) For Mr. Friedberg, includes 1,667 shares of Common Stock issuable upon the exercise stock options held by Mr. Friedberg, which are exercisable for shares of Common Stock at a price of $226.80 per share, 4,853 shares of Common Stock issuable upon the exercise of a stock option held by Mr. Friedberg, which are exercisable for shares of Common Stock at a price of $13.50 per share, an RSU for 5,667 shares, an RSU for 1,592 shares, 92,072 shares of Common Stock owned by Balmoral Financial Group LLC ("Balmoral") and 40,000 shares of Common Stock owned by Key Recovery Group LLC. In addition, Mr. Friedberg serves as a manager with individual dispositive power of Balmoral and Key, and accordingly, may be deemed to beneficially own the shares of Common Stock owned directly by Balmoral and Key.

&nbsp;&nbsp;&nbsp;&nbsp;(8) For Dr. Malamut, includes 1,667 shares of Common Stock issuable upon the exercise of stock options held by Dr. Malamut, which are exercisable for shares of Common Stock at a price of $226.80 per share, 4,853 shares of Common Stock issuable upon the exercise of a stock option held by Dr. Malamut, which are exercisable for shares of Common Stock at a price of $13.50 per share, an RSU for 5,667 shares, an RSU for 1,592 shares and 1,040 shares of Common Stock held by Dr. Malamut.

(9) For Mr. Pauls, includes 32,350 shares of Common Stock issuable upon the exercise of stock options held
by Mr. Pauls, which are exercisable for shares of Common Stock at a price of $13.50 per share and an RSU for 10,616 shares.

**MANAGEMENT**

The following table provides information regarding our current executive officers and directors upon completion of the Merger.

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| | | |
|:---|:---|:---|
| **Name** | **Age** | **Position** |
| **Executive Officers** |  |  |
| Scott Plesha | 61 | Chief Executive Officer, President and Director |
| Francis Knuettel II | 59 | Chief Financial Officer |
| Sai Rangarao | 41 | Chief Commercial Officer |
| **Non-employee Directors** |  |  |
| Todd Davis | 64 | Chairman of the Board |
| Richard Baxter | 62 | Director |
| Ezra Friedberg<sup>(1)</sup> | 55 | Director |
| Peter Greenleaf<sup>(3)</sup> | 55 | Director |
| Dr. Richard Malamut<sup>(2)(3)</sup> | 66 | Director |
| Matthew Pauls<sup>(1)(2)</sup> | 54 | Director |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) Member of the audit
 committee.

(2) Member of the compensation
 committee.

(3) Member of the nominating
 and corporate governance committee.

**Executive Officers**

***Scott M. Plesha*** has served as LNHC's Chief Executive Officer since November 2023 and as our Chief Executive Officer since July 2025. Prior to joining LNHC, Mr. Plesha served as the President and Chief Commercial Officer at BioDelivery Sciences (BDSI), a commercial-stage specialty pharmaceutical company dedicated to patients living with chronic conditions, from January 2018 until it was acquired by Collegium Pharmaceutical in 2022. Mr. Plesha joined BioDelivery Sciences in August 2015 as Senior Vice President, Sales, and assumed the additional responsibility of leading the marketing department in December 2015. He previously served as Senior Vice President of Gastrointestinal Sales at Salix Pharmaceuticals. Before Salix, Mr. Plesha was a Regional Sales Manager for Oclassen Dermatologics, a division of Watson Laboratories, and in commercial roles of increasing responsibility at Solvay Pharmaceuticals. Mr. Plesha received a Bachelor of Arts in Pre-Medical Studies from DePauw University. He was selected to serve as the Combined Company's Chief Executive Officer, President and Director due to his previous leadership of LNHC and extensive experience in sales and sales management in the pharmaceutical and medical industries.

***Francis Knuettel II*** has served as Channel's Chief Financial Officer, Treasurer and Secretary since June 2022, as Channel's Chief Executive Officer from July 2023 through July 2025, and served as a member of the Channel board of directors from August 2024 through July 2025. Prior to that, from December 2020 to April 2022, he served as Chief Executive Officer and director of Unrivaled Brands, where he helped grow revenue from an annualized rate of $10 million to $100 million in six quarters by acquiring three companies in the sector. He also served as Chief Financial Officer of OCG, Inc. from June 2019 to January 2021 and held various roles at MJardin Group, including Chief Strategy Officer, from August 2018 to January 2019. Prior to MJardin Group, Mr. Knuettel served as Chief Financial Officer of Aqua Metals in 2018 and held the same position at Marathon Patent Group from 2014 to 2018. During Mr. Knuettel's career, he has helped raise more than $300 million via venture equity and debt, public equity and debt offerings in the United States and Canada, convertible debt, PIPEs, bridge loans and other instruments. In addition, he has managed more than 15 mergers and acquisition transactions of companies as both buyer and seller and has handled large-scale licensing transactions with fortune 50 companies. Mr. Knuettel is also a board member at Etheros Pharmaceuticals Corp. since 2023. Mr. Knuettel received his BA with honors in Economics from Tufts University and holds an MBA in Finance and Entrepreneurial Management from The Wharton School at the University of Pennsylvania.

***Sai Rangarao*** serves as Senior Vice President, Head of Sales, Marketing & Commercial Operations at the Company. Mr. Rangarao joined the Company in March 2024. He has more than a decade of experience leading, launching, and marketing large and highly differentiated pharmaceutical products, including Otezla®, the only approved oral systemic therapy with a broad indication. Prior to joining the Company, Mr. Rangarao was Vice President of Marketing at Collegium Pharmaceutical, where he led marketing for the full product portfolio and Neurology sales. He joined Collegium from BioDelivery Sciences International (BDSI), which was acquired by Collegium in 2022. Under Mr. Rangarao's leadership as Vice President of Marketing and Commercial Operations at BDSI, the company expanded its pain and neurology product portfolio and increased market share of the company's lead product BELBUCA®, ultimately leading to the successful sale to Collegium. Before BDSI, he was Head of Dermatology Marketing at Celgene Corporation. At Celgene, Mr. Rangarao was responsible for the commercial efforts of Otezla in dermatology for three consecutive years leading to significant year-over-year market share growth until the product was sold to Amgen for $13 billion. He began his career at Novartis Pharmaceuticals, where he held roles of increasing responsibility across Global R&D, Sales Force Effectiveness, Multichannel, and In-Line Marketing. Mr. Rangarao also served as a key member of the commercial and marketing organization at Novartis that launched COSENTYX® in the U.S. Mr. Rangarao earned an MS in Bioscience Regulatory Affairs from The Johns Hopkins University, an MBA and MS from the New Jersey Institute of Technology, and a BS in Computer Science from Indiana University of Pennsylvania.

**Non-Employee Directors**

***Todd Davis*** has served as a member of Channel's board of directors since January 2023. He is the Chief Executive Officer of Ligand Pharmaceuticals Incorporated since December 2022 and is a member of the board of directors since 2007. He is the founder and has served as the managing partner of RoyaltyRx Capital, LLC, a special opportunities investment firm, since 2018. Since November 2019, he has also served as Chairman and CEO of Benuvia Holdings, LLC, a pharmaceutical holding company. From 2006 to 2018, Mr. Davis was a founder and Managing Partner of HealthCare Royalty Partners, a global healthcare investment firm. From 2004 to 2006, Mr. Davis was a partner at Paul Capital Partners, where he co-managed its royalty investments as a member of the Royalty Management Committee. From 2001 to 2004, he served as a partner responsible for biopharmaceutical growth equity investments at Apax Partners. Mr. Davis began his business career in sales at Abbott Laboratories where he held several commercial roles of increasing responsibility. He subsequently held general management, business development, and licensing roles at Elan Pharmaceuticals. Mr. Davis is a navy veteran and received a B.S. from the U.S. Naval Academy and an M.B.A. from the Harvard Business School. He currently serves on the board of directors of Palvella Therapeutics Inc., Virocell Biologics and Ligand Pharmaceuticals Incorporated. He is also a former board member of the Harvard Business School Healthcare Alumni Association. We believe Mr. Davis is qualified to serve on the board of directors because of his extensive experience within the life sciences industry, including as a founder and managing partner of a special opportunities investment firm.

***Richard Baxter*** has served as Senior Vice President of Investment Operations and a member of the Investment Committee at Ligand since 2024. Mr. Baxter is a co-founder of the healthcare group for the Drawbridge Special Opportunities Fund at Fortress Investment Group and was a Managing Director at Fortress Investment Group from 2004 to 2010. He also previously served as a Managing Director and co-head of the healthcare team at Hayfin Capital Management LLP from 2013 to 2017. Before starting his investment career, he held senior roles in the pharmaceutical industry as Head of Sales, Marketing, and Business Development at PathoGensis Corp., ViroPharma Inc., and Marketing leadership at SmithKline Beecham. He earned an AB (cum laude) from Princeton University and an MBA from Harvard Business School. We believe Mr. Baxter is qualified to serve on the board of directors because of his extensive experience in commercialization and investments in the healthcare industry.

***Ezra Friedberg*** has served as a member of Channel board of directors since May 2021, bringing over 30 years of investment experience across public and private markets. Since co-founding Multiplier Capital in 2011, a private credit fund specializing in sponsor-backed growth companies, he has acted as General Partner and a member of the fund's investment committee. A seasoned investor, Mr. Friedberg has a strong focus on the biotechnology sector, including his tenure on the board of Humanigen (Nasdaq: HGEN), a clinical-stage biopharmaceutical company developing monoclonal antibodies. His broader portfolio spans private equity, venture capital, and real estate investments. In addition to his work with Multiplier Capital, Mr. Friedberg manages diverse investments and businesses through Liberty Peak Capital, Key Recovery Group, and related entities. A graduate of Johns Hopkins University, he is also deeply committed to civic engagement, having founded and actively served on the boards of several community organizations, including a nonprofit mentoring agency. His extensive investment expertise and understanding of our industry were key factors in his selection to the Combined Company's board of directors.

***Peter Greenleaf*** has served as the Chief Executive Officer and member of the Board of Directors of Aurinia Pharmaceuticals Inc. (Nasdaq: AUPH), a biopharmaceutical company focused on delivering therapies to people living with autoimmune diseases with high unmet medical needs, since April 2019. From March 2018 to April 2019, he served as the CEO of Cerecor Pharmaceuticals, Inc. (now Avalo Therapeutics, Inc.). From March 2014 to February 2018, Mr. Greenleaf served as CEO and Chairman of Sucampo Pharmaceuticals, Inc. Sucampo was focused on the development and commercialization of medicines to meet major unmet medical needs of patients worldwide and was sold in February 2018 to UK pharmaceutical company, Mallinckrodt PLC. From June 2013 to March 2014, he served as CEO and a member of the Board of Directors of Histogenics Corporation, a regenerative medicine company. From 2006 to 2013, Mr. Greenleaf was employed by MedImmune LLC, the global biologics arm of AstraZeneca, where he most recently served as President. From January 2010 to June 2013, he also served as President of MedImmune Ventures, a wholly-owned venture capital fund within the AstraZeneca Group. Prior to serving as President of MedImmune, Mr. Greenleaf was Senior Vice President, Commercial Operations of the company, responsible for its commercial, corporate development, and strategy functions. He has also held senior commercial roles at Centocor, Inc. (now Jansen Biotechnology, Johnson & Johnson) from 1998 to 2006 and at Boehringer Mannheim (now Roche Holdings) from 1996 to 1998. Mr. Greenleaf previously partnered with Governor Martin O'Malley to chair the Maryland Venture Fund Authority, whose vision was to oversee the implementation of Invest Maryland, a public-private partnership to spur venture capital investment in the state. In addition, he has extensive public and private board experience and has served in leadership roles on both BIO and PhRMA throughout the years. Mr. Greenleaf earned an MBA from St. Joseph's University and a B.S. from Western Connecticut State University. We have concluded that Mr. Greenleaf should serve as a director based on his background in the commercialization of medicines and extensive corporate pharmaceutical experience.

***Dr. Richard Malamut*** has served as a member of Channel's board of directors since January 2023. Dr. Malamut is currently Chief Medical Officer at MedinCell Inc. He was most recently Chief Medical Officer and Executive Vice President at Collegium Pharmaceuticals from April 2019 to May 2022 and has also served as Chief Medical Officer for Braeburn Pharmaceuticals, Inc. from 2018 to 2019 where he was responsible for the company's medical affairs, non-clinical and clinical development, clinical operations, research and development quality assurance, and pharmacovigilance functions. Prior to that, Dr. Malamut had similar responsibilities as Chief Medical Officer at Avanir Pharmaceuticals from 2016 to 2018 and was Senior Vice President of Global Clinical Development at Teva Pharmaceutical Industries Ltd from 2013 to 2016 where he was responsible for Pain, Neuropsychiatry, Oncology, and New Therapeutic Entities. His experience also includes roles of increasing responsibility focusing on early clinical development and translational medicine in Neurology, Psychiatry and Analgesia at Bristol-Myers Squibb and AstraZeneca. Dr. Malamut earned his medical degree from Hahnemann University in Philadelphia and completed both a residency in Neurology and a fellowship in neuromuscular disease. He worked as a board-certified academic and clinical neurologist for 17 years and has more than 50 publications in the fields of pain medicine, neuromuscular disease, autonomic disease, and neurodegenerative disease. He was selected to serve on the Combined Company's board of directors due to his experience and knowledge of the Combined Company's industries.

***Matthew Pauls*** has served as the Chief Executive Officer of Savara, Inc. (NASDAQ: SVRA), a biopharmaceutical company focused on rare respiratory diseases, since December 2020, as the Chair of Savara's Board of Directors since September 2020 and was its Interim Chief Executive Officer from September 2020 to December 2020. Mr. Pauls has served as a member of Savara's Board of Directors since April 2017 and was a member of the board of directors of Mast Therapeutics, Inc. from October 2015 to April 2017. Previously, Mr. Pauls was the founder of Spartan Biopharma Insights, LLC, where he provided strategic advisement to institutional investors, and company management teams on investment thesis assessment, capitalization strategy, mergers and acquisitions, clinical execution, and commercialization from December 2019 to September 2020. Since August 2023, Mr. Pauls has served on the board of directors of Soleno Therapeutics, Inc. (Nasdaq: SLNO), a clinical-stage biopharmaceutical company developing novel therapeutics for rare diseases, as well as the board of directors of the privately held companies Amplo Biotechnology, Inc., a gene therapy company focused on rare neuromuscular disorders, and Pelthos Therapeutics, a biopharmaceutical company focused on dermatologic infectious diseases. Mr. Pauls served on the board of directors of Zyla Life Sciences (previously Egalet Corporation) (OTCQX: ZCOR), a commercial-stage life sciences company with a portfolio of medicines for pain and inflammation, from January 2019 until its merger with Assertio Therapeutics, Inc. in May 2020. From August 2014 to November 2019, Mr. Pauls served as President and Chief Executive Officer of Strongbridge Biopharma plc (Nasdaq: SBBP) ("Strongbridge"), a biopharmaceutical company focused on therapies that target rare diseases that Mr. Pauls lead through an initial public offering. He also served as a member of the board of directors of Strongbridge from September 2015 to November 2019. From April 2013 to August 2014, Mr. Pauls was Chief Commercial Officer of Insmed, Inc. (Nasdaq: INSM), a publicly traded global biopharmaceutical company focused on rare diseases. From 2007 to April 2013, Mr. Pauls worked at Shire Pharmaceuticals, a global specialty biopharmaceutical company, most recently as Senior Vice President, Head of Global Commercial Operations from May 2012 to April 2013. Earlier in his career, from 1997 to 2007, Mr. Pauls held senior positions at Bristol-Myers Squibb in Brand Management and Payor Marketing and at Johnson & Johnson in various U.S. and global commercial roles. Mr. Pauls holds B.S. and M.B.A. degrees from Central Michigan University and a J.D. from Michigan State University College of Law. We believe Mr. Pauls' experience with extensive commercialization, strategic planning and operations in the biopharmaceutical industry, qualifies him to serve as a member of the Board of Directors.

**Election of Officers**

Each executive officer serves at the discretion of the board of directors. There are no family relationships among any of the Company's directors or executive officers.

**Board of Directors** 

Our board of directors consists of seven members. The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. Our board of directors meets on a regular basis and additionally as required. There are no family relationships among any of the Company's directors and officers.

**Committees of the Board of Directors**

Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee, each of which has the composition and the responsibilities described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors. Each committee operates under a charter approved by our board of directors. Copies of each committee's charter are be posted on the investor relations section of our website at https://pelthos.com.

***Audit Committee***

Our audit committee is composed of Messrs. Friedberg and Pauls, each of whom qualifies as an independent director for audit committee purposes, as defined under the rules of the SEC and the applicable NYSE American listing rules and has sufficient knowledge in financial and auditing matters to serve on the Company's audit committee. Mr. Friedberg is the chairperson of the audit committee. Mr. Friedberg is an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act and currently serves as chair of the audit committee for Channel. This designation does not impose any duties, obligations or liabilities that are greater than those generally imposed on members of the Company's audit committee and the board of directors. Our audit committee will be directly responsible for, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our
accounting and financial reporting processes, including its financial statement audits and the integrity of its financial statements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our
compliance with legal and regulatory requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reviewing
and approving related person transactions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• selecting
and hiring the Company's registered independent public accounting firm;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the
qualifications, independence and performance of the Company's independent auditors; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the
preparation of the audit committee report to be included in our annual proxy statement.

***Compensation Committee***

Our compensation committee is composed of Messrs. Pauls and Malamut, each of whom qualifies as an independent director, as defined under applicable NYSE American listing rules and also meets the additional, heightened independence criteria applicable to members of the compensation committee. Mr. Pauls is the chairperson of the compensation committee.

Our compensation committee will be responsible for, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• evaluating,
recommending, approving and reviewing executive officer and director compensation arrangements, plans, policies and programs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• administering
our cash-based and equity-based compensation plans; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• making
recommendations to our board of directors regarding any other board of director responsibilities relating to executive compensation.

***Nominating and Corporate Governance Committee***

Our nominating and corporate governance committee is composed of Messrs. Greenleaf and Malamut, each of whom qualifies as an independent director, as defined under applicable NYSE American listing rules. Mr. Pauls is the chairperson of the nominating and corporate governance committee.

Our nominating and corporate governance committee will be responsible for, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• identifying,
considering and recommending candidates for membership on our board of directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• overseeing
the process of evaluating the performance of our board of directors; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• advising
our board of directors on other corporate governance matters.

**Involvement in Certain Legal Proceedings**

None.

**Code of Business Conduct and Ethics**

We have a written code of conduct and ethics that applies to our directors, officers, employees and contractors, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. The code of conduct and ethics is available on our website at *<u>https://pelthos.com</u>*. We intend to disclose future amendments to such code, or any waivers of its requirements, applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions or our directors on our website identified above or in a Current Report on Form 8-K that we would file with the SEC.

**Delinquent Section 16(a) Reports**

Under the securities laws of the United States, our directors, executive (and certain other) officers, and any persons holding ten percent or more of our Common Stock must report on their ownership of the Common Stock and any changes in that ownership to the SEC. Specific due dates for these reports have been established. During the fiscal year ended December 31, 2024, all reports required to be filed by such persons pursuant to Section 16(a) were filed on a timely basis.

**Compensation Committee Interlocks and Insider Participation**

In connection with the closing of the Merger, the board of directors selected members of the compensation committee, each of whom is a "non-employee" director within the meaning of Rule 16b-3 of the rules promulgated under the Exchange Act and independent within the meaning of the independent director guidelines of the NYSE American. None of the Company's executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers who is proposed to serve on the board of directors or compensation committee.

**Non-Employee Director Compensation**

In connection with closing of the Merger, it is expected that our board of directors will adopt a non-employee director compensation policy designed to enable the Company to attract and retain, on a long-term basis, highly qualified non-employee directors and align its directors' interests with those of its stockholders. Employee directors will not receive additional compensation for their services as directors. It is expected that each director who is not an employee will be paid cash and equity compensation for serving on our board of directors, the amount and terms of which have not yet been determined. The Company will also reimburse its non-employee directors for reasonable travel and out-of-pocket expenses incurred in connection with attending the board of director and committee meetings.

**Insider Trading Arrangements and Policies**

We have a written insider trading policy that applies to our directors, officers, employees and contractors, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. We intend to disclose future amendments to such policy, or any waivers of its requirements, applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions or our directors on our website identified above or in a Current Report on Form 8-K that we would file with the SEC.

Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our Common Stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from them. The director or officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a plan at any time. Our directors and executive officers also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material non-public information subject to compliance with the terms of our insider trading policy. Prior to 180 days after the date of the pricing of our IPO, subject to early termination, the sale of any shares under such plans would be prohibited by the lock-up agreement that the director or officer has entered into with the underwriters.

**EXECUTIVE AND DIRECTOR COMPENSATION**

Our named executive officers for 2024 were Mr. Francis Knuettel II, our Chief Executive Officer and President, Chief Financial Officer, Treasurer and Secretary, and Dr. Eric Lang, our Chief Medical Officer. Mr. Knuettel was first appointed in June 2022, and Dr. Lang was first appointed in May 2023.

Following the Merger, our named executive officers are Mr. Scott Plesha, our Chief Executive Officer and President, Mr. Franics Knuettel II, our Chief Financial Officer, and Mr. Sai Rangarao, our Chief Commercial Officer.

**Summary Compensation Table**

The following table provides information regarding the compensation of our named executive officers during the years ended December 31, 2024 and 2023.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Name and Principal Position** | **Year** | **Salary** | **Bonus** | **Option**<br> **Awards** | **Non-Equity**<br> **Incentive Plan**<br> **Compensation** | **Total** |
| &nbsp;&nbsp;&nbsp;Scott Plesha<sup>(1)</sup> | 2024 | $— | $— | $— | $– $– $|  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Executive Officer | 2023 | $— | $— | $— | $– $– $|  |
| &nbsp;&nbsp;&nbsp;Francis Knuettel II | 2024 | $424923 | $56666 | $361833 | $– $– $| 843422 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Financial Officer <sup>(2)</sup> | 2023 | $107500 | $— | $199510 | $– $– $| 307010 |
| &nbsp;&nbsp;&nbsp;Sai Rangarao <sup>(3)</sup> | 2024 | $— | $— | $— | $– $– $|  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Commercial Officer | 2023 | $— | $— | $— | $– $– $|  |
| &nbsp;&nbsp;&nbsp;Eric Lang<sup>(4)</sup> | 2024 | $446154 | $— | $230318 | $– $– $| 676472 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Medical Officer | 2023 | $166767 | $— | $120735 | $– $– $| 287502 |
| &nbsp;&nbsp;&nbsp;Christian Kopfli | 2024 | $— | $— | $— | $– $– $|  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Former Chief Executive Officer, Former Chief Strategy Officer, and Former Vice Chairman <sup>(5)</sup> | 2023 | $11280<sup>(6)</sup> | $— | $149633 | $– $– $| 160913 |

---

<sup>(1)</sup> Mr. Plesha was appointed to the position of Chief Executive Officer of Pelthos on July 1, 2025 following the consummation of the Merger between Channel and LNHC.

<sup>(2)</sup> Mr. Knuettel resigned as Chief Executive Officer on July 1, 2025 with the consummation of the Merger between Channel and LNHC and was appointed to the position of Chief Financial Officer of Pelthos on July 1, 2025.

<sup>(3)</sup> Mr. Rangarao was appointed to the position of Chief Commercial Officer of Pelthos on July 2, 2025 following the consummation of the Merger between Channel and LNHC.

<sup>(4)</sup> Represents the portion of Dr. Lang's salary attributable to his services to the Company during the year ended December 31, 2023. Dr. Lang was appointed Chief Medical Officer of the Company, effective May 15, 2023.

<sup>(5)</sup> Mr. Kopfli stepped down as Chief Financial Officer with the hiring of Mr. Knuettel, effective June 10, 2022. In addition, in July 2023, Mr. Knuettel assumed the role of Interim Chief Executive Officer and stepped down as Chief Strategy Officer, and Mr. Kopfli was appointed Vice Chairman and Chief Strategy Officer. On December 1, 2023, the Company terminated Mr. Kopfli as Vice Chairman and Chief Strategy Officer.

<sup>(6)</sup> Represents the portion of Mr. Kopfli's salary attributable to his services to the Company during the years ended December 31, 2023.

**Pre-Merger Employment Agreements and Arrangements**

***Christian Kopfli***

We were a party to an amended and restated employment agreement with Christian Kopfli, dated July 28, 2023. Pursuant to such agreement, Mr. Kopfli agreed to serve as our Vice Chairman and Chief Strategy Officer, in consideration for an annualized salary of $275,000, payable in cash at the rate of $5,000 per month (a minimum of $1,125 per week), with the remainder accrued and paid as of the earliest of a sale or liquidation of the Company, the Company's bankruptcy or three days after the approval by the board of directors of a funded budget with appropriately established milestones subsequent to the effective date of a Form S-1 registration statement ("Post-registration Approval"). Mr. Kopfli also agreed, as of Post-registration Approval, to resign as Chief Executive Officer of Chromocell Corporation although he could continue to serve on the board of directors of Chromocell Corporation, including as its board of directors Chair. The employment agreement provided that Mr. Kopfli receive an option to acquire 200,000 shares of our Common Stock, vesting quarterly over 10 quarters and beginning October 1, 2022. This option shall have an exercise price equal to the fair market value of our Common Stock on the date of grant and shall expire on the 10th anniversary of the date of grant. The option was awarded as of January 10, 2023. The employment agreement contemplated an annual bonus, as determined by the board of directors. The target bonus was 50% of Mr. Kopfli's annualized salary and was to be based on achievement of performance goals and objectives agreed to by Mr. Kopfli and the board of directors in January of each year. The board of directors was to increase the bonus in recognition of performance in excess of the performance objectives. Any bonus would have only been paid if Mr. Kopfli remained employed on the date of payment, which would have been no later than March 15 of the year following the year to which the bonus relates. Any bonus for 2022 would have been payable solely in the board of directors' discretion.

Pursuant to Mr. Kopfli's employment agreement, in the event he was involuntarily terminated by the Company other than for "Cause" or if he resigns for "Good Reason," he was entitled to receive (i) six months of salary at the same rate existing immediately prior to his termination, (ii) his target bonus, if performance goals and objectives had been established for the year and prorated for the period of service, and (iii) six months of additional vesting credit with respect to any outstanding time-based equity awards. "Cause" and "Good Reason" are each defined in the employment agreement.

Finally, Mr. Kopfli agreed to certain non-solicitation and non-competition provisions for a period of 12 months following termination and to certain confidentiality obligations. Additional terms and conditions are set forth in the employment agreement.

On November 27, 2023, Mr. Kopfli was removed from our board of directors by our stockholders having a majority of the number of votes necessary to take such action. Mr. Kopfli was then terminated from his position as Vice Chairman and Chief Strategy Officer by the Company for "Cause", as defined in the employment agreement, effective December 1, 2023.

***Camden Capital LLC***

We entered into a Consultant Agreement with Camden Capital LLC ("Camden"), dated January 10, 2023 (the "Consultant Agreement"). This Consultant Agreement replaced an agreement with Mr. Francis Knuettel II dated June 2, 2022 and pursuant to which, Camden agreed to provide the services of Mr. Knuettel, who was to serve as our Chief Financial and Strategy Officer, Treasurer and Secretary.

Under the Consultant Agreement, Camden accrued a consulting fee for the period June 6, 2022 through August 31, 2022 of $10,000 per month and effective September 1, 2022, began to accrue a consulting fee of $20,000 per month, payable in cash at the rate of $5,000 per month (a minimum of $1,125 per week), with the remainder accrued. All accrued consulting fees are payable as of the earliest of a sale or liquidation of the Company, the Company's bankruptcy or three days after Post-registration Approval. The Consultant Agreement provides for the following equity awards to Camden: (i) an option, awarded as of January 10, 2023, to acquire 200,000 shares of our Common Stock, vesting quarterly over 10 quarters and beginning October 1, 2022, with the option having an exercise price equal to the fair market value of our Common Stock on the date of grant and expiring on the 10th anniversary of the date of grant; (ii) an option, awarded as of January 10, 2023, to acquire 25,000 shares of our Common Stock, vesting 100% upon the sooner of the sale of the Company or Post-registration Approval, with the option having an exercise price equal to the fair market value of our Common Stock on the date of grant and expiring on the 10th anniversary of the date of grant; and (iii) an RSU, awarded as of January 10, 2023, of 150,000 shares of our Common Stock, vesting 100% on the day after the first trading window that opens after Post-registration Approval.

The Consultant Agreement contemplates an additional consulting fee, as determined by the board of directors. The potential additional consulting fee is 50% of the annualized consulting fee and will be based on achievement of performance goals and objectives established by the board of directors in concert with Mr. Knuettel in January of each year. The board of directors may increase the potential additional consulting fee in recognition of performance in excess of the performance objectives. Any amount shall only be paid if Camden continues to provide consulting services to the Company as of the date of payment, which will be no later than March 15 of the year following the year to which the additional consulting fee relates. Any additional consulting fee for 2022 is payable solely in the board of directors' discretion.

Pursuant to the Consultant Agreement, in the event the relationship with Camden is involuntarily terminated by the Company other than for "Cause" or if Camden terminates the relationship for "Good Reason," Camden is entitled to receive (i) six months of consulting fees at the same rate existing immediately prior to termination, (ii) a potential additional consulting fee, if performance goals and objectives have been established for the year and prorated for the period of service, and (iii) six months of additional vesting credit with respect to any outstanding time-based equity awards. "Cause" and "Good Reason" are each defined in the Consultant Agreement.

Finally, Camden and Mr. Knuettel agree to certain non-solicitation and non-competition provisions for a period of 12 months following termination of the relationship and to certain confidentiality obligations. Additional terms and conditions are set forth in the Consultant Agreement.

On June 23, 2023, we amended and restated the Consultant Agreement by entering into an Amended and Restated Consultant Agreement with Camden whereby the RSU for 16,667 shares of Common Stock was cancelled, and we agreed to grant Camden an option to acquire 27,777 shares of Common Stock within 30 days of the closing of the IPO. As of June 23, 2023, such RSU for 16,667 shares of our Common Stock had not vested, and no expense was recorded on the Company's consolidated financial statements. In addition, from and after June 1, 2023, the consulting fee will be paid in cash by the Company. No other material changes were made to the Consultant Agreement.

Effective July 19, 2023, the board of directors appointed Francis Knuettel II as Interim Chief Executive Officer and as of March 13, 2024, the board of directors appointed Francis Knuettel II as Chief Executive Officer of the Company, at which time Mr. Knuettel became an employee of the Company. Mr. Knuettel will serve as the Company's Chief Executive Officer until a successor is duly elected and qualified, unless sooner removed. In addition to his role as Chief Executive Officer of the Company, Mr. Knuettel will continue to serve in his capacity as Chief Financial Officer, Treasurer and Secretary of the Company.

***Eric Lang***

We are a party to an employment agreement with Eric Lang, effective May 15, 2023. Pursuant to such agreement, Dr. Lang agreed to serve as our Chief Medical Officer, in consideration for an annualized salary of $400,000. The employment agreement provides that Dr. Lang receive an option to acquire 218,000 shares of our Common Stock, vesting quarterly over 12 quarters and beginning August 15, 2023. This option shall have an exercise price equal to the fair market value of our Common Stock on the date of grant and shall expire on the 10th anniversary of the date of grant. The option was awarded as of May 15, 2023. The employment agreement contemplates an annual bonus, as determined by the board of directors. The target bonus is 50% of Dr. Lang's annualized salary and will be based on achievement of performance goals and objectives determined by our Chief Executive Officer. The Chief Executive Officer may increase the bonus in recognition of performance in excess of the performance objectives. Any bonus will be paid if Dr. Lang remains employed on the date of payment, which will be no later than March 15 of the year following the year to which the bonus relates. In addition, the employment agreement contemplates annual equity bonus. The board of directors may, in its sole discretion, and for so long as Dr. Lang remains an employee, make an annual discretionary bonus award of an option to acquire up to 32,000 additional shares of Common Stock of the Company. Any such option shall vest in equal increments on a quarterly basis, beginning one quarter after the date of grant, with the final vesting date on the third anniversary of the date of grant. The option shall have an exercise price equal to the fair market value of our Common Stock on the date of grant and shall expire on the 10th anniversary of the date of grant.

Pursuant to Dr. Lang's employment agreement, in the event he is involuntarily terminated by the Company other than for "Cause" or if he resigns for "Good Reason," he is entitled to receive (i) six months of salary at the same rate existing immediately prior to his termination, (ii) 50% of his annualized salary, prorated from January 1 of the year of termination and through the date of termination, (iii) vesting of all outstanding options with time-based vesting, and (iv) coverage of 18 months of group medical, dental and/or vision benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, if he elects to continue such benefits. "Cause" and "Good Reason" are each defined in the employment agreement.

Finally, Dr. Lang agreed to certain non-solicitation and non-competition provisions for a period of 12 months following termination and to certain confidentiality obligations. Additional terms and conditions are set forth in the employment agreement.

**Post-Merger Employment Agreements and Arrangements**

On the July 1, 2025, the Company entered into employment agreements with Messrs Plesha, Knuettel and Rangarao, effective as of July 1, 2025.

***Plesha Employment Agreement***

The term of the Employment Agreement with Mr. Plesha (the "Plesha Employment Agreement") commenced on July 1, 2025 and continues until terminated pursuant to the terms set forth in the Plesha Employment Agreement.

Pursuant to the Plesha Employment Agreement, Mr. Plesha will receive an annual base salary of $438,000 and will be eligible to receive an annual bonus (the "Annual Bonus"), which will be paid no later than 90 days following the end of the fiscal year in which the Annual Bonus was earned. The Annual Bonus will have a maximum amount of 50% of Mr. Plesha's base salary and is contingent upon Mr. Plesha's meeting certain annual goals (the "Annual Bonus Goals") set by the Company and the Board.

The Plesha Employment Agreement also provides that, subject to the approval of the Board, Mr. Plesha will be granted one or more equity awards covering 340,000 shares of the Company's Common Stock in the form of stock options ("Options"), RSUs, or a combination thereof, as determined by the Board (the "Equity Awards").

The Plesha Employment Agreement contains standard terms relating to termination of employment for cause, good reason, as well as standard provisions relating to Mr. Plesha's rights to receive unpaid salary through the date of termination and accrued but unused vacation time in accordance with Company policy and all other payment and benefits to which Mr. Plesha shall be entitled to under the terms of the Employment Agreement.

***Knuettel Employment Agreement***

The term of the Employment Agreement with Mr. Knuettel (the "Knuettel Employment Agreement") commenced on July 1, 2025 and continues until terminated pursuant to the terms set forth in the Knuettel Employment Agreement.

Pursuant to the Knuettel Employment Agreement, Mr. Knuettel will receive an annual base salary of $410,000 and will be eligible to receive Annual Bonus, which will be paid no later than 90 days following the end of the fiscal year in which the Annual Bonus was earned. The Annual Bonus will have a maximum amount of 40% of Mr. Knuettel's base salary and is contingent upon Mr. Knuettel's meeting his Annual Bonus Goals set by the Company and the Board.

The Knuettel Employment Agreement also provides that, subject to the approval of the Board, Mr. Knuettel will be granted one or more Equity Awards covering 136,000 shares of the Company's Common Stock in the form of Options, RSUs, or a combination thereof, as determined by the Board.

The Knuettel Employment Agreement contains standard terms relating to termination of employment for cause, good reason, as well as standard provisions relating to Mr. Knuettel's rights to receive unpaid salary through the date of termination and accrued but unused vacation time in accordance with Company policy and all other payment and benefits to which Mr. Knuettel shall be entitled to under the terms of the Employment Agreement.

***Rangarao Employment Agreement***

The term of the Employment Agreement with Mr. Rangarao (the "Rangarao Employment Agreement") commenced on July 1, 2025 and continues until terminated pursuant to the terms set forth in the Rangarao Employment Agreement.

Pursuant to the Rangarao Employment Agreement, Mr. Rangarao will receive an annual base salary of $400,000 and will be eligible to receive Annual Bonus, which will be paid no later than 90 days following the end of the fiscal year in which the Annual Bonus was earned. The Annual Bonus will have a maximum amount of 40% of Mr. Rangarao's base salary and is contingent upon Mr. Rangarao's meeting his Annual Bonus Goals set by the Company and the Board.

The Rangarao Employment Agreement also provides that, subject to the approval of the Board, Mr. Rangarao will be granted one or more Equity Awards covering 124,000 shares of the Company's Common Stock in the form of Options, RSUs, or a combination thereof, as determined by the Board.

The Rangarao Employment Agreement contains standard terms relating to termination of employment for cause, good reason, as well as standard provisions relating to Mr. Rangarao's rights to receive unpaid salary through the date of termination and accrued but unused vacation time in accordance with Company policy and all other payment and benefits to which Mr. Rangarao shall be entitled to under the terms of the Employment Agreement.

The foregoing descriptions of the Plesha Employment Agreement, the Knuettel Employment Agreement and the Rangarao Employment Agreement are not complete and is qualified in their entirety by reference to the full text of the Plesha Employment Agreement and the Knuettel Employment Agreement, copies of which are filed as Exhibits 10.17, 10.18 and 10.19, respectively, to the Original Filing and are incorporated by reference herein.

***Cash Bonuses***

Mr. Plesha was entitled to receive a cash bonus of $250,000 and Mr. Knuettel was entitled to receive a cash bonus of $100,000, payable by the Company as of the third business day following the consummation of the Merger, or as of the end of the pay period in which the consummation of the Merger occurs, and in no event, later that December 31, 2025.

**Equity and Equity-Based Plans**

**Outstanding Equity Awards at Fiscal Year-End** 

The following table provides information regarding the outstanding equity awards of our named executive officers during the year ended December 31, 2024.

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Option Awards** | **Option Awards** | **Option Awards** | **Option Awards** | **Option Awards** | **Stock Awards** | **Stock Awards** | **Stock Awards** | **Stock Awards** |
| <br>**Name and**<br> **Principal Position** | **Number of**<br> **Securities**<br> **Underlying**<br> **Unexercised**<br> **Options**<br> **Exercisable** | **Number of**<br> **Securities**<br> **Underlying**<br> **Unexercised**<br> **Options**<br> **Unexercisable** | **Equity**<br> **Incentive**<br> **Plan**<br> **Awards:**<br> **Number of**<br> **Securities**<br> **Underlying**<br> **Unexercised**<br> **Unearned**<br> **Options** | **Option**<br> **Exercise**<br> **Price** | **Option**<br> **Expiration**<br> **Date** | **Number**<br> **of**<br> **shares of Common Stock**<br> **Unvested** | **Market**<br> **Value of**<br> **shares of Common Stock**<br> **Unvested** | **Equity**<br> **Incentive Plan**<br> **Awards: Number**<br> **of Unearned**<br> **Unvested**<br> **Shares** | **Equity**<br> **Incentive**<br> **Plan**<br> **Awards:**<br> **Market**<br> **or Payout**<br> **Value of**<br> **Unearned**<br> **Unvested**<br> **Shares** |
| Scott Plesha, Chief Executive Officer |  |  |  |  |  |  |  |  |  |
| Francis Knuettel II, Chief Financial Officer | 2223 |  |  | $226.80 | 09/30/2032 |  | $— |  | $— |
| Francis Knuettel II, Chief Financial Officer | 278 |  |  | 226.80 | 1/10/2033 |  |  |  |  |
| Francis Knuettel II, Chief Financial Officer | 2778 |  |  | 226.80 | 5/15/2033 |  |  |  |  |
| Francis Knuettel II, Chief Financial Officer | 32400 |  |  | 13.00 | 6/14/2024 |  |  |  |  |
| Sai Rangarao, Chief Commercial Officer |  |  |  |  |  |  |  |  |  |
| Eric Lang, Chief Medical Officer | 10093 | 14130 |  | $226.80 | 5/15/2033 |  | $— |  | $— |
| Eric Lang, Chief Medical Officer | 32500 | 97500 |  | $13.00 | 6/14/2034 |  |  |  |  |

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**Equity Incentive Plan**

***The Pelthos Therapeutics Inc. Amended and Restated 2023 Equity Incentive Plan***

On January 10, 2023, our board of directors adopted and submitted for stockholder approval the Channel Therapeutics 2023 Equity Incentive Plan (the "Prior Plan"), which Prior Plan was later approved by the Company's stockholders. On February 15, 2023, we amended the Prior Plan to increase the number of shares available for issuance thereunder to 44,445 and on October 22, 2024, we further amended the Prior Plan to increase the number of shares available for issuance thereunder to 194,445. The following summary of the material features of the Prior Plan is qualified in its entirety by reference to the complete text of the Prior Plan, a copy of which is filed with this Report. The Prior Plan will terminate on January 10, 2033, in accordance with its terms, although, awards outstanding under the Prior Plan will continue to be governed by their existing terms after the Prior Plan's expiration.

On April 11, 2025, the Channel board of directors adopted a resolution approving the Pelthos Therapeutics Amended and Restated 2023 Plan (the "Amended and Restated 2023 Plan). On April 16, 2025, the Majority Stockholders approved the Amended and Restated 2023 Plan, which became effective as of the same date. The purpose of the Amended and Restated 2023 Plan is to encourage key employees, directors, and consultants of the Company and its subsidiaries to continue their association with the Company by providing favorable opportunities for them to participate in the ownership of the Company and its subsidiaries and in its future growth through the granting of equity ownership opportunities and incentives based on the Common Stock that are intended to align their interests with those of the Company's stockholders. The Amended and Restated 2023 Plan provides for awards of incentive and non-statutory stock options, restricted stock and restricted stock units, stock appreciation rights, performance shares and performance share units (collectively, the "Awards").

The Amended and Restated 2023 Plan reflects amendments to the Prior Plan, which, among other things, increase the number of shares of Common Stock that are authorized to be issued under the Prior Plan from 194,445 to 2,400,000.

The principal provisions of the Amended and Restated 2023 Plan are summarized below. This summary is qualified in its entirety by reference to the copy of the Amended and Restated 2023 Plan which has been filed as Exhibit 10.14 of the Original Filing with the SEC. To the extent the description below differs from the text of the Amended and Restated 2023 Plan, the text of the Amended and Restated 2023 Plan will control.

Share Reserve

An aggregate of 300,000 shares of common stock were originally authorized for issuance under the Prior Plan. In 2024, the Channel board of directors and stockholders approved an amendment to the Prior Plan, increasing the number of shares authorized for issuance to 400,000. Following the 9-for-1 reverse stock split, effective February 15, 2024, there were 44,445 shares underlying the Prior Plan. On October 22, 2024, the Channel board of directors and stockholders approved an amendment to the Prior Plan, increasing the number of shares authorized for issuance from 44,445 shares to 194,445 shares. The Amended and Restated 2023 Plan increases the number of shares of Common Stock that are authorized for issuance from 194,445 to 2,400,000. Shares subject to Awards that expire, are forfeited, or are cancelled will again become available for issuance under the Amended and Restated 2023 Plan. Further, shares of Common Stock delivered to the Company by a participant to satisfy the applicable exercise or purchase price of an award and/or to satisfy any applicable tax withholding obligation (including shares of Common Stock retained by the Company from the award being exercised or purchased and/or creating the tax obligation) will, as applicable, become or again be available for Award grants under the Amended and Restated 2023 Plan.

Administration

The Amended and Restated 2023 Plan will be administered by the board of directors or, in its discretion, by a committee or sub-committee of the board of directors, which is generally expected to the Compensation Committee of the board of directors (the administrator of the plan, as applicable, the "Compensation Committee"). The Compensation Committee has complete discretion to make all decisions relating to the Amended and Restated 2023 Plan and outstanding Awards.

Eligibility

Employees, non-employee members of the board of directors and other natural persons who render bona fide services (not in connection with the offer or sale of securities in a capital-raising transaction and not directly or indirectly promoting or maintaining a market for the Company's securities) to the Company are eligible to participate in the Amended and Restated 2023 Plan.

Types of Awards

The Amended and Restated 2023 Plan provides for the following types of awards granted with respect to shares of Common Stock:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• incentive
and nonqualified stock options to purchase shares of Common Stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• stock
appreciation rights, whether settled in cash or Common Stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• direct
awards or sales of shares of Common Stock, with or without restrictions; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• restricted
stock units.

The recipient of an award under the Amended and Restated 2023 Plan is referred to as a participant.

*Options.* The Compensation Committee may grant incentive stock options ("ISOs") and nonqualified stock options ("NSOs") under the Amended and Restated 2023 Plan. The Compensation Committee determines the number of shares of Common Stock subject to each option, its exercise price, its duration and the manner and time of exercise; provided, however, that no option may be issued under the Amended and Restated 2023 Plan with an exercise price that is less than the fair market value of our Common Stock as of the date the option is granted, and no option issued as an ISO will have a duration that exceeds ten years. ISOs may be issued only to the Company's employees or employees of its corporate subsidiaries, and in the case of a more than ten percent stockholder, must have an exercise price that is at least 110% of the fair market value of Common Stock as of the date the option is granted, and may not have a duration of more than five years.

The Compensation Committee, in its discretion, may provide that any option is subject to vesting limitations that make it exercisable during its entire duration or during any lesser period of time.

The exercise price of an option may be paid (i) in cash or check, (ii) by delivery of a recourse promissory note secured by Common Stock acquired upon exercise of the option (if approved by the Compensation Committee, except that such a loan would not be available to any of the Company's executive officers or directors), (iii) by means of a "cashless exercise" procedure in which a broker transmits to us the exercise price in cash, either as a margin loan or against the optionee's notice of exercise and confirmation by the Company that the Company will issue and deliver to the broker stock certificates for that number of shares of Common Stock having an aggregate fair market value equal to the exercise price, or agrees to pay the exercise price to us in cash upon receipt of stock certificates, (iv) if approved by the Compensation Committee, by delivery of shares of Common Stock already owned by the optionee, (v) if approved by the Compensation Committee, by a "net exercise" in the case of an NSO, (vi) by other lawful consideration set forth in the applicable option agreement or approved by the Compensation Committee, or (vii) by any combination of the methods listed, if approved by the Compensation Committee.

*Stock Appreciation Rights ("SARs")*. The Compensation Committee may also grant SARs to participants on such terms and conditions as it may determine. SARs may be granted separately or in connection with an option. No SAR may be issued under the Amended and Restated 2023 Plan with an exercise price that is less than the Fair Market Value of Common Stock as of the date the SAR is granted, and no SAR will have a duration that exceeds ten years. Upon the exercise of an SAR, the participant is entitled to receive payment equal to the excess of the fair market value, on the date of exercise, of the number of shares of Common Stock for which the SAR is exercised over the exercise price for Common Stock under a related option or, if there is not a related option, over an amount per share stated in the agreement setting forth the terms and conditions of the SAR.

Payment to the participant may be made in cash or other property, including Common Stock, in accordance with the provisions of the SAR agreement.

*Stock Grants*. The Compensation Committee may make an award in one or more of the following forms of stock grant. Stock grants (including restricted stock units and performance units after settlement) generally will provide the participant with all of the rights of a stockholder of ours, including the right to vote and to receive payment of dividends.

*Stock grant without restriction*. The Compensation Committee may make a stock grant without any restrictions.

*Restricted stock and RSUs*. The Compensation Committee may issue shares of Common Stock with restrictions determined by the Compensation Committee in its discretion. Restrictions could include conditions that require the participant to forfeit the shares in the event that the participant ceases to provide services to the Company or any of its affiliates thereof before a stated time. RSUs are similar to restricted stock except that no shares are actually issued to the participant on the RSU grant date. Rather, and provided all applicable restrictions are satisfied, shares of Common Stock are generally delivered at settlement of the award. The period of restriction, the number of shares of restricted stock or the number of RSUs granted, the purchase price, if any, and such other conditions and/or restrictions as the Compensation Committee may establish will be set forth in an award agreement. Participants holding RSUs will not have voting rights or other rights as a stockholder until any shares related to the RSU are issued. After all conditions and restrictions applicable to restricted shares and/or RSUs have been satisfied or have lapsed, shares of restricted stock will become freely transferable and RSUs may be settled in cash, in shares of Common Stock or in some combination of cash and shares of Common Stock, as determined by the Compensation Committee and stated in the award agreement.

*Performance shares and performance share units ("PSUs")*. With respect to an award of performance shares and/or PSUs, the Compensation Committee will establish performance periods and performance goals. The extent to which a participant achieves their performance goals during the applicable performance period will determine the value and/or the number of performance shares and/or PSUs earned by such participant. Payment of earned performance shares and/or PSUs will be in cash, shares of Common Stock or some combination of cash and shares of Common Stock, as determined by the Compensation Committee and stated in the award agreement.

*Substitute awards.* In connection with an entity's merger or consolidation with the Company or the Company's acquisition of an entity's property or stock, the Compensation Committee may grant awards in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company acquired by the Company or any subsidiary of the Company or with which the Company or any of its subsidiaries combines ("Substitute Awards"). Substitute Awards may be granted on such terms as the Compensation Committee deems appropriate, notwithstanding limitations on awards in the Amended and Restated 2023 Plan. Substitute Awards will not count against the number of shares of Common Stock that are authorized to be issued under the Amended and Restated 2023 Plan (nor will shares of Common Stock subject to a Substitute Award be added to the shares of Common Stock available for award under the plan), except that the shares of Common Stock acquired by exercise of substitute ISOs will count against the maximum number of shares of Common Stock that may be issued pursuant to the exercise of ISOs under the Amended and Restated 2023 Plan.

*Other awards*. The Compensation Committee may issue other types of equity-based or equity-related awards under the Amended and Restated 2023 Plan, on such terms and conditions as the Compensation Committee shall determine in its discretion.

Dividends; Dividend Equivalents

Participants holding restricted stock and performance shares will be entitled to receive dividends on our Common Stock, provided that participants will not be entitled to dividends with respect to unvested restricted stock and performance shares until the stock or shares vest, respectively. Dividend equivalent units may, but are not required to, be granted with respect to RSUs or PSUs and may be paid in cash, additional shares of Common Stock or a combination on the date the shares are delivered, all as determined by the Compensation Committee and stated in the award agreement.

The payment of dividend equivalents in cash in conjunction with any outstanding awards will not count against the number of shares of Common Stock that are authorized to be issued under the Amended and Restated 2023 Plan.

Effect of certain corporate transactions

In the event of a stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution on our Common Stock other than an ordinary cash dividend, the Compensation Committee shall make equitable adjustments to awards as it, in its sole discretion, deems appropriate. In the case of (1) a merger or consolidation of the Company with or into another entity pursuant to which all of our Common Stock is cancelled or converted into or exchanged for the right to receive cash, securities or other property, (2) any transfer or disposition of all of our Common Stock for cash, securities or other property pursuant to a share exchange or other transaction, (3) the sale or other disposition of all or substantially all of the Company's assets, (4) any liquidation or dissolution of the Company, or (5) a Change in Control of the Company (as defined in the Amended and Restated 2023 Plan), the Compensation Committee may take any of a number of actions including providing for the assumption of awards, the termination of awards (with advance notice permitting exercise), Awards to become exercisable at or prior to the event, the liquidation of awards or any combination of the foregoing.

Amendments or Termination of the Amended and Restated 2023 Plan and Awards

The board of directors may at any time amend or terminate the Amended and Restated 2023 Plan; however, no amendment may adversely affect an award outstanding under the Amended and Restated 2023 Plan without the consent of the affected participant and stockholder approval will be obtained for any amendment to the extent necessary to comply with applicable laws. The Amended and Restated 2023 Plan will terminate automatically ten years after the earlier of the date when the board of directors adopted the Amended and Restated 2023 Plan or the date when the Company's stockholders approved the Amended and Restated 2023 Plan. No awards may be granted under the Amended and Restated 2023 Plan after its termination, but awards previously granted prior to termination may remain outstanding following such termination in accordance with the Amended and Restated 2023 Plan. Further, the Compensation Committee may, without stockholder approval, amend any outstanding option or SAR to reduce its exercise price per share, or cancel outstanding options or SARs in exchange for cash, other awards or options or SARs with an exercise price per share that is less than the exercise price per share of the original options or SARs.

Federal Tax Aspects

The following summary is a brief discussion of certain federal income tax consequences to U.S. taxpayers and to the Company of Awards granted under the Amended and Restated 2023 Plan. This summary is not intended to be a complete discussion of all the federal income tax consequences of the Amended and Restated 2023 Plan or of all the requirements that must be met in order to qualify for the tax treatment described below. The following summary is based upon the provisions of U.S. federal tax law in effect on the date hereof, which is subject to change (perhaps with retroactive effect) and does not constitute tax advice. In addition, because tax consequences may vary, and certain exceptions to the general rules discussed in this summary may be applicable, recipients of Awards and persons eligible to receive Awards are encouraged to consult with their own advisors.

*Tax consequences of nonqualified stock options and stock appreciation rights*. In general, an employee, director or consultant will not recognize income at the time of the grant of nonqualified stock options or stock appreciation rights under the Amended and Restated 2023 Plan. When the holder exercises the stock option or stock appreciation right, he or she generally will recognize compensation income for federal income, Social Security, Medicare and Additional Medicare tax purposes equal to the excess, if any, of the fair market value (determined on the day of exercise) of the shares of Common Stock received (or cash equivalent) over the exercise price. The tax basis of such shares will be equal to the exercise price paid plus the amount of compensation income recognized at the time of the exercise. Upon a subsequent sale or exchange of shares acquired pursuant to the exercise of a nonqualified stock option or stock appreciation right, the holder will have taxable capital gain or loss, measured by the difference between the amount realized on the sale or exchange and the tax basis of the shares. The capital gain or loss will be short-term or long-term depending on the holding period of the shares sold. If a stock appreciation right is settled in cash, the amount received will be taxed as compensation income. the Company receives no tax deduction on the grant of a nonqualified stock option, but the Company is generally entitled to a tax deduction when a holder recognizes ordinary compensation income on exercise of the option, in the same amount as the income recognized by the holder.

*Tax treatment of incentive stock options*. Generally, a holder incurs no federal income tax liability on either the grant or the exercise of an incentive stock option, although a holder will generally have taxable income for alternative minimum tax purposes at the time of exercise equal to the excess of the fair market value of Common Stock subject to the option over the exercise price. Provided that the Common Stock is held for at least one year after the date of exercise of the option and at least two years after its date of grant, any gain realized on a subsequent sale of the Common Stock will be taxed as long-term capital gain. If the Common Stock is disposed of within a shorter period of time, the holder will recognize ordinary compensation income in an amount equal to the difference between the fair market value of the stock on the date of exercise (or the sale price of the shares sold, if less) over the exercise price. the Company receives no tax deduction on the grant or exercise of an incentive stock option, but the Company is generally entitled to a tax deduction if the holder recognizes ordinary compensation income on account of a premature disposition of shares acquired on exercise of an incentive stock option, in the same amount and at the same time as the holder recognizes income.

*Tax consequences of stock Awards*. In general, the recipient of an Award of Common Stock without restrictions will recognize compensation income at the time the shares of Common Stock are awarded in an amount equal to the excess, if any, of the fair market value of the shares of Common Stock received over the amount, if any, the recipient paid in exchange for the shares of Common Stock. In the case of a restricted stock award (such that the shares are subject to vesting or other restrictions), the recipient generally will not recognize income until the shares of Common Stock become vested or the restrictions otherwise lapse, at which time the recipient will recognize compensation income equal to the excess, if any, of the fair market value of the shares of Common Stock on the date of vesting (or the date of the lapse of a restriction) less the amount, if any, that the recipient paid in exchange for the shares of Common Stock. If the shares of Common Stock are forfeited under the terms of the restricted stock award, the recipient will not recognize compensation income and will not be allowed an income tax deduction with respect to the forfeiture.

A recipient may file an election under Section 83(b) of the Code with the Internal Revenue Service within thirty (30) days of the recipient's receipt of the restricted stock to recognize compensation income, as of the date of transfer, equal to the excess, if any, of the fair market value of the shares of Common Stock on the date of transfer less the amount, if any, that the recipient paid in exchange for the shares of Common Stock. If a recipient makes a Section 83(b) election, then the recipient will not otherwise be taxed in the year the vesting or restriction lapses, and, if the restricted stock award is forfeited, the recipient will not be allowed an income tax deduction for the compensation income recognized. (A loss is allowed with respect to any amount paid.) If the recipient does not make a Section 83(b) election, dividends paid to the recipient on the shares of Common Stock prior to the date the vesting or restrictions lapse will be treated as compensation income. All such taxable amounts are generally deductible by the Company at the time and in the amount of the ordinary compensation income recognized by the holder.

The recipient's tax basis for the determination of gain or loss upon the subsequent disposition of shares of Common Stock acquired as restricted stock awards will be the amount paid for the shares plus the amount of compensation income recognized in connection with the Award.

*Tax consequences of restricted stock units*. A recipient of a restricted stock unit is taxed when the shares are delivered (generally at vesting), rather than the date of grant. The recipient is taxed on compensation income measured by the cash received or the difference between the amount paid (if any) and the fair market value of Common Stock at settlement. If the recipient receives actual shares at settlement, the holding period will begin at settlement and the tax basis will be equal to the sum of the cash, if any, paid plus the amount of compensation income recognized at vesting. Dividend equivalents (if offered) will be taxed as additional compensation income at settlement. All such taxable amounts are generally deductible by the Company at the time and in the amount of the ordinary compensation income recognized by the holder.

*Additional Federal Tax*. A recipient may be required to pay a 3.8% Medicare tax with respect to net investment income, including dividends on and gains from the sale or other disposition of Common Stock, to the extent that total adjusted income exceeds applicable thresholds.

*Withholding and other consequences*. All compensation income of a recipient with respect to an Award will be subject to appropriate federal, state and local income and employment tax withholding.

*Tax effect for the Company*. The Company is generally entitled to an income tax deduction in connection with an Award under the Amended and Restated 2023 Plan in an amount equal to the compensation income recognized by a recipient at the time the recipient recognizes such income, subject to the limitation on the deduction of executive compensation under Section 162(m) of the Internal Revenue Code in the case of certain executives. Section 162(m) of the Internal Revenue Code generally disallows an income tax deduction to public companies for compensation in excess of $1,000,000 paid in any year to the principal executive officer, the principal financial officer and the three other most highly compensated executive officers. In addition, each person covered by Section 162(m) of the Code for a particular year remains subject to the $1,000,000-limit in subsequent years, even if not included in that group for the year. It is expected that certain of the Company's compensation arrangements may result in non-deductible compensation when the total exceeds $1,000,000. Nevertheless, the deductibility of compensation is but one of the critical factors in the design and implementation of any compensation arrangement, and the Compensation Committee reserves the right to pay nondeductible compensation when appropriate.

**THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON RECIPIENTS OF AWARDS UNDER THE AMENDED AND RESTATED 2023 PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF A RECIPIENT'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY STATE OR FOREIGN COUNTRY IN WHICH THE RECIPIENT MAY RESIDE. THE FOREGOING SUMMARY IS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED BY ANY TAXPAYER, TO AVOID PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER.**

On January 10, 2023, pursuant to the Prior Plan, we granted: (a) options to purchase up to an aggregate of 9,169 shares of Common Stock to employees and directors and (b) 1,667 RSUs to employees. On March 9, 2023, pursuant to the Prior Plan, we granted an option to purchase up to 1,500 shares of Common Stock to a director. On June 23, 2023, we granted options to acquire 5,200 shares of Common Stock to employees (inclusive of options that have not yet been granted but the Company has agreed to grant in connection with the closing of the IPO) and cancelled an RSU for 16,667 shares issued to an employee on January 10, 2023. On June 14, 2024, pursuant to the Prior Plan, we granted options to acquire 63,400 shares of Common Stock to employees and one of the directors and 25,800 RSUs to the other directors. On October 22, 2024, pursuant to the Prior Plan, we granted options to acquire 5,000 shares of Common Stock to a consultant to the Company. On November 13, 2024, pursuant to the Prior Plan, we granted 9,869 RSUs to certain directors. On April 11, 2025, pursuant to the Prior Plan, we granted options to acquire 7,899 shares of Common Stock to one employee and one director. On July 2, 2025, pursuant to the Amended and Restated 2023 Plan, we granted options to acquire 1,462,126 shares of Common Stock to employees and directors and 479,851 RSUs to employees and directors. On August 13, 2025, pursuant to the Amended and Restated 2023 Plan, we granted options to acquire 3,750 shares of Common Stock to employees and 1,232 RSUs to employees.

The offers and sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the above securities represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof.

**Director Compensation for Fiscal Year 2024**

We have not implemented a formal policy with respect to compensation payable to our non-employee directors. From time to time, we have granted equity awards to attract individuals to join our board of directors and for their continued service thereon. In 2024, independent directors of Channel received $14,396 in cash compensation. In addition, in 2024 directors were granted options to purchase 9,000 shares of Common Stock at fair market value as of the date of issuance, expiring ten years from issuance and RSUs representing 35,667 shares of Common Stock. In addition, we reimburse our directors for expenses associated with attending meetings of our board of directors and its committees. Our board of directors is still in the process of considering the non-employee director compensation policy.

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Name** | **Fees Earned** <br> **or Paid in** <br> **Cash**<br> **($)** | **Stock** <br> **Awards**<br> **($)** | **Stock** <br> **Option** <br> **Awards**<br> **($)(1)** | **Non-Equity** <br> **Incentive** <br> **Plan** <br> **Compensation**<br> **($)** | **Nonqualified** <br> **Deferred** <br> **Compensation** <br> **Earnings**<br> **($)** | **All Other** <br> **Compensation**<br> **($)** | **Total**<br> **($)** |
| &nbsp;&nbsp;&nbsp;Todd Davis | 14396 | 52258 | 299215 | – | 20000 | – | 385869 |
| &nbsp;&nbsp;&nbsp;Ezra Friedberg | 14396 | 26111 | 149608 | – | 20000 | – | 210115 |
| &nbsp;&nbsp;&nbsp;Richard Malamut | 14396 | 26111 | 149608 | – | 20000 | – | 210115 |
| &nbsp;&nbsp;&nbsp;Chia-Lin Simmons | 14396 |  | 183675 | – | 20000 | – | 218071 |
| &nbsp;&nbsp;&nbsp;Peter Greenleaf |  |  |  | – |  | – |  |
| &nbsp;&nbsp;&nbsp;Matt Pauls |  |  |  | – |  | – |  |
| &nbsp;&nbsp;&nbsp;Rich Baxter |  |  |  | – |  | – |  |
| &nbsp;&nbsp;&nbsp;Scott Plesha |  |  |  | – |  | – |  |

---

(1) Amounts reflect the aggregate grant date fair value of the stock options granted to each named executive officer during the fiscal year ended December 31, 2024 and 2023, as computed in accordance with Financial Accounting Standards Board ASC 718.

**Policies and Practices Related to The Grant of Certain Equity Awards**

We maintain the Amended and Restated 2023 Plan through which we grant equity awards, including stock options and stock appreciation rights, to our named executive officers, other employees, and directors as part of our compensation program. In addition, certain employment agreements with our named executive officers provide for the grant of such equity awards. We do not currently have a formal policy governing the timing of grants of stock options, stock appreciation rights, or similar option-like instruments to named executive officers or directors in relation to the release of material nonpublic information. Equity awards under the Amended and Restated 2023 Plan have been granted from time to time, including to directors to encourage their initial or continued service on our board of directors. Our board of directors is evaluating the adoption of a policy concerning the timing of such awards relative to material non-public information disclosures. We have not adopted any practice of timing, and do not time, the release of material non-public information to affect the value of equity awards granted to named executive officers or directors.

During the year ended December 31, 2024, there were no equity grants made to our executive officers during any period beginning four business days before the filing of a periodic report or current report disclosing material non-public information and ending one business day after the filing or furnishing of such report with the SEC.

**Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities**

**Market Information**

Our Common Stock trades on NYSE American under the symbol "PTHS."

**Holders of our Common Stock**

As of September 15, 2025, there were approximately 18 holders of record of our Common Stock. This number does not include shares of Common Stock held by brokerage clearing houses, depositories or others in unregistered form.

**Dividends**

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our Common Stock in the foreseeable future. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant.

**Securities Authorized for Issuance under Equity Compensation Plans**

Reference is made to "Executive and Director Compensation—Equity Incentive Plan—The Pelthos Therapeutics Inc. Amended and Restated 2023 Equity Incentive Plan" of this Form 8-K/A.

**Recent Sales of Unregistered Securities**

In conjunction with the consummation of the Merger, the Company closed the PIPE Financing pursuant to the Securities Purchase Agreement executed concurrently with the Merger Agreement, by and among the Company, and the PIPE Investors. At the closing of the PIPE Financing, which occurred immediately prior to the Effective Time, the Company issued an aggregate of 50,100 shares of Series A Preferred Stock to the PIPE Investors for gross proceeds of approximately $50.1 million, consisting of approximately $50.0 million in cash and the conversion of approximately $0.1 million of principal and interest under an outstanding convertible note.

Each share of Series A Preferred Stock is convertible into shares Common Stock, subject to certain beneficial ownership limitations, including a 49.9% cap for Ligand and a 4.99% cap for other PIPE Investors. Immediately following the PIPE Financing, certain PIPE Investors converted 23,810 shares of Series A Preferred Stock into an aggregate of 2,381,000 shares of Common Stock (after giving effect to the Reverse Stock Split).

The Securities Purchase Agreement also provides the PIPE Investors with customary rights, including participation rights in future financings, anti-dilution protections, and registration rights pursuant to a Registration Rights Agreement entered into on the Closing Date. The Company is obligated to file a resale registration statement with the SEC covering the shares of Common Stock issuable upon conversion of the Series A Preferred Stock.

Reference is made to the disclosures regarding recent sales of unregistered securities set forth Channel's documents filed with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, which are incorporated into this Form 8-K/A by reference.

The offers and sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the above securities represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof.

**Purchases of Equity Securities by the Issuer and Affiliated Purchasers**

*Stock Repurchase Plan:*

On August 5, 2024, the board of directors authorized a stock repurchase plan (the "Repurchase Plan") pursuant to which up to $250,000 of the Company's Common Stock may be repurchased prior to December 31, 2024, unless completed sooner or otherwise extended. We established the Repurchase Plan on the premise that the value of the Company's programs and prospects were not reflected in the trading price of the Company's Common Stock on the NYSE American and in an effort to maintain a minimum price relative to NYSE American's listing standards. Further, the Company endeavored to balance the repurchase of what the Company felt was undervalued stock and the Company's available cash, as a result of which, the timing and actual number of shares repurchased have depended and will continue to depend on a variety of factors including trading price of the Company's Common Stock on the NYSE American, the Company's financial performance, corporate and regulatory requirements and other market conditions.

*Repurchase Plan Amendment*

On October 22, 2024, the board of directors authorized an amendment (the "Plan Amendment") to the Repurchase Plan to increase the total value of shares of Common Stock available for repurchase by the Company under the Repurchase Plan by an additional $500,000, to $750,000. In addition, the Plan Amendment extended the termination date of the Repurchase Plan from December 31, 2024 to June 30, 2025, prior to which Common Stock may be repurchased.

We did not repurchase any shares during the second quarter of 2025 and the Repurchase Plan expired on June 30, 2025.

**CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS**

Our audit committee charter requires the audit committee to review, consider, and approve in advance all future transactions, in which we are a participant, that involve amounts that equal or exceed $120,000 and in which any Related Person has or will have a direct or indirect material interest in such transaction. Related Persons include any of our directors, executive officers, holder of 5% or more of any class of our capital stock, or any member of the immediate family of, or entities affiliated with, any of them, or any other related persons, as defined in Item 404 of Regulation S-K. In approving or rejecting any such proposal, our audit committee is to consider all available information deemed relevant by the audit committee, including, but not limited to, the extent of the related person's interest in the transaction, and whether the transaction is on terms no less favorable to us than terms we could have generally obtained from an unaffiliated third party under the same or similar circumstances.

**Review, Approval or Ratification of Transactions with Related Parties**

We have adopted a written related-person transactions policy that provides that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of our Common Stock and any members of the immediate family of the foregoing persons, are not permitted to enter into a material related-person transaction with us without the review and approval of our audit committee, or a committee composed solely of independent directors in the event it is inappropriate for its audit committee to review such transaction due to a conflict of interest. Such policy provides that any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of our Common Stock or with any of their immediate family members or affiliates, in which the amount involved exceeds the lesser of (i) $120,000 or (ii) one percent of the average of our total assets at year-end for the last two fiscal years, will be presented to its audit committee for review, consideration and approval. In approving or rejecting any such proposal, we expect that our audit committee will consider the relevant facts and circumstances available and deemed relevant to the audit committee, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person's interest in the transaction.

**Channel Related Person Transactions**

The following is a summary of transactions among related parties that occurred from Channel's incorporation, until its merger with and into LNHC:

In May 2021, Chromocell Corporation, a Delaware corporation ("Chromocell Holdings"), Channel and Flamands International Holdings LLC ("Flamands") commenced negotiations regarding a three-party agreement whereby Chromocell Holdings would spin off assets and liabilities associated with its therapeutics operations to Channel and Flamands would provide funding to Channel. As the parties contemplated various transactional structures, an agreement was never effectuated because significant details concerning the assumption of liabilities were never finalized. Chromocell Holdings instead provided multiple advances to Channel for its operations from May 2021 through August 2022. At December 31, 2021, all amounts previously received from Chromocell Holdings by Channel were recorded as advances payable on Channel's consolidated financial statements.

On August 10, 2022, Channel and Chromocell Holdings entered into the Contribution Agreement effecting (1) the contribution by Chromocell Holdings to Channel of assets related to Chromocell Holdings' therapeutics business, which Channel transferred to Channel (the "Therapeutics Business"), including all intellectual property secrets related to Chromocell Holdings' NaV1.7 program and its clinical-stage CC8464 lead compound, (2) assumption by Channel of direct liabilities related to Chromocell Holdings' historical Therapeutics Business in the amount of $1,556,323 as well as a cash payment by Channel to Chromocell Holdings of $597,038 within three business days of the closing of the IPO and (3) the issuance by Channel to Chromocell Holdings of 1,111,112 shares of Channel common stock and 600,000 shares of Channel Series A preferred stock.

On August 2, 2023, Channel entered into a Side Letter to the Contribution Agreement with Chromocell Holdings (the "Holdings Side Letter"). Pursuant to the Holdings Side Letter, upon closing of the IPO: (a) Chromocell Holdings re-assumed all $1.6 million in direct liabilities previously assumed by Channel in accordance with the Contribution Agreement, (b) Chromocell Holdings waived Channel's obligations to make a cash payment in the amount of $0.6 million to Chromocell Holdings, and (c) in consideration thereof, Channel issued to Chromocell Holdings 2,600 shares of Series C Preferred Stock (as defined below).

On April 17, 2023, Chromocell Holdings forfeited 133,745 shares of Channel common stock as Chromocell Holdings did not fund its pro rata allocation in a bridge financing in April 2023 for an aggregate principal amount of $393,808 (the "April Bridge Financing"), per the terms governing the April Bridge Financing.

On December 18, 2024, 747,187 shares of Channel common stock and 2,600 shares of Series C Preferred Stock held by Chromocell Holdings were transferred by Channel to Alexandra Wood (Canada) Inc. ("AWI") in satisfaction of a default judgement against Chromocell Holdings regarding the default by Chromocell Holdings of a secured promissory note by order of the Supreme Court of the State of New York, County of New York on November 25, 2024 in the matter *Alexandra Wood (Canada) Inc v. Chromocell Corp., Index No. 651735/2024*. AWI subsequently transferred 173,000 shares of Chromocell Holding's Channel common stock that it received such that AWI now owns 574,187 shares of the Channel common stock originally issued to Chromocell Holdings in connection with the Contribution Agreement.

On December 6, 2022, Channel and Mr. Todd Davis, one of Channel's directors, entered into the promissory note in the aggregate principal amount of $175,000 (the "Director Note"). The Director Note had an original issuance discount of $75,000 and matures on December 31, 2023, or, if earlier to occur, upon the closing of an underwritten offering of securities resulting in at least $15 million in gross proceeds. Mr. Davis, as lender, had the right but not the obligation to subscribe to the underwritten offering by presenting the Director Note in whole or in part to purchase such securities as legal tender therefor, on a dollar-for-dollar basis based upon the offering price of such securities to the public. The Director Note bears no interest except in the case of certain events of default. As of December 31, 2023, there was an unamortized debt discount of $0. On December 28, 2023, Channel entered into an amendment to the Director Note, which extended the maturity date to February 29, 2024.

On April 17, 2023, Channel entered into the April Bridge Financing for working capital purposes with various accredited investors, all of whom are pre-existing stockholders, including Chromocell Holdings, Boswell Prayer Ltd., Motif Pharmaceuticals Ltd, Aperture Healthcare Ventures Ltd., MDB Merchants Park LLC, Balmoral and AME Equities LLC (each a related party based on share ownership in excess of 5% or resulting from a principal at one of the entities being on Channel's board of directors) in the aggregate principal amount of $389,757, after giving effect to the affiliate transactions with the Representative (as defined below). During the year ended December 31, 2023, Channel received an aggregate of $303,651 in advances prior to the close of the April Bridge Financing from certain of the participating investors. Such advances accrued interest at a rate of eight percent (8%) per annum until close of the April Bridge Financing on April 17, 2023, for a total of $19,323 in aggregate interest on all advances during the year ended December 31. The April Bridge Financing consists of senior secured convertible notes that had a maturity date of October 17, 2023. On October 12, 2023, Channel entered into a first amendment to the senior secured convertible notes in the April Bridge Financing, which extended the maturity of the notes to November 1, 2023. On October 24, 2023, Channel entered into a second amendment to the senior secured convertible notes in the April Bridge Financing, which extended the maturity of the notes to November 14, 2023. On November 13, 2023, Channel entered into a third amendment to the senior secured convertible notes in the April Bridge Financing, which further extended the maturity of the notes to February 29, 2024. Such notes accrue interest on the unpaid principal amount at a rate of eight percent (8%) per annum and will automatically convert into 87,109 shares of Channel common stock in connection with the IPO at a twenty percent (20%) discount to the price per IPO Share (based on the IPO price of $6.00 per IPO Share). The senior secured convertible notes issued in the April Bridge Financing are secured by a security interest in all of Channel's assets (including its patents and intellectual property licenses). In connection with the April Bridge Financing, on April 17, 2023, Channel also entered into a securities purchase agreement with holders of the notes, pursuant to which Channel is required to file a registration statement within 180 calendar days after consummation of the IPO, providing for the resale of Channel common stock received by holders of the notes upon conversion of such notes.

On September 1, 2023, Channel entered into a bridge financing in September 2023 for an aggregate principal amount of $198,128 (the "September Bridge Financing" and together with the April Bridge Financing, the "Bridge Financings") with various accredited investors, certain of which are pre-existing stockholders, including Aperture Healthcare Ventures Ltd., MDB Merchants Park LLC, Balmoral and AME Equities LLC (each a related party based on share ownership in excess of 5% or resulting from a principal at one of the entities being on Channel's board of directors) in the aggregate principal amount of $197,421, after giving effect to the Representative Affiliate Transactions. The September Bridge Financing consists of senior secured convertible notes that have a maturity date of March 1, 2024. Such notes accrue interest on the unpaid principal amount at a rate of eight percent (8%) per annum and automatically converted into shares of Channel common stock in connection with the IPO at a twenty percent (20%) discount to the price per IPO Share plus 549 Bonus Shares (43,385 shares, based on the IPO price of $6.00 per IPO Share). The senior secured convertible notes issued in the September Bridge Financing are secured by a security interest in all of Channel's assets (including its patents and intellectual property licenses). In connection with the September Bridge Financing, on September 1, 2023, Channel also entered into a securities purchase agreement with holders of the notes, pursuant to which Channel is required to file a registration statement within 180 calendar days after consummation of the IPO, providing for the resale of Channel common stock received by holders of the notes upon conversion of such notes. Additionally, Channel entered into a subordination and intercreditor agreement, effective September 1, 2023, with the holders of the senior secured convertible notes issued in the April Bridge Financing, pursuant to which those notes and certain liens of Channel will be subordinated to the rights of the holders of the notes issued in the September Bridge Financing.

On October 12, 2023, Channel and four existing investors entered into promissory notes (the "October Promissory Notes") with an aggregate face amount of $210,000 and an aggregate purchase price of $175,000. The October Promissory Notes mature on November 12, 2023 or, if earlier to occur, upon the closing of the IPO. The October Promissory Notes bear no interest except in the case of certain events of default. On November 7, 2023, Channel amended and restated the October Promissory Notes to extend the maturity dates of the October Promissory Notes to November 17, 2023. On November 13, 2023, Channel amended and restated the October Promissory Notes to further extend the maturity dates of the Promissory Notes to February 29, 2024. The October Promissory Notes were repaid on February 26, 27 and 28, 2024.

On November 22, 2023, Channel commenced a rights offering (the "Rights Offering") pursuant to which Channel distributed non-transferable subscription rights (the "Subscription Rights") to each holder of Channel common stock held as of 5:00 p.m. Eastern Standard Time on November 22, 2023, the record date for the Rights Offering. The Subscription Rights could be exercised at any time during the subscription period, which commenced on November 22, 2023 and expired at 5:00 p.m., Eastern Standard Time, on December 1, 2023. The Subscription Rights were offered to all of its pre-existing stockholders, including Aperture Healthcare Ventures Ltd., MDB Merchants Park LLC, Balmoral and AME Equities LLC (each a related party based on share ownership in excess of 5%, or resulting from a principal at one of the entities being on Channel's board of directors), and each participated and exercised their Subscription Rights to purchase an aggregate of 1,211,238 shares of Channel common stock at the Subscription Price. In addition, Channel distributed to Mr. Knuettel, its Chief Executive Officer and Chief Financial Officer, and Mrs. Lara Knuettel c/o The Lara H. Knuettel Revocable Trust, a trust for which Mr. Knuettel and his wife are co-trustees (the "Knuettel Trust"), and at no charge to them, additional non-transferable Subscription Rights to purchase up to an aggregate 158,731 shares of Channel common stock in the Rights Offering at the same Subscription Price. On December 27, 2023, the Knuettel Trust made a charitable donation of 27,778 of those shares to Temple Israel of the City of New York. On June 28, 2024, the Knuettel Trust made an additional charitable donation of 5,000 shares to Temple Israel of the City of New York and 15,000 shares to The Hewitt School. Also on December 27, 2023, AME Equities LLC made a charitable donation of 87,778 of its shares to Ballantyne Jewish Center, Inc. Upon the closing of the Rights Offering, Channel issued an aggregate of 2,442,468 shares of Channel common stock and received aggregate net proceeds of $246,201, after giving effect to the Representative Affiliate Transactions, which Channel used primarily for general corporate purposes and expenses associated with its IPO.

On December 23, 2023, Channel entered into an exclusive licensing agreement (the "Benuvia License Agreement") with Benuvia Operations LLC ("Benuvia") for the Diclofenac Spray Formulation (as defined below), an intranasal spray formulation of Rizatriptan and an Ondansetron sublingual spray formulation (collectively, the "Spray Formulations", diversifying its pipeline of non-opioid pain treatment therapies, while adding therapeutic options for related conditions. The sublingual formulation of a Diclofenac spray for the treatment of acute pain (the "Diclofenac Spray Formulation") is patented and has started clinical development in human volunteers. Preliminary pharmacokinetics suggest that this formulation may have a faster onset of action than oral Diclofenac tablets. Diclofenac is an NSAID that is also marketed under additional brand names including Voltaren and Cataflam in its pill form. Rizatriptan, whose brand name is Maxalt, is used for the acute treatment of migraines as a pill. By a number of clinical measures it is thought to be superior to Sumatriptan. A sublingual formulation of Rizatriptan may potentially have a faster onset of action than an oral form and may be easier to tolerate than swallowing a pill when patients are experiencing nausea as a result of the migraine headache. Ondansetron is an anti-emetic that is available in oral and intravenous form. An Ondansetron sublingual spray formulation may potentially have a faster onset of action than an oral form and may be easier to tolerate than swallowing a pill when patients are experiencing nausea. Under the terms of the Benuvia License Agreement, Benuvia will be responsible for the manufacturing and supply of the Spray Formulations, but Channel will have exclusive, worldwide rights to develop, commercialize and distribute the Spray Formulations and Channel will purchase the Spray Formulations exclusively from Benuvia, pursuant to the Benuvia Supply Agreement. The initial sale price per unit for each Spray Formulation payable by Channel to Benuvia pursuant to the Benuvia Supply Agreement shall be subject to good faith negotiations; provided that the initial price for each Spray Formulation and the price for each Spray Formulation during the term of the Benuvia License Agreement in no event shall be less than Benuvia's cost of manufacturing the respective Spray Formulation plus a gross margin to Benuvia. The price for each Spray Formulation shall be subject to an annual increase in amounts equal to the percentage change in the Producer Price Index, Pharmaceutical Preparations as published by the U.S. Department of Labor, Bureau of Labor Statistics.

Under the terms of the Benuvia License Agreement, Channel obtained exclusive, worldwide rights to develop, commercialize and distribute the Spray Formulations. In connection with the Benuvia License Agreement, Channel agreed to pay Benuvia a six and one-half percent (6.5%) royalty on net sales of the Spray Formulations for a period of up to 15 years from the date of the first commercial sale of the Spray Formulations. To date, Channel has paid $0 to Benuvia as royalty on net sales of the Spray Formulations. Pursuant to the stock issuance agreement with Benuvia (the "Benuvia Stock Issuance Agreement"), Channel issued to Benuvia 384,226 shares of Channel common stock, which may be offered and sold pursuant to a resale prospectus. Benuvia will be responsible for the manufacturing and supply of the Spray Formulations, which is capped not to exceed a specific gross margin for Benuvia, and Channel has a most favored nation rate on development and regulatory services.

Under the Benuvia License Agreement, Channel will have exclusive, worldwide rights to develop, commercialize and distribute the Spray Formulations. Further, Channel has the right to request a bid from a third party to manufacture the Spray Formulations once each year.

The Benuvia License Agreement contains standard termination provisions. The Benuvia License Agreement may be terminated in its entirety, on a Spray Formulation by Spray Formulation basis, and by country by county for a material breach not cured within sixty (60) days after written notice thereof. If Channel breaches any of its payment obligations under the terms of the Benuvia License Agreement that are not the subject of a good faith dispute and are not cured within twenty (20) business days following notice thereof, Benuvia may terminate the Agreement upon written notice to Channel. Channel also has the right to terminate the Benuvia License Agreement in the event Channel determines, in its reasonable business judgment, that (i) any of the Spray Formulations will not be differentiated from oral tablets to result in a financially viable product or (ii) after having discussed a Spray Formulations with the FDA, Channel determines in its reasonable business judgment, that the cost of development of such Spray Formulation would exceed any reasonable forecast of a positive financial return. In the event Channel terminates the License Agreement, the parties will negotiate in good faith a license agreement to any improvements Channel made to the Spray Formulations, including any clinical trial data, and Benuvia will pay Channel a pre-determined royalty for such license. Mr. Davis, one of our directors, serves as the Chairman and Chief Executive Officer of Benuvia Holdings, LLC, which is the ultimate parent company of Benuvia.

On February 8, 2024, Channel and certain affiliates of the Representative entered into Bridge Financing Note Amendments. Under the Bridge Financing Note Amendments, both notes issued in the April Bridge Financing and the September Bridge Financing had a maturity date of March 1, 2024, and the full principal amount of both notes and any accrued interest thereon was payable solely in cash upon the consummation of the IPO. Both notes had an annual interest rate of eight percent (8%), which accrued daily, and was calculated on the basis of a 360-day year (consisting of twelve 30 calendar day periods).

On February 10, 2024, Channel entered into a Stock Rescission Agreement (the "Stock Rescission Agreement") with certain affiliates of the representative of the underwriters of the IPO (the "Representative"), pursuant to which Channel rescinded 111,129 shares of Channel common stock held by such affiliates of the Representative and agreed to refund an aggregate of $91,512 paid by such affiliates of the Representative in consideration therefor within 30 days of the effective date of the Stock Rescission Agreement.

**LNHC Transactions**

The following includes a summary of transactions from January 1, 2022 until the Merger, to which LNHC has been a party in which the amount involved exceeded or will exceed the lesser of (i) $120,000 and (ii) 1% of the average of LNHC's total assets at year-end for the prior two fiscal years, and in which any of LNHC's directors, executive officers or, to LNHC's knowledge, beneficial owners of more than 5% of LNHC capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements.

*Assignment Agreement*

Ligand and LNHC entered into an Assignment Agreement, dated March 24, 2025 (the "Assignment Agreement"), pursuant to which LNHC assigned to Ligand all of its material assets and liabilities (including intellectual property rights and contracts) relating to the NITRICIL platform technology, ZELSUVMI, and product candidates that utilize the NITRICIL platform technology. Ligand's rights to the assigned assets under the Assignment Agreement are subject to the License Agreement described below.

*License Agreement*

Ligand and LNHC entered into an Exclusive License and Sublicense Agreement, dated March 24, 2025, pursuant to which Ligand granted to LNHC an exclusive, sublicensable license under the intellectual property rights assigned to Ligand pursuant to the Assignment Agreement to exploit ZELSUVMI™ (berdazimer) topical gel (the "Licensed Product") for the treatment of molluscum contagiosum in humans (the "Licensed Field") anywhere in the world except Japan (the "Territory") and to make and have made certain compounds and products as defined in the Sato Agreement, pursuant to which Sato has received certain rights to certain compounds and products in Japan.

LNHC will use commercially reasonable efforts to commercialize the Licensed Product in the Licensed Field in the Territory. Within one year of the effective date of the License Agreement, Ligand and LNHC will also negotiate in good faith a development and funding agreement for LNHC to obtain rights to develop and commercialize the product program designated SB207.

LNHC will pay Ligand a 13% royalty on net sales of the Licensed Product. LNHC will also pay Ligand an aggregate amount of $10 million upon the achievement of certain sales and commercial milestones. LNHC will further pay Ligand a low-mid percentage of non-royalty payments received from its sublicensees.

Unless terminated earlier according to its terms, the License Agreement will expire when LNHC ceases to actively exploit the Licensed Product. Either party may terminate for the other party's material breach subject to a notice and cure period. Ligand may terminate if LNHC fails to achieve certain regulatory and commercial milestones with respect to certain major markets, if LNHC challenges the licensed patents or if LNHC becomes insolvent.

*Master Services Agreement*

In connection with drug products developed by Ligand, its affiliates or its licensees (the "Ligand Parties") utilizing the NITRICIL platform technology, Ligand and LNHC entered into a Master Services Agreement, pursuant to which LNHC will provide to the Ligand Parties certain development and manufacturing services in connection with such drug products developed by the Ligand Parties. In the event Ligand wishes to manufacture any product that uses the NITRICIL platform technology for other than ZELSUVMI (berdazimer) topical gel for the treatment of molluscum contagiosum in humans, then LNHC will transfer all necessary know-how to enable Ligand or its designee to manufacture such product. The Master Services Agreement will expire on March 24, 2040, subject to Ligand's election to renew the Master Services Agreement for additional five-year periods, provided Ligand gives at least 90 days' prior written notice thereof to LNHC. Ligand may terminate the Master Services Agreement for any reason or if LNHC undergoes a change in control, provided Ligand gives at least 30 days' prior written notice to LNHC. Either party may terminate for the other party's material breach subject to a notice and cure period or if the other party becomes insolvent or bankrupt.

*Ligand Bridge Note*

Effective January 1, 2025, LNHC entered into a revolving bridge promissory note with Ligand (the "Ligand Bridge Note") under which any amounts of cash transfers from Ligand to LNHC, and settlement of LNHC's expenses directly by Ligand, starting from January 1, 2025, are considered a loan from Ligand to LNHC. The maximum borrowing under the Ligand Bridge Note is $18.0 million. The Ligand Bridge Note was repaid at the closing of the Merger, and the amount repaid under the Ligand Bridge was offset against Ligand's funding commitment in the PIPE Financing.

**Post-Merger Related Party Transactions**

On July 1, 2025, the Company consummated the Merger with LNHC, pursuant to which Merger Sub merged with and into LNHC, with LNHC surviving the Merger and continuing as a wholly-owned subsidiary of the Company.

Pursuant to the terms of the Merger Agreement, executed by and among the Company, Merger Sub, LNHC and Ligand, the Merger closed on July 1, 2025. At the Effective Time, the Company issued an aggregate of approximately 31,278 shares of Series A Preferred Stock to Ligand, based on the exchange ratio set forth in the Merger Agreement. Immediately following the Effective Time, approximately 57,568 shares of Series A Preferred Stock were issued and outstanding. Following the Merger, LNHC became a wholly-owned subsidiary of the Company, and the Company adopted the business plan of LNHC. LNHC is a biopharmaceutical company committed to commercializing innovative, safe, and efficacious therapeutic products to help patients with unmet treatment burdens.

In conjunction with the consummation of the Merger, the Company closed the PIPE Financing pursuant to the Securities Purchase Agreement. At the closing of the PIPE Financing, which occurred immediately prior to the Effective Time, the Company issued an aggregate of 50,100 shares of Series A Preferred Stock to the PIPE Investors for gross proceeds of approximately $50.1 million, consisting of approximately $50.0 million in cash and the conversion of approximately $0.1 million of principal and interest under an outstanding convertible note.

Each share of Series A Preferred Stock is convertible into shares of Common Stock, subject to certain beneficial ownership limitations, including a 49.9% cap for Ligand and a 4.99% cap for other PIPE Investors. Immediately following the PIPE Financing, certain PIPE Investors converted 23,810 shares of Series A Preferred Stock into an aggregate of 2,381,000 shares of Common Stock (after giving effect to the Reverse Stock Split).

The Securities Purchase Agreement also provides the PIPE Investors with customary rights, including participation rights in future financings, anti-dilution protections, and registration rights pursuant to a Registration Rights Agreement entered into on the Closing Date. The Company is obligated to file a resale registration statement with the SEC covering the shares of Common Stock issuable upon conversion of the Series A Preferred Stock.

On the Closing Date, the Company effected the Reverse Stock Split and changed its name from Channel Therapeutics Corporation to Pelthos Therapeutics Inc. The Common Stock commenced trading on the NYSE American under the symbol "PTHS" on July 2, 2025.

*Nomis RoyaltyVest*

As an inducement to enter into the Securities Purchase Agreement, the Company and NRV entered into a Purchase and Sale Agreement, dated as of July 1, 2025, pursuant to which the Company sold to NRV, and NRV purchased, all of the Company's rights, title and interest in and to a portion of the Company's revenue payments for ZELSUVMI and all accounts with respect thereto. In addition, prior to the expiration of the Initial Royalty Term (as defined in the ZELSUVMI Royalty Agreement), NRV will receive a 1.5% royalty on net sales of ZELSUVMI worldwide, other than in Japan, and 3.46% of non-royalty sublicensing payments received by LNHC for its sublicensing of rights to ZELSUVMI, and (ii) after the expiration of the Initial Royalty Term, NRV will receive a 1.2% royalty on net sales of ZELSUVMI worldwide, other than in Japan, and 3.46% of non-royalty sublicensing payments received by LNHC for its sublicensing of rights to ZELSUVMI.

*NRV, Ligand, and Madison*

On July 1, 2025, the Company and NRV, Ligand, and Madison entered into a Purchase and Sale Agreement, pursuant to which the Company sold to each of NRV, Ligand, and Madison, and each of NRV, Ligand, and Madison purchased, all of the Company's rights, title and interest in and to a portion of the Company's revenue payments and all accounts related to or utilizing the Channel Covered Products. In addition, (A) prior to the expiration of the initial royalty term, (i) NRV will receive a 5.3% royalty, Ligand will receive a 1.7% royalty and Madison will receive a 1.5% royalty on Net Sales of the Channel Covered Products worldwide, and (ii) NRV will receive 12.23%, Ligand will receive 3.92% and Madison will receive 3.46% of non-royalty sublicensing payments received by Pharmaceutical Sub for its sublicensing of rights to the Channel Covered Products worldwide; and (B) after the expiration of the initial royalty term, (i) NRV will receive a 4.24% royalty, Ligand will receive a 1.36% royalty and Madison will receive a 1.2% royalty on Net Sales of the Channel Covered Products worldwide, and (ii) NRV will receive 12.23%, Ligand will receive 3.92% and Madison will receive 3.46% of non-royalty sublicensing payments received by Pharmaceutical Sub for its sublicensing of rights to the Channel Covered Products worldwide.

**DESCRIPTION OF CAPITAL STOCK**

**General**

*The following description of the Company's securities is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to our articles of incorporation, and our bylaws, each of which are filed as an exhibit to the Original Filing. Copies of these documents can be accessed through hyperlinks to those documents in the list of exhibits in our Original Filing.*

**Authorized Capital Stock** 

The Company's authorized capital shares consist of (a) 200,000,000 shares of Common Stock and (b) 20,000,000 shares of "blank check" preferred stock, par value $0.0001 per share (our "Preferred Stock"). The outstanding shares of our Common Stock are fully paid and nonassessable.

**Voting Rights** 

The holders of shares of Common Stock vote together as one class on all matters as to which holders of Common Stock are entitled to vote. Except as otherwise required by applicable law, all voting rights are vested in and exercised by the holders of Common Stock with each share of Common Stock being entitled to one vote, including in all elections of directors. The vote of the holders of a majority of the issued and outstanding shares of Common Stock entitled to vote thereon is sufficient to authorize, affirm, ratify or consent to such act or action, except as otherwise provided by law.

**Dividend Rights** 

Subject to the rights of holders of outstanding shares of Preferred Stock, if any, holders of Common Stock are entitled to receive such dividends and distributions and other distributions in cash, stock or property of the Company when, as and if declared thereon by the board of directors from time to time out of assets or funds of the Company legally available therefor.

**Liquidation Rights** 

Subject to the rights of holders of outstanding shares of Preferred Stock, if any, upon our liquidation, dissolution or winding up, the holders of Common Stock will be entitled to share ratably in the net assets and funds legally available for distribution to stockholders after the payment of all of the Company's debts and other liabilities.

**Other Rights and Preferences** 

Holders of Common Stock have no preemptive rights or other subscription rights, conversion rights, registration rights, redemption or sinking fund provisions by virtue of only holding such shares.

**Preferred Stock**

The board of directors has the authority, without further action by the Company's stockholders, to issue up to 20,000,000 shares of Preferred Stock in one or more classes or series and to fix the designations, rights, preferences, privileges and restrictions thereof, without further vote or action by the stockholder. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting, or the designation of, such class or series, any or all of which may be greater than the rights of Common Stock. The issuance of Preferred Stock could adversely affect the voting power of holders of Common Stock and the likelihood that such holders will receive dividend payments and payments upon the Company's liquidation. In addition, the issuance of Preferred Stock could have the effect of delaying, deferring or preventing a change in control of the Company or other corporate action.

***Series A Convertible Preferred Stock***

The Company has filed a Series A Certificate of Designations of Series A Convertible Preferred Stock with the Secretary of State of the State of Nevada designating 150,000 shares of Preferred Stock as the Series A Preferred Stock.

*Dividend Rights* 

Holders of Series A Preferred Stock are entitled to receive dividends as and when declared by the board of directors, in its sole discretion. Any such dividends are payable in cash out of legally available funds and are calculated based on the stated value of each share of Series A Preferred Stock. Dividends are not guaranteed and will only be paid if and when declared by the board of directors.

*Voting Rights* 

Holders of Series A Preferred Stock are entitled to receive notice of and vote at all shareholder meetings alongside holders of Common Stock, voting together as a single class provided, that each Holder will be deemed to have waived any voting rights such that the aggregate voting rights of any Common Stock beneficially owned by such holder and/or any of its Attribution Parties (as defined in the Series A Certificate of Designations), collectively, on any record date shall not exceed the Maximum Percentage (as defined below). Each share of Series A Preferred Stock has the right to vote together with the shares of Common Stock in an amount equal to the voting power of the aggregate number of shares of Common Stock that would be issuable to such holder upon conversion of such share of Series A Preferred Stock as if the conversion price of such share of Series A Preferred Stock was $1.255 (the "Voting Conversion Price"), such that each share of Series A Preferred Stock shall be entitled to vote, with the aggregate voting power of a holder's Series A Preferred Stock limited by the Maximum Percentage, subject to adjustment in the event of stock splits, combinations, or stock dividends affecting the Common Stock. Except as otherwise required by the Charter, Bylaws, or applicable law, Series A Preferred Stockholders have no special voting rights. However, where Nevada law requires a separate class or series vote for certain corporate actions, approval by the holders of a majority of the outstanding Series A Preferred Stock, voting together as a class, will be sufficient.

*Conversion* 

Each share of Series A Preferred Stock will be convertible at any time at the holder's option into a number of shares of Common Stock equal to (i) $1,000, subject to adjustment, plus any all declared and unpaid dividends thereon as of such date of determination, plus any other amounts owed to such holder pursuant to the Series A Certificate of Designations, divided by (ii) $1, subject to adjustments.

In general, a holder will not have the right to convert any portion of Series A Preferred Stock if the holder (together with its Attribution Parties) would beneficially own in excess of 49.9%, in the case of Ligand, and 4.99%, in the case of the other PIPE Investors (in each case, the "Maximum Percentage"), of the number of shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Series A Certificate of Designations. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99% upon notice to us, provided that any increase in this limitation will not be effective until 61 days after such notice from the holder to us and such increase or decrease will apply only to the holder providing such notice.

The Series A Certificate of Designations requires liquidated damages and "buy-in" payments to be made by us for failure to deliver shares of Common Stock issuable upon conversion.

*Liquidation Rights* 

In the event of a liquidation event, the holders of the Series A Preferred Stock shall be entitled to receive in cash out of the assets of the Company, whether from capital or from earnings available for distribution to our shareholders, the amount per share such holder would receive if such holder converted such shares of the Company Series A Preferred Stock into the Company Common Stock immediately prior to the date of such payment (without regard to any limitation on conversion set forth herein). Upon payment of such amount in full on the outstanding the Company Series A Preferred Stock, holders of the Series A Preferred Stock will have no rights to the Company's remaining assets or funds, if any.

***Series C Convertible Redeemable Preferred Stock***

The Company has filed a Certificate of Designation of Series C Redeemable Convertible Redeemable Preferred Stock with the Secretary of State of the State of Nevada designating 5,000 shares of Preferred Stock as Series C Convertible Redeemable Preferred Stock (the "Series C Preferred Stock").

*Dividend Rights* 

The Series C Preferred Stock has no dividend rights.

*Voting Rights* 

Holders of Series C Preferred Stock are not entitled to vote, unless otherwise permitted by the NRS.

*Redemption Rights* 

The Company, at its option shall have the right to redeem a portion or all of the outstanding shares of Series C Preferred Stock at any time; provided, however, that the Company may not redeem any shares of the Series C Preferred Stock prior to the expiration of the lock-up period associated with this IPO without first obtaining consent of the holder of shares being redeemed. The Company shall pay in cash an amount equal to the Stated Value (as defined in the Certificate of Designation of Series C Convertible Redeemable Preferred Stock) per share of Series C Preferred Stock redeemed.

*Conversion* 

Each share of Series C Preferred Stock will be convertible at any time at the holder's option into a number of shares of Common Stock determined by (i) multiplying the number of shares of Series C Preferred Stock by the Stated Value of the Series C Preferred Stock, and then (ii) dividing the value obtained from the preceding clause (i) by 125% of the IPO Price (as defined in the Certificate of Designation of Series C Convertible Redeemable Preferred Stock). If the Common Stock trades for twenty (20) consecutive trading days above 175% of the IPO Price, each share of Series C Preferred Stock shall mandatorily convert into a number of shares of Common Stock equal to the result by multiplying 120% with the quotient obtained by dividing the Stated Value by the price per IPO Share issued to the public in connection with the IPO.

*Liquidation Rights* 

The shares of Series C Preferred Stock will be entitled to a liquidation preference of $1,000 per share of Series C Preferred Stock (the "the Company Series C Liquidation Preference"). In the event that the Company voluntarily or involuntarily liquidates, dissolves, or winds up its affairs, holders of the shares of Series C Preferred Stock are entitled to receive out of the Company's assets available for distribution to stockholders, after satisfaction of liabilities and obligations to creditors, if any, and subject to the rights of holders of any shares of capital stock then outstanding ranking senior to or on parity with the Series C Preferred Stock with respect to distributions upon the voluntary or involuntary liquidation, dissolution, or winding-up of the Company's business and affairs, and before the Company makes any distribution or payment out of the Company's assets to the holders of Common Stock or any other class or series of the Company's capital stock ranking junior to the Series C Preferred Stock with respect to distributions upon the Company's liquidation, dissolution, or winding-up, an amount per share equal to the Series C Liquidation Preference.

**Anti-Takeover Provisions** 

Some features of the NRS, which are further described below, may have the effect of deterring third parties from making takeover bids for control of us or may be used to hinder or delay a takeover bid. This would decrease the chance that our stockholders would realize a premium over market price for their shares of Common Stock as a result of a takeover bid. These provisions may also adversely affect the prevailing market price for shares of our Common Stock.

***Acquisition of Controlling Interest***

The NRS contain provisions governing acquisition of a controlling interest of a Nevada corporation. These provisions provide generally that any person or entity that acquires a certain percentage of the outstanding voting shares of a Nevada corporation may be denied voting rights with respect to the acquired shares, unless certain criteria are satisfied.

***Combination with Interested Stockholder***

The NRS contains provisions governing combinations of a Nevada corporation that has 200 or more stockholders of record with an "interested stockholder." These provisions only apply to a Nevada corporation that, at the time the potential acquirer became an interested stockholder, has a class or series of voting shares listed on a national securities exchange, or has a class or series of voting shares traded in an "organized market" and satisfies certain specified public float and stockholder levels. As we do not now meet those requirements, we do not believe that these provisions are currently applicable to us. However, to the extent they become applicable to us in the future, they may have the effect of delaying or making it more difficult to affect a change in control of the Company in the future.

A corporation affected by these provisions may not engage in a combination within two years after the interested stockholder acquires his, her or its shares unless the combination or purchase is approved by the board of directors before the interested stockholder acquired such shares. Generally, if approval is not obtained, then after the expiration of the two-year period, the business combination may be consummated with the approval of the board of directors before the person became an interested stockholder or a majority of the voting power held by disinterested stockholders, or if the consideration to be received per share by disinterested stockholders is at least equal to the highest of:

● the highest price per share paid by the interested stockholder within the three years immediately preceding the date of the announcement of the combination or within three years immediately before, or in, the transaction in which he, she or it became an interested stockholder, whichever is higher;

● the market value per share on the date of announcement of the combination or the date the person became an interested stockholder, whichever is higher; or

● if higher for the holders of preferred stock, the highest liquidation value of the preferred stock, if any.

Generally, these provisions define an interested stockholder as a person who is the beneficial owner, directly or indirectly of 10% or more of the voting power of the outstanding voting shares of a corporation, and define combination to include any merger or consolidation with an interested stockholder, or any sale, lease, exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions with an interested stockholder of assets of the corporation:

● having an aggregate market value equal to 5% or more of the aggregate market value of the assets of the corporation;

● having an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation; or

● representing 10% or more of the earning power or net income of the corporation.

The Company's articles of incorporation expressly include a provision by which the Company elects to opt out of these provisions if and when the Company becomes a "resident domestic corporation" (as defined in NRS Section 78.427).

***Anti-Takeover Effects of Certain Provisions of our Charter and Bylaws***

The Company's articles of incorporation provide that directors may be removed by the stockholders with or without cause upon the vote of a majority of the holders of Common Stock then entitled to vote. Except as otherwise provided in the Company's bylaws and articles of incorporation, any vacancies or newly created directorships on the board of directors resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

The Company's bylaws also provide that only our chairman of the board of directors, chief executive officer, president or one or more stockholders holding shares in the aggregate entitled to cast not less than ten percent of the votes at that meeting may call a special meeting of stockholders.

The combination of these provisions makes it more difficult for the Company's existing stockholders to replace the board of directors as well as for another party to obtain control of us by replacing the board of directors. Since the board of directors has the power to retain and discharge the Company's officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. In addition, the authorization of undesignated Company preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change the Company's control.

These provisions are intended to enhance the likelihood of continued stability in the composition of the board of directors and its policies and to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to reduce the Company's vulnerability to hostile takeovers and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for the Company's shares and may have the effect of delaying changes in the Company's control or management. As a consequence, these provisions may also inhibit fluctuations in the market price of Common Stock that could result from actual or rumored takeover attempts. the Company believes that the benefits of these provisions, including increased protection of the Company's potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure the Company, outweigh the disadvantages of discouraging takeover proposals, because negotiation of takeover proposals could result in an improvement of their terms.

**Limitations of Director Liability and Indemnification of Directors, Officers and Employees**

NRS 78.138 provides that a director of a corporation is not individually liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer unless: (a) the presumption that directors and officers acted in good faith on an informed basis with a view toward the best interest of the corporation has been rebutted and (b) it is proven that:

● The director's or officer's act or failure to act constituted a breach of his or her fiduciary duties as a director or officer; and

● such breach involved intentional misconduct, fraud or a knowing violation of law.

Our articles of incorporation provide that we will indemnify our directors, officers, employees, and agents to the fullest extent permitted by law. Indemnification applies to legal proceedings arising from service to the company or to another entity at the company's request. However, indemnification for proceedings initiated by the individual requires prior Board authorization.

We have obtained a policy of directors' and officers' liability insurance.

We have entered into indemnification agreements with our directors and certain of our executive officers that provide, to the fullest extent permitted by applicable law, for indemnification, advancement of expenses, and other rights. These agreements generally require us to indemnify and hold harmless each director or officer against expenses (including reasonable attorneys' fees and other costs), judgments, fines, penalties, and settlement amounts actually and reasonably incurred in proceedings arising out of their service to the company or at our request, provided they meet the applicable standards of conduct and comply with the procedures for requesting indemnification and advancement set forth in the agreements.

These agreements also provide for advancement of expenses prior to final disposition of a proceeding, subject to an undertaking to repay amounts advanced if it is ultimately determined that the individual is not entitled to indemnification. In certain circumstances, if indemnification is unavailable, the company may be obligated to contribute to losses or settle claims under terms favorable to the indemnitee, and it may not settle any matter involving the indemnitee without their written consent.

We believe these indemnification protections are necessary to attract and retain qualified individuals as directors and officers.

The limitation of liability and indemnification provisions in our articles of incorporation, bylaws and these agreements could discourage stockholders from bringing derivative or direct actions, even if such actions might be in the company's or stockholders' interests. Our financial condition could be adversely impacted to the extent we are required to pay for indemnification, advancement, or settlement costs.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or controlling persons, the SEC has stated that such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

At present, no litigation or proceeding is pending or threatened involving any of our directors or officers for which indemnification is required or expected to be sought.

**Listing** 

Shares of our Common Stock are listed on the NYSE American LLC under the symbol "PTHS".

**Transfer Agent and Registrar** 

The transfer agent and registrar for our Common Stock is Nevada Agency and Transfer Company. The transfer agent's address is 50 West Liberty Street, Suite 880, Reno NV 89501 and its telephone number is (775) 322-0626.

**Item 2.02. Results of Operations and Financial Condition.**

**MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**AND RESULTS OF OPERATIONS OF LNHC**

*The following discussion and analysis should be read in conjunction with the section titled "Unaudited Pro Forma Financial Statements" and our condensed financial statements and related notes included elsewhere in this Form 8-K/A. This discussion and analysis and other parts of this Form 8-K/A contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth in the section titled "Risk Factors" and elsewhere in this Form 8-K/A. You should carefully read the "Risk Factors" section of this Form 8-K/A to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled "Cautionary Note Regarding Forward-Looking Statements".*

*Solely with respect to this "Management's Discussion and Analysis of Financial Condition and Results of Operations of LNHC", section, the "Company" "we," "us" and "our" refers to LNHC, Inc. and its consolidated subsidiary.*

***Separation from Ligand and Merger Agreement with Channel***

We have historically operated as part of Ligand since the Novan Acquisition date on September 27, 2023, and not as a separate, publicly traded company. Our condensed financial statements have been derived from Ligand's historical accounting records and are presented on a carve-out basis. All sales and costs as well as assets and liabilities directly associated with our business activity are included as a component of the condensed financial statements. The condensed financial statements also include allocations of certain general, administrative, sales and marketing expenses and cost of sales from Ligand's corporate office and from other Ligand businesses to us and allocations of related assets, liabilities, and Ligand's investment, as applicable. We believe the allocations have been determined on a reasonable basis; however, the amounts are not necessarily representative of the amounts that would have been reflected in the condensed financial statements had we been an entity that operated separately from Ligand during the periods presented. Further, the historical condensed financial statements may not be reflective of what our results of operations, income (loss), historical financial position, equity or cash flows might be in the future.

We have entered into various agreements with Ligand to provide for the allocation between us and Ligand of Ligand's assets, employees, liabilities and obligations attributable to periods prior to, at and after the separation and will govern certain relationships between us and Ligand after the separation.

On March 24, 2025, LNHC assigned its IP portfolio to Ligand, and entered into an exclusive license and sublicense agreement with Ligand, pursuant to which Ligand licensed to LNHC the intellectual property rights necessary to make, use, sell or offer to sell ZELSUVMI for the treatment of molluscum contagiosum in humans worldwide, except for Japan. In addition, on March 24, 2025, LNHC and Ligand also entered into a Master Services Agreement under which Ligand, or related parties, may contract with LNHC to provide active pharmaceutical ingredients for clinical or commercial use related to NITRICIL technology. In addition, the agreement also allows Ligand to require LNHC to provide manufacturing technology transfer services, if requested, for products other than ZELSUVMI for the treatment of molluscum contagiosum in humans, to a potential third-party manufacturer.

On April 17, 2025, Ligand and Channel announced the signing of a definitive merger agreement to combine LNHC (Ligand's wholly owned subsidiary) with CHRO Merger Sub Inc., a wholly owned subsidiary of Channel. The merger was supported by $50 million in capital raised from a group of strategic investors.

On July 1, 2025, Channel Therapeutics Corporation, Merger Sub, LNHC, and solely for the purposes of Article III thereof, Ligand consummated the Merger, pursuant to which, (i) Merger Sub merged with and into LNHC, with LNHC as the surviving company in the merger and, after giving effect to such merger, continuing as a wholly-owned subsidiary of the Company and (ii) the Company's name was changed from Channel Therapeutics Corporation to Pelthos Therapeutics Inc.

The Company has launched and is focused on the commercialization of ZELSUVMI and is continuing to build its sales, marketing and commercial team to detail ZELSUVMI. The Company expects pediatricians, pediatric dermatologists, dermatologists and infectious disease specialists will be the target prescribers.

***Overview***

On September 27, 2023, Ligand acquired certain assets of Novan. This transaction ("Novan Acquisition") was accounted for as a business combination. Novan was a medical dermatology company focused on developing and commercializing innovative therapeutic products for skin diseases. Through its NITRICIL technology platform, Novan had concentrated on developing SB206 (berdazimer gel, 10.3%) as a topical prescription gel for the treatment of viral skin infections, with a focus on molluscum contagiosum.

In January 2023, Novan submitted a New Drug Application to the FDA for berdazimer gel, 10.3% as a topical treatment for molluscum contagiosum which was subsequently approved by the FDA on January 5, 2024, and is commercially known as ZELSUVMI.

As of the effective date of the Novan Acquisition, all assets and liabilities acquired by Ligand in the Novan Acquisition were held by LNHC, which is a wholly owned subsidiary of Ligand.

Unless the context otherwise requires, the "Company" refers to LNHC.

***Key Factors Affecting Our Results of Operations and Future Performance***

We believe that our financial performance has been, and in the foreseeable future will continue to be, primarily driven by multiple factors as described below, each of which presents growth opportunities for our business. These factors also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations. Our ability to successfully address these challenges is subject to various risks and uncertainties, including those described in the section of this Form 8-K/A titled "Risk Factors."

● We must effectively implement and maintain sales, marketing and distribution capabilities for our products to successfully commercialize and generate revenues from our products.

● Our products must achieve a broad degree of physician and patient adoption and use necessary for commercial success. The commercial success of our approved products depends significantly on the broad adoption and use of such products by physicians and patients for approved indications.

● Our product revenues will be dependent on sales to a few significant wholesale customers and the loss of, or substantial decline in, sales to one of these wholesale customers could have a material adverse effect on our expected future revenues and profitability.

● Delays or disruptions in our supply chain and the manufacturing of our product could adversely affect our sales and marketing efforts.

● Unexpected results in the analysis of raw materials, the API or drug product or problems with the execution of or quality systems supporting the analytical testing work, whether conducted internally or by third-party service providers, could adversely affect our commercialization activities.

***Components of Results of Operations***

***Revenue***

Revenue in all periods is primarily related to recognition of deferred revenue from a collaboration agreement with Sato Pharmaceutical Co., Ltd. ("Sato Agreement"). For information about Sato Agreement, see Note (3), Sato Agreement in the notes to our condensed financial statements.

***Research and Development Expenses***

Research and development expenses include all direct and indirect development costs incurred for the development of ZELSUVMI. These expenses include salaries and related costs, including stock-based compensation and travel costs for research and development personnel, allocated facility costs, laboratory and manufacturing materials and supplies, consulting fees, product development, preclinical studies, clinical trial costs, licensing fees and milestone payments under license agreements and other fees and costs related to the development of drug candidates. The cost of tangible and intangible assets that are acquired for use on a particular research and development project, have no alternative future uses, and are not required to be capitalized in accordance with the Company's capitalization policy, are expensed as research and development costs as incurred.

***Selling, General and Administrative Expenses***

Selling, general and administrative expenses primarily consist of salaries, benefits and other personnel-related costs for employees in our executive, accounting and finance, corporate development, office administration, facility, legal and human resources functions as well as professional services fees, such as consulting, audit, tax and legal fees, general corporate costs and allocated overhead expenses. For the periods presented, selling expenses were not significant based on the stage of the business as it relates to its pre-commercial status. We expect that our selling, general and administrative expenses will increase substantially in absolute dollars in future periods, primarily due to the implementation and deployment of the commercial, sales, and marketing infrastructure necessary to sell ZELSUVMI, increased headcount to support anticipated growth in the business and due to incremental costs associated with operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC and stock exchange listing standards, public relations, director and officer insurance and professional services. We expect these expenses to vary from period to period as a percentage of revenue.

***Amortization of Intangibles***

The amortization of intangibles is related to Ligand purchase accounting of Novan upon which the Company recognized an intangible asset for NITRICIL technology in the amount of $10.7 million. This intangible asset is amortized on a straight-line basis over 15 years.

***Interest expense***

Interest expense is attributable to the Reedy Creek Purchase Agreement that was entered into on April 29, 2019, pursuant to which Reedy Creek provided funding to the Company in an amount of $25 million for the Company to pursue the development, regulatory approval and commercialization activities for SB206.

As of Novan Acquisition date, this liability was recognized at fair value in Ligand purchase accounting of Novan. Subsequently, this liability was accounted for under the effective interest method with non-cash interest expense added to the amount of liability on a quarterly basis. For information about the Reedy Creek Purchase Agreement, see Note (5), Reedy Creek Liability in the notes to our condensed financial statements.

***Results of Operations***

***Revenue***

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three months ended*** | ***Three months ended*** | ***Six months ended*** | ***Six months ended*** |
|  | ***June 30,*** | ***June 30,*** | ***June 30,*** | ***June 30,*** |
| ***(Dollars in thousands)*** | ***2025*** | ***2024*** | ***2025*** | ***2024*** |
| *Revenue* | $*317* | $*219* | $*611* | $*437* |

---

*Q2 2025 vs. Q2 2024*

Revenue was $317 thousand during the three months ended June 30, 2025, an increase of $98 thousand, or 45%, compared to $219 thousand for the three months ended June 30, 2024. Revenue in both periods was primarily related to the recognition of deferred revenue from Sato Agreement. Revenue increased primarily due to more delivery of study materials to Sato in 2025.

*YTD 2025 vs. YTD 2024*

Revenue was $611 thousand during the six months ended June 30, 2025, an increase of $174 thousand, or 40%, compared to $437 thousand for the six months ended June 30, 2024. Revenue in both periods was primarily related to the recognition of deferred revenue from Sato Agreement. Revenue increased primarily due to more delivery of study materials to Sato in 2025.

***Operating Expenses***

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended** | **Three months ended** | **Six months ended** | **Six months ended** |
|  | **June 30,** | **June 30,** | **June 30,** | **June 30,** |
| **(Dollars in thousands)** | **2025** | **2024** | **2025** | **2024** |
| Operating expenses: |  |  |  |  |
| Research and development | $3938 | $2288 | $6670 | $5617 |
| Selling, general and administrative | 12384 | 3174 | 16646 | 7087 |
| Amortization of intangibles |  | 178 | 162 | 357 |
| Total operating expenses | $16322 | $5640 | $23478 | $13061 |

---

*Q2 2025 vs. Q2 2024*

Research and development expense was $3.9 million during the three months ended June 30, 2025, an increase of $1.7 million, or 72%, compared to $2.3 million for the three months ended June 30, 2024. The increase in research and development expense was primarily attributable to increased personnel costs of approximately $0.6 million and increased costs related to preventive maintenance associated with equipment of $0.5 million.

Selling, general and administrative expense was $12.4 million during the three months ended June 30, 2025, an increase of $9.2 million, or 290%, compared to $3.2 million for the three months ended June 30, 2024. The increase in selling, general and administrative expense was primarily attributable to a $5.0 million milestone owed to Ligand related to ZELSUVMI commercialization activities, commercialization work, including marketing and education materials and conference costs totaling $1.8 million.

Amortization of intangibles was $0 thousand during the three months ended June 30, 2025, a decrease of $178 thousand, or 100%, compared to $178 thousand for the three months ended June 30, 2024. The decrease in amortization of intangibles was related to the transfer of the intangible asset for the NITRICIL technology from LNHC to Ligand in March 2025.

*YTD 2025 vs. YTD 2024*

Research and development expense was $6.7 million during the six months ended June 30, 2025, an increase of $1.1 million, or 19%, compared to $5.6 million for the six months ended June 30, 2024. The increase in research and development expense was primarily attributable to increased costs related to preventive maintenance associated with equipment of $0.5 million.

Selling, general and administrative expense was $16.6 million during the six months ended June 30, 2025, an increase of $9.6 million, or 135%, compared to $7.1 million for the six months ended June 30, 2024. The increase in selling, general and administrative expense was primarily attributable to a $5.0 million milestone owed to Ligand related to ZELSUVMI commercialization activities, commercialization work, including marketing and education materials and conference costs, totaling $1.7 million.

Amortization of intangibles was $162 thousand during the six months ended June 30, 2025, a decrease of $195 thousand, or 55%, compared to $357 thousand for the six months ended June 30, 2024. The decrease in amortization of intangibles was related to the transfer of the intangible asset for the NITRICIL technology from LNHC to Ligand in March 2025.

***Other income (expense)***

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended** | **Three months ended** | **Six months ended** | **Six months ended** |
|  | **June 30,** | **June 30,** | **June 30,** | **June 30,** |
| **(Dollars in thousands)** | **2025** | **2024** | **2025** | **2024** |
| Other income (expense), net: |  |  |  |  |
| Interest expense | $(930) | $(380) | $(1556) | $(750) |
| Other income (expense) | (26) | 2 | (49) | (4) |
| Total other income (expense), net | $(956) | $(378) | $(1605) | $(754) |

---

*Q2 2025 vs. Q2 2024*

Interest expense was $930 thousand during the three months ended June 30, 2025, an increase of $550 thousand, or 145%, compared to $380 thousand for the three months ended June 30, 2024. Interest expense is primarily attributable to a long-term liability to Reedy Creek. As of Novan Acquisition date, this liability was recognized at fair value in Ligand's purchase accounting adjustments of Novan. Subsequently, this liability was accounted for under the effective interest method with non-cash interest expense added to the amount of liability on a quarterly basis. Interest expense increased primarily due to the increase in effective interest rate as a result of increased ZELSUVMI sales forecast, as well as the increased outstanding balance of the liability that interest rate is applied to as no payments have yet been made.

*YTD 2025 vs. YTD 2024*

Interest expense was $1,556 thousand during the six months ended June 30, 2025, an increase of $806 thousand, or 107%, compared to $750 thousand for the six months ended June 30, 2024. Interest expense is primarily attributable to a long-term liability to Reedy Creek. As of Novan Acquisition date, this liability was recognized at fair value in Ligand's purchase accounting adjustments of Novan. Subsequently, this liability was accounted for under the effective interest method with non-cash interest expense added to the amount of liability on a quarterly basis. Interest expense increased primarily due to the increase in effective interest rate as a result of increased ZELSUVMI sales forecast, as well as the increased outstanding balance of the liability that interest rate is applied to as no payments have yet been made.

***Income tax benefit***

Income tax benefit amounted to zero and $59 thousand during the three months ended June 30, 2025 and 2024, and zero and $136 thousand during the six months ended June 30, 2025 and 2024, respectively. The amount of income tax benefit consists of federal deferred income tax benefit.

We remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. We assessed the positive and negative evidence to determine if sufficient future taxable income will be generated to use the existing deferred tax assets. Our evaluation of evidence resulted in management concluding that the majority of our deferred tax assets will not be realized.

***Liquidity and Capital Resources***

Since Ligand's acquisition of Novan, we have participated in Ligand's centralized approach to cash management and financing of its operations. Accordingly, none of the cash, cash equivalents, and short-term investments at the corporate level have been assigned to our company in the condensed financial statements. Prior to separation, transfers of cash to and from Ligand have been reflected in parent company net investment in the historical condensed balance sheets, condensed statements of cash flows and condensed statements of changes in parent company net investment.

Effective January 1, 2025, we entered into a bridge loan agreement with Ligand under which any amounts of cash transfers from Ligand to us, or settlement of our expenses directly by Ligand, starting from January 1, 2025, will be considered a loan from Ligand to us. The maximum borrowing under the bridge loan agreement is $18 million. The repayment of this loan at closing of the Merger will be offset against Ligand's funding commitment in the PIPE Financing.

In addition, on April 16, 2025, LNHC entered into a bridge loan agreement with two third-party lenders, part of the group of strategic investors led by Murchinson, for an aggregate amount of $6 million. This loan will accumulate interest on a risk-free rate, and will be either payable back to the lenders, or reduce their funding commitment with respect to the anticipated merger transaction.

Since the closing of the Merger, our capital structure and sources of liquidity have changed significantly from our historical capital structure, and Ligand is no longer be a source of liquidity for us. Since the closing of the Merger, our only sources of liquidity have been cash on hand and cash to be generated from product sales. We expect to continue to incur losses for the foreseeable future, as we continue to invest in commercialization activities for ZELSUVMI, add operational, financial and management information systems and personnel to support our operations and incur additional costs associated with operating as a public company.

Our ability to continue our operations is dependent upon our ability to obtain additional capital in the future and generate cash flows from operations. Based on our current projections, management believes there is substantial doubt about our ability to continue to operate as a going concern and to fund our operations through at least the next twelve months. While we completed an equity offering of $50.1 million in July 2025 related to the Merger, we expect that costs associated with the commercial launch of ZELSUVMI, in addition to other activities, will require us to raise additional funds. However, there is no assurance that we will be able to raise such additional funds on acceptable terms, if at all. If we raise additional funds by issuing securities, existing stockholders may be diluted.

In addition, we may utilize our available financial resources sooner than we currently expect. We will need to raise additional capital in the future if we decide to expand our business to develop other product candidates, or to pursue strategic investments or acquisitions, and we may consider raising additional capital to take advantage of favorable market conditions or financing opportunities or for other reasons.

Our future capital requirements will depend on many factors, including, but not limited to:

● The level of sales achieved from the commercialization of ZELSUVMI for the treatment of molluscum contagiosum;

● the costs of commercializing ZELSUVMI, including our business development and marketing efforts;

● the effect of competing products and other market developments;

● the extent to which we acquire or seek to develop other product candidates;

● the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patents and other intellectual property and proprietary rights, and

● our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company.

We anticipate that our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures and other general corporate purposes.

***Cash Flow Summary***

---

| | | |
|:---|:---|:---|
|  | **Six months ended** | **Six months ended** |
|  | **June 30,** | **June 30,** |
| **(Dollars in thousands)** | **2025** | **2024** |
| Net cash provided by (used in): |  |  |
| Operating activities | $(15664) | $(12678) |
| Investing activities | (67) | $(29) |
| Financing activities | 18548 | $12707 |

---

Net cash used in operating activities for the six months ended June 30, 2025 and 2024 was $15.7 million and $12.7 million, respectively, consisting primarily of the operating loss for the respective period.

Net cash used in investing activities for the six months ended June 30, 2025 and 2024 was $67 thousand and $29 thousand, respectively, consisting exclusively of purchases of property and equipment.

Net cash provided by financing activities for the six months ended June 30, 2025 and 2024 was $18.5 million and $12.7 million, respectively, consisting exclusively of cash transferred to the Company from parent based on Company cash needs for operating and investing activities. Parent company managed our cash and financing arrangements prior to the completion of the separation.

***Contractual Obligations and Commitments***

We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods. Such arrangements include those related to our lease commitments, long-term debt, and long-term manufacturing agreements.

***Lease Commitments***

Our lease commitments reflect payments due under our operating lease agreement for our corporate headquarters and small-scale manufacturing site. The lease expires in 2032. As of June 30, 2025, our contractual commitments for the lease were $4.7 million, of which $324 thousand is expected to be paid through the end of 2025, and $4.4 million will be paid over the remaining term of such leases. For additional information on our leases and timing of future payments, please read Note (7), Leases, to the condensed financial statements included in this Form 8-K/A.

***Reedy Creek***

On April 29, 2019, we entered into the Reedy Creek Purchase Agreement with Reedy Creek, pursuant to which Reedy Creek provided funding to us in an amount of $25 million for us to pursue the development, regulatory approval and commercialization activities (including through out-license agreements and other third-party arrangements) for SB206, a topical gel with anti-viral properties being developed as a treatment for molluscum, and advancing programmatically such activities with respect to SB204, a once-daily, topical monotherapy being developed for the treatment of acne vulgaris, and SB414, a topical cream-based product candidate being developed for the treatment of atopic dermatitis. For additional information on our Reedy Creek obligation and timing of future payments, please read Note (5), Reedy Creek Liability, to the condensed financial statements included in this Form 8-K/A.

***Ligand Pharmaceuticals***

On March 24, 2025, we assigned our IP portfolio to Ligand, and entered into an exclusive license and sublicense agreement with Ligand, pursuant to which Ligand licensed to us the intellectual property rights necessary to make, use, sell or offer to sell ZELSUVMI for the treatment of molluscum contagiosum in humans worldwide, except for Japan. In addition, on March 24, 2025, we and Ligand also entered into a Master Services Agreement under which Ligand, or related parties, may contract with us to provide active pharmaceutical ingredients for clinical or commercial use related to NITRICIL technology. In addition, the agreement also allows Ligand to require us to provide manufacturing technology transfer services, if requested, for products other than ZELSUVMI for the treatment of molluscum contagiosum in humans, to a potential third-party manufacturer. For additional information on our Ligand obligation and timing of future payments, please read Note (4), License Agreements, to the condensed financial statements included in this Form 8-K/A.

***Other Obligations***

In February 2025, LNHC entered into a non-exclusive Contract Management Agreement with Orion to manufacture and assemble various components related to the ZELSUVMI commercial drug product, including the final fill/finish process and product packaging. This agreement has an initial period of five years, with automatic two-year renewal periods thereafter, unless a notice of non-renewal is provided by either party. This commercial supply agreement includes customary terms governing the manufacture of the ZELSUVMI drug product, including but not limited to, a quality agreement governing the manufacture and quality control of the drug product, required periodic forecasting and demand planning/production scheduling, periodic non-binding, and binding purchase commitments, including minimums, and pricing and cost parameters.

***Critical Accounting Policies and Estimates***

The preparation of condensed financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the condensed financial statements and accompanying notes. The SEC has defined a company's critical accounting policies as the ones that are most important to the portrayal of the company's financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies, which involve the use of estimates, judgments, and assumptions that are significant to understanding our results. For additional information, see Note (2), Basis of Presentation and Significant Accounting Policies in the notes to our condensed financial statements. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.

***Inventory***

The Company measures inventory using the first-in, first-out method and values inventory at the lower of cost or net realizable value. Inventory value includes amounts related to materials, manufacturing labor and overheads. The Company adjusts its inventory for potentially obsolete inventory. The adjustment for obsolescence is generally an estimate of the value of inventory that is expected to expire in the future based on projected sales volume and product expiration or expected sell-by dates. These assumptions require the Company to analyze the aging of and forecasted demand for its inventory and make estimates regarding future product sales.

Prior to obtaining initial regulatory approval for ZELSUVMI in January 2024, the Company expensed costs relating to production of pre-launch inventory as research and development expense in its condensed statements of operations in the period incurred. Inventory acquired and the related costs after January 5, 2024, the date of the FDA's approval of ZELSUVMI, are capitalized.

Additionally, the Company's product is subject to strict quality control and monitoring that is performed throughout the manufacturing process, including release of work-in-process to finished goods. In the event that certain batches or units of product do not meet quality specifications, the Company records a write-down of any potential unmarketable inventory to its estimated net realizable value. The amount of expense related to inventory write down as a result of excess, obsolescence, scrap, or other reasons is recorded as research and development expense in the condensed statement of operations. The Company-recorded inventory write-down amounted to $264 thousand during the three and six months ended June 30, 2025, and $248 thousand during the three and six months ended June 30, 2024. Any of such expenses incurred subsequent to the ZELSUVMI commercial launch date will be recorded as cost of sales.

***Impairment of Goodwill and Long-Lived Assets***

Goodwill, which has an indefinite useful life, represents the excess of cost over fair value of net assets acquired. Goodwill is reviewed for impairment at the reporting unit level at least annually during the fourth quarter, or more frequently if an event occurs indicating the potential for impairment. During the goodwill impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and the overall financial performance. If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair value of our reporting unit is less than the carrying amount, then no additional assessment is deemed necessary. The Company performed the annual assessment for goodwill impairment at the reporting unit level during the fourth quarter of 2024, noting no impairment. The Company did not identify indicators of impairment for goodwill during the three and six months ended June 30, 2025 and 2024.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for an amount by which the carrying amount of the asset exceeds the fair value of the asset. The Company did not identify indicators of impairment for the finite-lived intangibles during the three and six months ended June 30, 2025 and 2024.

As noted above, on March 24, 2025, LNHC assigned its rights to its IP portfolio to Ligand, and entered into an exclusive license and sublicense agreement with Ligand. An IP transfer transaction was accounted as a non-cash distribution from LNHC to the Parent, resulting in a reduction of Parent Company Net Investments balance by the amount of IP's net book value as of the date of the transfer.

***Fair Value of Financial Instruments***

Accounts receivable, other current assets, accounts payable, accrued expenses, operating lease liabilities and other long-term liabilities (Reedy Creek liability) are financial instruments and are recorded at cost in the condensed balance sheets.

The estimated fair value of the Reedy Creek liability is classified as Level 3 within the fair value hierarchy (Unobservable inputs in which there is little or no market data, which require the Company to develop its own assumptions) since it is determined based upon inputs that are both significant and unobservable. This liability was fair valued based on the discounted cash flow method that estimated the present value of the potential royalties, milestones, and collaboration revenue streams derived from the related programs mentioned above, by applying a discount rate of 20% (revenue risk-adjusted discount rate).

The estimated fair value of the remaining financial instruments approximates their carrying value as of June 30, 2025 and December 31, 2024.

***Recent Accounting Pronouncements***

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity's effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU will be effective for the annual periods beginning after December 15, 2024. The Company is currently evaluating the impact ASU No. 2023-09 will have on its condensed financial statements.

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2024-03, "Disaggregation of Income Statement Expenses," which requires disclosures of certain disaggregated income statement expense captions into specified categories within the footnotes to the financial statements. The requirements of the ASU are effective for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The requirements will be applied prospectively with the option for retrospective application. The Company is currently evaluating the impact ASU No. 2024-03 will have on its condensed financial statements.

The Company does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the condensed financial statements or disclosures.

**Item 9.01. Financial Statements and Exhibits**

**(a) Financial Statements of Business Acquired**

The audited financial statements of LNHC as of December 31, 2024 and 2023 and for the years ended December 31, 2024 and 2023 and the related notes are included in the definitive information statement, dated May 27, 2025 which was filed by the Company with the SEC on May 27, 2025 (the "Information Statement") beginning on page F-68 and are incorporated herein by reference.

The unaudited condensed financial statements of LNHC as of March 31, 2025 and 2024 and for the three months ended March 31, 2025 and 2024 and the related notes included in the Information Statement beginning on page F-50 and are incorporated herein by reference.

The unaudited condensed financial statements of LNHC as of June 30, 2025 and 2024 and for the three months and six months ended June 30, 2025 and 2024 are filed as Exhibit 99.1 and incorporated by reference herein.

**(b) Pro Forma Financial Information**

The unaudited pro forma condensed combined financial information of the Company for the year ended December 31, 2024 giving effect to the Merger is filed as Exhibit 99.2 and incorporated by reference herein.

The unaudited pro forma condensed combined financial information of the Company as of and for the six months ended June 30, 2025 giving effect to the Merger is filed as Exhibit 99.2 and incorporated by reference herein.

**(d) Exhibits:**

---

| | |
|:---|:---|
| **Exhibit** <br> **No.** | **Description** |
| 3.1 | [Certificate of Amendment to Certificate of Designation of Rights and Preferences of Series A Convertible Preferred Stock, filed with the Secretary of State of the State of Nevada on July 17, 2025 (incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement on Form S-8 filed with the Commission on July 25, 2025 (Registration No. 333- 288980)).](http://www.sec.gov/Archives/edgar/data/1919246/000175392625001183/g084895_ex4-3.htm) |
| 3.2 | [Certificate of Designations, Preferences and Rights of Series A Convertible Redeemable Preferred Stock, filed with the Secretary of State of the State of Nevada on July 1, 2025 (filed as Exhibit 3.3 to Registrant's Current Report on Form 8-K filed with the Commission on July 2, 2025).](http://www.sec.gov/Archives/edgar/data/1919246/000175392625001055/g084856_ex3-3.htm) |
| 3.3 | [Certificate of Designations, Preferences and Rights of Series C Convertible Redeemable Preferred Stock, filed with the Secretary of State of the State of Nevada on November 8, 2024 (filed as Exhibit 3.1(c) to Registrant's Current Report on Form 8-K filed with the Commission on November 18, 2024).](http://www.sec.gov/Archives/edgar/data/1919246/000175392624001955/g084563_ex3-1ic.htm) |
| 10.1 | [Agreement and Plan of Merger, dated as of April 16, 2025, by and among Channel Therapeutics Corporation, CHRO Merger Sub Inc., LNHC, Inc. and Ligand Pharmaceuticals Incorporated (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the Commission on April 17, 2025).](http://www.sec.gov/Archives/edgar/data/1919246/000175392625000652/g084777_ex2-1.htm) |
| 10.2 | [Securities Purchase Agreement, dated as of April 16, 2025, by and among Channel Therapeutics Corporation, LNHC Inc., and each of the investors thereto. (incorporated by reference to Exhibit 10.1 the Registrant's Current Report on Form 8-K filed with the Commission on April 17, 2025).](http://www.sec.gov/Archives/edgar/data/1919246/000175392625000652/g084777_ex10-1.htm) |
| 10.3 | [Registration Rights Agreement (incorporated by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K filed with the Commission on July 2, 2025).](http://www.sec.gov/Archives/edgar/data/1919246/000175392625001055/g084856_ex10-8.htm) |
| 10.4 | [Form of Lock-Up Agreement (certain investors who have entered the Securities Purchase Agreement) (incorporated by reference to Exhibit 10.3 the Registrant's Current Report on Form 8-K filed with the Commission on April 17, 2025).](http://www.sec.gov/Archives/edgar/data/1919246/000175392625000652/g084777_ex10-3.htm) |
| 10.5\*++ | [License Agreement dated January 12, 2017, by and between Novan, Inc. and Sato Pharmaceutical Co., Ltd.](g084946_ex10-5.htm) |
| 10.6\*++ | [First Amendment to License Agreement dated January 12, 2017, by and between Novan, Inc. and Sato Pharmaceutical Co., Ltd.](g084946_ex10-6.htm) |
| 10.7\*++ | [Second Amendment to License Agreement dated October 5, 2018, by and between Novan, Inc. and Sato Pharmaceutical Co., Ltd.](g084946_ex10-7.htm) |
| 10.8\*++ | [Royalty and Milestone Payments Purchase Agreement dated April 29, 2019, by and between Novan, Inc. and Reedy Creek Investments LLC.](g084946_ex10-8.htm) |
| 10.9\* | [Amendment, Assignment and Assumption Agreement dated September 11, 2023, by and between Novan, Inc., LNHC, Inc. and Reedy Creek Investments LLC.](g084946_ex10-9.htm) |
| 10.10\*++ | [Amended, Restated and Consolidated License Agreement dated June 27, 2012, by and between The University of North Carolina at Chapel Hill and Novan, Inc.](g084946_ex10-10.htm) |
| 10.11\*++ | [First Amendment to Amended, Restated and Consolidated License Agreement dated as of November 20, 2012, between The University of North Carolina at Chapel Hill and Novan, Inc.](g084946_ex10-11.htm) |
| 10.12\*++ | [Second Amendment to Amended, Restated and Consolidated License Agreement dated April 12, 2016, by and between The University of North Carolina at Chapel Hill and Novan, Inc.](g084946_ex10-12.htm) |
| 10.13\*++ | [Third Amendment to Amended, Restated and Consolidated License Agreement dated November 1, 2018, by and between The University of North Carolina at Chapel Hill and Novan, Inc.](g084946_ex10-13.htm) |
| 10.14\*++ | [Fourth Amendment to Amended, Restated and Consolidated License Agreement dated November 26, 2018, by and between The University of North Carolina at Chapel Hill and Novan, Inc.](g084946_ex10-14.htm) |
| 10.15\*++ | [Fifth Amendment to Amended, Restated and Consolidated License Agreement dated October 27, 2021, by and between The University of North Carolina at Chapel Hill and Novan, Inc.](g084946_ex10-15.htm) |
| 10.16\* | [Sixth Amendment to Amended, Restated and Consolidated License Agreement dated July 26, 2024, by and between The University of North Carolina at Chapel Hill and Novan, Inc.](g084946_ex10-16.htm) |
| 10.17\* | [Seventh Amendment to Amended, Restated and Consolidated License Agreement dated March 12, 2025, by and between The University of North Carolina at Chapel Hill and Novan, Inc.](g084946_ex10-17.htm) |
| 10.18\* | [Lease dated January 18, 2021 by and between Copper II 2020, LLC and Novan, Inc.](g084946_ex10-18.htm) |
| 10.19\* | [Second Amendment to Lease dated November 23, 2021 by and between Copper II 202, LLC and Novan, Inc.](g084946_ex10-19.htm) |
| 10.20\* | [Third Amendment to Lease dated October 17, 2023 by and between TBC Stirrup Creek Owner LLC and LNHC, Inc.](g084946_ex10-20.htm) |
| 10.21\*++ | [Contract Manufacturing Agreement dated February 12, 2025 by and between LNHC, Inc. and Orion Corporation.](g084946_ex10-21.htm) |
| 10.22\* | [Assignment Agreement dated March 24, 2025, by and between Ligand Pharmaceuticals Incorporated and LNHC, Inc.](g084946_ex10-22.htm) |
| 10.23\* | [Master Services Agreement for Product Supply dated as of March 24, 2025, by and between Ligand Pharmaceuticals Incorporated and LNHC, Inc.](g084946_ex10-23.htm) |
| 10.24\* | [Exclusive License and Sublicense Agreement dated March 24, 2025, by and between Ligand Pharmaceuticals Incorporated and LNHC, Inc.](g084946_ex10-24.htm) |
| 10.25 | [Employee Lease Agreement, dated July 1, 2025, by and between Ligand Pharmaceuticals Incorporated and Pelthos Therapeutics Inc. (incorporated by reference to Exhibit 10.20 to the Company's Current Report on Form 8-K filed with the SEC on July 2, 2025).](http://www.sec.gov/Archives/edgar/data/1919246/000175392625001055/g084856_ex10-20.htm) |
| 10.26 | [Transition Services Agreement, dated July 1, 2025, by and between Ligand Pharmaceuticals Incorporated and LNHC, Inc. (incorporated by reference to Exhibit 10.21 to the Company's Current Report on Form 8-K filed with the SEC on July 2, 2025)](http://www.sec.gov/Archives/edgar/data/1919246/000175392625001055/g084856_ex10-21.htm) |
| 99.1\* | [Unaudited financial statements of LNHC, Inc. as of and for the three and six months ended June 30, 2025 and June 30, 2024.](g084946_ex99-1.htm) |
| 99.2\* | [Unaudited pro forma condensed combined financial information of Pelthos Therapeutics Inc. as of and for the six months ended June 30, 2025 and for the year ended December 31, 2024.](g084946_ex99-2.htm) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |

---

\* &nbsp;&nbsp;&nbsp;&nbsp; Filed herewith.

++ &nbsp;&nbsp;&nbsp;&nbsp; Certain information contained in this Exhibit has been excluded pursuant to Item 601(b)(10)(iv) of Regulation S-K because it is both not material and is the type of information that the Company treats as private or confidential.

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

---

| | | | |
|:---|:---|:---|:---|
| Date: September 16, 2025 | **Pelthos Therapeutics Inc.** | **Pelthos Therapeutics Inc.** | **Pelthos Therapeutics Inc.** |
|  | By: | /s/ Francis Knuettel II | /s/ Francis Knuettel II |
|  |  | Name: | Francis Knuettel II |
|  |  | Title: | Chief Financial Officer |

---

## Exhibit 10.5

**Exhibit 10.5**

**Certain confidential information contained in this exhibit have been omitted by means of redacting a portion of the text and replacing it with [\*\*\*], pursuant to Regulation S-K Item 601(b)(10) of the Securities Act of 1933, as amended. Certain confidential information has been excluded from this exhibit because it is: (i) not material; and (ii) the registrant treats such information as private or confidential.**

**Execution Copy**

**January 12, 2017**

**Novan, Inc**

(as Licensor)

and

**Sato Pharmaceutical Co., Ltd**

(as Licensee)

**LICENSE AGREEMENT**

**CONTENTS**

---

| | | |
|:---|:---|:---|
|  | **Clause** | **Page** |
| <u>1.</u> | <u>DEFINITIONS</u> | 1 |
| <u>2.</u> | <u>GRANT OF LICENSE; RIGHT OF FIRST NEGOTIATION</u> | 10 |
| <u>3.</u> | <u>DILIGENCE</u> | 14 |
| <u>4.</u> | <u>DEVELOPMENT AND COMMERCIALIZATION OF LICENSED PRODUCT</u> | 15 |
| <u>5.</u> | <u>MANUFACTURING & SUPPLY</u> | 17 |
| <u>6.</u> | <u>EXCHANGE OF SCIENTIFIC INFORMATION</u> | 18 |
| <u>7.</u> | <u>INVENTIONS; ACCESS TO IMPROVEMENTS; PATENTS</u> | 20 |
| <u>8.</u> | <u>TRADEMARKS</u> | 26 |
| <u>9.</u> | <u>SERIOUS ADVERSE EVENT REPORTING</u> | 28 |
| <u>10.</u> | <u>REPRESENTATIONS AND WARRANTIES</u> | 29 |
| <u>11.</u> | <u>CONFIDENTIALITY OBLIGATIONS OF SATO</u> | 32 |
| <u>12.</u> | <u>CONFIDENTIALITY OBLIGATIONS OF NOVAN</u> | 33 |
| <u>13.</u> | <u>PRESS RELEASES</u> | 34 |
| <u>14.</u> | <u>PAYMENT</u> | 35 |
| <u>15.</u> | <u>ROYALTY PAYMENT; AUDITS</u> | 36 |
| <u>16.</u> | <u>INDEMNIFICATION</u> | 38 |
| <u>17.</u> | <u>LIMITATION OF LIABILITY; EXCLUSION OF DAMAGES; DISCLAIMER</u> | 41 |
| <u>18.</u> | <u>TERM</u> | 41 |
| <u>19.</u> | <u>EARLY TERMINATION</u> | 42 |
| <u>20.</u> | <u>OBLIGATIONS UPON EARLY TERMINATION</u> | 43 |
| <u>21.</u> | <u>FORCE MAJEURE</u> | 45 |
| <u>22.</u> | <u>GENERAL PROVISIONS</u> | 45 |
| <u>23.</u> | <u>GOVERNING LAW</u> | 47 |
| <u>24.</u> | <u>DISPUTE RESOLUTION; JURISDICTION</u> | 47 |

---

**LICENSE AGREEMENT**

This License Agreement is entered into by and between Novan, Inc., a Delaware corporation having an address at 4105 Hopson Road, Morrisville, North Carolina 27560, USA ("**Novan**") and Sato Pharmaceutical Co., Ltd, a Japanese corporation having an address at 1-5-27, Moto-Akasaka, Minato-ku, Tokyo 107-0051, Japan ("**Sato**"). Novan and Sato are also referred to individually as a "**Party**" and together as the "**Parties**".

**WITNESSETH THAT:**

**WHEREAS**, Novan is developing a pharmaceutical product in the United States known as SB204 for the treatment of acne vulgaris, and owns or controls certain proprietary technology, know-how and information relating to such product; and

**WHEREAS**, Sato desires to obtain from Novan a license to develop and commercialize such product in Japan, and Novan desires to grant such license and option to Sato.

**NOW, THEREFORE**, it is agreed between the Parties as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1. DEFINITIONS**

The following terms as used in this Agreement (as hereinafter defined) shall have the meanings set forth in this Section (which meanings shall be applicable both to the singular and the plural forms of such terms):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.1** "**Accountant**" has the meaning set forth in Section 15.8.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.2** "**Additional License Agreement**" has the meaning set forth in Section 2.10(ii).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.3** "**Additional Licensed Territories**" shall mean China (including Hong Kong), South Korea, Taiwan, Singapore, Indonesia, Thailand, Philippines, Vietnam, Malaysia, Cambodia, Brunei, Myanmar, or Laos.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.4** "**Affiliate**" means with respect to each Party, any Person that directly or indirectly is controlled by, controls or is under common control with a Party. For the purposes of this definition only, the term "control" (including, with correlative meanings, the terms "controlled by" and "under common control with") as used with respect to a Person means (a) in the case of a corporate entity, direct or indirect ownership of voting securities entitled to cast at least fifty percent (50%) of the votes in the election of directors or (b) in the case of a non-corporate entity, direct or indirect ownership of at least fifty percent (50%) of the equity interests with the power to direct the management and policies of such entity; provided that, if local Laws restrict foreign ownership, control shall be established by direct or indirect ownership of the maximum ownership percentage that may, under such local Laws, be owned by foreign interests, but only if such lower percentage provides such Person with the power to direct the management and policies of such entity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.5** "**Agreement**" means this License Agreement, including all of its Annexes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.6** "**[\*\*\*]**" means the **[\*\*\*]**, and shall include **[\*\*\*]**. Such **[\*\*\*]** shall be in accordance with U.S. GAAP, consistently applied. **[\*\*\*]** shall not include **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.7** "**Approved Label**" means the label included in the Marketing Approval for the Licensed Product in the Licensed Field in the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.8 "Bankruptcy Laws**" has the meaning set forth in Section 20.3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.9** "**Base Price**" has the meaning set forth in Section 5.4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.10** "**Business Day**" means a day other than Saturday, Sunday or any day on which commercial banks located in the State of North Carolina, U.S., or in Tokyo, Japan are authorized or obligated by Laws to close.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.11** "**CEO**" has the meaning set forth in Section 24.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.12** "**Commercial Supply Agreement**" has the meaning set forth in Section 5.4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.13** "**Commercially Reasonable Efforts**" means, with respect to a Party's obligation under this Agreement to develop, manufacture, commercialize or seek intellectual property protection for the Licensed Product, the level of efforts required to carry out such obligation in a sustained manner consistent with the efforts that a similarly situated company devotes to a product of similar market potential, profit potential, or strategic value at a similar stage in its development or product life within its portfolio. For purposes of illustration, Commercially Reasonable Efforts requires, with respect to such an obligation, that a Party reasonably and in good faith: (a) promptly assign responsibility for such obligation to specific employee(s) who are held accountable for progress and monitor such progress on an on-going basis, (b) set and seek to achieve reasonable objectives for carrying out such obligation, and (c) reasonably make and implement decisions and allocate resources designed to advance progress with respect to such objectives, all taking into account issues of available intellectual property coverage, safety and efficacy information, targeted product profile, the competitiveness of the marketplace, other technical, legal, scientific and/or medical factors and the pricing and reimbursement status for the relevant product. In evaluating whether a Party has used Commercially Reasonable Efforts, due consideration will be given to any delays by the other Party in performing its obligations under this Agreement that adversely impact the first Party's ability to perform its obligations under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.14** "**Competing Product**" means **[\*\*\*]** product for **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.15** "**Compound**" means the substance known as NVN1000, which is the subject of Investigational New Drug Application **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.16** "**Confidentiality Agreement**" means that certain confidentiality agreement between Sato and Novan dated **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.17** "**Control**" means possession of the ability to grant a license, sublicense or access as provided for under this Agreement without (a) violating the terms of any agreement or other arrangement with any Third Party or (b) increasing at any time the amount of any payments required under any such agreement or arrangement that is entered into after the Effective Date, provided that this subsection (b) shall not apply if the other Party elects in writing to be responsible for all such increased payments as provided in Section 2.9.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.18** "**Conversion Rate**" means the average conversion rate from JPY to USD during the **[\*\*\*]** prior to the Effective Date, as published in *The Wall Street Journal*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.19** "**Cover**", "**Covered**" or "**Covering**" means, with reference to a Patent and a product, composition, article of manufacture, or method, that the manufacture, practice, use, offer for sale, sale or importation of the product, composition, article of manufacture, or method, would infringe a Valid Claim of such Patent in the country in which such activity occurs without a license thereto (or ownership thereof).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.20** "**Damages**" has the meaning set forth in Section 16.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.21** "**Development Plan**" has the meaning set forth in Section 4.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.22** "**Dispute**" has the meaning set forth in Section 24.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.23** "**Drug Approval Application**" means an application for Marketing Approval required before commercial sale or use of the Licensed Product as a drug in a regulatory jurisdiction or country.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.24** "**Effective Date**" means January 12, 2017.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.25** "**[\*\*\*]**" has the meaning set forth in Section 2.3(v).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.26** "**Election Time Period**" has the meaning set forth in Section 16.3(i).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.27** "**FCPA**" has the meaning set forth in Section 10.3(iii).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.28** "**First Commercial Sale**" means the first arm's length commercial sale of a Licensed Product by Sato or an Affiliate of Sato to a Third Party (including without limitation any final sale to a distributor or wholesaler under any non-conditional sale arrangement) in a country where Marketing Approval of such Licensed Product has been obtained by Sato or an Affiliate of Sato.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.29 "Force Majeure**" has the meaning set forth in Section 21.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.30** "**Fully Burdened Manufacturing Cost**" means, as applicable to Study Materials manufactured by Novan or its Third Party supplier, Novan's or its Affiliate's cost of manufacturing such Study Material, which is equal to (a) **[\*\*\*]** for the Study Material (or components thereof) made by Novan, **[\*\*\*]**, in each case for the manufacture of the Study Material, (b) **[\*\*\*]**, and (c) for Study Materials (or components thereof) made by Novan's Third Party supplier, **[\*\*\*]** to the extent such costs in (a) and (c) are **[\*\*\*]**. Fully Burdened Manufacturing Cost shall be calculated in a manner consistent with U.S. GAAP, consistently applied.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.31** "**Goods**" means the Compound, Study Materials and/or the Licensed Product.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.32** "**Government or Public Official**" has the meaning set forth in Section 10.3(iii).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.33** "**ICDR**" has the meaning set forth in Section 24.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.34** "**Improvement**" means any **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.35** "**Information**" means all data, materials and documents necessary for the development or commercialization of the Licensed Product within the Licensed Field, including without limitation those relating to or comprising inventions; practices; methods; knowledge; know-how; skill; experience; compositions of matter; assays; medical, toxicological, pharmacological, pre-clinical, clinical and chemical data; specifications; medical uses; adverse reactions; formulations; bioanalytical metrics; analytical and quality control data and methods; and all proprietary information submitted to relevant Regulatory Authorities to support a Drug Approval Application for and Marketing Approval of the Licensed Product in the Licensed Field.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.36** "**Indemnification Claim Notice**" has the meaning set forth in Section 16.3(i).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.37** "**Indemnified Party**" has the meaning set forth in Section 16.3(i).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.38** "**Indemnifying Party**" has the meaning set forth in Section 16.3(i).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.39** "**Invention**" means any and all discoveries, developments, improvements, modifications, formulations, materials, compositions of matter, cell lines, processes, machines, manufactures and other inventions (whether patentable or not patentable) made in the course of activities performed under this Agreement by or on behalf of either Party or both Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.40** "**JNDA**" has the meaning set forth in Section 3.1(i).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.41** "**Joint Committee**" or "**JC**" has the meaning set forth in Section 2.4(i).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.42** "**Joint Inventions**" has the meaning set forth in Section 7.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.43** "**Joint Patent**" has the meaning set forth in Section 7.4(iii).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.44** "**JPY**" means a Japanese yen.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.45** "**Law**" means all applicable laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision, domestic or foreign.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.46** "**Licensed Field**" means the treatment of acne vulgaris in humans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.47** "**Licensed Product**" means any topical finished dosage form that (i) contains the Compound and (ii) meets the Specifications or, subject to Section 4.3, the Modified Specifications.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.48** "**Licensed Rights**" means the rights granted by Novan to Sato pursuant to Section 2.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.49** "**Licensed Territory**" means Japan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.50** "**Licensee Efficacy Data**" means Licensee Scientific Information relating to the efficacy of the Licensed Product, including, without limitation, **[\*\*\*]** and **[\*\*\*]**. For clarity, Licensee Efficacy Data excludes **[\*\*\*]**, including, without limitation, **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.51** "**Licensee Scientific Information**" means the Scientific Information **[\*\*\*]** that is **[\*\*\*]**, that is **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.52** "**Litigation Conditions**" has the meaning set forth in Section 16.3(i).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.53** "**Marketing Approval**" means, with respect to a particular country or regulatory jurisdiction, all necessary authorizations and approvals by the Regulatory Authorities required to manufacture, use, import, market, distribute and promote the Licensed Product in the Licensed Field in such country or regulatory jurisdiction, including, but not limited to, any importation or manufacturing licenses, marketing authorization (health registration), labeling approval, and NHI Price and reimbursement approval, if applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.54** "**Marketing Exclusivity**" means, with respect to the Licensed Territory, the period of data exclusivity as provided under local Laws during which Third Parties do not have the right, in connection with seeking or obtaining Marketing Approval of a pharmaceutical product that contains the same or substantially similar active ingredient(s) or the same active moiety(ies) as a Licensed Product, (i) to reference the Licensed Product's clinical dossier without an express right of reference from the dossier holder, or (ii) to rely on previous Regulatory Authority determinations of safety and effectiveness with respect to the Licensed Product to support the submission, review or approval of a Drug Approval Application or similar regulatory submission filed with the applicable Regulatory Authority for such pharmaceutical product, as well as any other exclusivity periods available under local Laws (e.g. with respect to orphan drugs, new chemical entity exclusivity and pediatric exclusivity) during which Third Parties are prevented from filing or having accepted by Regulatory Authorities a Drug Approval Application for, or obtaining Marketing Approval of, a pharmaceutical product that contains the same or substantially similar active ingredient(s) or the same active moiety(ies) as a Licensed Product in the Licensed Field in the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.55** "**Modified Specifications**" has the meaning set forth in Section 4.3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.56** "**Net Sales**" means the gross amounts invoiced or otherwise billed by Sato or its Affiliates on account of sales or any other commercial disposition of the Licensed Product to Third Parties, including without limitation wholesalers, hospitals, distributors and/or other intermediate Third Parties, in the Licensed Territory (hereinafter the "**Gross Sales**"), less the following to the extent specifically related to the Licensed Product and actually allowed, incurred or paid during such period according to Japanese GAAP:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) **[\*\*\*]** and **[\*\*\*]**, **[\*\*\*]** and other **[\*\*\*]** directly related to the sale to the extent applicable and not reimbursable, but **[\*\*\*]**;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) amounts **[\*\*\*]** or **[\*\*\*]** (including without limitation **[\*\*\*]** and **[\*\*\*]**), **[\*\*\*]**, **[\*\*\*]** or **[\*\*\*]** with respect to the Licensed Product;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) **[\*\*\*]**, **[\*\*\*]**, **[\*\*\*]**, **[\*\*\*]** or **[\*\*\*]** and **[\*\*\*]** to the **[\*\*\*]**;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) charges incurred in connection with the **[\*\*\*]** or **[\*\*\*]** of the Licensed Product, to the extent not deducted pursuant to subsection (i) or subsection (iii) above;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) **[\*\*\*]** in connection with the Licensed Product (it being understood that "**Net Sales**" will include all amounts received for any **[\*\*\*]**); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) **[\*\*\*]** and **[\*\*\*]** on account of the sale of the Licensed Product to the extent actually allowed and common within the pharmaceutical industry in the Licensed Territory;

provided that all of the foregoing deductions are incurred in the ordinary course and calculated in accordance with Japanese GAAP, consistently applied, during the applicable calculation period throughout the selling party's organization.

All such discounts, allowances, credits, rebates, and other deductions granted for a range of products shall be fairly and equitably allocated to the Licensed Product and other products of Sato and its Affiliates such that the Licensed Product does not bear a disproportionate portion of such deductions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.57** "**[\*\*\*]**" means the **[\*\*\*]** for **[\*\*\*]** as approved by relevant Regulatory Authorities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.58** "**Novan Confidential Information**" has the meaning set forth in Section 11.1(i).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.59** "**Novan Indemnitees**" has the meaning set forth in Section 16.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.60** "**Novan Know-How**" means Information that (i) is necessary for the development, manufacture, use, sale, offer for sale and/or importation of Licensed Product in the Licensed Field, and (ii) is within the Control of Novan during the Term of this Agreement.

Notwithstanding anything herein to the contrary, Novan Know-How shall exclude Novan Patents, but shall include the Novan Scientific Information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.61** "**Novan License**" has the meaning set forth in Section 2.3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.62** "**Novan Licensee**" means any Third Party to which Novan has granted a sublicense or other rights under the Novan Patents or Novan Know-How for development or commercialization of the Licensed Product in the Licensed Field outside of the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.63** "**Novan Patent**" means a Patent which claims inventions necessary for the development, manufacture, use, sale, offer for sale and/or importation of Licensed Products within the Licensed Field, and that is Controlled by Novan during the Term of this Agreement, including without limitation Novan's interest in any Joint Patents. Novan Patents include without limitation the patents listed in <u>Annex 2</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.64** "**Novan Scientific Information**" means such Scientific Information generated and/or compiled by or on behalf of Novan as of the Effective Date and listed in <u>Annex 1</u> as well as Scientific Information generated and/or compiled by or on behalf of Novan that is Controlled by Novan during the Term of this Agreement, and that is necessary for the development, manufacture, use, sale, offer for sale and/or importation of Licensed Product in the Licensed Field.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.65** "**Novan Trademarks**" means the trademarks set forth on <u>Annex 4</u>, as updated from time to time to reflect trademarks obtained by Novan for use with Licensed Products in the Licensed Field (excluding for clarity trademarks generally used by Novan in its business or for use with products that are not Licensed Products).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.66** "**Option**" has the meaning set forth in Section 2.10(i).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.67** "**Option Exercise Fee**" means **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.68** "**Option Period**" means the period starting on the date that is **[\*\*\*]** and ending **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.69** "**Patent**" means (a) letters patent (or other equivalent legal instrument), including without limitation utility and design patents, and including without limitation any extension, substitution, registration, confirmation, reissue, re-examination or renewal thereof, (b) applications for letters patent, including without limitation a provisional application, non-provisional application, reissue application, a re-examination application, a continuation application, a continued prosecution application, a continuation-in-part application, a divisional application or any equivalent of the foregoing applications that is pending at any time during the Term of this Agreement before a government patent authority and (c) all foreign or international equivalents of any of the foregoing in any country.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.70** "**Patent Family**" means any and all nonprovisionals, continuations, continuations-in-part, divisions, substitutions, extensions, reissues, reexaminations, and/or foreign counterparts of a Patent, all of which claim priority from a common Patent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.71** "**Patent Term Extensions**" has the meaning set forth in Section 7.8.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.72** "**Paying Party**" has the meaning set forth in Section 15.6.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.73** "**Person**" means any individual, firm, corporation, partnership, limited liability company, trust, business trust, joint venture, governmental authority, association or other entity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.74** "**PMDA**" means Japan's Pharmaceuticals and Medical Devices Agency.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.75** "**Product Infringement**" has the meaning set forth in Section 7.5(ii)(a).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.76** "**Prosecuting Party**" has the meaning set forth in Section 7.4(iii).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.77 "Publications**" has the meaning set forth in Section 11.3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.78** "**Recipient Party**" has the meaning set forth in Section 15.6.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.79** "**Regulatory Authority**" means any national or supranational governmental authority, including without limitation the MHLW (i.e., the Japanese Ministry of Health, Labour and Welfare, or any successor agency thereto), or other governmental body that has responsibility in a given country or jurisdiction over the development, manufacture and/or commercialization of the Licensed Product.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.80** "**Remaining Novan Patent**" means **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.81** "**Repeat Studies**" has the meaning set forth in Section 4.4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.82** "**Rules**" has the meaning set forth in Section 24.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.83** "**Sales Report**" means with respect to each calendar quarter a report detailing:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the number and description of Licensed Products sold or otherwise disposed of;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the relevant Gross Sales in the Licensed Territory invoiced by Sato or its Affiliates to Third Parties, including wholesalers, hospitals or other intermediate Third Parties, indicating the breakdown of sales by each type of the Licensed Product;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the deductions from Gross Sales used to calculate Net Sales;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the Net Sales in the Licensed Territory;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) the currency exchange rate used, if applicable; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) the sum of royalties due pursuant to Section 15.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.84** "**Sato Confidential Information**" has the meaning set forth in Section 12.1(i).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.85** "**Sato Efficacy Data**" means Sato Scientific Information relating to the efficacy of the Licensed Product, including, without limitation, all efficacy data and information included in all draft and final reports of any test, study or trial of Licensed Product. For clarity, Sato Efficacy Data excludes Sato Scientific Information relating to the safety of the Licensed Product, including, without limitation, the safety data and information included in all draft and final reports of any test, study or trial of Licensed Product.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.86** "**Sato Improvements**" has the meaning set forth in Section 7.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.87** "**Sato Indemnitees**" has the meaning set forth in Section 16.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.88** "**Sato Scientific Information**" means the Scientific Information generated and/or compiled by or on behalf of Sato that is Controlled by Sato during the Term of this Agreement, that is necessary for the development, manufacture, use, sale, offer for sale and/or importation of Licensed Product in the Licensed Field.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.89** "**Sato Know-How**" means Information that (i) is necessary for the development, manufacture, use, sale, offer for sale and/or importation of Licensed Product in the Licensed Field, and (ii) is within the Control of Sato during the Term of this Agreement or thereafter (if Section 20.1 applies). Notwithstanding anything herein to the contrary, Sato Know-How shall exclude Sato Patents, but shall include Sato Scientific Information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.90** "**Sato Patent**" means a Patent that claims inventions necessary for the development, manufacture, use, sale, offer for sale and/or importation of Licensed Product within the Licensed Field, and that is Controlled by Sato during the Term of this Agreement or thereafter (if Section 20.1 applies), including without limitation Sato's interest in any Joint Patents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.91** "**Sato Trademarks**" has the meaning set forth in Section 8.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.92** "**Scientific Information**" means all Information relating to or comprising medical, toxicological, pharmacological, pre-clinical, clinical and chemical data; specifications; medical uses; adverse reactions; formulations; bioanalytical metrics; analytical and quality control data and methods; and all proprietary information submitted to relevant Regulatory Authorities to support a Drug Approval Application for and Marketing Approval of the Licensed Product in the Licensed Field in any country of the world.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.93** "**Sole Inventions**" has the meaning set forth in Section 7.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.94** "**Specifications**" means the specifications set forth in <u>Annex 3</u> or, if applicable, the Modified Specifications.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.95** "**Study Materials**" means any supplies of Licensed Product as well as placebos for use in developing the Licensed Product in the Licensed Field.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.96** "**Term**" shall have the meaning set forth in Section 18.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.97** "**Third Party**" means any person or corporation or unincorporated body other than Novan and Sato and their respective Affiliates, including, without being limited to, governmental bodies and authorities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.98** "**Third-Party Licensee**" has the meaning set forth in Section 2.10(i).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.99** "**Third-Party Territory**" has the meaning set forth in Section 2.10(i).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.100** "**Trademark Infringement**" has the meaning set forth in Section 8.2(v).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.101** "**UNC**" means The University of North Carolina at Chapel Hill.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.102** "**UNC IP**" has the meaning set forth in Section 2.7.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.103** "**UNC License Agreement**" means that certain Amended, Restated and Consolidated License Agreement between Novan and UNC with an effective date of June 27, 2012 and as amended on November 30, 2012 and April 12, 2016, and as may be further amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.104** "**USD**" means a United States Dollar.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.105** "**U.S.**" means the United States of America, its territories and possessions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.106** "**Valid Claim**" means, for a country, a claim of an issued and unexpired Patent, or a Patent application filed in good faith, in each case, that is within the Novan Patents (including the Joint Patents), and that has not been held unpatentable, invalid, or unenforceable by a final unappealable decision of a court or other government agency of competent jurisdiction, in an unappealed or unappealable decision, admitted to be invalid or unenforceable through reissue, re-examination, disclaimer, or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.107** "**Withholding Taxes**" has the meaning set forth in Section 15.6.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2. GRANT OF LICENSE; RIGHT OF FIRST NEGOTIATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.1 License Grant to Sato.** Subject to the terms and conditions of this Agreement, Novan hereby grants to Sato, and Sato accepts, an exclusive, royalty-bearing, non-transferable (except pursuant to Section 22.1) right and license under Novan Know-How and Novan Patents, with the right to grant sublicenses solely with Novan's prior written consent (not to be unreasonably withheld, delayed or conditioned), to develop, manufacture (but excluding the manufacture of Compound as set forth in Section 5.4), use, sell, offer for sale, import, market, distribute and promote the Licensed Product in the Licensed Field and in the Licensed Territory. For clarity, the license granted under this Section 2.1 does not grant Sato any right to manufacture or have manufactured the Compound, or any right to use, sell, offer for sale or import the Compound except in connection with the development, manufacture or commercialization of Licensed Product in the Licensed Field in the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.2 No Practice of Novan Patents and Novan Know-How Outside Scope of License**. Sato shall not, directly or through its Affiliates or sublicensees, practice the Novan Patents and Novan Know-How outside the scope of the license granted to it in Section 2.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.3 License Grant to Novan**. Subject to the terms and conditions of this Agreement, Sato hereby grants to Novan and Novan accepts, an exclusive, fully paid-up, royalty-free, non-transferable (except pursuant to Section 22.1) right and license under Sato Know-How and Sato Patents, with the right to, subject to Sections 2.3(i) through 2.3(vii), grant sublicenses through multiple tiers of sublicensees, develop, manufacture, use, sell, offer for sale, import, market, distribute and promote the Licensed Product in the Licensed Field outside the Licensed Territory and within the Licensed Territory to manufacture Goods for sale outside the Licensed Territory (the "**Novan License**").

Each agreement between Novan and a sublicensee, or between Novan's sublicensees and their further sublicensees, granting a sublicense under the Novan License:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) shall be in writing and subject and subordinate to, and consistent with, the terms and conditions of this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) shall not diminish, reduce or eliminate any of Novan's obligations under this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) shall require the sublicensee(s) to comply with all applicable terms of this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) shall require further sublicensing to be done only on terms consistent with this Section 2.3, with Novan being responsible for the performance of each such sublicensee and ensuring that each sublicensee complies with all relevant provisions of this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) for any sublicense to a Third Party, shall provide that such sublicense **[\*\*\*]**, including, without limitation, the **[\*\*\*]** unless and until either (a) **[\*\*\*]**, or (b) **[\*\*\*]**;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) for any sublicense to a Third Party, shall provide that **[\*\*\*]**, provided that the Novan Know-How shall include all Information **[\*\*\*]** with respect to the Licensed Product; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) if Novan grants to any Third Party a sublicense under the license granted to Novan in this Section 2.3 or in Section 7.4(iii), other than with respect to **[\*\*\*]** or with respect to safety data (which is to be made available as set forth in Section 2.3(vi)), **[\*\*\*]** based on (a) **[\*\*\*]**, (b) **[\*\*\*]**, and (c) **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.4 Joint Committee**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) **Membership**. Within **[\*\*\*]** after the Effective Date, each Party shall appoint three (3) of its senior employees with appropriate expertise related to the then-ongoing activities in connection with Licensed Product in the Licensed Field to serve on the Joint Committee ("**JC**"). Each Party may replace its JC representatives by written notice to the other Party. For the first **[\*\*\*]** following the Effective Date, a JC member appointed by Novan shall serve as chairperson of the JC. In each subsequent year commencing upon an anniversary of the Effective Date, the chairperson shall be appointed by the Party that did not appoint the chairperson for the immediately preceding year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) **Responsibilities**. The JC shall oversee the research, development, and commercialization of the Licensed Products in the Licensed Territory. In particular, the JC shall:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) coordinate the Parties' communications and exchange of Scientific Information and data regarding development and marketing activities pursuant to the Agreement as further specified in Articles 3, 4, 6, 7 and 9;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) review and serve as a forum for discussing the Development Plan and review and approve amendments thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) review and approve any proposed changes to the Specifications for Licensed Products in the Licensed Territory in the Licensed Field; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) perform such other functions as are set forth herein or as the Parties may mutually agree in writing, except where in conflict with any provision of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) **JC Meetings**. The JC shall meet at least once every **[\*\*\*]** prior to the First Commercial Sale of the Licensed Product in the Licensed Field in the Licensed Territory and at least **[\*\*\*]** every year thereafter, in each case at times mutually agreed upon by the Parties. At least **[\*\*\*]** of such meetings per calendar year shall be held in person, and all other such meetings may be held by teleconference or videoconference. The location of the meetings of the JC to be held in person shall be agreed upon by the Parties. Each Party shall bear all the expenses of its representatives on the JC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) **JC Decision-Making**. The JC shall operate by unanimous consent of its members. Any disagreement between the representatives of the Parties on the JC as to matters within the JC's jurisdiction that remain unresolved for **[\*\*\*]** shall, at the election of either Party's JC members, be submitted to the Parties' designated officers for resolution in accordance with Section 24.1. The JC shall not have the power to amend or waive compliance with this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) **JC Meeting Agendas.** The JC chairperson shall be responsible for preparing and circulating an agenda in advance of each meeting of the JC, and preparing and issuing minutes of each meeting within **[\*\*\*]** thereafter. Such minutes will not be finalized until both Parties' representatives on the JC review and confirm the accuracy of such minutes in writing. Sato shall provide a summary of its technical and other efforts made towards the First Commercial Sale of the Licensed Product in the Licensed Field in the Licensed Territory at each meeting of the JC and shall provide the JC with any updates that have occurred since the last meeting. Each Party will disclose to the other Party any other proposed agenda items along with appropriate information at least **[\*\*\*]** in advance of each meeting of the JC; provided that, under exigent circumstances requiring the JC's input, a Party may provide its agenda items to the other Party within a lesser period of time in advance of the meeting so long as such other Party consents to such later addition of such agenda items for such JC meeting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) **Disbandment**. The JC shall continue to exist until the first to occur of (1) the Parties mutually agreeing in writing to disband the JC or (2) the expiration or termination of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.5 No Other Licenses**. Neither Party grants to the other Party any rights, licenses or covenants in or to any intellectual property, whether by implication, estoppel, or otherwise, other than the license rights that are expressly granted under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.6 Retained Rights**. Novan will at all times retain the exclusive and absolute right to practice and license the Novan Know-How and Novan Patents for any and all uses outside of the Licensed Field in the Licensed Territory, and for all uses outside the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.7 Upstream Agreement**. Sato hereby acknowledges and agrees that all licenses granted by Novan under this Article 2, to the extent they constitute sublicenses under intellectual property rights owned or controlled by UNC and licensed to Novan under the UNC License Agreement (the **"UNC IP**"), are subject to the limitations set forth in, and other relevant terms and conditions of, the UNC License Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.8 Non-Compete**. During the Term of this Agreement, Sato and its Affiliates shall not, directly or indirectly (by itself or with or through any Third Party), conduct outside the scope of this Agreement any commercialization of any Competing Product in the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.9 Third-Party Information, Scientific Information or Patents**. If, after the Effective Date, either Party enters into an agreement or other arrangement to obtain a license or other rights to or under Information or Patents that are owned or controlled by a Third Party and that would, solely but for the operation of Section 1.17, in the case of Novan be included in the Novan Know-How or Novan Patents or, in the case of Sato, be Sato Know-How or Sato Patents, then the Party obtaining such license or rights shall promptly notify the other Party and shall specify in such notice the type and amount of payments that would be due to such Third Party by reason of the practice or use of, or access to, such Information or Patents by the other Party pursuant to the license set forth in Section 2.1 or 2.3, as applicable (but not by reason of the practice or use of, or access to, such Information or Patents outside the scope of such license). The Party receiving such notice may elect in writing to bear the responsibility for such additional payments, and upon such receiving Party's written election to bear such responsibility, the Information, Scientific Information, or Patents as applicable, shall thereafter be deemed "**Controlled**" by the Party originally obtaining such license or rights (notwithstanding Section 1.17), and shall be subject to the license under Section 2.1 or 2.3, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.10 Exclusivity Period; Exclusive Option for Negotiation of Additional Licensed Territories**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) **Option**. Subject to the terms and conditions of this Agreement, Novan hereby grants to Sato the exclusive option to elect by written notice to Novan during the Option Period to negotiate to acquire an exclusive license under Novan Know-How and Novan Patents, with the right to grant sublicenses solely with Novan's prior written consent (not to be unreasonably withheld, delayed or conditioned), to develop (including to obtain relevant Marketing Approvals), manufacture, use, sell, offer for sale, import, market, distribute and promote the Licensed Product in the Licensed Field in one or more countries in the Additional Licensed Territories (the "**Option**"). In consideration for the grant of the Option, Sato shall pay to Novan the Option Exercise Fee within **[\*\*\*]** after **[\*\*\*]**. For clarity, prior to the Option Period, Novan shall retain the right to license the Novan Know-How and Novan Patents to a Third Party (a "**Third-Party Licensee**") to develop, manufacture, use, sell, offer for sale, import, market, distribute and promote the Licensed Product in the Licensed Field in one or more countries in the Additional Licensed Territories (the "**Third-Party Territory**"). In the event Novan enters into such an agreement with a Third-Party Licensee, Sato's Option hereunder shall not be exercisable with respect to that Third-Party Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) **Exercise of Option**. Subject to Section 2.10(i), Sato may, in its sole discretion, exercise the Option at any time during the Option Period by written notice of such exercise to Novan prior to the expiration of the Option Period. If Sato so exercises the Option, the Parties shall negotiate in good faith until the expiration of the Option Period or until the Parties enter into the Additional License Agreement, whichever is earlier, the terms pursuant to which Sato would obtain an exclusive license to develop and commercialize the Licensed Product in the Licensed Field in the Additional Licensed Territories (excluding the Third-Party Territory) (such license, the "**Additional License Agreement**"). If the Parties do not enter into an Additional License Agreement within the Option Period, then Novan shall be free to grant such rights to one or more Third Parties with no further obligation to Sato**.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3. DILIGENCE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.1 Diligence of Sato**. Sato shall (a) use Commercially Reasonable Efforts to develop the Licensed Product in the Licensed Field in the Licensed Territory in accordance with the Development Plan, and (b) shall develop the Licensed Product in the Licensed Field in the Licensed Territory in accordance with the requirements of this Agreement and in conformity with all applicable Laws. Sato's obligations under this Section 3.1 shall include, but not be limited to, the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) using Commercially Reasonable Efforts to submit a New Drug Application for the Licensed Product in the Licensed Field with the PMDA (a "**JNDA**") as soon as reasonably practical after the Effective Date; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) using Commercially Reasonable Efforts to obtain, and once obtained, to maintain, Marketing Approval for the Licensed Product in the Licensed Field in the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.2 Diligence of Novan**. Novan shall use Commercially Reasonable Efforts to obtain Marketing Approval for the Licensed Product in the Licensed Field in the U.S. Novan shall also use Commercially Reasonable Efforts to provide Sato, at Sato's request, with reasonable assistance, **[\*\*\*]**, relating to Sato's development of the Licensed Product and obtainment of Marketing Approvals for the Licensed Product in the Licensed Field in the Licensed Territory; provided that if the assistance required by Sato pursuant to the immediately preceding sentence requires **[\*\*\*]**, then Novan shall be obligated to **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4. DEVELOPMENT AND COMMERCIALIZATION OF LICENSED PRODUCT**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.1 PMDA Consultation**. Within **[\*\*\*]** after Sato's receipt of Novan Scientific Information pursuant to Section 6.1, Sato shall use Commercially Reasonable Efforts to visit and start consultation with PMDA with respect to development of and obtainment of the Marketing Approval for the Licensed Product in the Licensed Field in the Licensed Territory. Novan shall, at Sato's request, reasonably cooperate with Sato in such PMDA consultation (including but not limited to by attending such PMDA consultation) at Novan's expense.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.2 Development Plan**. Within **[\*\*\*]** after the completion of the PMDA consultation described in Section 4.1, Sato shall submit a development plan ("**Development Plan**") to the JC for review and approval. The Development Plan shall, at all times, contain (a) detailed plans of Sato's studies to support obtaining or maintaining Marketing Approval of the Licensed Product in the Licensed Field in the Licensed Territory, including study designs, CMC/process development protocols, summaries of nonclinical study protocols, and summaries of clinical study protocols, summaries of post-approval study protocols; and (b) a detailed timeline for achieving each key milestone in the development of the Licensed Product in the Licensed Field in the Licensed Territory and target dates for regulatory submissions to a Regulatory Authority with respect to the Licensed Product in the Licensed Field. The Development Plan shall be reviewed **[\*\*\*]** after the first submission by Sato to Novan, and any material amendment to the Development Plan shall be subject to the JC's prior written approval, which approval shall not be unreasonably withheld.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.3 Modified Specifications**. Sato may propose modifications to the Specifications for the Licensed Product in the Licensed Field. The JC shall discuss any such proposed modifications and the bases therefor. If the JC approves such modification, then the Specifications shall be updated as approved by the JC ("**Modified Specifications**"). For clarity, Novan shall have no obligation to modify the specifications for Licensed Product in the Licensed Field outside the Licensed Territory if any Modified Specifications are adopted for the Licensed Product in the Licensed Field in the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.4 JNDA**. During the Term, Sato will be responsible for conducting all activities necessary to support the submission of the JNDA. Sato will submit the JNDA utilizing pre-clinical information included in the Novan Scientific Information. In the event that the PMDA determines, as documented in official, written correspondence with Sato, that the applicable Pre-Clinical Studies are not sufficient for approval of the JNDA, then the JC shall decide whether the applicable Pre-Clinical Studies should be repeated. If the JC determines that such Pre-Clinical Studies should be repeated (such repeated Pre-Clinical Studies, the "**Repeat Studies**"), Novan shall perform such Repeat Studies at Novan's expense, provided that in no event shall Novan be required to spend more than one million ($1,000,000) USD with regard to all Repeat Studies in the aggregate. Sato agrees that Novan owns the data and results of any such Repeat Study. Other studies for Licensed Product in the Licensed Field, including the implementation of, cost sharing for, and ownership of data resulting from such studies, shall be discussed by the JC. Novan may, at its discretion, elect to participate in the funding and conduct of any such studies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.5 Costs**. Sato shall have full responsibility for all development and commercialization activities for the Licensed Product in the Licensed Field in the Licensed Territory, including, without limitation, all activities in Sections 4.4 and 4.7, at Sato's expense (unless otherwise provided in this Agreement) and risk and in accordance with the terms of this Agreement and in conformity with all applicable Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.6 Marketing.** Sato shall commence the marketing of the Licensed Product in the Licensed Field under either the Novan Trademark or another trademark selected and owned or Controlled by Sato, as Sato in its sole discretion shall decide and as set forth in Article 8, in the Licensed Territory within **[\*\*\*]** after the first **[\*\*\*]** of the Licensed Product in the Licensed Field is listed. Sato shall notify Novan promptly of the date of First Commercial Sale of the Licensed Product in the Licensed Field in the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.7 Launch**. After receiving Marketing Approval of the Licensed Product in the Licensed Field in the Licensed Territory, Sato shall use Commercially Reasonable Efforts to market, sell and promote the Licensed Product in the Licensed Field in the Licensed Territory.

Specifically, and without limiting any of Sato's obligations under Sections 4.6 or 4.7, Sato shall (a) launch commercially a Licensed Product in the Licensed Field in the Licensed Territory no later than **[\*\*\*]** after receipt of Marketing Approval for such Licensed Product in the Licensed Field in the Licensed Territory, and (b) not withdraw a Licensed Product from sale or abandon for more than **[\*\*\*]** the sale of a Licensed Product, provided that Sato shall not be in breach of the foregoing obligations to the extent that Sato's failure to launch or abandonment of the Licensed Product as described above results from a **[\*\*\*]**, as applicable, including without limitation if **[\*\*\*]**, and further provided that to the extent that Section 21.1 applies to prevent Sato from complying with its obligations under this Section 4.7, then Sato shall not be deemed in breach of this Section 4.7 and the Parties shall have the rights and obligations set forth in Section 21.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.8 Communications**. The JC will coordinate communications regarding certain aspects of the Parties' marketing efforts for Licensed Product in the Licensed Field as follows. Through the JC:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Novan shall share with Sato **[\*\*\*]** any and all of the marketing information in the Control of Novan with respect to the Licensed Product in the Licensed Field, including without limitation, complete promotion plans and strategies, as well as all promotional and sales materials used for the launch and marketing of the Licensed Product in the Licensed Field outside the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Sato shall share with Novan **[\*\*\*]** any and all of marketing information in the Control of Sato with respect to Licensed Product in the Licensed Field, including without limitation, complete promotion plans and strategies, as well as all promotional and sales activities and materials used for the launch and marketing of the Licensed Product in the Licensed Field in the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.9 Approvals**. Sato shall (i) use Commercially Reasonable Efforts not to abandon or allow to lapse any Drug Approval Application for a Licensed Product in the Licensed Field in the Licensed Territory, and (ii) not abandon or allow to lapse any Marketing Approval for the Licensed Product in the Licensed Field in the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5. MANUFACTURING & SUPPLY**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.1 Development Supply**. Novan shall, by itself or through its Third Party contract manufacturer, supply to Sato, and Sato shall purchase from Novan, all quantities of Study Materials required by Sato to develop the Licensed Product in the Licensed Field in the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.2 Pricing**. Sato will purchase the Study Materials at a price equal to the Fully Burdened Manufacturing Cost thereof. The other terms concerning sales and purchase of the Study Material shall be separately determined after the completion of the PMDA consultation pursuant to Section 4.1 and set forth in a clinical supply agreement between the Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.3 Payment**. Novan will invoice Sato for each delivery of Study Materials. Payment is due **[\*\*\*]** after the date of receipt of invoice by Sato. All payments under this Section 5.3 shall be made in USD.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.4 Commercial Supply**. Within **[\*\*\*]** after the conclusion of the PMDA consultation described in Section 4.1, the Parties shall commence negotiations of a commercial supply agreement that shall govern Novan's supply of Compound to Sato for Sato's manufacture of the Licensed Product (the "**Commercial Supply Agreement**"). The Parties shall use Commercially Reasonable Efforts to conclude negotiations of such Commercial Supply Agreement within **[\*\*\*]** after they commence such negotiations. Both Parties understand that the Commercial Supply Agreement shall be modified, if necessary, consistent with the conditions of the Marketing Approval in the Licensed Territory. Pursuant to the Commercial Supply Agreement, Novan shall be obligated, by itself or through its Third Party contract manufacturer, to supply to Sato, and Sato shall be required to purchase Compound at a price **[\*\*\*]** equal to **[\*\*\*]** of Licensed Product in the Licensed Territory, provided that such price per gram shall not be less than an amount equal to the Base Price (as defined below). The "**Base Price**" shall mean the USD value of **[\*\*\*]** of Compound supplied, calculated using the Conversion Rate. For example, if **[\*\*\*]** of Licensed Product in the Licensed Territory is **[\*\*\*]**, then Sato shall be required to purchase Compound at a price **[\*\*\*]** of **[\*\*\*]**, provided that such price **[\*\*\*]** is not less than an amount equal to the Base Price at the time such payment is due. All payments under the Commercial Supply Agreement shall be made in JPY**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.5 Negotiations for Supply of Licensed Products**. At any time, Sato may propose in writing to negotiate the terms and conditions pursuant to which it would purchase from Novan necessary volumes of the finished Licensed Products to be sold in the Licensed Field in the Licensed Territory, and the Parties shall negotiate in good faith such terms and conditions; provided that no such terms and conditions shall become effective without the mutual written consent of the Parties (the agreement with such effective terms and conditions, the "**Product Supply Agreement**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.6 Appointment of Distributors; No Delivery or Sale for Use Outside Licensed Territory**. Sato may at its discretion appoint distributors or wholesalers for the Licensed Product in the Licensed Field in the Licensed Territory. Throughout the Term, Sato shall not, and shall use Commercially Reasonable Efforts (consistent with any applicable Law) to obligate its distributors or wholesalers to not, deliver or cause to be delivered, including via the Internet or mail order, Licensed Product either outside the Licensed Field in the Licensed Territory, or outside the Licensed Territory, and to not sell any Licensed Product to a purchaser if in either case Sato, its approved distributors or wholesalers knows, or has reason to believe, that such purchaser intends to sell such Licensed Product outside the Licensed Field in the Licensed Territory or to remove such Licensed Product from the Licensed Territory for the purpose of sales or use by patients of the Licensed Product outside the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6. EXCHANGE OF SCIENTIFIC INFORMATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.1 Technology Transfer**. Within **[\*\*\*]** after the Effective Date, Novan shall deliver to Sato a copy of all Novan Scientific Information listed in <u>Annex 1</u> that is available in tangible form as of the Effective Date. Novan shall deliver to Sato copies of Novan Scientific Information that is necessary for the development, manufacture or commercialization of the Licensed Product in the Licensed Field in the Licensed Territory becomes available in tangible or written form after the Effective Date, as may be mutually agreed upon by the Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.2 Communication by Novan Relating to Material Events**. Whenever any material event occurs in the course of the development of the Licensed Product in the Licensed Field by Novan or Novan Licensees of which Novan becomes aware, but in no event less than **[\*\*\*]** until such time as Sato receives Marketing Approval for the Licensed Product in the Licensed Field in the Licensed Territory, Novan shall disclose to Sato all Novan Scientific Information resulting from all development activities with respect to the Licensed Product in the Licensed Field conducted by Novan or its Affiliates as may be necessary or useful for development of the Licensed Product in the Licensed Field in the Licensed Territory, and a description of the status of such development efforts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.3 Communication by Sato Relating to Material Events**. Whenever any material event occurs in the course of the development of the Licensed Product by Sato, but in no event less than **[\*\*\*]** during the Term of this Agreement, Sato shall disclose to Novan all Sato Scientific Information resulting from all development activities with respect to the Licensed Product in the Licensed Field conducted by Sato or its Affiliates, and a description of the status of such development efforts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.4 Use of Scientific Information**. Each Party shall have the right, at no additional expense, to use all Scientific Information disclosed to it pursuant to Section 6.2 or Section 6.3, as applicable, for the development and commercialization of the Licensed Product pursuant to the license granted to it in Sections 2.1 and 2.3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.5 Right of Cross-Reference**. Novan, its Affiliates and Novan Licensees shall have the right to cross-reference, for purposes of developing Licensed Products outside of the Licensed Territory or in the Licensed Territory outside the Licensed Field, all Drug Approval Applications and other filings with Regulatory Authorities made by Sato for Licensed Products, subject to Section 2.3 (for clarity, for **[\*\*\*]**, this Section 6.5 applies, as to **[\*\*\*]**). Sato shall have the right to cross-reference, for purposes of developing Licensed Products in the Licensed Field in the Licensed Territory all Drug Approval Applications and other filings with Regulatory Authorities made by Novan or, to the extent Controlled by Novan and as long as Novan would not incur costs to grant such a right to cross-reference to Sato, the Novan Licensees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.6 Communication Through Joint Committee**. The JC shall coordinate the Parties' sharing of Scientific Information as required under this Agreement. Through the JC:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Novan shall share with Sato, **[\*\*\*]**, any and all Novan Scientific Information generated or compiled during the Term of this Agreement for use in development and commercialization of the Licensed Product in the Licensed Field in the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Sato shall share with Novan, **[\*\*\*]**, any and all Sato Scientific Information generated or compiled during the Term of this Agreement for use in development and commercialization of the Licensed Product outside of the Licensed Territory or within the Licensed Territory outside the Licensed Field.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.7 Ownership of Novan Scientific Information**. Sato agrees that all Novan Scientific Information delivered by Novan or any of its Affiliates or Novan Licensees hereunder shall, as between the Parties, at all times be and remain sole and exclusive property of Novan, or its Affiliates or Novan Licensees, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.8 Ownership of Sato Scientific Information**. Novan agrees that all Sato Scientific Information delivered by Sato or any of its Affiliates hereunder shall, as between the Parties, at all times be and remain sole and exclusive property of Sato or its Affiliates, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7. INVENTIONS; ACCESS TO IMPROVEMENTS; PATENTS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.1 Improvements**. Novan shall have the right to grant sublicenses under Section 2.3 according to the terms therein with respect to Sato Know-How and Sato Patents that constitute Improvements ("**Sato Improvements**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.2 Ownership of Inventions**. Inventorship shall be determined in accordance with U.S. patent laws. Any Invention made solely by employees, agents, or independent contractors of a Party in the course of performing activities under this Agreement, together with all intellectual property rights therein ("**Sole Inventions**") shall be owned by such Party. Any Invention made jointly by employees, agents, or independent contractors of each Party, together with all intellectual property rights therein ("**Joint Inventions**") shall be owned jointly by the Parties in accordance with joint ownership interests of co-inventors under U.S. patent laws, with each joint Party having, unless otherwise set forth in this Agreement, the unrestricted right to license and grant rights to sublicense any such Joint Invention without any duty of accounting to the other Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.3 Disclosure of Inventions**. Each Party shall promptly disclose to the other Party in writing any Invention disclosures, or other similar documents, submitted to it by its employees, agents, or independent contractors describing each and every Invention that may be either a Sole Invention or a Joint Invention, and all Information relating to such Invention.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.4 Prosecution of Patents**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) **Novan Patents Other than Joint Patents**. Novan shall have the sole right and authority to file, prosecute, and maintain Novan Patents other than Joint Patents on a worldwide basis at its sole discretion and at its own cost. Novan shall provide Sato with a copy of material communications from patent authorities in the Licensed Territory regarding the Novan Patents, and shall provide drafts of any material filings or responses to be made to such Patent authorities in a timely manner. Novan may **[\*\*\*]** a Novan Patent in the Licensed Territory **[\*\*\*]**. For any Novan Patent that Novan is filing, prosecuting or maintaining, Novan shall do so at its own cost.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) **Sato Patents Other than Joint Patents**. Sato shall have the first right and authority to file, prosecute, and maintain Sato Patents other than Joint Patents on a worldwide basis at its sole discretion and at its own cost. Sato shall provide Novan with a copy of material communications from patent authorities in the Licensed Territory regarding the Sato Patents, and shall provide drafts of any material filings or responses to be made to such Patent authorities in a timely manner. Notwithstanding the foregoing, if Sato determines in its sole discretion to abandon or not maintain a Sato Patent other than a Joint Patent, Sato shall provide Novan with **[\*\*\*]** prior written notice of such determination and, if Novan so requests, shall provide Novan with the opportunity to prosecute and maintain such Sato Patent in the name of Sato. Thereafter, Novan shall bear all expenses of filing, prosecuting and maintaining such Sato Patent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) **Joint Patents**. Subject to this Section 7.4(iii) and (a) unless otherwise agreed by the Parties Sato will prosecute and maintain any Patent applications Covering a Joint Invention (any such Patent application and any Patents issuing therefrom, a "**Joint Patent**") in the Licensed Territory and (b) Novan shall have the first right to prosecute and maintain the Joint Patents outside the Licensed Territory, with Sato having a backup right to do so if Novan elects to cease such prosecution and maintenance on **[\*\*\*]** prior written notice to Sato. The Parties shall coordinate their efforts as appropriate to make such prosecution activities as efficient, convenient, and harmonious as possible. The Parties shall share equally all expenses of filing, prosecuting and maintaining such Joint Patents in the Licensed Territory. **[\*\*\*]** of filing, prosecuting and maintaining such Joint Patents outside the Licensed Territory. **[\*\*\*]** of filing, prosecuting and maintaining the Joint Patents outside the Licensed Territory pursuant to this Section 7.4(iii), Sato hereby grants Novan an exclusive, fully paid-up, royalty-free, non-transferable (except pursuant to Section 22.1) license, with the right to grant sublicenses through multiple tiers of sublicensees, under Sato's interest in the Joint Patents for all purposes outside of those within the scope of the rights granted to Novan under Section 2.3, subject to the last sentence of this Section 7.4(iii). The Party that prosecutes a Joint Patent (the "**Prosecuting Party**") in the Licensed Territory shall provide the other Party the opportunity to review and comment on any and all such prosecution efforts regarding the applicable Joint Patent in the Licensed Territory, provided that the Prosecuting Party shall have final control over such prosecution efforts after reasonably considering the other Party's comments, if any. The Prosecuting Party for a Joint Patent in any jurisdiction shall provide the other Party with a copy of all material communications from any Patent authority in the applicable jurisdictions regarding the Joint Patent being prosecuted by such Party, and shall provide drafts of any material filings or responses to be made to such patent authorities a reasonable amount of time in advance of submitting such filings or responses. In particular, each Party agrees to provide the other Party with all information necessary or desirable to enable the other Party to comply with any duty of candor and/or duty of disclosure requirements of any Patent authority. Notwithstanding anything to the contrary, the Prosecuting Party shall not take any action while prosecuting or maintaining the applicable Joint Patent that could reasonably be expected to have a materially detrimental effect on the other Party's interest in such Joint Patent or any Novan Patent. Except to the extent a Party is restricted by the licenses granted by such Party to the other Party under the terms of this Agreement, and/or the other covenants contained in this Agreement, each Party shall be entitled to practice, and grant licenses to Third Parties and Affiliates of such Third Parties to practice, the Joint Patents and all Joint Inventions without restriction or an obligation to account to the other Party, and the other Party shall consent and hereby consents, without additional consideration, to any and all such licenses. Notwithstanding the foregoing, if Novan grants a sublicense under the license granted to Novan pursuant to this Section 7.4(iii), then Section 2.3(vii) will apply.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) **Cooperation in Prosecution**. Each Party shall provide the other Party all reasonable assistance and cooperation in the Patent prosecution efforts described above in this Section 7.4, including without limitation providing any necessary power of attorney and executing any other required documents or instruments for such prosecution.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.5 Infringement of Patents by Third Parties**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) **Notification**. Each Party shall promptly notify the other Party in writing of any existing or threatened infringement of the Novan Patents (including Joint Patents) of which it becomes aware in the Licensed Territory, and shall provide to the other Party any and all evidence and information available to such Party regarding such alleged infringement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) **Product Infringement of Novan Patents (Including Joint Patents) in the Licensed Field in the Licensed Territory**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If a Party becomes aware of any actual or alleged existing or threatened infringement by a Third Party of any Novan Patent, including any Joint Patent, by making, using, importing, offering for sale, or selling the Licensed Product in the Licensed Field (such activities, "**Product Infringement**") in the Licensed Territory, such Party shall notify the other Party as provided in Section 7.5(i).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) With respect to Product Infringement of Novan Patents excluding Joint Patents, subject to Section 7.11, **[\*\*\*]** an appropriate suit or other action against any Person engaged in such Product Infringement in the Licensed Territory, subject to Section 7.5(ii)(d); provided that if **[\*\*\*]**, it shall **[\*\*\*]**. **[\*\*\*]** shall provide to **[\*\*\*]** reasonable assistance in any such enforcement, including without limitation joining an action as a party plaintiff if so required by Laws to pursue such action. **[\*\*\*]** shall keep **[\*\*\*]** regularly informed of the status and progress of such enforcement efforts, and shall reasonably consider **[\*\*\*]**'s comments on any such efforts. **[\*\*\*]** shall **[\*\*\*]** in connection with each Party's activities under this Section 7.5(ii)(b), provided that **[\*\*\*]** pursuant to this Agreement, **[\*\*\*]**, **[\*\*\*]** and **[\*\*\*]** shall **[\*\*\*]**. **[\*\*\*]** may **[\*\*\*]** under this Section 7.5(ii)(b) **[\*\*\*]**, provided that **[\*\*\*]** pursuant to this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) With respect to Product Infringement of Joint Patents, Sato shall have a period of **[\*\*\*]** (or any such shorter period described in Section 7.5(ii)(b)) after the notification to or by Sato pursuant to Section 7.5(ii)(a), to elect to so enforce such Joint Patent in the Licensed Territory, subject to Section 7.5(ii)(d). If Sato does not so elect, Sato shall so notify Novan in writing during such **[\*\*\*]** period, but in no event later than **[\*\*\*]** prior to any deadline relating to loss of any rights with respect to the Product Infringement, whichever is earlier, in which case Novan shall have the right, but not the obligation, to commence a suit or take action to enforce such Joint Patent against the Third Party(ies) allegedly perpetrating such Product Infringement. Each Party shall provide to the Party enforcing any such rights under this Section 7.5(ii)(c) reasonable assistance in such enforcement, including without limitation joining an action as a party plaintiff if so required by Laws to pursue such action. The enforcing Party shall keep the other Party regularly informed of the status and progress of such enforcement efforts, and shall reasonably consider the other Party's comments on any such efforts. The Parties shall equally bear and be responsible for all costs incurred in connection with enforcing the Joint Patents under this Section 7.5(ii)(c).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The Party not bringing an action with respect to Product Infringement under this Section 7.5 shall be entitled to separate representation in such matter by counsel of its own choice and at its own expense, but such Party shall at all times cooperate fully with the Party bringing such action. Additionally, the Party not bringing an action under this Section 7.5 may have an opportunity to participate in such action to the extent that the Parties may mutually agree at the time the other Party elects to bring an action hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) **Other Infringement of Novan Patents (Including Joint Patents) Outside the Licensed Field in the Licensed Territory and Outside the Territory**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) For any and all infringement of Novan Patents other than Joint Patents anywhere outside the Licensed Territory, and for any and all infringement other than Product Infringement of the Novan Patents (other than Joint Patents) in the Licensed Territory, Novan shall have the sole and exclusive right, but not the obligation, to bring an appropriate suit or other action against any person or entity engaged in such infringement of such Patents, in its sole discretion, and as between the Parties Novan shall bear all related expenses and retain all related recoveries. If Novan brings a suit or other action against such infringement, Novan shall periodically make a report to Sato about the state of the progress of the suit or action.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If a Third Party infringes a Joint Patent outside the Licensed Territory, Novan shall have the sole and exclusive right, but not the obligation, to bring an appropriate suit or other action against any person or entity engaged in such infringement of such Joint Patent, in its sole discretion, and as between the Parties Novan shall bear all related expenses and retain all related recoveries. Sato shall provide to Novan reasonable assistance in such enforcement, at Novan's request and expense, including without limitation joining such action as a party plaintiff if so required by Laws to pursue such action.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) **Settlement**. Subject to Section 7.11, Sato shall not settle any claim, suit, or action that it brings under this Section 7.5 involving Novan Patents (excluding Joint Patents) in any manner that would negatively impact Novan, including settlements involving the ownership, validity or enforceability of any of the Novan Patents, or that do not include a full and unconditional release from all liability of Novan, without the prior written consent of Novan, which shall not be unreasonably withheld, delayed or conditioned. Novan shall not settle any claim, suit, or action that it brings under this Section 7.5 involving Novan Patents (excluding Joint Patents) in the Licensed Territory in any manner that would negatively impact Sato, or that do not include a full and unconditional release from all liability of Sato, without the prior written consent of Sato, which shall not be unreasonably withheld, delayed or conditioned. Moreover, any settlement by Sato involving Novan Patents (excluding Joint Patents), or by Novan involving Novan Patents (excluding Joint Patents) in the Licensed Territory, that (i) results in cross-licensing or (ii) results in sublicenses to Third Parties, shall require the other Party's written consent, which shall not be unreasonably withheld, delayed or conditioned. Neither Party shall settle any claim, suit, or action that it brings under this Section 7.5 involving Joint Patents in any manner that would negatively impact the other Party, including settlements on the ownership, validity or enforceability of any of the Joint Patents, or if the settlement does not include a full and unconditional release from all liability of the other Party, without the prior written consent of such other Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) **Allocation of Proceeds**. Except as otherwise provided herein, if either Party recovers monetary damages from any Third Party in a suit or action brought under this Section 7.5, whether such damages result from the infringement of Sato Patents or Novan Patents, such recovery shall be **[\*\*\*]** in such litigation (excluding expenses of internal counsel), and any **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.6 Infringement of Third Party Rights in the Licensed Territory**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) **Notice**. If the development, manufacture, use, sale, offer for sale, import or export of the Licensed Product in the Licensed Field and in the Licensed Territory results in a claim for Patent infringement by a Third Party, the Party first having notice of such claim shall promptly notify the other Party in writing of such a claim. Following such notice, the Parties agree to enter into either a joint defense or common interest agreement, under which agreement the Parties can share the known facts of such infringement in reasonable detail, if they are advised to do so by counsel.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) **Third Party Claims**. Sato shall assume control of the defense of any claims brought by Third Parties alleging infringement of Third Party intellectual property rights in connection with the development, manufacture, use, sale, offer for sale, import or export of the Licensed Product in the Licensed Field in the Licensed Territory, represented by its own counsel. If requested by Sato, Novan agrees to cooperate reasonably with Sato with respect to such litigation, at Sato's expense. Sato shall have the exclusive right to settle any such claim without the consent of Novan, unless such settlement could negatively impact Novan, including without limitation settlements on the ownership, validity or enforceability of any Novan Patents (for which Novan's consent shall be required). Any expenses incurred in defending any such claims and any damages awarded to or settlement agreed with such Third Parties shall be **[\*\*\*]**, provided that **[\*\*\*]**, provided that **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.7 Patent Oppositions and Other Proceedings**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) **By the Parties**. If either Party desires to bring an opposition, action for declaratory judgment, nullity action, interference, declaration for non-infringement, reexamination, or other attack upon the validity, title, or enforceability of a Patent owned or controlled by a Third Party that Covers, in the Licensed Territory, the Licensed Product in the Licensed Field, or the manufacture, use, sale, offer for sale, or importation of the Licensed Product in the Licensed Field (except insofar as such action is a counterclaim to or defense of, or accompanies a defense of, a Third Party's claim or assertion of infringement under Section 7.6, in which case the provisions of Section 7.6 shall govern), such Party shall so notify the other Party, and the Parties shall promptly confer to determine whether to bring such action or the manner in which to settle such action. **[\*\*\*]** shall have the first right, but not the obligation, to bring in its sole control and at its sole expense such action in the Licensed Territory. If **[\*\*\*]** does not bring such action within **[\*\*\*]** of notification thereof pursuant to this Section 7.7 (or earlier, if required by the nature of the proceeding), then **[\*\*\*]** shall have the right, but not the obligation, to bring, in **[\*\*\*]** sole control and at its sole expense, such action. The Party not bringing an action under this Section 7.7 shall join the action as a joint party plaintiff if required to enable the other Party to bring such action, at the other Party's expense. Additionally, if appropriate, the Party not bringing an action under this Section 7.7 shall be entitled to separate representation, at its sole expense, in such proceeding by counsel of its own choice, and shall cooperate fully with the Party bringing such action. Any awards or amounts received in bringing any such action shall **[\*\*\*]**, and any **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) **By Third Parties**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If a Novan Patent (excluding a Joint Patent) becomes the subject of any proceeding commenced by a Third Party in the Licensed Territory in connection with an opposition, reexamination request, action for declaratory judgment, nullity action, interference, or other attack upon the validity, title or enforceability thereof (except insofar as such action is a counterclaim to or defense of, or accompanies a defense of, an action for infringement against a Third Party under Section 7.5, in which case the provisions of Section 7.5 shall govern), then **[\*\*\*]** shall control such defense at its sole cost. Upon **[\*\*\*]** request, **[\*\*\*]** shall reasonably cooperate with **[\*\*\*]** in such defense at **[\*\*\*]** cost. Subject to Section 7.11, **[\*\*\*]** shall permit **[\*\*\*]** to participate in the proceeding to the extent permissible under Laws, and to be represented by its own counsel in such proceeding, at **[\*\*\*]** sole expense.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If a Joint Patent becomes the subject of any proceeding commenced by a Third Party in the Licensed Territory in connection with an opposition, reexamination request, action for declaratory judgment, nullity action, interference, or other attack upon the validity, title or enforceability thereof (except insofar as such action is a counterclaim to or defense of, or accompanies a defense of, an action for infringement against a Third Party under Section 7.5, in which case the provisions of Section 7.5 shall govern), then **[\*\*\*]** shall control such defense at its sole cost. Upon **[\*\*\*]** request, **[\*\*\*]** shall reasonably cooperate with **[\*\*\*]** in such defense at **[\*\*\*]** cost. Subject to Section 7.11, **[\*\*\*]** shall permit **[\*\*\*]** to participate in the proceeding to the extent permissible under Laws, and to be represented by its own counsel in such proceeding, at **[\*\*\*]** sole expense.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Except as set forth in Sections 7.7(ii)(a) or 7.7(ii)(b) above, all expenses incurred by the Parties in an applicable action under Sections 7.7(ii)(a) or 7.7(ii)(b) shall **[\*\*\*]**. Any awards or amounts received in defending any such Third Party action, if any, shall **[\*\*\*]**, as if the **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.8 Patent Term Extensions in the Territory**. The patent counsel of each Party shall discuss and recommend for which, if any, of the Novan Patents in the Licensed Territory the Parties should seek any term extensions, supplementary protection certificates, and equivalents thereof offering Patent protection beyond the initial term with respect to any issued Patents ("**Patent Term Extensions**") in the Licensed Territory. Subject to Section 7.11, Sato shall have the final decision-making authority with respect to applying for any such Patent Term Extensions in the Licensed Territory, provided that Sato shall not unreasonably fail or refuse to do so, and shall have the sole right to apply for any such Patent Term Extensions Sato decides to seek, at its expense. Novan shall cooperate fully with Sato, at Sato's expense, in making such filings or taking any related actions, for example and without limitation, making available all required regulatory data and information and executing any required authorizations to apply for such Patent Term Extension.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.9 Orange Book Equivalent**. Upon request of Sato and at Sato's expense, to the extent that Sato shall not have the right to itself do so, Novan shall file appropriate information with Regulatory Authorities in the Licensed Territory listing any Novan Patents with such Regulatory Authorities in the equivalent of the U.S. Orange Book, if any, as a Patent related to the Licensed Product. Novan shall use Commercially Reasonable Efforts to maintain such listing, at Sato's expense.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.10 Patent Marking**. Sato agrees to mark or have marked with the Novan Patents to the extent consistent with applicable Laws any Licensed Product sold by Sato in accordance with the statutes of the Licensed Territory relating to the marketing of patented articles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.11 Rights and Obligations Under UNC License Agreement**. Notwithstanding anything to the contrary in this Article 7, to the extent the provisions of this Article 7 conflict with Novan's rights and obligations under the UNC License Agreement with respect to UNC IP, the terms and conditions of the UNC License Agreement shall prevail. In such case, the Parties shall discuss in good faith to determine a reasonable solution that may best reflect the Parties original intentions under Article 7.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8. TRADEMARKS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.1 General**. Sato shall be responsible for the selection, registration and maintenance of all trademarks which it employs in connection with the commercialization of any Licensed Product in the Licensed Field in the Licensed Territory under this Agreement, other than the Novan Trademarks (the "**Sato Trademarks**"). Sato shall solely own the Sato Trademarks and pay all relevant costs thereof. Sato shall not select, register or otherwise use any trademark that is the same as or confusingly similar to, misleading or deceptive with respect to or that dilutes any of the Novan Trademarks. Novan shall not use any trademark that is the same as or confusingly similar to, misleading or deceptive with respect to or that dilutes any of the Sato Trademarks. Sato shall have the sole right to initiate at its own discretion legal proceedings against any infringement or threatened infringement of any Sato Trademark.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.2 Election to Use Novan Trademarks**. Sato shall inform Novan in writing if Sato elects to use the Novan Trademarks, or equivalent thereof, in the Licensed Territory, in connection with the commercialization of the Licensed Product in the Licensed Field in the Licensed Territory, and Novan shall have the right to approve, at its sole discretion, such use of the Novan Trademarks, including approval of the size, position, and location thereof on the Licensed Product or its components. If Novan so provides its approval, the Parties shall enter into an agreement setting forth the terms and conditions of Sato's use of such Novan Trademarks, subject to Section 8.1, which agreement shall include the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Novan shall and hereby does grant to Sato an exclusive, royalty-free license to use the Novan Trademarks on or in connection with the commercialization of the Licensed Product in the Licensed Territory in the Licensed Field. Novan shall not grant to any Third Party a license to use the Novan Trademarks on or in connection with the commercialization of any products outside the Licensed Field in the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Sato shall not use any trademark that is confusingly similar to, misleading or deceptive with respect to or that dilutes any of the Novan Trademarks.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Sato shall properly designate the Novan Trademarks on the packaging of the final Licensed Product, to the extent required or permissible by the applicable Marketing Approvals and Sato agrees that all Licensed Products with which the Novan Trademarks are used shall conform to all requirements of any applicable Laws and any Regulatory Authorities in the Licensed Territory and shall be of a level of quality commensurate to Novan's Licensed Products outside of the Territory, but in no event less than a reasonable level of quality.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Except as otherwise provided in this Section 8.2, if Sato elects to use the Novan Trademarks, Novan shall have an obligation to register and maintain the Novan Trademarks in the Licensed Territory (subject to this Section 8.2(iv)) at Sato's expense. Novan shall provide Sato reasonable opportunity to review and comment on such registration efforts regarding the Novan Trademarks. Novan shall provide Sato with a copy of material communications from any governmental authority in the Licensed Territory regarding the Novan Trademark, and shall provide drafts of any material filings or responses to be made to such authorities in a timely manner. Notwithstanding the foregoing, if Novan determines in its sole discretion to abandon or not maintain any Novan Trademark in the Licensed Territory, Novan shall provide Sato with **[\*\*\*]** prior written notice of such determination and, if Sato so requests, shall transfer to Sato such Novan Trademark in the Licensed Territory. Sato shall bear all costs of such transfer and maintenance of such Novan Trademark in the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) If a Party becomes aware of any actual or alleged threatened or existing infringement of any Novan Trademark or of any unfair trade practices, trade dress imitation, passing off of counterfeit goods, or like offenses, against such Novan Trademark by a Third Party in the Licensed Territory (such activities, "**Trademark Infringement**"), such Party shall notify the other Party, and shall provide to the other Party any and all evidence and information available to such Party regarding such alleged infringement. Sato shall have the first right, but not the obligation, to bring an appropriate suit or other action against any person or entity engaged in such Trademark Infringement, at its sole expense, subject to this Section 8.2(v). Sato shall have a period of **[\*\*\*]** after such notification to or by Sato, to elect to so enforce such Novan Trademark. If Sato does not so elect, Sato shall so notify Novan in writing during such **[\*\*\*]** period, or **[\*\*\*]** prior to any deadline relating to loss of any rights with respect to the Trademark Infringement, whichever is earlier, and Novan shall have the right, but not the obligation, to commence a suit or take action to enforce such Novan Trademark against such Third Party, at its sole expense. Each Party shall provide to the Party enforcing any such rights under this Section 8.2(v) reasonable assistance in such enforcement, at such enforcing Party's request and expense, including without limitation joining an action as a party plaintiff if so required by Laws to pursue such action. The enforcing Party shall keep the other Party regularly informed of the status and progress of such enforcement efforts, and shall reasonably consider the other Party's comments on any such efforts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) The Party not bringing an action with respect to Trademark Infringement under this Section 8.2 shall be entitled to separate representation in such matter by counsel of its own choice and at its expense, but such Party shall at all times cooperate fully with the Party bringing such action. Additionally, the Party not bringing an action under this Section 8.2 may have an opportunity to participate in such action to the extent that the Parties may mutually agree at the time the other Party elects to bring an action hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.3 Infringement of Sato Trademarks by Third Parties**. With respect to any Sato Trademarks associated with Licensed Products in the Licensed Territory, each Party shall notify the other Party promptly upon learning of any actual or alleged threatened or existing infringement of any trademark or of any unfair trade practices, trade dress imitation, passing off of counterfeit goods, or like offenses, against such trademark. Sato shall have the sole right, in its own discretion and at its own expense, to bring an action to address such infringement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9. SERIOUS ADVERSE EVENT REPORTING**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.1 Serious Adverse Event Reporting by the Parties**. Each Party shall (i) notify the other Party within **[\*\*\*]** (or any such shorter period required by applicable Law) of its becoming aware of any information relating to the occurrence of any serious adverse event in connection with the Licensed Product or concerning any and all charges, complaints or claims reportable to any Regulatory Authority relating to the Licensed Product and (ii) promptly provide to the other Party all such information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.2 Recall or Market Withdrawal of Licensed Product; "Dear Doctor" Letters**. In the event that: (i) Sato determines that an event, incident, or circumstance has occurred which may result in the need for a recall, market withdrawal or other removal of the Licensed Product or any lot or lots thereof from the market in the Licensed Territory, or Novan determines that an event, incident, or circumstance that could reasonably adversely affect the Licensed Product in the Licensed Territory has occurred which is reasonably likely to result in the need for a recall, market withdrawal or other removal of the Licensed Product, or any lot or lots thereof from the market; (ii) either Party becomes aware that a Regulatory Authority is threatening or has initiated an action to remove the Licensed Product from the market in the Licensed Territory or, if such event could reasonably adversely affect the Licensed Product in the Licensed Territory, any Regulatory Authority is threatening or has initiated an action to remove the Licensed Product from the market; or (iii) either Party is required by any Regulatory Authority to distribute a "**Dear Doctor**" letter or its equivalent regarding use of the Licensed Product in the Licensed Territory or, if such event could reasonably adversely affect Licensed Product in the Licensed Territory, any Regulatory Authority has required distribution of a "**Dear Doctor**" letter or its equivalent regarding use of the Licensed Product, it shall promptly advise the other Party in writing with respect thereto, and shall provide to the other Party copies of all relevant correspondence, notices, and the like in the possession or Control of such Party. In such event, Sato shall have the sole authority to determine if a recall or other removal of the Licensed Product is required in the Licensed Territory, and shall be responsible for conducting any such recall or other removal of the Licensed Product in the Licensed Territory, whether voluntary or involuntary, or taking such other remedial action required by applicable Laws in the Licensed Territory. At Sato's request, Novan shall assist Sato, at Sato's expense, with respect to any such recall or remedial action, and shall provide Sato with all information that Sato may request in connection with its dealings with a Regulatory Authority in connection with such recall or remedial action. Expenses incurred in connection with such recall or remedial action shall be **[\*\*\*]** except to the extent (i) **[\*\*\*]**, or (ii) such recall or remedial action is **[\*\*\*]**. For avoidance of doubt, Novan shall have the sole authority to determine if a recall or other removal of the Licensed Product is required outside of the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.3 Pharmacovigilance**. At least **[\*\*\*]** before the First Commercial Sale of the Licensed Product in the Licensed Territory, the Parties shall enter into a pharmacovigilance agreement to specify in detail each Party's respective obligations with respect to adverse event reporting, monitoring, maintenance of safety databases and related submissions to Regulatory Authorities and other similar obligations with respect to the commercialized Licensed Product in the Licensed Field in the Licensed Territory, which shall be consistent with this Article 9. Both Parties understand that the pharmacovigilance agreement shall be modified, if necessary, consistent with the conditions of the Marketing Approval in the Licensed Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10. REPRESENTATIONS AND WARRANTIES**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.1 The Parties' Representations and Warranties**. Each Party hereby represents and warrants to the other Party, as of the Effective Date, as set forth below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Such Party (a) is a corporation duly organized and subsisting under the applicable Laws of its jurisdiction of organization, and (b) has full power and authority and the legal right to own and operate its property and assets and to carry on its business as it is now being conducted and as it is contemplated to be conducted by this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Such Party has the power, authority and legal right, and is free to enter into this Agreement and, in so doing, will not violate any other agreement to which such Party is a party as of the Effective Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) This Agreement has been duly executed and delivered on behalf of such Party and constitutes a legal, valid, and binding obligation of such Party and is enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency, or other applicable Laws of general application affecting the enforcement of creditor rights and judicial principles affecting the availability of specific performance and general principles of equity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Such Party has taken all corporate action necessary to authorize the execution and delivery of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Except with respect to Marketing Approvals for the Licensed Product or as otherwise described in this Agreement, such Party has obtained all necessary consents, approvals, and authorizations of all Regulatory Authorities and other Third Parties required to be obtained by such Party in connection with the execution and delivery of this Agreement and the performance of its obligations hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) The execution and delivery of this Agreement and the performance of such Party's obligations hereunder (i) do not conflict with or violate any requirement of applicable Laws or any provision of the articles of incorporation, bylaws, limited partnership agreement, or any similar instrument of such Party, as applicable, in any material way, and (ii) do not conflict with, violate, or breach or constitute a default or require any consent under, any applicable Laws or any contractual obligation or court or administrative order by which such Party is bound.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) All of such Party's employees, officers, independent contractors, consultants, and agents have executed agreements requiring assignment to such Party of all Inventions made during the course of and as a result of their association with such Party and obligating the individual to maintain as confidential the confidential information of such Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) Neither such Party, nor any of such Party's employees, independent contractors, consultants, agents or officers: (i) has ever been debarred or is subject to debarment or, to such Party's knowledge, convicted of a crime for which a Person could be debarred before a Regulatory Authority under applicable Laws, or (ii) to such Party's knowledge, has ever been under indictment for a crime for which a Person could be debarred under such Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) All documents, information and know-how furnished or transferred by such Party to the other Party under this Agreement shall be, to its knowledge, free of errors in any material respect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.2 Novan's Representations and Warranties.** Novan hereby represents and warrants to Sato, as of the Effective Date, as set forth below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Novan has sufficient legal and/or beneficial title under its intellectual property rights necessary to grant the licenses contained in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Novan has the right to transfer to Sato a copy of the Novan Know-How set forth in <u>Annex 1</u> in accordance with this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) There is no pending or, to Novan's knowledge, threatened claim, litigation or any other proceeding brought by a Third Party against Novan challenging the validity of the Novan Patent Rights in the Licensed Territory, or claiming that the development, manufacture or commercialization of the Licensed Product in the Licensed Field in the Licensed Territory constitutes or would constitute infringement of such Third Party's intellectual property right(s).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Novan has not received any written communications alleging that it has violated or that it would violate, in any material manner, through the manufacture, use, import, export, sale, and/or offer for sale of the Licensed Product in the Licensed Field and in the Licensed Territory, any intellectual property rights of any Third Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Novan has (1) the sole and exclusive ownership of or (2) a license (with the right to grant sublicenses thereunder) to the Novan Patents, Novan Trademarks (if used with the Licensed Product), Novan Study Materials and Novan Scientific Information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.3 The Parties' Covenants**. Each Party hereby covenants throughout the Term of this Agreement as set forth below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Such Party shall not enter into any agreement with a Third Party that will conflict with the rights granted to the other Party under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If during the Term of this Agreement, a Party has reason to believe that it or any of its employees, officers, independent contractors, consultants, or agents rendering services relating to the Licensed Product: (x) is or will be debarred or convicted of a crime for which such Person could be debarred before a Regulatory Authority under applicable Laws, or (y) is or will be under indictment under such Laws, then such Party promptly shall notify the other Party of the same in writing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) In connection with this Agreement, and without limiting anything in this Article 10, each Party represents, warrants and covenants that it has not given or promised to give, and will not make, offer, agree to make or authorize any payment or transfer anything of value, directly or indirectly, to (i) any Government or Public Official (as defined below); (ii) any political party, party official or candidate for public or political office; (iii) any person while knowing or having reason to know that all or a portion of the value will be offered, given, or promised, directly or indirectly, to anyone described in items (i) or (ii) above; or (iv) any owner, director, employee, representative or agent of any actual or potential customer of such Party (if any such transfer of value would be a violation of any applicable Laws). Each Party agrees to comply with all applicable anti-bribery laws in the countries where the Parties have their principal places of business and where they conduct activities under this Agreement. Additionally, each Party represents, warrants and covenants that such Party shall comply with the U.S. Foreign Corrupt Practices Act ("**FCPA**") and the UK Anti-Bribery Act, both as revised from time to time, as well as similar applicable Laws of the country where a Party has its principal place of business and where such Party conducts activities under this Agreement, and to take no action that would reasonably be deemed to cause the other Party to be in violation of the FCPA, the UK Anti-Bribery Act or similar applicable Laws of the country where a Party has its principal place of business and where it conducts activities under this Agreement. Additionally, each Party will make reasonable efforts to comply with requests for information, including answering questionnaires and narrowly tailored audit inquiries, to enable the other Party to ensure compliance with applicable anti-bribery Laws. For purposes of this Agreement, "**Government or Public Official**" means any officer or employee or anyone acting in an official capacity on behalf of: a government or any department or agency thereof; a public international organization (such as the United Nations, the International Monetary Fund, the International Red Cross, and the World Health Organization), or any department, agency or institution thereof; or a government-owned or controlled company, institution, or other entity, including a government-owned hospital or university.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.4 No Off-Label Uses**. Sato hereby covenants throughout the Term that it shall not (by itself or with or through a Third Party) develop, sell, offer for sale, import, market, distribute or promote the Licensed Product in the Licensed Field in the Licensed Territory for uses or indications outside of the scope of the Approved Label. If Sato becomes aware of any activities in contravention of the immediately preceding sentence Sato shall immediately notify Novan and provide to Novan relevant information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11. CONFIDENTIALITY OBLIGATIONS OF SATO**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.1 Confidentiality Obligations**. During the Term of this Agreement and for a period of **[\*\*\*]** thereafter, or **[\*\*\*]** from the Effective Date, whichever is longer, Sato:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) shall hold in strict confidence any and all information disclosed to it by Novan, including, without limitation Novan Scientific Information, (collectively "**Novan Confidential Information**") and shall not use, nor disclose or supply to any Third Party, nor permit any Third Party, to have access to the Novan Confidential Information, without first obtaining the written consent of Novan, except as expressly permitted in this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) shall take all reasonable precautions necessary or prudent to prevent material in its possession or control that contains or refers to Novan Confidential Information from being destroyed or lost, or discovered, received, used, intercepted or copied by any Third Party; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) may disclose the Novan Confidential Information only to its employees, consultants, independent contractors, agents, Affiliates, and actual or potential acquirers, provided that such employees, consultants, independent contractors, agents, Affiliates, and actual or potential acquirers are bound by terms and conditions of confidentiality no less protective than the terms and conditions that bind Sato hereunder.

For the avoidance of doubt, it is understood that Sato shall be liable for any breach of the confidentiality obligation under this Section 11.1 by any Person to whom the Novan Confidential Information is disclosed by Sato.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.2 Exceptions**. Sato's obligations of confidentiality and non-use under Section 11.1 shall not apply and Sato shall have no further obligations with respect to any of the Novan Confidential Information, to the extent Sato can establish by competent proof that such Novan Confidential Information:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) is or becomes part of the public domain without breach by Sato of this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) was in Sato's possession before disclosure by Novan and was not acquired directly or indirectly from Novan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) is obtained from a Third Party with no obligation of confidentiality to Novan, who has a right to disclose it to Sato;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) is developed by Sato without using any Novan Confidential Information; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) is required to be revealed in response to a court decision or administrative order, or to comply with applicable Laws, in which case Sato shall inform Novan immediately by written notice and cooperate with Novan using Commercially Reasonable Efforts either to enable Novan to seek protective measures for such Novan Confidential Information, or to seek confidential treatment of such Novan Confidential Information, and in such case Sato shall disclose only such portion of the Novan Confidential Information which is so required to be disclosed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.3 Disclosure for Marketing Approvals; Publications**. Nothing herein shall prevent Sato from disclosing any Novan Confidential Information to the extent that such Novan Confidential Information is required to be used or disclosed for the purposes of seeking or obtaining Marketing Approvals of Licensed Products in the Licensed Field in the Licensed Territory or seeking patent protection for Inventions it owns or has responsibility for prosecuting under Article 7. Sato shall further have the right to present Novan Scientific Information at conferences or to publish Novan Scientific Information in journals (collectively "**Publications**"), provided such Publication is subject to Novan's prior written consent, not to be unreasonably withheld, delayed or conditioned.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12. CONFIDENTIALITY OBLIGATIONS OF NOVAN**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.1 Confidentiality Obligations**. During the Term of this Agreement and for a period of **[\*\*\*]** thereafter, or **[\*\*\*]** from the Effective Date, whichever is longer, Novan:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) shall hold in strict confidence any and all information disclosed to it by Sato, including without limitation the Sato Scientific Information, (collectively "**Sato Confidential Information**") and shall not use, nor disclose or supply to any Third Party nor permit any Third Party to have access to the Sato Confidential Information, without first obtaining the written consent of Sato, except as expressly permitted in this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) shall take all reasonable precautions necessary or prudent to prevent material in its possession or control that contains or refers to Sato Confidential Information from being destroyed or lost, or discovered, received, used, intercepted or copied by any Third Party; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) may disclose the Sato Confidential Information only to its employees, consultants, independent contractors, agents, Affiliates, actual and potential Novan Licensees and actual and potential acquirers, provided that such employees, consultants, independent contractors, agents, Affiliates, actual and potential Novan Licensees and actual and potential acquirers are bound by terms and conditions of confidentiality no less protective than the terms and conditions that bind Novan hereunder.

For the avoidance of doubt, it is understood that Novan shall be liable for any breach of the confidentiality obligation under this Section 12.1 by any person or corporation to whom the Sato Confidential Information is disclosed by Novan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.2 Exceptions**. Novan's obligations of confidentiality and non-use under Section 12.1 shall not apply and Novan shall have no further obligations with respect to any of the Sato Confidential Information as far as Novan can establish by competent proof that such Sato Confidential Information:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) is or becomes part of the public domain without breach by Novan of this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) was in Novan's possession before disclosure by Sato to Novan and was not acquired directly or indirectly from Sato;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) is obtained from a Third Party with no obligation of confidentiality to Sato, who has a right to disclose it to Novan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) is developed by Novan without using any Sato Confidential Information; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) is required to be revealed in response to a court decision or administrative order, or to comply with applicable Laws of a governmental authority or rules of a securities exchange, in which case Novan shall inform Sato immediately by written notice and cooperate with Sato using Commercially Reasonable Efforts either to enable Sato to seek protective measures for such Sato Confidential Information, or to seek confidential treatment of such Sato Confidential Information, and in such case Novan shall disclose only such portion of the Sato Confidential Information which is so required to be disclosed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.3 Disclosure for Marketing Approvals; Publications**. Nothing herein shall prevent Novan from disclosing any Sato Confidential Information to the extent that such Sato Confidential Information is required to be used or disclosed for the purposes of seeking or obtaining Marketing Approvals of Licensed Products outside the Licensed Territory, obtaining Marketing Approvals of Licensed Products in the Licensed Territory outside the Licensed Field, or seeking patent protection for Inventions it owns or has responsibility for prosecuting under Article 7. Novan, its Affiliates and Novan Licensees shall further have the right to disclose any Sato Scientific Information in a Publication, provided that if the Sato Scientific Information concerned has not been previously published, such Publication is subject to Sato's prior written consent, not to be unreasonably withheld, delayed or conditioned.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13. PRESS RELEASES**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.1 Press Releases.** Subject to Articles 11 or 12 as applicable, either Party may issue a press release or public announcement concerning any aspect of the development or commercialization of the Licensed Product in the Licensed Field in the Licensed Territory, provided that it provides to the other Party a copy of such press release or public announcement at least **[\*\*\*]** in advance of its intended publication or release thereof and obtains the written consent, not to be unreasonably withheld, delayed or conditioned, of such other Party to such publication or release. Notwithstanding the foregoing, subject to Sections 11.2(v) or 12.2(v) as applicable, either Party may issue any public announcement that it is advised by legal counsel is required under applicable Laws or rules of a securities exchange, provided that such Party provides to the other Party a copy of such press release or public announcement promptly after its release thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.2 No Disclosure of Terms and Conditions.** No press release or public announcement shall be made by either Party concerning the execution of this Agreement or the terms and conditions hereof, without the prior written consent of the other Party which shall not be unreasonably withheld, delayed or conditioned. Notwithstanding the foregoing, either Party may disclose the existence of this Agreement and the terms and conditions hereof without the prior written consent of the other pursuant to Section 11.2(v) or Section 12.2(v), as applicable, or in connection with a due diligence process associated with any future financing by either Party or the negotiation or exploration of a possible strategic transaction involving such Party, provided that such disclosure is made in the course of such diligence, negotiation or exploration pursuant to confidentiality obligations consistent with those set forth in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14. PAYMENT** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.1 Payments**. In consideration of the licenses and other rights granted to Sato herein, Sato shall pay to Novan a total of 4.00 billion JPY, payable in equal annual installments over fifteen (15) years after the Effective Date of this Agreement; provided that such payment condition (for clarity, the amount of payment is not included) may be changed under the mutual consent of the Parties. In addition to such payment, Sato shall pay to Novan the following sales milestone payments.

SALES MILESTONE PAYMENTS

One-time sales milestone payments shall be made by Sato to Novan upon the first achievement of each of the following annual Net Sales milestones:

---

| | |
|:---|:---|
| Annual Net Sales of **[\*\*\*]** | **[\*\*\*]** |
| Annual Net Sales of **[\*\*\*]** | **[\*\*\*]** |
| Annual Net Sales of **[\*\*\*]** | **[\*\*\*]** |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.2 Currency**. All payments under Section 14.1 shall be made in JPY.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.3 Notification**. Sato shall notify Novan of the achievement of each of the sales milestones set forth in Section 14.1 within **[\*\*\*]** after Sato closes its books for the relevant annual period in which such sales milestone payment becomes due. All payments under Section 14.1 shall be made within **[\*\*\*]** after Sato receives the relevant invoice from Novan. All payments under Section 14.1 shall be made without setoff or deduction of any kind, other than pursuant to Sections **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.4 Account**. All payments to be made to Novan under this Agreement shall be made by wire transfer to the following account:

---

| | |
|:---|:---|
| For all wire payments denominated in JPY | Payments should be remitted to **[\*\*\*]**<br>Any such payments to **[\*\*\*]** should be remitted **[\*\*\*]**  |
| For all other wire payments | Recipient US Bank: **[\*\*\*]**<br>|

---

or such other account as may be specified by Novan in writing to Sato.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15. ROYALTY PAYMENT; AUDITS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.1 Royalty**. In consideration of the rights granted to Sato herein, Sato shall pay to Novan a royalty of **[\*\*\*]** of annual Net Sales in the Licensed Territory during the Term, subject to Section 15.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.2 Royalty Term; Reduction**. Royalties shall be payable in the Licensed Territory, on a product-by-product basis, for the duration of the Term. If, on a product-by-product basis, during the Term (i) no Valid Claim exists in the Licensed Territory Covering the Licensed Product or its manufacture, use or sale, or (ii) the Marketing Exclusivity with respect to such Licensed Product in the Licensed Territory has expired, then the royalty rate shall be reduced to **[\*\*\*]** of annual Net Sales for the remainder of the Term in the Licensed Territory for such Licensed Product.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.3 Significant Value of Novan Know-How**. The Parties acknowledge that the Novan Know-How is of significant value for the development and commercialization of Licensed Product in the Licensed Field in the Licensed Territory, and have determined the royalty rate and royalty term set forth herein on the basis of this assumption.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.4 Payment**. Sato shall provide to Novan a good faith estimate of the royalties payable to Novan under Section 15.1 within **[\*\*\*]** after the end of the calendar quarter in which such royalties are due, and shall pay to Novan all royalties payable to Novan under Section 15.1 within **[\*\*\*]** after the end of the applicable calendar quarter. Payment of royalties under Section 15.1 shall be made in JPY. All payments under Section 15.1 shall be made without setoff or deduction of any kind, other than pursuant to Sections **[\*\*\*]**. Royalties payable under Section 15.1 shall be payable only once with respect to a particular unit of Licensed Product and shall be paid only once regardless of the number of Patents applicable to such Licensed Product.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.5 Maintenance of Records**. Sato shall keep true, correct and complete records of all royalties and other amounts payable to Novan under Section 15.1 hereof, including without limitation all financial information needed to calculate Net Sales for such periods of time as are required under applicable Law, provided that in no event shall Sato retain such books and records for less than **[\*\*\*]** after the date of relevant payment made to Novan. Sato shall deliver to Novan a preliminary Sales Report **[\*\*\*]** after the end of each calendar quarter and a final Sales Report **[\*\*\*]** after the end of each calendar quarter. All financial terms and standards (including any calculation of Net Sales and financial payments due under this Agreement) shall be governed by and determined in accordance with Japanese GAAP and shall be consistent with Sato's audited consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.6 Taxes**. All payments under this Agreement shall be made without any deduction or withholding for or on account of any tax, except as set forth in this Section 15.6. The Parties agree to cooperate with one another and use reasonable efforts to minimize obligations for any and all income or other taxes required by Law to be withheld or deducted from any of the royalty and other payments made by or on behalf of a Party hereunder ("**Withholding Taxes**"). The applicable paying Party under this Agreement (the "**Paying Party**") shall, if required by Law, deduct from any amounts that it is required to pay to the recipient Party hereunder (the "**Recipient Party**") an amount equal to such Withholding Taxes, provided that the Paying Party shall give the Recipient Party reasonable notice prior to paying any such Withholding Taxes. Such Withholding Taxes shall be paid to the proper taxing authority for the Recipient Party's account and, if available, evidence of such payment shall be secured and sent to recipient within **[\*\*\*]** of such payment. The Paying Party shall, at the Recipient Party's cost and expense, do all such lawful acts and things and sign all such lawful deeds and documents as the Recipient Party may reasonably request to enable the Paying Party to avail itself of any applicable legal provision or any double taxation treaties with the goal of paying the sums due to the Recipient Party hereunder without deducting any Withholding Taxes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.7 [\*\*\*]**. All payments due from Sato to Novan under Section 15.1 **[\*\*\*]**, provided that **[\*\*\*]**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.8 Audits**. Novan shall have the right, no more than **[\*\*\*]** during each calendar year during the Term of this Agreement and for **[\*\*\*]** after its termination, to have an independent certified public accountant ("**Accountant**") of its own selection (subject to Sato's acceptance of such Accountant, such acceptance not to be unreasonably withheld, delayed or conditioned) and at its own expense audit the relevant books and records of account of Sato in connection with the payment of royalties and any other amounts under this Agreement during normal business hours, and upon reasonable prior notice, to determine whether appropriate accounting has been performed and payments have been made to Novan hereunder; provided that such Accountant shall be bound to treat all information reviewed during such audit as confidential, and does not disclose to Novan any information other than information which shall have previously been given to Novan pursuant to any provision of this Agreement or information regarding the payments due to or by Novan as a result of such audit. Notwithstanding the foregoing, such Accountant may support its audit conclusions with underlying Sato Confidential Information if challenged by Sato, provided that all such disclosures shall be maintained as confidential by such Accountant and Novan with respect to Third Parties, except that Novan may disclose such Sato Confidential Information to UNC as part of Novan's reporting obligations under the UNC License Agreement.

If the Accountant determines that the Sales Report has not been true or accurate, then Sato shall refund Novan for the costs of the Accountant if Sato has underpaid such royalties by more than **[\*\*\*]**, and the royalties shall be re-calculated on the basis of the Accountant's findings. Such Accountant's findings shall be binding for both Parties absent manifest error.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.9 Late Payments**. If Novan does not receive payment of any sum due to it under Section 14.1 or Section 15.1 on or before the due date, simple interest shall thereafter accrue on the sum due to Novan from the due date until the date of payment at the USD LIBOR plus **[\*\*\*]** or the maximum rate allowable by applicable Law, whichever is less.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**16. INDEMNIFICATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**16.1 By Novan**. Novan shall defend, indemnify and hold harmless Sato and its Affiliates and their respective directors, officers, agents, successors, assignees and employees (the "**Sato Indemnitees**") from and against any and all claims, liabilities, losses, costs, actions, suits, damages and expenses, including reasonable attorneys' fees (collectively "**Damages**") to the extent arising from any claim, action or proceeding made or brought against Sato Indemnitees by a Third Party in connection with (i) the gross negligence, recklessness, or intentional wrongful acts or omissions of Novan, its Affiliates, and/or Novan Licensees and its or their respective employees, officers, independent contractors, consultants, or agents, in connection with the performance by or on behalf of Novan of Novan's obligations or exercise of its rights under this Agreement; (ii) any breach by Novan, or its Affiliates, Novan Licensees or independent contractors of any representation, warranty, covenant, or obligation of Novan set forth in this Agreement, and (iii) the development, manufacture, use, handling, storage, commercialization, transfer, importation, exportation or labeling, of the Licensed Product by or for Novan, its Affiliates or Novan Licensees either prior to the Effective Date anywhere in the world, or on or after the Effective Date outside the Licensed Territory or outside the Licensed Field in the Licensed Territory; except in any such case to the extent such Damages are reasonably attributable to any negligence, willful misconduct, or breach of this Agreement by Sato or a Sato Indemnitee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**16.2 By Sato**. Sato shall defend, indemnify and hold harmless Novan and its Affiliates, directors, officers, agents, successors, assignees and employees (the "**Novan Indemnitees**") from and against any and all Damages to the extent arising from any claim, action or proceeding made or brought against Novan Indemnitees by a Third Party in connection with (i) the gross negligence, recklessness, or intentional wrongful acts or omissions of Sato, its Affiliates, and its or their respective employees, officers, independent contractors, consultants, or agents, in connection with the performance by or on behalf of Sato of Sato's obligations or exercise of its rights under this Agreement; (ii) any breach by Sato, or its Affiliates or independent contractors of any representation, warranty, covenant, or obligation of Sato set forth in this Agreement; and (iii) the development, manufacture (other than by Novan or its contract manufacturers), use, handling, storage, commercialization, transfer, importation, exportation or labeling of the Licensed Product by or for Sato or any of its Affiliates, agents, and independent contractors; except in any such case to the extent such Damages are reasonably attributable to any negligence, willful misconduct, or breach of this Agreement by Novan or an Novan Indemnitee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**16.3 Indemnification Procedure**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Each Party shall notify the other in the event it becomes aware of a claim for which indemnification may be sought pursuant to this Article 16. In case any proceeding (including any governmental investigation) shall be instituted involving any Party in respect of which indemnity may be sought pursuant to this Article 16, such Party (the "**Indemnified Party**") shall promptly notify the other Party (the "**Indemnifying Party**") in writing (an "**Indemnification Claim Notice**"). The Indemnifying Party and Indemnified Party shall promptly meet to discuss how to respond to any claims that are the subject matter of such proceeding. At its option, the Indemnifying Party may assume the defense of any Third Party claim subject to indemnification as provided for in this Section 16.3 by giving written notice to the Indemnified Party within **[\*\*\*]** (or until such time provided in any applicable extension to appropriately answer any complaint, if any, but no longer than **[\*\*\*]** (the "**Election Time Period**"); with the Indemnified Party being obligated to make all reasonable efforts to obtain any such extension) after the Indemnifying Party's receipt of an Indemnification Claim Notice, solely for claims, (i) that solely seek monetary damages and (ii) as to which the Indemnifying Party expressly agrees in writing that, as between the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be solely obligated to satisfy and discharge the claim in full (the matters described in (i) and (ii), the "**Litigation Conditions**"). The Indemnified Party may assume responsibility for such defense if the Litigation Conditions are not satisfied, by written notice to the Indemnifying Party within the Election Time Period. If the Indemnified Party fails to promptly provide an Indemnification Claim Notice, and such failure materially prejudices the defense of such claim, then the Indemnifying Party shall be relieved of its responsibility to indemnify the Indemnified Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Upon assuming the defense of a Third Party claim in accordance with this Section 16.3, the Indemnifying Party shall be entitled to appoint lead and any local counsel in the defense of the Third Party claim. Should the Indemnifying Party assume and continue the defense of a Third Party claim, except as otherwise set forth in this Section 16.3, the Indemnifying Party will not be liable to the Indemnified Party for any legal expenses subsequently incurred by such Indemnified Party after the date of assumption of defense in connection with the analysis, defense, countersuit or settlement of the Third Party claim. Without limiting this Section 16.3, any Indemnified Party will be entitled to participate in, but not control, the defense of a Third Party claim for which it has sought indemnification hereunder and to engage counsel of its choice for such purpose; provided, however, that such engagement will be at the Indemnified Party's own expense unless (a) the engagement thereof has been specifically requested by the Indemnifying Party in writing, or (b) the Indemnifying Party has failed to assume and actively further the defense and engage counsel in accordance with this Section 16.3 (in which case the Indemnified Party will control the defense), or (c) the Indemnifying Party no longer satisfies the Litigation Conditions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Subject to the Litigation Conditions being satisfied, the Indemnifying Party will have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Damages, on such terms as the Indemnifying Party, in its reasonable discretion, will deem appropriate (provided, however that such terms shall include a complete and unconditional release of the Indemnified Party from all liability with respect thereto), and will transfer to the Indemnified Party all amounts which such Indemnified Party will be liable to pay pursuant to such settlement or disposal of such claim prior to the time such payments become due by the Indemnified Party. With respect to all other Damages in connection with Third Party claims, where the Indemnifying Party has assumed the defense of the Third Party claim in accordance with this Section 16.3, the Indemnifying Party will have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Damages, provided it obtains the prior written consent of the Indemnified Party, not to be unreasonably withheld, delayed or conditioned.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) The Indemnifying Party that has assumed the defense of the Third Party claim in accordance with this Section 16.3 will not be liable for any settlement or other disposition of any Damages by an Indemnified Party that is reached without the written consent of such Indemnifying Party. The Indemnified Party will not admit any liability with respect to, or settle, compromise or discharge, any Third Party claim without first offering to the Indemnifying Party the opportunity to assume the defense of the Third Party claim in accordance with this Section 16.3. If the Indemnifying Party chooses to defend or prosecute any Third Party claim, the Indemnified Party will cooperate in the defense or prosecution thereof and will furnish such records, information and testimony, provide such witnesses including to the extent possible, former employees and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection with such Third Party claim. Such cooperation will include access during normal business hours afforded to the Indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party claim, and making employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Indemnifying Party will reimburse the Indemnified Party for all its reasonable out-of-pocket expenses incurred in connection with such cooperation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**16.4 Insurance**. During the Term of this Agreement and for **[\*\*\*]** thereafter, Novan shall keep and maintain the following insurance with a reputable carrier **[\*\*\*]** reasonably acceptable to Sato: comprehensive public liability, including products liability coverage and clinical trial coverage, with limits of (a) before receipt of Marketing Approval for any Licensed Product, not less than **[\*\*\*]** USD per event and (b) after receipt of Marketing Approval for any Licensed Product, not less than **[\*\*\*]** USD per event or any such greater mutually agreed amount and type of insurance determined by the board of directors of the each Party, naming Sato as an additional insured from the Effective Date forward with respect to Novan's performance hereof. Sato shall keep and maintain the following insurance with a reputable carrier **[\*\*\*]** reasonably acceptable to Novan, naming Novan as an additional insured with respect to Sato's performance hereof: (i) from no later than the start of a clinical study of the Licensed Product in the Licensed Territory until **[\*\*\*]** after the expiration or termination of this Agreement, comprehensive public liability including clinical trial coverage, with limits of not less than **[\*\*\*]** USD per event, and (ii) from no later than the first commercial sale of the Licensed Product in the Licensed Territory until **[\*\*\*]** after the expiration or termination of this Agreement, comprehensive public liability including products liability coverage, with limits of not less than **[\*\*\*]** USD per event. The type and amount of insurance maintained by the Parties pursuant to this Section 16.4 may be modified upon mutual written agreement of the Parties. Both Parties agree to provide the other Party certificate evidencing such coverage within **[\*\*\*]** after the date on which such Party purchases the relevant insurance pursuant to the terms and conditions of this Section 16.4 and at least annually thereafter. If such insurance is canceled or materially altered, the each Party shall provide prompt written notice to the other Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**16.5** Except as expressly provided in this Article 16, neither Party shall have any liability to indemnify the other Party against any Third Party claims.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**17. LIMITATION OF LIABILITY; EXCLUSION OF DAMAGES; DISCLAIMER**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**17.1** EXCEPT IN THE CASE OF A BREACH OF ARTICLES 11 OR 12, AND WITHOUT LIMITING THE PARTIES' OBLIGATIONS UNDER ARTICLE 16 OR LIABILITY OF A PARTY FOR INFRINGEMENT OR MISAPPROPRIATION OF THE INTELLECTUAL PROPERTY RIGHTS OF THE OTHER PARTY OR FOR FRAUD OR WILLFUL MISCONDUCT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES (INCLUDING WITHOUT LIMITATION DAMAGES RESULTING FROM LOSS OF USE, LOSS OF PROFITS, INTERRUPTION OR LOSS OF BUSINESS, OR OTHER ECONOMIC LOSS) ARISING OUT OF THIS AGREEMENT OR WITH RESPECT TO A PARTY'S PERFORMANCE OR NON-PERFORMANCE HEREUNDER.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**17.2** EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY PROVIDES ANY WARRANTIES, WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED, REGARDING THE LICENSED PRODUCT AND EACH PARTY HEREBY DISCLAIMS ALL OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, EXPRESS AND IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND FREEDOM FROM INFRINGEMENT OF THIRD PARTY RIGHTS.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18. TERM**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.1 Term**. The term of this Agreement shall commence as of the Effective Date and, unless sooner terminated as specifically provided in this Agreement, shall continue in effect until the tenth (10<sup>th</sup>) anniversary of the First Commercial Sale of the Licensed Product in the Licensed Field in the Licensed Territory (the "**Term**"), unless terminated earlier pursuant to Section 19. This Agreement may be renewed by mutual written agreement of the Parties for additional two (2) year periods following expiration of the Term.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.2 Effect of Expiration**. Upon expiration of this Agreement in accordance with Section 18.1:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Licensed Rights shall continue in full force and effect and be considered to be fully paid-up;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) subject to Section 18.2(i) hereof, Sato's confidentiality obligation under Section 11 shall continue to be in full force and effect for a period of **[\*\*\*]** following expiration of this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Novan shall have the right to freely use and license all Novan Scientific Information and all Sato Scientific Information disclosed by Sato to Novan hereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) The licenses granted by Sato to Novan pursuant to Section 2.3 and other provisions of this Agreement shall continue in effect in addition to those sections that also survive pursuant to Section 18.3 and shall be expanded to include the Licensed Field in the Licensed Territory;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Sato shall transfer and assign to Novan all of Sato's right, title and interest in and to all Drug Approval Applications, Marketing Approvals, and regulatory dossiers with respect to any and all Licensed Products in the Licensed Field in the Licensed Territory; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) subject to Sections 18.2(iii) and 18.2(iv) hereof, Novan's confidentiality obligation under Section 12 shall continue to be in full force and effect for a period of **[\*\*\*]** following expiration of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.3 Survival**. For the avoidance of doubt, it is understood that provisions under Sections 6.7 (*Ownership of Novan Scientific Information*), 6.8 (*Ownership of Sato Scientific Information*), 7.1 (*Improvements*), 7.2 (*Ownership of Inventions*), 8.1 (*Trademarks*), 9 (*Serious Adverse Event Reporting*), 11 (*Confidentiality Obligations of Sato*), 12 (*Confidentiality Obligations of Novan*), 15.5 (*Maintenance of Records*), 15.6 (*Taxes*), 15.8 (*Audits*), 16 (*Indemnification*), 17 (*Limitation of Liability; Exclusion of Damages; Disclaimer*), 18.2 (*Effect of Expiration*) 18.3 (*Survival*), 20 (*Obligations Upon Early Termination*), 22 (*General Provisions*), 23 (*Governing Law*) and 24 (*Dispute Resolution; Jurisdiction*) shall survive the expiration of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.4 Other Remedies**. Termination or expiration of this Agreement for any reason shall not release any Party from any liability or obligation that has accrued prior to such expiration or termination, nor affect the survival of any provision hereof to the extent it is expressly stated to survive termination. Termination or expiration of this Agreement for any reason shall not constitute a waiver or release of, or otherwise be deemed to prejudice or adversely affect, any rights, remedies, or claims, whether for damages or otherwise, that a Party may have hereunder or that may arise out of or in connection with such termination or expiration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19. EARLY TERMINATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.1 At Sato's Convenience.** Sato may terminate this Agreement at-will on one hundred twenty (120) calendar days' written notice to Novan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.2 Material Breach**. Without prejudice and in addition to any other contractual remedy the non-defaulting Party may have under this Agreement, either Party may terminate this Agreement in writing, if the other Party commits a material breach of any provision of this Agreement and such breach is not cured within sixty (60) calendar days after written notice of the breach is received by the other Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.3 Force Majeure**. The Agreement may be terminated by either Party in the event of a Force Majeure (as hereinafter defined) pursuant to Section 21.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.4 Insolvency**. Either Party may terminate this Agreement upon written notice if the other Party is dissolved or liquidated, files or has filed against it a petition under any bankruptcy or insolvency law that is not dismissed within sixty (60) calendar days, makes an assignment for the benefit of its creditors or has a receiver or trustee appointed for all or substantially all of its property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.5 Patent Challenge**. In the event that Sato or any of its Affiliates commences or otherwise, directly or indirectly, pursues (or, other than as required by Law or legal process, voluntarily assists any Third Party to pursue in any material respect where Sato has knowledge that its assistance will be used by the Third Party to pursue) any proceeding seeking to have any of the Novan Patents revoked or declared invalid, unpatentable, or unenforceable, Novan may declare a material breach hereunder, terminate this Agreement on written notice to Sato and shall then have the right to exercise the remedies available under Section 20.1 with immediate effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**20. OBLIGATIONS UPON EARLY TERMINATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**20.1 Early Termination by Novan; Termination for Convenience by Sato**. In the event of termination of this Agreement by Novan in accordance with Sections 19.2, 19.3, 19.4 or 19.5 or by Sato under Section 19.1:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) all Licensed Rights shall revert to Novan without any compensation to be paid by Novan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Sato shall return to Novan any and all Novan Scientific Information;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Sato shall transfer to Novan or its nominee any and all Marketing Approvals and all other filings and submissions with and to Regulatory Authorities with respect to the Licensed Product. To this end Sato shall make Commercially Reasonable Efforts to file for transfer with the relevant Regulatory Authorities and to give all other notifications and approvals necessary under law for the transfer of Marketing Approvals and such other filings and submissions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Sato shall grant to Novan a worldwide, fully-paid, royalty-free license, with the right to sublicense, to use the Sato Trademarks (including, without limitation, the goodwill symbolized by such Sato Trademarks) used to brand the Licensed Product, and a license to reproduce, distribute, perform, display and prepare derivative works of Sato's copyrights used to brand or promote the Licensed Product, in each case solely to the extent necessary or useful for commercializing the Licensed Product;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) The licenses granted by Sato to Novan pursuant to Section 2.3 and other provisions of this Agreement shall continue in effect in addition to those sections that also survive pursuant to Section 18.3 and shall be expanded to include the Licensed Field in the Licensed Territory;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) Sato shall furnish Novan with reasonable cooperation, at Sato's expense, to assure a smooth transition of any clinical or other studies in progress related to the Licensed Products which Novan determines to continue in compliance with applicable Laws and ethical guidelines applicable to the transfer or termination of any such studies. In the event that Novan informs Sato that it does not intend to continue specific development activities then in progress, costs incurred in closing out such activities shall be borne by Sato; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) Sato shall not withdraw or cancel any Marketing Approval or Drug Approval Application, unless expressly instructed so by Novan in writing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**20.2 Early Termination by Sato**. In the event of termination of this Agreement by Sato in accordance with Sections 19.2, 19.3 or 19.4:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) If such termination is pursuant to Section 19.2 or 19.4 for Novan's material breach or Novan's insolvency that in either case does not result in Novan's material failure to supply Compound or Licensed Product pursuant to then-existing obligations under the Commercial Supply Agreement or any Product Supply Agreement, Sato may elect by written notice to Novan provided concurrently with the relevant termination notice to have the Licensed Rights survive for the remainder of the Term (such Term determined as if the early termination had not occurred) subject to payment by Sato to Novan of (a) **[\*\*\*]** and (b) all **[\*\*\*]**; provided that **[\*\*\*]**;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If such termination is pursuant to Section 19.2 or 19.4 for Novan's material breach or Novan's insolvency that in either case results in Novan's material failure to supply Compound or Licensed Product pursuant to then-existing obligations under the Commercial Supply Agreement or any Product Supply Agreement, or if Sato does not elect for the Licensed Rights to survive as provided in Section 20.2(i) concurrently with the relevant termination notice, the Licensed Rights shall terminate upon the effective date of termination, and Sato may pursue all rights and remedies it may have at law or in equity with respect to the early termination of this Agreement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Novan's obligations and Sato's rights under Articles 5, 6, 7, and 8 shall continue in addition to those sections that also survive pursuant to Section 18.3, including without limitation Sato's obligation to indemnify Novan pursuant to Section 16.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**20.3 Bankruptcy Laws**. All rights and licenses granted under or pursuant to this Agreement by Novan or Sato are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code and of any similar provisions of applicable Laws under any other jurisdiction (collectively, the "**Bankruptcy Laws**"), licenses of right to "**intellectual property**" as defined under the Bankruptcy Laws. Each Party agrees that the other Party, as a licensee of rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**21. FORCE MAJEURE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**21.1 Force Majeure**. No failure or delay by either Party in the performance of any obligation hereunder shall be deemed a breach of this Agreement nor create any liability for any damages, increased cost or losses which the other Party may sustain by reason of such failure or delay of performance, if the same shall arise from any cause or causes beyond the control of that Party, such as earthquake, storm, flood, fire, other acts of nature, epidemic, war, riot, hostility, public disturbance, cessation of transport, act of public enemies, prohibition or act by a government or public agency, strike or other labor dispute or work stoppage (collectively "**Force Majeure**"); provided, however, that the Party so prevented shall continue to take all commercially reasonable actions within its power to comply with its obligations hereunder as fully as possible and to mitigate possible damages.

The Party so prevented shall without undue delay notify the other Party in writing thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**21.2 Continued Force Majeure**. Should the event of Force Majeure continue for more than **[\*\*\*]**, the Parties shall promptly discuss their further performance under this Agreement and whether to modify or terminate this Agreement in view of the effect of the event of Force Majeure. If no agreement can be reached within **[\*\*\*]** after expiration of such **[\*\*\*]**, either Party may terminate this Agreement effective immediately upon written notice to the other Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22. GENERAL PROVISIONS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.1 Assignment**. This Agreement is binding upon and will inure to the benefit of the Parties and their respective permitted assignees or successors in interest, including without limitation those that may succeed by assignment, transfer or otherwise to the ownership of either of the Parties or of the assets necessary to the conduct of the business to which this Agreement relates. This Agreement may not be assigned or otherwise transferred by either Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld, delayed or conditioned; provided, however, that either Party may, without such consent, assign this Agreement together with all of its rights and obligations hereunder to its Affiliates, or to a successor in interest in connection with the transfer or sale of all or substantially all of its business to which this Agreement relates, or in the event of its merger or consolidation or similar transaction, subject to the assignee agreeing to be bound by the terms of this Agreement. Any purported assignment in violation of the preceding sentences shall be void. Any permitted successor shall assume and be bound by all obligations of its assignor or predecessor under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.2 Headings**. Headings are inserted for convenience and shall not affect the meaning or interpretation of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.3 Waiver**. No waiver of any default hereunder by either Party or any failure to enforce any rights hereunder shall be deemed to constitute a waiver of any subsequent default with respect to the same or any other provision hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.4 Notices**. Any and all notices given by one Party to the other Party under this Agreement must be in writing and shall be deemed effectively given (i) upon personal delivery to the Party to be notified, (ii) when sent by confirmed email or facsimile if sent during normal business hours of the recipient, if not, then on the next Business Day, (iii) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt, or (iv) on the second Business Day after the date deposited if mailed by certified mail, return receipt requested, postage prepaid. All notices shall be sent to the other Party's address as set out at the beginning of this Agreement or to the latest address of such Party as shall have been communicated to the other Party.

---

| | |
|:---|:---|
| Notices sent to Novan shall be directed to: | Novan, Inc. <br> 4105 Hopson Road <br> Morrisville, North Carolina 27560 <br> USA <br> Attn: **[\*\*\*]**  |
| Notices sent to Sato shall be directed to: | Sato Pharmaceutical Co. Ltd. <br> AHC Building 1-5-27 <br> Moto-Akasaka, Minato-ku, Tokyo 107-0051 <br> Japan <br> Attn: **[\*\*\*]**  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.5 Severability**. Should any part of this Agreement be held unenforceable or in conflict with the applicable Laws of any jurisdiction, the invalid or unenforceable part or provision shall be replaced with a provision which accomplishes, to the extent possible, the original business purpose of such part or provision in a valid and enforceable manner, and the remainder of this Agreement shall remain binding upon the Parties hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.6 Entire Agreement**. This Agreement, together with all Annexes attached hereto, constitute the whole agreement between the Parties and shall cancel and supersede any and all prior and contemporaneous negotiations, correspondence, understandings and agreements, whether oral or written, between the Parties respecting the subject matter hereof, including without limitation the Confidentiality Agreement, provided, however, that all Confidential Information (as defined therein) exchanged between the Parties under the Confidentiality Agreement shall be deemed Confidential Information under this Agreement and shall be governed by the terms of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.7 Amendment**. Any amendment or modification to this Agreement shall only be made in writing and shall only be valid when signed by the due representatives of the Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.8 Counterparts**. This Agreement may be executed in more than one (1) counterpart, each of which shall be deemed an original, but all of such counterparts taken together shall constitute one (1) and the same agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.9 Agency**. Neither Party is, nor shall be deemed to be, an employee, agent, co-venturer, or legal representative of the other Party for any purpose. Neither Party shall be entitled to enter into any contracts in the name of, or on behalf of the other Party, nor shall either Party be entitled to pledge the credit of the other Party in any way or hold itself out as having the authority to do so.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.10 Further Actions**. Each Party agrees to execute, acknowledge, and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.11 Compliance with Laws**. Each Party will comply with all Laws in performing its obligations and exercising its rights hereunder, including without limitation all Laws relating to the export, re-export or other transfer of any Information transferred pursuant to this Agreement or the Licensed Product.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.12 Performance by Affiliates**. Sato may perform some or all of its obligations under this Agreement through Affiliates, provided, however, that Sato shall remain responsible for the performance by its Affiliates and shall use Commercially Reasonable Efforts to cause its Affiliates to comply with the provisions of this Agreement in connection with such performance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**23. GOVERNING LAW**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**23.1 Governing Law**. The construction, validity and performance of this Agreement shall be governed in all respects by the laws of the state of Delaware, excluding its provisions regarding conflicts of law, except that Article 24 and any arbitration thereunder shall be governed by the Federal Arbitration Act, Chapters 1 and 2. The United Nations Convention on the International Sale of Goods shall not apply. This Agreement shall be written and executed in, and all other communications under or in connection with this Agreement shall be in, the English language. Any translation into any other language shall not be an official version thereof, and in the event of any conflict in interpretation between the English version and such translation, the English version shall control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**24. DISPUTE RESOLUTION; JURISDICTION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**24.1 Resolution by CEOs**. In the event of any dispute, claim, question, or disagreement arising from or relating to this Agreement or the breach thereof ("**Dispute**"), the Chief Executive Officers of each Party ("**CEO**s") shall attempt to reach a solution satisfactory to both Parties. If the CEOs do not reach such solution within a period of **[\*\*\*]** or such longer period as the Parties may mutually agree upon, then, upon notice by either Party to the other, all Disputes shall be finally settled by arbitration administered by the International Centre for Dispute Resolution ("**ICDR**") in accordance with the International Arbitration Rules ("**Rules**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**24.2 Arbitration**. The arbitration shall be held in London, United Kingdom. The language of the arbitration shall be English. The arbitration shall be conducted by three (3) arbitrators; provided, however, that the arbitration may be conducted by only one arbitrator if the Parties so agree in advance of the arbitration and are able to agree upon a single, mutually acceptable individual who is knowledgeable in the subject matter at issue in the dispute. If the arbitration is to be conducted by three (3) arbitrators, within **[\*\*\*]** after the commencement of arbitration, each Party shall appoint one (1) arbitrator, and within **[\*\*\*]** of their appointment, the two appointed arbitrators shall select a third arbitrator who shall act as the chair of the tribunal. If any of the arbitrators are not appointed within the deadline, the ICDR shall appoint the arbitrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**24.3 Award**. The award shall be made within **[\*\*\*]** of the filing of the notice of arbitration, and the arbitrator(s) shall agree to comply with this schedule before accepting appointment. However, this time limit may be extended by agreement of the Parties or by the arbitrator(s) if necessary. Judgment on the award rendered by the arbitrator(s) may be enforced in any court having competent jurisdiction thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**24.4 Attorneys' Fees and Costs**. The arbitrator(s) shall award to the prevailing Party, if any, as determined by the arbitrators, all of its attorneys' fees and costs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**24.5 Confidentiality**. The Parties undertake to keep confidential all awards in their arbitration, together with all materials in the proceedings created for the purpose of the arbitration and all other documents produced by another Party in the proceedings not otherwise in the public domain, save and to the extent that disclosure may be required of a Party by legal duty, to protect or pursue a legal right or to enforce or challenge an award in legal proceedings before a court or other judicial authority.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**24.6 Disputes Relating to Patent Rights**. Notwithstanding the provisions of this Section 24, disputes relating to the inventorship, enforceability, validity or scope of patent rights shall be submitted for resolution to a court of competent jurisdiction.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed in duplicate by their respective duly authorized officers or representatives.

---

| | | | |
|:---|:---|:---|:---|
| **Novan, Inc.** | **Novan, Inc.** | **Sato Pharmaceutical Co., Ltd.** | **Sato Pharmaceutical Co., Ltd.** |
| /s/ Nathan Stasko | /s/ Nathan Stasko | /s/ Seiichi Sato | /s/ Seiichi Sato |
| By:  | **Nathan Stasko, President and CEO**  | By:  | **Seiichi Sato, President and CEO**  |
| Date: | January 12, 2017 | Date: | January 12, 2017 |

---

**Overview of Annexes (to be attached):**

**Annex 1: Novan Scientific Information**

**Annex 2: Patent List**

**Annex 3: Specifications**

**Annex 4: Novan Trademarks**

## Exhibit 10.6

**Exhibit 10.6**

**Certain confidential information contained in this exhibit have been omitted by means of redacting a portion of the text and replacing it with [\*\*\*], pursuant to Regulation S-K Item 601(b)(10) of the Securities Act of 1933, as amended. Certain confidential information has been excluded from this exhibit because it is: (i) not material; and (ii) the registrant treats such information as private or confidential.**

**Execution Copy**

FIRST AMENDMENT TO LICENSE AGREEMENT BETWEEN NOVAN, INC. AND SATO PHARMACEUTICAL CO., LTD.

This First Amendment to the License Agreement (the "**Amendment"**) is made and entered into as of January 12, 2017 (the "**Amendment Effective Date**") by and between Novan, Inc., a Delaware corporation having an address at 4105 Hopson Road, Morrisville, North Carolina 27560, USA ("**Novan**") and Sato Pharmaceutical Co., Ltd., a Japanese corporation having an address at 1-5-27, Moto-Akasaka, Minato-ku, Tokyo 107-0051, Japan ("**Sato**"), and amends that certain License Agreement between Novan and Sato, dated as of January 12, 2017 (the "**Agreement**").

RECITALS

WHEREAS, Novan and Sato are parties to the Agreement; and

WHEREAS, Novan and Sato desire to amend certain payment terms and conditions of the Agreement as provided below.

NOW THEREFORE, in consideration of the mutual covenants contained herein, the Parties hereto agree as follows:

AGREEMENT

1.  **<u>Defined Terms.</u>** All capitalized terms used herein but not defined herein shall have the meanings given to such terms
 in the Agreement.

2.  **<u>Section 14.1.</u>** Section 14.1 shall be amended and restated in its entirety to read as follows:

**14.1Payments**. In consideration of the licenses and other rights granted to Sato herein, Sato shall pay to Novan the following one-time, lump sum payments on occurrence of the corresponding events.

UPFRONT PAYMENT (the "**Upfront Payment**")

<u>Upon the Effective Date</u> 1.25 billion JPY

DEVELOPMENT MILESTONE PAYMENTS

---

| | |
|:---|:---|
| Upon [\*\*\*] | [\*\*\*] |
| Upon [\*\*\*] | [\*\*\*] |
| Upon [\*\*\*] | [\*\*\*] |
| Upon [\*\*\*] | [\*\*\*] |
| Upon [\*\*\*] | [\*\*\*] |

---

SALES MILESTONE PAYMENTS

One-time sales milestone payments shall be made by Sato to Novan upon the first achievement of each of the following annual Net Sales milestones:

---

| | |
|:---|:---|
| Annual Net Sales of **[\*\*\*]** | **[\*\*\*]** |
| Annual Net Sales of **[\*\*\*]** | **[\*\*\*]** |
| Annual Net Sales of **[\*\*\*]** | **[\*\*\*]** |

---

For avoidance of doubt, if two or more of the foregoing milestones shall be achieved in the same calendar year, the payments corresponding to each such milestone shall be payable to Novan with respect to such calendar year.

3.  **<u>Section 14.3.</u>** Section 14.3 shall be amended and restated in its entirety to read as follows:

**14.3Notification**. Sato shall notify Novan of the achievement of each of the development milestones set forth in Section 14.1 within **[\*\*\*]** of its achievement, and each of the sales milestones set forth in Section 14.1 within **[\*\*\*]** after Sato closes its books for the relevant annual period in which such sales milestone payment becomes due. All payments under Section 14.1 shall be made within **[\*\*\*]** after Sato receives the relevant invoice from Novan, except that the Upfront Payment due pursuant to Section 14.1 shall be made within **[\*\*\*]** after the Effective Date. All payments under Section 14.1 shall be made without setoff or deduction of any kind, other than pursuant to **[\*\*\*]**.

4.  **<u>Effective Date</u>.** This Amendment is effective as of the Amendment Effective Date immediately after the Agreement becomes
 effective (the "**Effective Time** "), and the terms and conditions of this Amendment shall govern after such
 Effective Time.

5.  **<u>Reaffirmation of Other Terms and Conditions.</u>** The Agreement shall remain in full force and effect, as amended hereby,
 and as so amended, the Parties hereby reaffirm their respective rights and obligations thereunder.

6. The
 Parties may execute this Amendment in multiple counterparts, each of which shall be an original and all of which together
 shall constitute, together with the Agreement, one legal instrument.

IN WITNESS WHEREOF, the Parties have signed and delivered this Amendment as of the date first written above.

---

| | | | |
|:---|:---|:---|:---|
| **Novan, Inc.** | **Novan, Inc.** | **Sato Pharmaceutical Co., Ltd.** | **Sato Pharmaceutical Co., Ltd.** |
| /s/ Nathan Stasko | /s/ Nathan Stasko | /s/ Seiichi Sato | /s/ Seiichi Sato |
| By: | **Nathan Stasko, President and CEO** | By: | **Seiichi Sato, President and CEO** |
| Date: January 12, 2017 | Date: January 12, 2017 | Date: January 12, 2017 | Date: January 12, 2017 |

---

## Exhibit 10.7

**Exhibit 10.7**

**Certain confidential information contained in this exhibit have been omitted by means of redacting a portion of the text and replacing it with [\*\*\*], pursuant to Regulation S-K Item 601(b)(10) of the Securities Act of 1933, as amended. Certain confidential information has been excluded from this exhibit because it is: (i) not material; and (ii) the registrant treats such information as private or confidential.**

SECOND AMENDMENT TO LICENSE AGREEMENT BETWEEN NOVAN, INC. AND SATO PHARMACEUTICAL CO., LTD.

This Second Amendment to the License Agreement (the "**Second Amendment**"), is made and entered into as of October 5, 2018 (the "**Second Amendment Effective Date**") by and between Novan, Inc., a Delaware corporation having an address at 4105 Hopson Road, Morrisville, North Carolina 27560, USA ("**Novan**") and Sato Pharmaceutical Co., Ltd., a Japanese corporation having an address at 1-5-27, Moto-Akasaka, Minato-ku, Tokyo 107-0051, Japan ("**Sato**"). Novan and Sato shall also be referred to individually as a "**Party**" and collectively as the "**Parties**".

RECITALS

WHEREAS, the Parties have previously entered into a License Agreement, dated as of January 12, 2017 and amended on January 12, 2017 (as amended, the "**Agreement**"); and

WHEREAS, the Parties wish to further amend the Agreement to add one additional product based on the Compound and to amend certain payment terms and conditions of the Agreement as provided below.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Parties agree as follows:

AGREEMENT

1.  **<u>Defined Terms.</u>** All capitalized terms used herein but not defined herein shall have the
 meanings given to such terms in the Agreement.

2.  **<u>Definitions.</u>** The following defined terms are hereby added to Section 1 of the Agreement as
 follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.108 "Acne Licensed Product"** means any topical finished dosage form that (i) contains the Compound and (ii) meets the Specifications for the "Acne Licensed Product" as specified in <u>Annex 3</u>, or, subject to Section 4.3, the Modified Specifications therefor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.109 "Antiviral Licensed Product"** means any topical finished dosage form that (i) contains the Compound and (ii) meets the Specifications for the "Antiviral Licensed Product" as specified in <u>Annex 3</u>, or, subject to Section 4.3, the Modified Specifications therefor.

3.  **<u>Section 1.14.</u>** Section 1.14 shall be amended and restated in its entirety to read as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.14 "Competing Product"** means [\*\*\*] product for [\*\*\*].

4.  **<u>Section 1.46.</u>** Section 1.46 shall be amended and restated in its entirety to read as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.46 "Licensed Field"** means: (a) with respect to the Acne Licensed Product, the treatment of acne vulgaris in humans; and (b) with respect to the Antiviral Licensed Product, the treatment of viral infections of the skin in humans, including warts and molluscum contagiosum.

5.  **<u>Section 1.47.</u>** Section 1.47 shall be amended and restated in its entirety to read as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.47 "Licensed Product"** means, individually or collectively, as applicable, the Acne Licensed Product and the Antiviral Licensed Product.

6.  **<u>Section 1.83(i).</u>** Section 1.83(i) shall be amended and restated in its entirety to read
 as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) the number and description of Licensed Products sold or otherwise disposed of and the applicable NHI Price therefor;

7.  **<u>Section 1.94.</u>** Section 1.94 shall be amended and restated in its entirety to read as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.94 "Specifications"** means the specifications set forth in <u>Annex 3</u> for the Licensed Products; or, in each case, if applicable, the Modified Specifications therefor.

8.  **<u>Section 2.4(iii).</u>** The first sentence of Section 2.4(iii) shall be amended and restated
 in its entirety to read as follows (with the remainder of Section 2.4(iii) remaining
 unchanged):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) **JC Meetings**. The JC shall meet at least once every [\*\*\*] for so long as any Licensed Product remains in development by Sato (directly or through its Affiliates or sublicensees) under this Agreement and at least [\*\*\*] every year thereafter, in each case at times mutually agreed upon by the Parties.

9.  **<u>Section 14.1.</u>** Section 14.1 shall be amended and restated in its entirety to read as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.1 Payments**. In consideration of the licenses and other rights granted to Sato herein, Sato shall pay to Novan the following one-time, lump sum payments on occurrence of the corresponding events.

UPFRONT PAYMENT (the "**Upfront Payment**")

Upon the Effective Date <u>1.25 billion JPY</u>

SECOND AMENDMENT UPFRONT PAYMENT (the "**Second Amendment Upfront Payment**")

Upon the Second Amendment Effective Date, 1.25 billion JPY, which shall be paid in installments upon the dates set forth below:

Second Amendment Effective Date <u>0.25 billion JPY</u> <br> <u>February 14, 2019</u> <u>0.5 billion JPY</u> <br> <u>September 13, 2019</u> <u>0.5 billion JPY</u>

DEVELOPMENT MILESTONE PAYMENTS

---

| | |
|:---|:---|
| &nbsp;&nbsp;Upon [\*\*\*]. | &nbsp;&nbsp;[\*\*\*] |
| &nbsp;&nbsp;Upon [\*\*\*]. | &nbsp;&nbsp;[\*\*\*] |
| &nbsp;&nbsp;Upon [\*\*\*]. | &nbsp;&nbsp;[\*\*\*] |
| &nbsp;&nbsp;Upon [\*\*\*]. | &nbsp;&nbsp;[\*\*\*] |

---

SALES MILESTONE PAYMENTS

One-time sales milestone payments shall be made by Sato to Novan upon the first achievement of each of the following annual Net Sales milestones, based on aggregate Net Sales of all Licensed Products:

---

| | |
|:---|:---|
| &nbsp;&nbsp;Annual Net Sales of [\*\*\*] | &nbsp;&nbsp;[\*\*\*] |
| &nbsp;&nbsp;Annual Net Sales of [\*\*\*] | &nbsp;&nbsp;[\*\*\*] |
| &nbsp;&nbsp;Annual Net Sales of [\*\*\*] | &nbsp;&nbsp;[\*\*\*] |
| &nbsp;&nbsp;Annual Net Sales of [\*\*\*] | &nbsp;&nbsp;[\*\*\*] |
| &nbsp;&nbsp;Annual Net Sales of [\*\*\*] | &nbsp;&nbsp;[\*\*\*] |

---

For avoidance of doubt, if two or more of the foregoing milestones shall be achieved in the same calendar year, the payments corresponding to each such milestone shall be payable to Novan with respect to such calendar year.

10.  **<u>Section 14.3.</u>** Section 14.3 shall be amended and restated in its entirety as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.3 Notification**. Sato shall notify Novan of the achievement of each of the development milestones set forth in Section 14.1 within [\*\*\*] of its achievement, and each of the sales milestones set forth in Section 14.1 within [\*\*\*] after Sato closes its books for the relevant annual period in which such sales milestone payment becomes due. All payments under Section 14.1 shall be made within [\*\*\*] after Sato receives the relevant invoice from Novan, except that (i) the Upfront Payment due pursuant to Section 14.1 shall be made within [\*\*\*] after the Effective Date, (ii) the first installment of the Second Amendment Upfront Payment shall be made within [\*\*\*] after the Second Amendment Effective Date, and (iii) the second and third installments of the Second Amendment Upfront Payment shall each be made within [\*\*\*] after the date of the relevant invoice from Novan. All payments under Section 14.1 shall be made without setoff or deduction of any kind, other than pursuant to [\*\*\*].

11.  **<u>Section 15.1.</u>** Section 15.1 shall be amended and restated in its entirety as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.1 Royalty**. In consideration of the rights granted to Sato herein, Sato shall pay to Novan a royalty on the applicable portion of aggregate annual Net Sales of all Licensed Products in the Licensed Territory during the Term as follows, subject to Section 15.2:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) [\*\*\*] of the portion of aggregate annual Net Sales in the Licensed Territory of all Licensed Products below [\*\*\*];

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) [\*\*\*] of the portion of aggregate annual Net Sales in the Licensed Territory of all Licensed Products equal to or exceeding [\*\*\*] and below [\*\*\*]; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) [\*\*\*] of the portion of aggregate annual Net Sales in the Licensed Territory of all Licensed Products equal to or exceeding [\*\*\*].

12.  **<u>Section 15.2.</u>** Section 15.2 shall be amended and restated in its entirety as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.2 Royalty Term; Reduction**. Royalties shall be payable in the Licensed Territory for the duration of the Term. If during the Term (i) no Licensed Product (including without limitation its manufacture, use or sale) remains Covered by a Valid Claim in the Licensed Territory, and (ii) the Marketing Exclusivity with respect to all Licensed Products in the Licensed Territory has expired, then the royalty rate applicable shall be reduced by [\*\*\*] for the remainder of the Term in the Licensed Territory.

13.  **<u>Section 18.1.</u>** Section 18.1 shall be amended and restated in its entirety as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.1 Term**. The term of this Agreement shall commence as of the Effective Date and, unless sooner terminated as specifically provided in this Agreement, shall continue in effect until the twentieth (20<sup>th</sup>) anniversary of the First Commercial Sale (the "**Term**"), unless terminated earlier pursuant to Section 19. This Agreement may be renewed by mutual written agreement of the Parties for additional two (2) year periods following expiration of the Term.

14.  **<u>Annex 2.</u>** <u>Annex 2</u> of the Agreement is hereby replaced in its entirety by <u>Annex 2</u> attached hereto.

15.  **<u>Annex 3.</u>** <u>Annex 3</u> of the Agreement is hereby replaced in its entirety by <u>Annex 3</u> attached hereto.

16.  **<u>Upfront Payment.</u>** Novan acknowledges that it received payment of the Upfront Payment from
 Sato on January 19, 2017.

17.  **<u>Reaffirmation of Other Terms and Conditions.</u>** The Agreement shall remain in full force and effect,
 as amended hereby, and as so amended, the Parties hereby reaffirm their respective rights
 and obligations hereunder.

18. The
 Parties acknowledge and agree that Article 23 and Article 24 of the Agreement shall apply
 to this Second Amendment as if fully set forth herein.

19. The
 Parties may execute this Second Amendment in multiple counterparts, each of which shall
 be an original and all of which together shall constitute, together with the Agreement,
 one legal instrument.

*[Signature page follows]*

IN WITNESS WHEREOF, the Parties have signed and delivered this Second Amendment as of the date first written above.

---

| | |
|:---|:---|
| **Novan, Inc.** | **Sato Pharmaceutical Co., Ltd.** |
| /s/ G. Kelly Martin | /s/ Seiichi Sato |
| By: **Kelly Martin, CEO** | By: **Seiichi Sato, President and CEO** |
| Date: October 5, 2018 | Date: October 4, 2018 |

---

**Annex 2: Patent List**

---

| | | | |
|:---|:---|:---|:---|
| **Application No.** | **Title** | **Filing Date;**<br> **Licensed Territory**<br> **Numbers** | **Countries where**<br> **Application was**<br> **Filed & Status** |
| **[**\*\*\***]**<br>| **[**\*\*\***]** | **[**\*\*\***]** | **[**\*\*\***]** |
| **[**\*\*\***]**<br>| **[**\*\*\***]** | **[**\*\*\***]** | **[**\*\*\***]** |
| **[**\*\*\***]**<br>| **[**\*\*\***]** | **[**\*\*\***]** | **[**\*\*\***]** |
| **[**\*\*\***]**<br>| **[**\*\*\***]** | **[**\*\*\***]** | **[**\*\*\***]** |
| **[**\*\*\***]**<br>| **[**\*\*\***]** | **[**\*\*\***]** | **[**\*\*\***]** |
| **[**\*\*\***]**<br>| **[**\*\*\***]** | **[**\*\*\***]** | **[**\*\*\***]** |

---

**Annex 3: Specifications**

**[\*\*\*]**

## Exhibit 10.8

**Exhibit 10.8**

**Certain confidential information contained in this exhibit have been omitted by means of redacting a portion of the text and replacing it with [\*\*\*], pursuant to Regulation S-K Item 601(b)(10) of the Securities Act of 1933, as amended. Certain confidential information has been excluded from this exhibit because it is: (i) not material; and (ii) the registrant treats such information as private or confidential.**

***Execution Version***

***Confidential***

**ROYALTY AND MILESTONE PAYMENTS PURCHASE AGREEMENT**

This Royalty and Milestone Payments Purchase Agreement (this "**Agreement**") is entered into as of April 29, 2019 (the "**Effective Date**") by and between Novan, Inc., a Delaware corporation ("**Novan**"), and Reedy Creek Investments LLC, a North Carolina limited liability company ("**Reedy Creek**"). Novan and Reedy Creek are also referred to individually as a "**Party**" and together as the "**Parties**".

**BACKGROUND**

**WHEREAS**, Novan is in the business of developing and commercializing pharmaceutical products for, among other things, the treatment of dermatological conditions and other indications in humans and wishes to obtain funding in respect of such development and commercialization efforts;

**WHEREAS**, Novan wishes to sell, assign, convey and transfer to Reedy Creek the Assigned Rights (as defined below) in consideration for the payment by Reedy Creek of the Purchase Price (as defined below); and

**WHEREAS**, Reedy Creek wishes to purchase from Novan the Assigned Rights, all on the terms and conditions set forth below.

**NOW, THEREFORE**, in consideration of the premises and mutual covenants herein below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;**1.** **Definitions** 

The following capitalized terms shall have the meanings set forth below when used in this Agreement.

"**Affiliate**" means with respect to each Party, any Person that directly or indirectly is controlled by, controls or is under common control with a Party. For the purposes of this definition only, the term "control" (including, with correlative meanings, the terms "controlled by" and "under common control with") as used with respect to a Person means (a) in the case of a corporate entity, direct or indirect ownership of voting securities entitled to cast at least fifty percent (50%) of the votes in the election of directors or (b) in the case of a non-corporate entity, direct or indirect ownership of at least fifty percent (50%) of the equity interests with the power to direct the management and policies of such entity; provided that, if local laws restrict foreign ownership, control shall be established by direct or indirect ownership of the maximum ownership percentage that may, under such local laws, be owned by foreign interests, but only if such lower percentage provides such Person with the power to direct the management and policies of such entity.

"**Akron License Agreement**" means that certain License Agreement between Novan and The University of Akron Research Foundation with an effective date of May 23, 2012, as may be amended from time to time.

"**Applicable Laws**" means all applicable laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision, domestic or foreign, that relate to a Party's activities under this Agreement, including any rules, regulations, guidelines or other requirements of any applicable Regulatory Authority.

"**Assigned Rights**" means the SB204 Rights, SB206 Rights and SB414 Rights.

"**Assigned Rights Period**" means, with respect to each Product, the longer of: (a) the period beginning with the Effective Date and ending on the [\*\*\*] of the Effective Date and (b) the period beginning with the Effective Date and ending on the [\*\*\*] of the First Commercial Sale of such Product.

"**Calendar Quarter**" means each three (3)-month period commencing on January 1, April 1, July 1 or October 1.

"**Calendar Year**" means each twelve (12)-month period commencing on January 1 and ending on December 31.

"**Change of Control**" means, with respect to a Party, the occurrence of any of the following: (a) any "person" or "group" (as such terms are defined in Section 13(d) and Section 14(d) of the Securities Exchange Act of 1934, as amended, or any successor provisions (the "**Exchange Act**")) that is or becomes the "beneficial owner" (as determined in accordance with Rule 13d-3 under the Exchange Act), directly or indirectly, of shares of voting stock (or other equity interest) of such Party representing fifty percent (50%) or more of the total voting power of all outstanding classes of voting stock (or other equity interest) of such Party; (b) the sale or transfer of all or substantially all of the assets of such Party; or (c) any merger, consolidation, share exchange, business combination or similar transaction in which such Party is not the surviving entity or in which the holders of the outstanding shares of stock of such Party immediately prior to such transaction hold, immediately after such transaction, less than fifty percent (50%) of the total voting power of the outstanding securities entitled to vote generally in the election of directors of the surviving or resulting entity in such transaction.

"**Clinical Trial Success**" means (i) the achievement, no later than March 31, 2020, of statistically significant rates of complete clearance of lesions for molluscum contagiosum in humans at week 12 in each of the two Phase III Clinical Trials or any other primary endpoint required or accepted by the FDA for the SB206 Product, or (ii) equivalent achievement (as agreed upon by the Parties).

"**Commercialize**" or "**Commercialization**" means, with respect to a Product, marketing, promotion, sale (and offer for sale or contract to sell), distribution, importation or other commercial exploitation of such Product following receipt Regulatory Approval. Commercialization shall include commercial activities conducted in preparation for First Commercial Sale.

"**Commercially Reasonable Efforts**" means, with respect to Novan's obligation under this Agreement to develop, obtain Regulatory Approval or Commercialize a Product, the level of effort, expertise, and resources required to carry out such obligation that would be typically exerted by a similarly situated biotechnology or pharmaceutical company of comparable size and capabilities as Novan in pursuing the development and commercialization of a similar product with similar product characteristics at a similar stage in its development or product life, including without limitation with respect to commercial potential, the proprietary position of such Product, the regulatory status and approval process and other relevant technical, scientific, medical or legal factors.

"**Confidential Information**" of a Party means (a) the terms and conditions of this Agreement; and (b) any information or material, including all trade secrets, whether in tangible form or not, disclosed by such Party to the other Party prior to the Effective Date or during the Term; provided, however, that the foregoing information in subsection (b) shall not be deemed Confidential Information, to the extent the receiving Party can establish by competent proof that such information:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) was already known to the receiving Party, other than under an obligation of confidentiality owed to the disclosing Party, at the time of disclosure;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) was generally available to the public or otherwise part of the public domain at the time of its disclosure hereunder to the receiving Party;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) becomes generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) was independently developed by the receiving Party without use of or reference to any Confidential Information disclosed by the disclosing Party; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) was subsequently disclosed to the receiving Party by a person other than the disclosing Party that was not under any legal obligation to the disclosing Party with respect to such information.

"**Contract Party**" means, as applicable, a Licensee, or any Third Party with which Novan or its Affiliates engages for the development, Commercialization, marketing, Regulatory Approval, or sale of a Product.

"**Development Payments**" means any payments received by Novan from Third Parties, including Licensees, as consideration for Novan's or its Affiliates' performance of research and development services or activities or the provision of goods or materials regarding the Products or otherwise, including without limitation any related reimbursement or cost-sharing arrangements or activities. Development Payments shall not include any payments received by Novan in connection with Commercialization.

"**FDA**" means the United States Food and Drug Administration or any successor agency thereto.

"**First Commercial Sale**" means for each Product, the first commercial sale to a Third Party in any country in the Territory as part of a nationwide introduction by Novan or its sublicensees following receipt of Regulatory Approval. Sales for clinical trial purposes or for compassionate use or on a named patient basis shall not be considered to constitute a First Commercial Sale.

"**In-License Agreement**" means, with respect to each Product, (a) the following license agreements or other written agreements entered into by Novan and a Third Party whereby Novan is granted rights under Intellectual Property of such Third Party with respect to such Product: the UNC License Agreement, Akron License Agreement and KIPAX Agreement; and (b) any such license agreement or written agreement entered into by Novan and a Third Party and approved by Reedy Creek under Section 3.7.

"**Included Payments**" means, as applicable, the aggregate payments due or payable to Reedy Creek hereunder for Assigned Rights and Sales Royalties.

"**Intellectual Property**" means any and all right, title and interest in, arising from, or relating to inventions, ideas, Know-How, works of authorship and confidential information, including copyrights, patents and patent applications, trade secrets, any registrations or applications relating to any of the foregoing, and any other rights of a similar nature or character whether now existing or hereafter created, developed, arising or otherwise coming into being.

"**KIPAX Agreement**" means that certain Patent Purchase Agreement between Novan and KIPAX AB dated July 27, 2015, as may be amended from time to time.

"**Know-How**" means all non-public information, results and data of any type, in any tangible or intangible form, whether or not patentable, including without limitation practices, methods, processes, protocols, techniques, specifications, algorithms, formulae, knowledge, skill, experience, databases, studies and procedures.

"**License Agreement(s)**" means, collectively, the In-License Agreements and Out-License Agreements.

"**Licensee**" means the Third Party counterparty to Novan in any Out-License Agreement.

"**Material Adverse Change**" means any material impairment of or material adverse change in (i) the expected value to the Products, the Out-License Agreements, or Product Intellectual Property, (ii) the expected value of the Included Payments, including (A) a material adverse change in the validity or enforceability of any of the In-License Agreements or Out-License Agreements, (B) a material adverse change in the ability of Novan to satisfy and perform any of its obligations under any In-License Agreement or Out-License Agreement, or (C) a material adverse change in the rights or remedies of Novan under any of the In-License Agreement or Out-License Agreement, or (iii) any material adverse change in the business, operations, assets or financial condition of Novan, taken as a whole, that could reasonably be expected to have a material adverse effect on the ability of Novan to perform any of its obligations under this Agreement, or (iv) any material adverse change in the validity, enforceability or transferability of any Product Intellectual Property (including any Third Party's Intellectual Property subject to an In-License Agreement), the status of any challenge to or any litigation involving any Product Intellectual Property (including any Third Party's Intellectual Property under an In-License Agreement), or the restriction, cessation, suspension or termination of Novan's license to any Third Party's Intellectual Property granted under an In-License Agreement.

"**Net Sales**" means, with respect to a Product, the total invoiced sales price received for such Product sold by Novan or its Affiliates less (a) [\*\*\*], (b) [\*\*\*], (c) [\*\*\*], (d) [\*\*\*], (e) [\*\*\*], and (f) [\*\*\*]. Notwithstanding the foregoing, Net Sales shall not include, and shall be deemed zero with respect to, (1) the distribution of reasonable quantities of promotional samples of such Product, or (2) Product provided for clinical trials or research purposes, or charitable or compassionate use purposes.

"**Out-License Agreement**" means, with respect to any Product, any license agreement or other written agreement entered into by Novan and a Third Party whereby Novan grants any rights under any Intellectual Property related to such Product or to any Regulatory Approvals for such Product, in each case for the development and/or Commercialization of such Product by such Third Party in the Territory.

"**Person**" means any individual, firm, corporation, partnership, limited liability company, trust, business trust, joint venture, governmental authority, association or other entity.

"**Phase III Clinical Trial**" means a clinical trial of a Product designed to support approval of an application for Regulatory Approval in the Territory.

"**Product**" means, individually, the SB204 Product, the SB206 Product or the SB414 Product.

"**Product Field of Use**" means, individually, the SB204 Product Field of Use, the SB206 Product Field of Use or the SB414 Product Field of Use.

"**Product Intellectual Property**" means all of the Intellectual Property necessary for the development, manufacture, use, sale, offer for sale and/or importation of the Products in the Territory.

"**Products**" means, collectively, the SB204 Product, the SB206 Product and the SB414 Product.

"**Purchase Price**" has the meaning set forth in Section 2.2.

"**Regulatory Approval**" means, with respect to a particular country or regulatory jurisdiction, all necessary authorizations and approvals by the Regulatory Authorities required to manufacture, use, import, market, distribute and promote a Product in such country or regulatory jurisdiction.

"**Regulatory Authority**" means any national or supranational governmental authority or other governmental body that has responsibility in a given country or jurisdiction over the development, manufacture and/or commercialization of a Product, including FDA.

"**Sales Royalties**" means, collectively, the SB204 Sales Royalty, SB206 Sales Royalty and SB414 Sales Royalty.

"**Sales Royalty Term**" means, on a Product-by-Product, country-by-country basis, the period beginning with the First Commercial Sale of such Product in such country until the last to occur of: (a) [\*\*\*], (b) [\*\*\*] and (c) the [\*\*\*] of the First Commercial Sale of such Product.

"**SB204 Applicable Percentage**" means, with respect to each of the SB204 Net Milestones and SB204 Net Royalties, twenty percent (20%). Notwithstanding the foregoing, until Novan has made payments to Reedy Creek under this Agreement the sum of which equals the Purchase Price, the SB204 Applicable Percentage shall mean, with respect to SB204 Net Milestones, twenty-five percent (25%).

"**SB204 Net Milestones**" means the aggregate, gross amount of upfront fees, milestone payments and equivalent fees or payments received by Novan pursuant to any Out-License Agreement based on the occurrence of events specified in such Out-License Agreement, including the achievement of any milestones, with respect to the SB204 Product in the Territory in the SB204 Field of Use, less any upfront fees, milestone payments and equivalent fees or payments payable by Novan pursuant to any In-License Agreement with respect to the SB204 Product in the Territory in the SB204 Field of Use. SB204 Net Milestones shall not include any Development Payments received by Novan with respect to the SB204 Product.

"**SB204 Net Royalties**" means the aggregate, gross amount of royalty payments and any collections, recoveries, payments, supplements or other compensation made in lieu thereof and any other remuneration of any kind received by or for Novan pursuant to any Out-License Agreement for sales or other transfers of the SB204 Product in the Territory for use in the SB204 Product Field of Use in the Territory, less any royalty payments and any collections, recoveries, payments, supplements or other compensation made in lieu thereof and any other remuneration of any kind payable by Novan pursuant to any In-License Agreement with respect to such sales or transfers. For clarity, SB204 Net Royalties shall not include any milestone payments received by or for Novan pursuant to any Out-License Agreements for sales or other transfers of the SB204 Product in the Territory in the SB204 Product Field of Use, provided however, such milestone payments shall be included as part of the SB204 Net Milestones. SB204 Net Royalties shall not include any Development Payments received by Novan with respect to the SB204 Product.

"**SB204 Product**" means Novan's pharmaceutical product known as SB204 being developed for the treatment of acne vulgaris in humans, as such product exists as of the Effective Date or as such product may be modified (i) during the development process up to and including the first Regulatory Approval by the FDA and (ii) for the treatment of acne vulgaris in humans from time to time thereafter.

"**SB204 Product Field of Use**" means the treatment of any distinct illness, sickness, interruption, cessation or disorder of a particular bodily function, system, tissue type or organ, or sign or symptom of any such items or conditions, regardless of the severity, frequency or route of any treatment, dosage strength or patient class, for which Regulatory Approval is being sought or has been obtained, including treatment of acne vulgaris in humans.

"**SB204 Rights**" means the right to receive cash in an amount equal to the sum of (a) the product of the SB204 Applicable Percentage multiplied by the SB204 Net Milestones and (b) the product of the SB204 Applicable Percentage multiplied by the SB204 Net Royalties, in each case during the Assigned Rights Period and pursuant to the terms and conditions of this Agreement.

"**SB204 Sales Royalty**" has the meaning set forth in Section 2.3(b).

"**SB206 Applicable Percentage**" means, with respect to each of the SB206 Net Milestones and SB206 Net Royalties, ten percent (10%). Notwithstanding the foregoing, until Novan has made payments to Reedy Creek under this Agreement the sum of which equals the Purchase Price, the SB206 Applicable Percentage shall mean, with respect to SB206 Net Milestones, twenty-five percent (25%).

"**SB206 Net Milestones**" means the aggregate, gross amount of upfront fees, milestone payments and equivalent fees or payments received by Novan pursuant to any Out-License Agreement based on the occurrence of events specified in such Out-License Agreement, including the achievement of any milestones, with respect to the SB206 Product in the Territory in the SB206 Field of Use, less any upfront fees, milestone payments and equivalent fees or payments payable by Novan pursuant to any In-License Agreement with respect to the SB206 Product in the Territory in the SB206 Field of Use. SB206 Net Milestones shall not include any Development Payments received by Novan with respect to the SB206 Product.

"**SB206 Net Royalties**" means the aggregate, gross amount of royalty payments and any collections, recoveries, payments, supplements or other compensation made in lieu thereof and any other remuneration of any kind received by or for Novan pursuant to any Out-License Agreement for sales or other transfers of the SB206 Product in the Territory for use in the SB206 Product Field of Use in the Territory, less any royalty payments and any collections, recoveries, payments, supplements or other compensation made in lieu thereof and any other remuneration of any kind payable by Novan pursuant to any In-License Agreement with respect to such sales or transfers. For clarity, SB206 Net Royalties shall not include any milestone payments received by or for Novan pursuant to any Out-License Agreements for sales or other transfers of the SB206 Product in the Territory in the SB206 Product Field of Use, provided however, such milestone payments shall be included as part of the SB206 Net Milestones. SB206 Net Royalties shall not include any Development Payments received by Novan with respect to the SB206 Product.

"**SB206 Product**" means Novan's pharmaceutical product known as SB206 being developed for the treatment of molluscum contagiosum in humans, as such product exists as of the Effective Date or as such product may be modified (i) during the development process up to and including the first Regulatory Approval by the FDA and (ii) for the treatment of molluscum contagiosum in humans from time to time thereafter.

"**SB206 Product Field of Use**" means the treatment of any distinct illness, sickness, interruption, cessation or disorder of a particular bodily function, system, tissue type or organ, or sign or symptom of any such items or conditions, regardless of the severity, frequency or route of any treatment, dosage strength or patient class, for which Regulatory Approval is being sought or has been obtained, including treatment of molluscum contagiosum in humans.

"**SB206 Rights**" means the right to receive cash in an amount equal to the sum of (a) the product of the SB206 Applicable Percentage multiplied by the SB206 Net Milestones and (b) the product of the SB204 Applicable Percentage multiplied by the SB206 Net Royalties, in each case during the Assigned Rights Period and pursuant to the terms and conditions of this Agreement.

"**SB206 Sales Royalty**" has the meaning set forth in Section 2.3(b).

"**SB414 Applicable Percentage**" means, with respect to each of the SB414 Net Milestones and SB414 Net Royalties, twenty percent (20%). Notwithstanding the foregoing, until Novan has made payments to Reedy Creek under this Agreement the sum of which equals the Purchase Price, the SB414 Applicable Percentage shall mean, with respect to SB414 Net Milestones, twenty-five percent (25%).

"**SB414 Net Milestones**" means the aggregate, gross amount of upfront fees, milestone payments and equivalent fees or payments received by Novan pursuant to any Out-License Agreement based on the occurrence of events specified in such Out-License Agreement, including the achievement of any milestones, with respect to the SB414 Product in the Territory in the SB414 Field of Use, less any upfront fees, milestone payments and equivalent fees or payments payable by Novan pursuant to any In-License Agreement with respect to the SB414 Product in the Territory in the SB414 Field of Use. SB414 Net Milestones shall not include any Development Payments received by Novan with respect to the SB414 Product.

"**SB414 Net Royalties**" means the aggregate, gross amount of royalty payments and any collections, recoveries, payments, supplements or other compensation made in lieu thereof and any other remuneration of any kind received by or for Novan pursuant to any Out-License Agreement for sales or other transfers of the SB414 Product in the Territory for use in the SB414 Product Field of Use in the Territory, less any royalty payments and any collections, recoveries, payments, supplements or other compensation made in lieu thereof and any other remuneration of any kind payable by Novan pursuant to any In-License Agreement with respect to such sales or transfers. For clarity, SB414 Net Royalties shall not include any milestone payments received by or for Novan pursuant to any Out-License Agreements for sales or other transfers of the SB414 Product in the Territory in the SB414 Product Field of Use, provided however, such milestone payments shall be included as part of the SB414 Net Milestones. SB414 Net Royalties shall not include any Development Payments received by Novan with respect to the SB414 Product.

"**SB414 Product**" means Novan's pharmaceutical product known as SB414 being developed for the treatment of atopic dermatitis in humans, as such product exists as of the Effective Date or as such product may be modified (i) during the development process up to and including the first Regulatory Approval and (ii) for the treatment of atopic dermatitis in humans from time to time thereafter.

"**SB414 Product Field of Use**" means the treatment of any distinct illness, sickness, interruption, cessation or disorder of a particular bodily function, system, tissue type or organ, or sign or symptom of any such items or conditions, regardless of the severity, frequency or route of any treatment, dosage strength or patient class, for which Regulatory Approval is being sought or has been obtained, including treatment of atopic dermatitis in humans.

"**SB414 Rights**" means the right to receive cash in an amount equal to the sum of (a) the product of the SB414 Applicable Percentage multiplied by the SB414 Net Milestones and (b) the product of the SB414 Applicable Percentage multiplied by the SB414 Net Royalties, in each case during the Assigned Rights Period and pursuant to the terms and conditions of this Agreement.

"**SB414 Sales Royalty**" has the meaning set forth in Section 2.3(b).

"**SEC**" means the United States Securities and Exchange Commission or any successor agency thereto.

"**Term**" has the meaning set forth in Section 6.1.

"**Territory**" means the United States of America, Canada, Mexico and each of their territories and possessions.

"**Third Party**" means any Person other than Novan and Reedy Creek and their respective Affiliates.

"**Transfer**" means any sale (or any transaction having the effect of a sale), assignment, conveyance of rights, deed of trust, Encumbrance, exclusive license, seizure or other transfer of any sort and to any degree, voluntary or involuntary, including by operation of law.

"**UNC License Agreement**" means that certain Amended, Restated and Consolidated License Agreement between Novan and The University of North Carolina at Chapel Hill with an effective date of June 27, 2012 and as amended on November 30, 2012, April 12, 2016 and November 1, 2018, and as may be further amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;**2.** **Purchase of Assigned Rights; PAYMENTS BY NOVAN** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.1 Purchase of Assigned Rights.** Subject to the terms and conditions of this Agreement, Novan hereby sells, assigns, transfers and conveys to Reedy Creek, and Reedy Creek hereby purchases from Novan, all of Novan's right, title and interest in and to the Assigned Rights, free and clear of all liens, mortgages, pledges, leases, options, assignments and security interests ("**Encumbrances**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.2 Purchase Price**. In consideration of the Assigned Rights, Reedy Creek shall pay to Novan the following payments (collectively, the "**Purchase Price**"): (a) on the Effective Date, Twenty-Five Million United States Dollars ($25,000,000); and (b) contingent on Clinical Trial Success, Ten Million United States Dollars ($10,000,000) to be paid within [\*\*\*] of the notice of Clinical Trial Success given pursuant to Section 3.2. The Parties acknowledge if Clinical Trial Success is not achieved, the "Purchase Price" shall be automatically adjusted to reflect, as full consideration, the initial payment of $25,000,000 under Section 2.2(a). Payment of the Purchase Price shall be made by wire transfer of immediately available funds to an account designated by Novan. For clarity, Novan shall use the Purchase Price primarily for the purposes of the development and Commercialization of the Products under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.3 Payments by Novan.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) In consideration of the Purchase Price paid by Reedy Creek, Reedy Creek shall be entitled to receive, and Novan shall pay, with respect to each Calendar Quarter during the Assigned Rights Period, the aggregate amount of the following (as applicable):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) the product of the SB204 Applicable Percentage and the SB204 Net Milestones received by Novan during such Calendar Quarter;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the product of the SB204 Applicable Percentage and the SB204 Net Royalties received by Novan during such Calendar Quarter;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the product of the SB206 Applicable Percentage and the SB206 Net Milestones received by Novan during such Calendar Quarter;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iv) the product of the SB206 Applicable Percentage and the SB206 Net Royalties received by Novan during such Calendar Quarter;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (v) the product of the SB414 Applicable Percentage and the SB414 Net Milestones received by Novan during such Calendar Quarter; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (vi) the product of the SB414 Applicable Percentage and the SB414 Net Royalties received by Novan during such Calendar Quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In the event Novan elects to Commercialize any Product solely using its internal capabilities or through its Affiliates (and without entering any Out-License Agreement), or in the event a successor to Novan following a Change of Control of Novan elects to commercialize any Product using its internal capabilities or through its Affiliates (and without entering any Out-License Agreement), Novan or such successor of Novan shall notify Reedy Creek of this election and the provisions of Section 2.3(a) shall no longer apply with respect to such Product, and upon such notice, the provisions of this Section 2.3(b) shall apply. In consideration for the Purchase Price by Reedy Creek, effective only upon delivery of the foregoing notice from Novan with respect to a Product, Novan hereby sells to Reedy Creek all of its right, title and interest in and to royalties on Net Sales of such Product in the Territory in the applicable Product Field of Use, with respect to each Calendar Quarter during the Sales Royalty Term, calculated as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) if the applicable Product is the SB204 Product, a royalty equal to [\*\*\*] of Net Sales of the SB204 Product in the SB204 Field of Use ("**SB204 Sales Royalty**"),

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) if the applicable Product is the SB206 Product, a royalty equal to [\*\*\*] of Net Sales of the SB206 Product in the SB206 Field of Use ("**SB206 Sales Royalty**"), and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) if the applicable Product is the SB414 Product, a royalty equal to [\*\*\*] of Net Sales of the SB414 Product in the SB414 Field of Use ("**SB414 Sales Royalty**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) All of the foregoing payments in this Section 2.3 shall be made by wire transfer of immediately available funds within [\*\*\*] following the end of each Calendar Quarter during the Assigned Rights Period or Sales Royalty Term, as applicable, to an account designated by Reedy Creek. For the avoidance of doubt, Reedy Creek shall be entitled to receive the payments set forth in this Section 2.3 notwithstanding the absence of payment by Reedy Creek under Section 2.2(b) due to failure by Novan to achieve Clinical Trial Success. Amounts payable under Section 2.3 shall not be subject to any setoff or other deduction by reason of any amounts otherwise payable under this Agreement or any other agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) In the event that Novan Commercializes a Product both internally under Section 2.3(b) and under Out-License Agreements under Section 2.3(a), the Included Payment shall be calculated as the aggregate sums calculated and due under Sections 2.3(a) and (b).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) In the event that any Contract Party offsets all or any part of the Included Payments against any right, payment or claim of such Contract Party against Novan or its Affiliates and such offset actually reduces the amount of any payment on the Included Payments (any such reduction, a "**Payment Shortfall**"), Novan will pay Reedy Creek the amount of the Payment Shortfall within [\*\*\*] of written notice thereof from Reedy Creek. After Novan makes the payment to Reedy Creek contemplated in the preceding sentence, Novan shall be entitled to retain any amount subsequently recovered from such Contract Party in respect of such offset.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.4 Taxes.** All payments under this Agreement shall be made without any deduction or withholding for or on account of any tax, except as set forth in this Section 2.4. The Parties agree to cooperate with one another and use reasonable efforts to minimize obligations for any and all income or other taxes required by Applicable Laws to be withheld or deducted from any of the royalty and other payments made by or on behalf of a Party hereunder ("**Withholding Taxes**"). The applicable paying Party under this Agreement (the "**Paying Party**") shall, if required by Applicable Laws, deduct from any amounts that it is required to pay to the recipient Party hereunder (the "**Recipient Party**") an amount equal to such Withholding Taxes, provided that the Paying Party shall give the Recipient Party reasonable notice prior to paying any such Withholding Taxes. Such Withholding Taxes shall be paid to the proper taxing authority for the Recipient Party's account and, if available, evidence of such payment shall be obtained and sent to recipient within one (1) month of such payment. The Paying Party shall, at the Recipient Party's cost and expense, do all such lawful acts and things and sign all such lawful deeds and documents as the Recipient Party may reasonably request to enable the Paying Party to avail itself of any applicable legal provision or any double taxation treaties with the goal of paying the sums due to the Recipient Party hereunder without deducting any Withholding Taxes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.5 Interest.** Payment required under this Agreement shall, if overdue, bear interest until payment at a per annum rate one percent (1%) above the prime rate quoted in the Money Rates section of The Wall Street Journal, Eastern Edition for the date on which payment was due, calculated daily on the basis of a 365-day year; provided, however, that in no event shall such rate exceed the applicable maximum legal annual interest rate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.6 Acquisition of Assigned Rights Only.** Reedy Creek is acquiring no rights other than those expressly assigned herein. For the avoidance of doubt, Reedy Creek is acquiring no rights under any Intellectual Property of Novan, including any Product Intellectual Property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.7 Currency.** All payments made hereunder shall be in United States Dollars.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.8 No Assumed Obligations.** Reedy Creek is not assuming any liability or obligation of Novan or any of its Affiliates, whether presently in existence or arising or asserted hereafter, whether under any In-License Agreement or otherwise. All such liabilities and obligations shall be retained, paid, performed and discharged by and remain the sole obligations and liabilities of Novan or its Affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;**3.** **ADDITIONAL COVENANTS OF NOVAN** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.1 Development and Commercialization of the Products.** During the Term, Novan shall use Commercially Reasonable Efforts to develop, obtain Regulatory Approval for and Commercialize the Products. Novan may elect to fulfill the foregoing obligations using its internal capabilities, through its Affiliates or by entering into Out-License Agreements. Promptly after entering into any Out-License Agreement, Novan shall provide to Reedy Creek notice and a copy of such Out-License Agreement. Novan may also utilize the services of Third Parties, including without limitation Third Party contract research organizations, contract manufacturing organizations, suppliers, partners and other service providers to develop, obtain Regulatory Approval and Commercialize the Products. Additionally, each Calendar Quarter until the First Commercial Sale of a Product and, thereafter, twice per Calendar Year with respect to such Product (or as more frequently reasonably requested by Reedy Creek), Novan will deliver to Reedy Creek a report summarizing its development and Commercialization activities during the prior relevant period. Each such report shall include (i) a summary of services provided by all Third Party contract research organizations, contract manufacturing organizations, suppliers, partners and other service providers; (ii) reports, summaries or other documents provided by or on behalf of Novan relating to the development of or clinical trial performance of a Product (including Phase III Clinical Trial results related to the determination of Clinical Trial Success); (iii) identification of any material Product Intellectual Property developed, created, reduced to practice or acquired by or on behalf of Novan; and (iv) copies of Novan's business plans, financial plans, marketing plans and projections, as well as any filings or submissions to any Regulatory Authority. If an Affiliate and/or Contract Party meets or fulfills any or all of the obligations of Novan under this Agreement, and/or observes any of the terms or conditions hereof, then Novan will be deemed to have met or fulfilled such obligations or observed such terms or conditions, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.2 Clinical Trial Success.** Novan shall promptly notify Reedy Creek upon achieving of Clinical Trial Success. Any notice from Novan claiming that Clinical Trial Success has been achieved shall be accompanied by a publicly released press release of top line results of the Phase III Clinical Trials, and any other documentation or information reasonably requested by Reedy Creek to confirm such achievement. Any dispute regarding the achievement of Clinical Trial Success will be subject to the dispute resolution procedure in Section 9.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.3 Maintenance of Product Intellectual Property.** During the Term, Novan shall (a) maintain and not abandon the Product Intellectual Property in the Territory owned by Novan, including with respect to any Product Intellectual Property comprising issued patents in the Territory, and (b) maintain and not abandon the Product Intellectual Property in the Territory controlled but not owned by Novan under any In-License Agreement to the extent Novan has the right and obligation to do so under such In-License Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.4 Performance under License Agreements.** During the Term, Novan shall duly perform and observe all of its respective obligations under each License Agreement in all material respects and maintain in full force and effect the License Agreements. Upon the occurrence of a material breach of any License Agreement by any counterparty thereto, which is not cured as provided therein, Novan shall use Commercially Reasonable Efforts to seek to enforce all of its rights and remedies thereunder. Novan shall not, without the prior written consent of Reedy Creek, which consent shall not be unreasonably withheld, forgive, release or compromise any amount owed to Novan under a License Agreement in a manner which could reasonably be expected to materially adversely affect the Included Payments. Novan shall provide Reedy Creek with written notice as promptly as practicable (and in any event within [\*\*\*]) upon receiving written notice from a Contract Party terminating or providing notice of termination of any License Agreement, alleging any breach of or default under any License Agreement, or asserting the existence of any facts, circumstances or events which alone or together with other facts, circumstances or events could reasonably be expected (with or without the giving of notice or passage of time or both) to give rise to a breach of or default under or right to terminate such License Agreement. In each such case, Novan's written notice shall include a summary describing in reasonable detail the relevant breach, default or termination event, including a copy of any written notice received from such Contract Party and, describing the corrective action Novan proposes to take. Novan shall thereafter use its Commercially Reasonable Efforts to cure such breach.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.5 Litigation.** Novan promptly shall notify Reedy Creek in writing of the commencement of any litigation in respect of the Product Intellectual Property, the License Agreements, or any Third Party's Intellectual Property licensed under an In-License Agreement of which Novan has knowledge, and such notification shall contain full particulars of the event described therein. Novan shall keep Reedy Creek reasonably informed as to the status of any such litigation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.6 No Transfer without Consent.** During the Term, other than in connection with a Change of Control, Novan shall not Transfer or consent to the Transfer of any portion of its (i) Product Intellectual Property, or (ii) rights in, under, or to any of the License Agreements (including any right to receive all or any portion of any royalty, milestone, or other payment thereunder), without the prior written consent of Reedy Creek. Notwithstanding the foregoing, Novan shall be permitted, and nothing in this Agreement shall restrict Novan's ability, to enter into any Out-License Agreement, lending arrangements that are secured by any Product Intellectual Property or other assets of Novan, or product revenue monetization arrangements similar to this Agreement, provided that in each case the Assigned Rights remain free and clear of any Encumbrances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.7 New In-License Agreement**. In the event that Novan elects to license additional Third Party Intellectual Property or elects to amend an approved In-License Agreement in connection with royalty or milestone payments, structure, or timeline, Novan may present such draft agreement with a Third Party (or, if provision is prohibited, a summary of relevant commercial terms) to Reedy Creek for review and approval. Any approved proposed In-License Agreement shall upon its execution (a copy of which will be provided to Reedy Creek) constitute an "In-License Agreement". In addition, Novan may at any time present an executed agreement to Reedy Creek for review and approval. Reedy Creek shall consider in good faith, and on a commercially reasonable basis, all requests for approval from Novan to add any license or other written instrument granting rights to Novan under Third Party Intellectual Property or to amend any approved In-License Agreement, and not unreasonably withhold or delay any such approvals. Any license or other written instrument entered into by Novan and a Third Party whereby Novan is granted rights under Third Party Intellectual Property that is not so approved may not form part of the calculation of Included Payments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.8 Maintenance of Books and Records.** During the Term, Novan shall keep and maintain, or cause to be kept and maintained, at all times books and records of account consistent with good business practices and customary industry standards adequate to correctly reflect all payments paid and/or payable with respect to the Assigned Rights and Sales Royalties, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.9 Quarterly Reports.** Without limiting the reporting required under Section 3.1, together with payment of any Included Payment, Novan shall prepare and deliver to Reedy Creek a written statement sufficient to compute Novan's calculation of all underlying royalties, milestones, and sales of a Product during such Calendar Quarter, including without limitation an itemized listing of all fees paid to Third Parties pursuant to an In-License Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.10 Financial Reports.** If at any time Novan is no longer required to publicly disclose audited financial reports with the SEC, on a quarterly basis, Novan will promptly provide to Reedy Creek copies of its regularly prepared financial statements, which shall include a balance sheet as of the last date of the applicable quarter and a statement of income and operating expenses with respect to such quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.11 Inspection Rights.** Reedy Creek shall have the right, no more than [\*\*\*] during each Calendar Year during the Term (as defined below) and for [\*\*\*] thereafter, to have an independent certified public accountant reasonably acceptable to Novan ("**Audit Representative**") and at Reedy Creek's own expense audit the relevant books and records of account of Novan in connection with the development of the Products, clinical trials, Clinical Trial Success, Commercialization of a Product, any other sales or other transactions used to calculate the Included Payments, and payment of any amounts under this Agreement during normal business hours, and upon reasonable prior notice, to determine whether appropriate accounting has been performed and payments have been accurately and timely made to Reedy Creek hereunder, for a period covering not more than [\*\*\*]. The Audit Representative will execute with Novan a written confidentiality agreement reasonably acceptable to Novan and will disclose to Reedy Creek only such information as is reasonably necessary to provide Reedy Creek with information regarding any actual or potential discrepancies between amounts reported and actually paid and amounts payable under this Agreement. The Audit Representative will send a copy of the report to Novan at the same time it is sent to Reedy Creek. The report sent to both Parties will include the methodology and calculations used to determine the results.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.12 Audit Costs.** In the event any audit of the books and records of Novan reveals that the amounts paid to Reedy Creek hereunder for the period of such audit have been understated by more than ten percent (10%) of the amounts determined to be due for the period subject to such audit or Ten Thousand United States Dollars ($10,000), whichever is greater, then the costs incurred by Reedy Creek in respect of such audit shall be borne by Novan; and in all other cases, such audit costs shall be borne by Reedy Creek.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.13 Security Interest.** The Parties acknowledge and agree that Parties intend for the sale, assignment, transfer and conveyance of the Assigned Rights and Sales Royalties to constitute a sale of the Assigned Rights and Sales Royalties from Novan to Reedy Creek and not a borrowing, loan or equity investment. Accordingly, Novan shall treat the sale, transfer, assignment and conveyance of the Assigned Rights and Sales Royalties as a sale of an "account" or a "payment intangible" (as applicable) (as each of the foregoing terms is defined by the Uniform Commercial Code in the applicable jurisdiction ("UCC")) in accordance with the UCC, and Novan hereby authorizes Reedy Creek to file financing statements naming Novan as the debtor and Reedy Creek as the secured party with respect to the Assigned Rights and Sales Royalties. Without limiting the foregoing, in the event the sale, assignment, transfer and conveyance of the Assigned Rights or Sales Royalties is hereafter held not to be a sale, Novan hereby grants to Reedy Creek, as security for the obligations of Novan hereunder, a first priority security interest in and to all of Novan's right, title and interest in and to the Assigned Rights, Sales Royalties and any "proceeds" (as such term is defined by the UCC) thereof, and Novan hereby authorizes Reedy Creek to file such financing statements as may be necessary to perfect such security interest. Prior to filing any financing statement, Reedy Creek shall provide a copy of such financing statement to Novan to review and provide comments on such financing statement, and shall in good faith take such comments into account. For the avoidance of doubt, nothing in this Agreement shall be deemed to grant a security interest to Reedy Creek in any assets or other property of Novan, including without limitation the Product Intellectual Property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.14 Insurance.** During the Term, Novan shall maintain insurance policies with reputable insurance companies that provide coverage in accordance with standards customary for comparable companies, with coverages and in amounts sufficient for the development and Commercialization activities and to comply with any License Agreement and otherwise that is customary for companies of comparable size and condition similarly situated in the same industry as such Persons, including clinical trial, product liability insurance and directors and officers insurance.

&nbsp;&nbsp;&nbsp;&nbsp;**4.** **representations and warranties of novan** 

Novan represents and warrants to Reedy Creek as follows as of the Effective Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.1 Organization.** Novan is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its incorporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.2 Authorization.** Novan has the full right, power and authority to enter into this Agreement and to consummate or cause to be consummated all of the transactions contemplated hereby and to fulfill or cause to be fulfilled all of the obligations of Novan hereunder. The execution and delivery of this Agreement by Novan and the due consummation by Novan of the transactions contemplated hereby have been duly authorized by all necessary action of Novan. This Agreement constitutes a legal, valid and binding agreement of Novan enforceable against Novan in accordance with its terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.3 Consents and Approvals.** No consent or approval from any Third Party is required to be made or obtained by Novan in connection with Novan's execution, delivery and performance of this Agreement, or the consummation of the transactions contemplated hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.4 Governmental Authorization**. The execution and delivery by Novan of this Agreement and the performance of its obligations hereunder, does not require any notice to, action or consent by, or in respect of, or filing with, any Government Authority, except for the filing of financing statements under the UCC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.5 No Conflict or Violation.** Neither the execution, delivery or performance of this Agreement, nor the consummation of the transactions contemplated hereby will result in a breach by Novan of, or a default by Novan under, any term or provision of any contract, agreement, lease, commitment, license, permit or authorization to which Novan is a party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.6 No Litigation.** There is no pending, or to the knowledge of Novan or its Affiliates, threatened action, suit, arbitration proceeding, claim, dispute, investigation, governmental or regulatory inquiry against Novan or its Affiliates, which, if adversely determined, would question the validity of, or could reasonably be expected to have a Material Adverse Change on Novan, the Products, the Included Payments, or the transactions contemplated hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.7 Compliance with Laws.** To the knowledge of Novan, Novan (a) is not in violation of, has violated or is under investigation with respect to, and (b) has not been threatened to be charged with or been given notice of any violation of, any law, rule, ordinance or regulation of, or any judgment, order, writ, decree, permit or license entered by any Regulatory Authority applicable to Novan or the Products which would reasonably be expected to have a material adverse effect on Novan, the Products or the transactions contemplated hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.8 Product Intellectual Property.** To the knowledge of Novan, Novan owns all right, title and interest in, or holds a valid license (enforceable against Novan and to Novan's knowledge the Contract Party thereto) to, the Product Intellectual Property that are required to develop and Commercialize the Products, in each case free and clear of any Encumbrances. There is no pending or, to the knowledge of Novan, threatened action, suit, proceeding, investigation or claim by any Person to which Novan is a party that claims that the Product Intellectual Property or the development, manufacture, use, sale, offer for sale and/or importation of any Product infringes on any Intellectual Property of any other Person or constitutes misappropriation of any other Person's trade secrets or other Intellectual Property. To the knowledge of Novan, no Third Party has infringed or misappropriated or is now infringing or misappropriating the Product Intellectual Property. Other than the In-License Agreements, to Novan's knowledge, no license of rights to Intellectual Property are necessary to be licensed in order for Novan to develop or Commercialize the Products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.9 Ownership of Assigned Rights.** Novan, immediately prior to the sale of the Assigned Rights, has the power and authority to sell all of the Assigned Rights. Neither Novan nor any of its Affiliates has assigned or sold any right, title, interest or claim in or to the Assigned Rights, other than by Novan to Reedy Creek pursuant to this Agreement. The Assigned Rights are free and clear of any and all Encumbrances. The assignment and transfer of the Included Payments from Novan to Reedy Creek shall not impair in any manner the obligation of a Contract Party to pay royalties or other fees under the applicable agreements with respect to the Product Intellectual Property or Products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.10 License Agreements**. With respect to each License Agreement, as applicable:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Such License Agreement is in full force and effect and has not been impaired, waived, altered or modified in any respect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) No Contract Party under such License Agreement has been released, in whole or in part, from any of its obligations under such License Agreement in a manner that could reasonably be expected to result in a Material Adverse Change.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) There has been no correspondence or any other communication sent by or on behalf of Novan to, or received by or on behalf of Novan from, any Contract Party, the subject matter of which has resulted in or would reasonably be expected to result in a Material Adverse Change, and no breach or dispute has occurred with respect to any payment or other obligations, the subject matter of which has resulted in or would reasonably be expected to result in a Material Adverse Change.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Novan has not received (i) any notice of any Contract Party's intention to terminate such License Agreement in whole or in part or (ii), any notice requesting any amendment, alteration or modification of such License Agreement or any sublicense or assignment thereunder that has not either been withdrawn in writing or reflected in such License Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) No payment required to be made under the terms of any License Agreement has been subject to any claim pursuant to any right of rescission, set-off, counterclaim or defense and no Contract Party to an Out-License Agreement has the right to rescind, set-off, counterclaim or withhold any payment required to be made under such Out-License Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Novan has provided true and correct copies of all In-License Agreements to Reedy Creek, including all amendments thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) The License Agreement is the legal, valid and binding obligation of Novan and the Contract Party thereto, enforceable against Novan and, to the knowledge of Novan, such Contract Party in accordance with its terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.11 Adverse Data.** Novan has disclosed to Reedy Creek all material adverse data relating to the Product and their efficacy and safety in animals and humans and the development and regulatory status known to Novan as of the Effective Date of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.12 Sufficiency of Assets; Financial Condition.** No insolvency proceeding of any character, including, without limitation, bankruptcy, receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary, has been commenced by or against Novan or any of its assets or properties, nor has any such proceeding been threatened. Novan does not contemplate and has not taken any action in contemplation of the institution of any such proceeding. The Purchase Price, together with the available capital of Novan, constitutes sufficient capital for Novan to: (i) pursue the development, Commercialization (through Out-License Agreements and other Third Party arrangements) and Regulatory Approval activities for the SB206 Product in the manner reasonably anticipated under this Agreement for products of similar market potential, and profit potential, with the objective of launching the SB206 Product in the Territory, and (ii) advance programmatically such activities with respect to the SB204 Product and the SB414 Product.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.13 Debarment.** Novan has not utilized and will not utilize, in developing or commercializing the Products, any Person that at such time, to Novan's knowledge, is debarred by FDA or any other Regulatory Authority.

&nbsp;&nbsp;&nbsp;&nbsp;**5.** **REPRESENTATIONS AND WARRANTIES OF REEDY CREEK** 

Reedy Creek represents and warrants to Novan as follows as of the Effective Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.1 Organization.** Reedy Creek is a duly organized and validly existing limited liability company in good standing under the laws of the jurisdiction of its organization.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.2 Authorization.** Reedy Creek has the full right, power and authority to enter into this Agreement and to consummate or cause to be consummated all of the transactions contemplated hereby and to fulfill or cause to be fulfilled all of the obligations of Reedy Creek hereunder. The execution and delivery of this Agreement by Reedy Creek and the due consummation by Reedy Creek of the transactions contemplated hereby have been duly authorized by all necessary action of Reedy Creek. This Agreement constitutes a legal, valid and binding agreement of Reedy Creek enforceable against Reedy Creek in accordance with its terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.3 Consents and Approvals.** No consent or approval from any Third Party is required to be made or obtained by Reedy Creek in connection with Reedy Creek's execution, delivery and performance of this Agreement, or the consummation of the transactions contemplated hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.4 No Conflict or Violation.** Neither the execution, delivery or performance of this Agreement, nor the consummation of the transactions contemplated hereby will result in a breach by Reedy Creek of, or a default by Reedy Creek under, any term or provision of any contract, agreement, lease, commitment, license, permit or authorization to which Reedy Creek is a party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.5 No Litigation.** There is no pending, or to the knowledge of Reedy Creek, threatened action, suit, arbitration proceeding, claim, investigation, governmental or regulatory inquiry against Reedy Creek which, if adversely determined, would question the validity of, or could reasonably be expected to have a material adverse effect on the transactions contemplated hereby.

&nbsp;&nbsp;&nbsp;&nbsp;**6.** **TERM AND TERMINATION** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.1 Term; Termination.** This Agreement shall commence on the Effective Date and will continue for as long as payments are due and payable under this Agreement (the "**Term**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.2 Termination by Reedy Creek.** If Reedy Creek believes that Novan is in material breach of this Agreement, then Reedy Creek may deliver notice identifying with specificity such alleged breach to Novan. Novan will have sixty (60) days to cure such breach. If Novan fails to cure such breach within such cure period, Reedy Creek may, subject to the remainder of this Section 6.2, terminate this Agreement by providing Novan a written notice at the end of such cure period. Notwithstanding the foregoing, if Novan fails to cure such breach within such cure period, but within such cure period Novan is using good faith efforts to cure such breach, then Reedy Creek may not terminate this Agreement for so long as Novan is using good faith efforts to cure such breach. Notwithstanding the foregoing, if Novan disputes in good faith the existence or materiality of such breach and provides notice to Reedy Creek of such dispute within such cure period, Reedy Creek will not have the right to terminate this Agreement in accordance with this Section 6.2 unless and until it has been determined in accordance with Article 9 that this Agreement was materially breached by Novan and Novan failed to cure such breach within the applicable cure period. It is understood and acknowledged that during the pendency of such a dispute, all of the terms and conditions of this Agreement will remain in effect and the Parties will continue to perform all of their respective obligations hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.3 Effect of Termination.** Expiration or termination of this Agreement for any reason will not release any Party from any obligations that, at the time of such expiration or termination, have already accrued to the other Party. The termination of this Agreement, including termination due to the expiration of the Term, shall not terminate the obligation of Novan, or its Affiliates, or assignees, to pay any Included Payment accrued prior to termination. Upon termination of this Agreement, Reedy Creek shall have the right to retain any Included Payment already paid by Novan under this Agreement. If this Agreement is early terminated by Reedy Creek pursuant to Section 6.2 for a material breach of Section 3.1 and the acts or omissions constituting such breach occurred no more than one year prior to Reedy Creek's notice to Novan of such breach, then, in addition to all other rights and remedies available to it, within thirty (30) days after written notice from Reedy Creek to Novan following the effective date of such termination, Novan shall pay to Reedy Creek an amount equal to the Purchase Price paid by Reedy Creek as of the effective date of termination less any payments made by Novan under this Agreement as of the effective date of termination. In addition, the rights and obligations of the Parties set forth in this Section 6.3 and Articles 1 (to the extent necessary to enforce other surviving rights and obligations of the Parties) and 7-10 shall survive termination or expiration of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;**7.** **CONFIDENTIAL INFORMATION** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.1 Confidential Information.** During the Term and for a period of [\*\*\*] thereafter, each Party shall (a) keep Confidential Information of the other Party confidential to the same extent such Party maintains its own information of similar nature (but at a minimum each Party shall use commercially reasonable efforts to maintain such Confidential Information in confidence), (b) not publish or otherwise disclose such Confidential Information to a Third Party, and (c) not use or exploit such Confidential Information for any purpose except for the performance of such Party's obligations or exercise of such Party's rights under this Agreement. Each Party may only disclose Confidential Information of the other Party to those officers, employees, or agents of such Party with a need to know, and only after such officers, employees, or agents have been advised of the confidential nature of such information and are bound by an obligation of confidentiality of similar scope to the terms of this Agreement. If either Party becomes aware or has knowledge of any unauthorized use or disclosure of the other Party's Confidential Information, it shall promptly notify the other Party of such unauthorized use or disclosure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.2 Permitted Disclosures.** Except with respect to required disclosures under Section 7.3, neither Party shall not make any public announcement of the existence or the terms of this Agreement, without the prior express written consent and approval of the other Party. Each Party may disclose the terms of this Agreement to any of its or its Affiliates' actual or prospective insurers, investors, lenders, business partners or acquirers performing a due diligence review of such Party or its Affiliates, and the agents or advisors of the foregoing, provided such permitted recipients are bound by written or professional obligations of confidentiality for such purpose.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.3 Required Disclosures.** Notwithstanding any other provision of this Agreement, disclosure of Confidential Information shall not be prohibited to the extent such disclosure: (a) is in response to a valid order of a court or Regulatory Authority or (b) is otherwise required by law, regulation, or the rules of any relevant agency, including the SEC, or body related to a regulated stock exchange; provided, however, that the receiving Party shall, except where not permitted or reasonably feasible under the applicable circumstances of such order or legal requirement, first have given reasonable notice to the other Party in order to allow such Party to object and/or seek a protective order prior to disclosure. With respect to any required filings with the SEC that include disclosure of the terms of this Agreement, each filing Party shall request (to the extent legally permitted) confidential treatment of the terms hereof for which confidential treatment is customarily sought, to the extent such confidential treatment is reasonably available to such Party under the circumstances. In the event of any such filing, the filing Party will provide the other Party with a copy of the Agreement marked to show provisions for which the filing Party intends to seek confidential treatment and shall reasonably consider the other Party's timely comments thereon.

&nbsp;&nbsp;&nbsp;&nbsp;**8.** **INDEMNIFICATION; DISCLAIMER; LIMITATION ON LIABILITY** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.1 Indemnification by Novan.** Novan shall defend, indemnify and hold harmless Reedy Creek and its Affiliates and its and their respective directors, officers, managers, employees, and agents (collectively, the "**Reedy Creek Indemnitees**") from and against any and all claims, liabilities, losses, costs, actions, suits, damages and expenses, including reasonable attorneys' fees (collectively, "**Damages**") to the extent arising from any claim, action or proceeding made or brought against any Reedy Creek Indemnitees in connection with: (a) any breach of this Agreement by Novan; (b) the gross negligence or willful misconduct of Novan, its Affiliates and/or Contract Parties in connection with the performance by or on behalf of Novan of Novan's obligations or exercise of its rights under this Agreement; (c) the development, manufacture, use, handling, storage, commercialization, transfer, importation, exportation or labeling of the Products by Novan, its Affiliates or Licensees in the Territory; (d) any infringement or misappropriation of any Intellectual Property of any Third Party by Novan, its Affiliates and/or Licensees in connection with the performance by or on behalf of Novan of Novan's obligations or exercise of Novan's rights under this Agreement; or (e) any violation of any Applicable Laws by Novan, its Affiliates or Licensees; except in any such case to the extent such Damages are attributable to any breach of this Agreement by Reedy Creek, the gross negligence or willful misconduct of Reedy Creek or a Reedy Creek Indemnitee or any violation of any Applicable Laws by Reedy Creek or a Reedy Creek Indemnitee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.2 Indemnification Procedure.** In the event that Reedy Creek receives notice of any Third Party claim, action or proceeding for which a Reedy Creek Indemnitee claims indemnity hereunder, Reedy Creek, on behalf of such Reedy Creek Indemnitee, shall promptly notify Novan of such matter. Novan shall then promptly assume responsibility for and shall have full control of such matter using counsel reasonably satisfactory to Reedy Creek, including settlement negotiations and any legal proceedings, and Reedy Creek shall, and shall cause the applicable Reedy Creek Indemnitee to, fully cooperate at Novan's expense in Novan's handling and defense thereof. Reedy Creek may participate, at its own expense, in the defense of such claim or litigation provided that Novan shall direct and control the defense of such claim or litigation. Novan shall not, in the defense of such claim or litigation resulting therefrom, consent to entry of any judgment except with the written consent of the Reedy Creek Indemnitee, which shall not be unreasonably withheld, or enter into any settlement except with the written consent of the Reedy Creek Indemnitee, which shall not be unreasonably withheld, which: (a) does not include as an unconditional term thereof the giving by the plaintiff to the Reedy Creek Indemnitee of a release from all liability in respect of such claim or litigation; or (b) contains any admission of liability.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.3 Disclaimer.** Except as provided under Article 4 and Article 5, each Party expressly disclaims any and all warranties of any kind, express or implied, including without limitation the warranties of design, merchantability, fitness for a particular purpose, noninfringement of Intellectual Property of Third Parties, or arising from a course of dealing, usage or trade practices, in all cases with respect thereto. Without limiting the foregoing, Reedy Creek acknowledges and agrees that Reedy Creek has made its own investigation of the Products and the Product Intellectual Property and is not relying on any implied warranties or upon any representation or warranty as to the future value or amount or potential value or amount of the Assigned Rights or Sales Royalties, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.4 Limitation on Liability.** IN NO EVENT SHALL A PARTY BE LIABLE TO THE OTHER PARTY IN CONNECTION WITH THIS AGREEMENT FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL, EXEMPLARY OR PUNITIVE DAMAGES OF ANY KIND, INCLUDING LOST PROFITS AND LOST REVENUE, REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT, NEGLIGENCE, STRICT PRODUCT LIABILITY, OR OTHERWISE, EVEN IF INFORMED OF OR AWARE OF THE POSSIBILITY OF ANY SUCH DAMAGES IN ADVANCE; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATION WILL NOT LIMIT (A) NOVAN'S OBLIGATION TO INDEMNIFY REEDY CREEK TO THE EXTENT REQUIRED BY SECTION 8.1, OR (B) A PARTY'S LIABILITY FOR BREACH OF ARTICLE 7.

&nbsp;&nbsp;&nbsp;&nbsp;**9.** **DISPUTE RESOLUTION** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.1 Resolution by Executive Officers.** In the event of any dispute, disagreement or controversy between the Parties arising from or relating to any alleged performance or non-performance of this Agreement or the interpretation or application of this Agreement ("**Dispute**"), the Chief Executive Officer or Manager of each Party (collectively, the "**Executive Officers**"), as applicable, shall attempt to reach a solution satisfactory to both Parties. If the Executive Officers do not reach such solution within a period of [\*\*\*] or such longer period as the Parties may mutually agree upon, then, upon notice by either Party to the other, such Dispute shall be referred to non-binding mediation with a neutral mediator. If, such Dispute remains unresolved [\*\*\*] following notice by a Party requesting non-binding mediation, such Dispute shall be adjudicated in accordance with Section 9.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.2 Venue.** In the event any Dispute is not resolved pursuant to process set forth in Section 9.1, such Dispute shall be finally resolved exclusively in any state or federal court located in Wake County, North Carolina.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.3 Emergency Relief.** Nothing in this Article 9 shall prevent either Party from immediately seeking injunctive relief from any court of competent jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;**10.** **MISCELLANEOUS** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.1 Construction and Interpretation.** All terms defined in the singular form shall include the plural and vice versa. Unless otherwise stated, all sections referred to herein are sections of this Agreement. Each of the exhibits referred to in this Agreement and attached hereto, and all attachments and amendments thereto, are and shall be incorporated herein and made a part hereof. The headings of the articles and sections in this Agreement are inserted for convenience only and are not intended to interpret, define or limit the scope or content hereof or any provision hereof. The words "include," "includes" and "including" shall be deemed to be followed by the phrase "but not limited to" unless expressly stated otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.2 Choice of Law.** This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina without giving effect to the choice of law provisions thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.3 Severability.** If any provision of this Agreement is held by any competent authority to be invalid or unenforceable in whole or in part, this Agreement shall continue to be valid as to the other provisions hereof and the remainder of the affected provision; provided that if the absence of such provision causes a material adverse change in either the risks or benefits of this Agreement to either Party, the Parties shall negotiate in good faith a commercially reasonable substitute or replacement for the invalid or unenforceable provision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.4 Assignment.** This Agreement is not assignable by either Party to any Third Party without the prior written consent of the other Party (which consent shall not unreasonably be withheld), provided, however, that each Party may assign this Agreement, without such consent, to an Affiliate of such Party, or in the event of a Change of Control of such Party. The terms and conditions of this Agreement will be binding on and inure to the benefit of the successors and permitted assigns of the Parties. Any attempted assignment in violation of this Section 10.4 shall be null and void.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.5 Waiver.** Any term or provision of this Agreement may be waived at any time by the Party entitled to the benefit thereof only by a written instrument executed by such Party. No delay on the part of Novan or Reedy Creek in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on the part of either Novan or Reedy Creek of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder nor will any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.7 Compliance with Applicable Laws.** Each Party shall comply with all Applicable Laws in the performance of its obligations under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.8 Force Majeure.** Either Party may suspend performance of any of its obligations (other than an obligation to make payment) under this Agreement, in whole or in part, without liability to the other Party by promptly notifying the other Party of the nature and estimated duration of the suspension period in the event of: act of God, war, riot, fire, explosion, terrorist action, accident, lack of adequate fuel, power, compliance with governmental requests, laws, regulations, orders or actions, breakage or failure of machinery or apparatus, national defense requirements or any other event, whether or not of the classes enumerated herein, beyond the reasonable control of the Party, or in the event of labor trouble, strike, lockout or injunction, which event renders the performance of the obligation commercially impracticable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.9 Entire Agreement.** The Parties agree that this Agreement constitutes the entire agreement between the Parties relating to the subject matter hereof, and all prior agreements or arrangements, written or oral, between the Parties relating to the subject matter hereof are hereby superseded and merged with this Agreement, including the Summary of Principal Terms dated March 29, 2019.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.10 Amendment.** This Agreement may not be amended, supplemented or otherwise modified except in writing signed by both Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.11 Counterparts.** This Agreement may be executed in two counterparts and by facsimile or PDF signature, each of which shall be deemed an original and which together shall constitute one instrument.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.12 Notices.** All notices required hereunder shall be in writing and shall be made by certified letter, postage prepaid, return receipt requested or next business day delivery service directed to the other Party as provided below:

If to Novan:

Novan, Inc.

4105 Hopson Road

Morrisville, NC 27560

Attn: Chief Executive Officer

With copy (which shall not constitute notice) to:

Smith, Anderson, Blount,

Dorsett, Mitchell & Jernigan, LLP

Wells Fargo Capitol Center

150 Fayetteville Street, Suite 2300

Raleigh, NC 27601

Attn: Gerald F. Roach, Esq.

If to Reedy Creek:

Reedy Creek Investments LLC

100 Matrix Drive, Box 8000

Cary, NC 27513

Attn: Donald R. Parker

With copy (which shall not constitute notice) to:

SAS Institute Inc.

Attn: David B. Keim, Assistant General Counsel

SAS Campus Drive, A7368

Cary, NC 27513

[\*\*\*]

[\*\*\*]

[\*\*\*]

Notice given by certified mail shall be deemed given three (3) days after its deposit in the mail. Notice given by next business day delivery shall be deemed given one (1) business day after its deposit with a next business day delivery courier. Each Party agrees to provide a copy of any such notice by telefax, which copy shall not constitute notice given. Either Party from time to time may change its address or telefax number by giving the other Party notice as provided herein. Notice deposited after the last regularly scheduled pick-up time on a business day will be deemed to have been deposited on the next business day.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.13 Further Assurances.** The Parties will execute and deliver, or cause to be executed or delivered, such further documents and do or cause to be done such further acts and things as may be required to carry out the intent and purpose of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.14 Use of Names.** Neither Party will, without prior written consent of the other Party, use the name or any trademark or trade name owned by the other Party, or owned by an Affiliate of the other Party, in any publication, publicity, advertising, or otherwise, except as expressly permitted by Article 7.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.15 Third-Party Beneficiary.** This Agreement is solely for the benefit of the Parties and their respective successors and permitted assigns, and no other person or entity has any right, benefit, priority or interest under or because of the existence of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.16 Advice of Counsel.** Novan and Reedy Creek have each consulted counsel of their choice regarding this Agreement, and each acknowledges and agrees that this Agreement shall not be deemed to have been drafted by one Party or another and shall be construed accordingly.

[Signatures Appear on Following Page]

[*Signature Page to Royalty and Milestone Payments Purchase Agreement*]

**IN WITNESS WHEREOF**, the Parties have executed this Agreement as of the Effective Date.

---

| | |
|:---|:---|
| **NOVAN, INC.** | **NOVAN, INC.** |
| By: | /s/ George Kelly Martin |

---

Print Name: <u>George Kelly Martin</u> <br>

---

| | |
|:---|:---|
| Title: | CEO |
| **REEDY CREEK INVESTMENTS LLC** | **REEDY CREEK INVESTMENTS LLC** |
| By: | /s/ Donald R. Parker |

---

Print Name: <u>Donald R. Parker</u> <br>

Title: <u>Manager</u>

## Exhibit 10.9

**Exhibit 10.9**

***Execution Version***

**AMENDMENT, ASSIGNMENT AND ASSUMPTION AGREEMENT**

This AMENDMENT, ASSIGNMENT AND ASSUMPTION AGREEMENT (this "**Agreement**") is made and entered into as of September 11, 2023 (the "**Effective Date**"), by and between Novan, Inc., a Delaware corporation ("**Novan**"), LNHC, Inc., a Delaware corporation ("**LNHC**"), and Reedy Creek Investments LLC, a North Carolina limited liability company ("**Reedy Creek**"). Novan, LNHC and Reedy Creek are also referred to individually as a "**Party**" and together as the "**Parties**".

**WHEREAS**, Novan and Reedy Creek previously entered into that certain Royalty and Milestone Payments Purchase Agreement, effective as of April 29, 2019 (as amended, restated or modified from time to time, the "**Royalty Agreement**");

**WHEREAS**, capitalized terms used but not otherwise defined herein shall have the meaning ascribed to such terms in the Royalty Agreement;

**WHEREAS**, Novan has provided notice to Reedy Creek that, pursuant to the transactions contemplated by that certain Amended and Restated Asset Purchase Agreement, dated as of September 1, 2023, by and between Novan, EPI Health, LLC, a South Carolina limited liability company, and Ligand Pharmaceuticals Incorporated, a Delaware corporation ("**Ligand**") (as amended, restated or otherwise modified, the "**Asset Purchase Agreement**"), Novan has agreed to assume and assign the Royalty Agreement to Ligand;

**WHEREAS**, following the execution and delivery of the Asset Purchase Agreement, Ligand has assigned to LNHC all of its right, title and interest in, to and under the Asset Purchase Agreement to LNHC, and LNHC assumed all of Ligand's obligations thereunder;

**WHEREAS**, Novan wishes to assume and assign, transfer and convey, and LNHC wishes to accept and take assignment of, Novan's contractual obligations under the Royalty Agreement;

**WHEREAS**, concurrent with the assumption and assignment of the Royalty Agreement, the Parties wish to amend the Royalty Agreement in accordance with the terms of this Agreement; and

**NOW, THEREFORE**, in consideration of the promises and covenants herein, the Parties agree as follows:

**<u>S ECTION 1</u>**

**<u>A MENDMENTS</u>**

Effective as of the consummation of the transactions contemplated by the Asset Purchase Agreement (the "**Closing**"):

1.1 For all purposes under the Royalty Agreement, any and
all references therein to Novan shall be deemed to be references to LNHC, and all instances of the defined term "Novan"
and the name "Novan, Inc." throughout the Agreement shall be automatically deleted and replaced with the defined term
"LNHC" or the name "LNHC, Inc.", as applicable.

1.2 The Royalty Agreement is hereby amended by inserting the following as a new Section 2.9 immediately following Section 2.8:

"**2.9 Treatment of Payments to Ligand.** Notwithstanding anything to the contrary herein, Reedy Creek acknowledges and agrees that, for all purposes under this Agreement, the amounts payable by LNHC to Reedy Creek pursuant to this Article 2 in respect of the SB206 Product (and, as applicable, the corresponding calculations of SB206 Net Sales, SB206 Net Milestones, and SB206 Net Royalties) (a) are intended to be calculated net of the amount of any royalty payments and any collections, recoveries, payments, supplements or other compensation made in lieu thereof and any other remuneration of any kind payable by Novan (or, after giving effect to the Closing, LNHC) that would be payable to Ligand with respect to the SB206 Product pursuant to that certain Development Funding and Royalties Agreement, dated as of May 4, 2019 (as in effect on the Effective Date), to which Ligand and Novan are each a party (the "**Ligand Agreement**"), and (b) shall not be affected or deemed modified in any respect by reason of Ligand being an Affiliate of LNHC. Reedy Creek further acknowledges and agrees that, if for any reason Ligand causes LNHC to cease to make actual disbursements of cash (whether by wire transfer, check or otherwise) in respect of payments to Ligand pursuant to the Ligand Agreement (whether for accounting, tax or other reasons), the calculation of the amounts payable by LNHC to Reedy Creek pursuant to this Article 2 in respect of the Products (and, as applicable, the corresponding calculations of SB206 Net Sales, SB206 Net Milestones and SB206 Net Royalties) shall not be affected or deemed modified in any respect. For the avoidance of doubt, any Milestone Payments (as defined in the Ligand Agreement) payable or paid to Ligand pursuant to and in accordance with Section 4.2 of the Ligand Agreement will not reduce or affect the calculation of Net Sales, SB204 Net Milestones or SB414 Net Milestones for purposes of this Agreement."

1.3 The address information for Novan set forth in Section 10.12 of the Royalty Agreement is hereby
deleted and replaced as follows:

If to LNHC:

c/o Ligand Pharmaceuticals Incorporated <br> 3911 Sorrento Valley Boulevard, Suite 110 <br> San Diego, CA 92121

Attention: Chief Financial Officer <br> Email: mkorenberg@ligand.com

with copies (which shall not constitute notice) to:

Ligand Pharmaceuticals Incorporated

3911 Sorrento Valley Boulevard, Suite 110

San Diego, CA 92121

Attention: General Counsel

Email: areardon@ligand.com

and

Morgan, Lewis & Bockius LLP

101 Park Avenue

New York, NY 10178

Attention: Craig Wolfe

Email: craig.wolfe@morganlewis.com

**<u>S ECTION 2</u>** 

**<u>A SSIGNMENT AND ASSUMPTION</u>**

2.1 Effective as of the Closing, Novan hereby assumes and assigns, transfers,
conveys and delivers to LNHC (the "**Assignment** "), and LNHC hereby accepts from Novan and takes assignment and
delivery of all of Novan's right, title, and interest in and to the Royalty Agreement. LNHC hereby accepts the Assignment
and hereby agrees to assume the Royalty Agreement and agrees to pay, perform and discharge when due the obligations of Novan from
and after the Closing under the Royalty Agreement (such liabilities, the "**Assumed Liabilities** "). LNHC assumes
no liabilities or obligations other than those expressly assumed herein and the parties hereto agree that all liabilities and obligations
not expressly assumed by LNHC herein shall remain the sole responsibility of Novan. Without limiting the generality of the foregoing,
and for the avoidance of doubt, any outstanding amounts owed by Novan to Reedy Creek prior to the Closing shall not be assumed
by LNHC hereunder.

2.2 Novan represents and warrants to LNHC that, subject to the provisions of <u>Section 2.3</u>, Novan
has the right and authority to make the assignment as herein provided.

2.3 Reedy Creek hereby consents to the Assignment by Novan to LNHC hereunder,
contingent upon the occurrence of the Closing. Reedy Creek acknowledges and agrees that: (a) notwithstanding anything in the Royalty
Agreement to the contrary, the Assignment and the transactions contemplated by the Asset Purchase Agreement will not give rise
to any right to terminate or void any rights to which Novan is entitled under the Royalty Agreement; (b) the Assignment and the
transactions contemplated by the Asset Purchase Agreement will not constitute a breach of, or default under, any assignment provision
or any other provision of the Royalty Agreement or give rise to an event that could result in Reedy Creek's right to terminate
the Royalty Agreement in connection with a Change of Control or otherwise or upon the giving of notice or lapse of time (or both);
and (c) Reedy Creek is not entitled to additional compensation as a result of the Assignment or the consummation of the transactions
contemplated by the Asset Purchase Agreement (including, without limitation, any enhanced or increased fees, milestone or royalty
payments, or any reimbursement of any costs or expenses in connection with the Assignment or this Agreement).

**<u>S ECTION 3</u>** 

**<u>M ISCELLANEOUS</u>**

3.1 If the Closing does not occur and the transactions of the Asset Purchase Agreement is not consummated,
(a) the consent of Reedy Creek herein shall be null and void and of no further force or effect, (b)
the Royalty Agreement shall not be amended or otherwise modified pursuant hereto and (c) neither the Royalty Agreement, any of
Novan's rights, title and interest therein nor any of Novan's obligations and duties thereunder will be assigned or
assumed hereunder, and Novan will continue as a party to the Royalty Agreement.

3.2 Each of the Parties agrees to execute and deliver such other instruments
and documents and take such other actions as may be reasonably requested from time to time as necessary to carry out, evidence
and confirm the intended purposes of this Agreement.

3.3 Each of the Parties acknowledges and agrees that, except as specifically
set forth in this Agreement, no other term or provision of the Royalty Agreement is affected hereby, and that the terms of the
Royalty Agreement not affected hereby shall continue in full force and effect as set forth therein. This Agreement shall amend
and be incorporated into and made part of the Royalty Agreement. In the event of any discrepancy between the provisions of this
Agreement and any provision of the Royalty Agreement, then the provisions of this Agreement shall control. Any reference to "this
Agreement", "hereunder", "hereof" or words of like import referring to the Royalty Agreement, and
each reference in any other document to "the Agreement", "thereunder", "thereof" or words of
like import referring to the Royalty Agreement, shall mean and be a reference to the Royalty Agreement as expressly modified by
this Agreement.

3.4 This Agreement shall be governed by and construed in accordance with the laws of the State of North
Carolina without giving effect to the choice of law provisions thereof.

3.5 This Agreement may not be amended, supplemented or otherwise modified except in writing signed
by each of the Parties.

3.6 This Agreement may be executed in two counterparts and by facsimile or PDF
signature, each of which shall be deemed an original and which together shall constitute one instrument.

*[Signature Page Follows]*

The persons signing this Agreement represent that they have the full power and authority to enter into this Agreement and further represent that they have been duly authorized to enter into this Agreement.

---

| | |
|:---|:---|
| **NOVAN, INC.** | **NOVAN, INC.** |
| By: | ![](img001.jpg) |
| Name: Paula Brown Stafford | Name: Paula Brown Stafford |
| Title: President, Chief Executive Officer, and Chairman | Title: President, Chief Executive Officer, and Chairman |

---

[*Signature Page to Amendment, Assignment and Assumption Agreement*]

---

| | |
|:---|:---|
| **LNHC, INC.** | **LNHC, INC.** |
| By: | ![](img002.jpg) |
| Name: Matthew Korenberg | Name: Matthew Korenberg |
| Title: President | Title: President |

---

*[Signature Page to Amendment, Assignment and Assumption Agreement]*

---

| | |
|:---|:---|
| **REEDY CREEK INVESTMENTS LLC** | **REEDY CREEK INVESTMENTS LLC** |
| By: | ![](img003.jpg) |
| Name: David B. Keim | Name: David B. Keim |
| Title: Company Secretary and Chief Legal Officer | Title: Company Secretary and Chief Legal Officer |

---

*[Signature Page to Amendment, Assignment and Assumption Agreement]*

## Exhibit 10.10

**Exhibit 10.10**

**Certain confidential information contained in this exhibit have been omitted by means of redacting a portion of the text and replacing it with [\*\*\*], pursuant to Regulation S-K Item 601(b)(10) of the Securities Act of 1933, as amended. Certain confidential information has been excluded from this exhibit because it is: (i) not material; and (ii) the registrant treats such information as private or confidential.**

**AMENDED, RESTATED AND CONSOLIDATED LICENSE AGREEMENT**

This AMENDED, RESTATED AND CONSOLIDATED LICENSE AGREEMENT (this "**LICENSE AGREEMENT**") is entered into this 27th day of June, 2012 (the "**EFFECTIVE DATE**'') between The University of North Carolina at Chapel Hill having an address at Campus Box 4105, 308 Bynum Hall, Chapel Hill, North Carolina, 27599-4105 ("**UNIVERSITY**") and Novan, Inc., a corporation organized and existing under the laws of the State of Delaware ("**LICENSEE**").

**WITNESSETH**

WHEREAS, UNIVERSITY entered into a first license agreement with LICENSEE effective July 18, 2007, a FIRST AMENDMENT thereto effective September 30, 2008 and a SECOND AMENDMENT thereto effective October 29, 2010 (such license agreement, as amended by the FIRST AMENDMENT and the SECOND AMENDMENT thereto, the "**FIRST AGREEMENT**"); and

WHEREAS, UNIVERSITY entered into a second license agreement with LICENSEE effective October 1, 2009 and a FIRST AMENDMENT thereto effective October 29, 2010 (such license agreement, as amended by the FIRST AMENDMENT thereto, the "**SECOND AGREEMENT**"); and

WHEREAS, UNIVERSITY and LICENSEE wish to amend, restate and consolidate the FIRST AGREEMENT and the SECOND AGREEMENT into a single agreement as provided herein.

NOW, THEREFORE, in consideration of the premises and mutual promises and covenants contained in this LICENSE AGREEMENT and for good and valuable consideration, it is agreed by and between UNIVERSITY and LICENSEE as follows:

**ARTICLE 1: DEFINITIONS**

In addition to such terms defined elsewhere in this LICENSE AGREEMENT, the following terms shall have the meanings described below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 "**AFFILIATE**" means (a) any person or entity which owns or controls at least fifty percent (50%) of the equity or voting stock of the LICENSEE, or (b) any person or entity fifty percent (50%) of whose equity or voting stock is owned or controlled by LICENSEE or (c) any person or entity of which at least fifty percent (50%) of the equity or voting stock is owned or controlled by the same person or entity owning or controlling at least fifty percent (50%) of LICENSEE.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 **"EXISTING PATENT RIGHTS"** means all PATENT RIGHTS claiming INVENTIONS or otherwise existing as of the EFFECTIVE DATE.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 "**FIRST COMMERCIAL SALE**" means the first sale of commercial quantities of any LICENSED PRODUCT (as defined below) for human therapeutic use under an approved NDA or BLA (or foreign equivalent thereof) by LICENSEE, an AFFILIATE, or any SUBLICENSEE of either of the foregoing for which the proceeds of such sale qualify as NET SALES (as defined below).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 "**IMPROVEMENT**" means any (i) modification, enhancement, or improvement of an INVENTION or any other invention described in the EXISTING PATENT RIGHTS or (ii) other invention, the manufacture, use, or sale of which modification, enhancement, or improvement would, but for the licenses granted hereunder, infringe one or more claims of the EXISTING PATENT RIGHTS.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 "**INVENTIONS**" means the subject matter of any invention disclosures, patent applications or patents identified in <u>Appendix A</u>. "**UNIVERSITY INVENTIONS**" refers to INVENTIONS that have only inventors, as determined under the Patent Laws of the United States of America, that are obligated to assign their rights in any INVENTIONS to the UNIVERSITY. "**JOINT INVENTIONS**" refers to INVENTIONS that have inventors, as determined under the Patent Laws of the United States of America, that are obligated to assign their rights in any INVENTIONS to the UNIVERSITY and inventors that are obligated to assign their rights in any INVENTIONS to LICENSEE or an AFFILIATE.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 "**LICENSED FIELD**" means all uses and applications.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 "**LICENSED PRODUCTS**" means any method or process, composition, product, or component part thereof claimed in whole or in part by an issued, unexpired, or pending claim contained in the PATENT RIGHTS whose manufacture, intended use, or sale would, but for the license(s) granted in this LICENSE AGREEMENT, infringe on the PATENT RIGHTS in the country of sale.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.8 "**LICENSED TERRITORY**" means the entire world.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.9 "**NET SALES**" means the total invoiced sales price received for LICENSED PRODUCTS sold by LICENSEE, its AFFILIATES, and their SUBLICENSEES less (a) sales taxes or other taxes, (b) shipping and insurance charges, (c) actual allowances, rebates, credits, or refunds for returned or defective LICENSED PRODUCTS, (d) trade discounts and quantity discounts, retroactive price reductions, or other allowances actually allowed or granted from the billed amount and taken, (e) rebates, credits, and chargeback payments (or the equivalent thereof) granted to managed health care organizations, wholesalers, or to federal, state/provincial, local and other governments, including their agencies, purchasers, and/or reimbursers, or to trade customers, and (f) any import or export duties, tariffs, or similar charges incurred with respect to the import or export of LICENSED PRODUCTS into or out of any country in the LICENSED TERRITORY. LICENSED PRODUCTS will be considered sold when paid for. Notwithstanding the foregoing, NET SALES shall not include, and shall be deemed zero with respect to, (1) the distribution of reasonable quantities of promotional samples of LICENSED PRODUCTS, (2) LICENSED PRODUCTS provided for clinical trials or research purposes, or charitable or compassionate use purposes, or (3) LICENSED PRODUCTS provided to any AFFILIATE, SUBLICENSEE or other strategic partner under an agreement in which NET SALES by such AFFILIATE, SUBLICENSEE or other strategic partner shall be subject to royalties under Section 3.5 or 3.6.

Notwithstanding the foregoing, in the event that LICENSED PRODUCTS are sold by LICENSEE, an AFFILIATE, or a SUBLICENSEE as part of a combination product or bundled product, or in conjunction with a delivery system, the NET SALES of such product, for the purposes of determining royalty payments due under this LICENSE AGREEMENT, shall be determined by multiplying the NET SALES (as originally defined above) of the combination product by the fraction A/(A+B), where A is the average sale price of the LICENSED PRODUCT when sold separately in finished form and B is the average sale price of the other product(s) or system sold separately in finished form, so that A+B is the average sale price of all of the product(s) and, if applicable, the delivery system together, as the case may be. In the event that such average sale price cannot be determined for both the LICENSED PRODUCT and such other product(s) or system(s) in combination, NET SALES for the purposes of determining royalty payments with respect to such combination or bundled product shall be commercially reasonable and determined by good faith negotiation between UNIVERSITY and LICENSEE.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.10 "**PATENT RIGHTS**" means any United States, foreign or international patents and/or patent applications claiming the INVENTIONS or any IMPROVEMENTS owned or controlled by UNIVERSITY prior to or during the term of this LICENSE AGREEMENT, which shall include but not be limited to those patents and patent applications listed on <u>Appendix A</u>, attached hereto, as well as any continuations, continuations-in-part (to the extent they are directed to subject matter described in, claimed by, or enabled by the patents or patent applications set forth on <u>Appendix A</u>, any INVENTIONS, or any IMPROVEMENT), divisionals, provisionals, continued prosecution applications, reexaminations, renewals, extensions, request for continued examinations, or reissues thereof, and any foreign counterpart of any of the foregoing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.11 "**PHASE I CLINICAL TRIAL"** means any human clinical trial, conducted by or on behalf of LICENSEE, an AFFILIATE, or a SUBLICENSEE with respect to a LICENSED PRODUCT, including typically the first phase of clinical trials conducted in relatively small numbers of healthy volunteers or patients with the targeted condition to obtain information on a LICENSED PRODUCT's safety, tolerability, pharmacological activity, pharmacokinetics, drug metabolism and mechanism of action, as more fully defined in 21 C.F.R. § 312.21(a), as may be amended, and, with respect to any other country or jurisdiction, the equivalent of such a clinical trial in such other country or jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.12 "**PHASE II CLINICAL TRIAL**" means any well-controlled clinical trial, conducted by or on behalf of LICENSEE, an AFFILIATE, or a SUBLICENSEE with respect to a LICENSED PRODUCT, in human subjects, including clinical trials conducted in patients with the targeted condition, and designed to evaluate clinical activity (including but not limited to, pertinent pharmacodynamic effects or biomarker responses) and safety for a LICENSED PRODUCT for one or more indications, as well as to obtain an indication of the dosage regimen required, as more fully defined in 21 C.F.R. § 312.21(b), as may be amended, and, with respect to any other country or jurisdiction, the material equivalent of such a clinical trial in such other country or jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.13 "**SUBLICENSEE**" means any third party to whom LICENSEE or any AFFILIATE licenses any of the rights granted under this LICENSE AGREEMENT pursuant to Article 6.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.14 "**SUBLICENSING REVENUE**" means sublicense payments to the extent received by LICENSEE directly and solely, as reasonably determined by LICENSEE, as consideration for the grant of rights to PATENT RIGHTS, including upfront fees or milestone payments but excluding sales-based royalties, sales-based milestone fees, or other payments calculated on the basis of SUBLICENSEES' sales of LICENSED PRODUCTS, purchases of equity or debt of LICENSEE, payments made in connection with research and development agreements or collaborations, or other payments made by a SUBLICENSEE where LICENSEE is obligated to perform services or to provide goods in connection with such payment shall not be considered sublicense payments for purposes of this LICENSE AGREEMENT.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.15 "**UNIVERSITY TECHNOLOGY**" means any unpublished research and development information, know-how, and technical data in the possession of UNIVERSITY prior to or following the EFFECTIVE DATE of this LICENSE AGREEMENT which relates to and is necessary for the practice of the INVENTIONS or IMPROVEMENTS and which UNIVERSITY has the right to provide to LICENSEE.

**ARTICLE 2: GRANT OF LICENSE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 UNIVERSITY hereby grants to LICENSEE and its AFFILIATES to the extent of the LICENSED TERRITORY a non-exclusive right and license to use UNIVERSITY TECHNOLOGY in the LICENSED FIELD, with the right to sublicense, subject to all the terms and conditions of this LICENSE AGREEMENT. Nothing herein shall constitute a sale of the UNIVERSITY TECHNOLOGY.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 UNIVERSITY hereby grants to LICENSEE and its AFFILIATES to the extent of the LICENSED TERRITORY an exclusive right and license under the PATENT RIGHTS to make, have made, use, offer for sale, sell and import LICENSED PRODUCTS in the LICENSED FIELD, with the right to sublicense, subject to all the terms and conditions of this LICENSE AGREEMENT.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 UNIVERSITY reserves the right to practice under the PATENT RIGHTS, to use UNIVERSITY TECHNOLOGY, and to make, use and provide LICENSED PRODUCTS for, in each and every case, its own internal, not-for-profit research, public service, teaching and educational purposes, without payment of royalties, provided that the exercise of such reserved rights by UNIVERSITY shall not (i) be on behalf of, sponsored with funding received from, or subject to any intellectual property rights granted to any commercial third party nor (ii) include any human use or clinical administration without prior written approval from LICENSEE. Furthermore, UNIVERSITY shall be free to publish UNIVERSITY TECHNOLOGY as it sees fit, provided that (i) UNIVERSITY shall provide LICENSEE with a manuscript of any proposed paper or an abstract of any proposed presentation describing any INVENTIONS, IMPROVEMENTS, or technology claimed or described in the patents and patent applications included in the PATENT RIGHTS at least [\*\*\*] ([\*\*\*]) days prior to its submission for publication or presentation and (ii) as reasonably requested by LICENSEE, UNIVERSITY shall instruct its patent counsel to make such patent filings or conduct the prosecution of the patents and patent applications included in the PATENT RIGHTS as appropriate prior to publication or presentation of such material to prevent the loss of any rights granted under this LICENSE AGREEMENT.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 UNIVERSITY may transfer (i) any materials incorporating UNIVERSITY TECHNOLOGY or any of the INVENTIONS or (ii) any materials whose manufacture, use, or practice would infringe any of the PATENT RIGHTS to nonprofit, academic research institutions for their own internal, not-for-profit, research, teaching, and educational purposes upon such institution's execution of a Material Transfer Agreement with UNIVERSITY in a form substantially similar to that attached hereto as <u>Appendix B</u> (any such material transfer agreement entered into, a "Material Transfer Agreement"), provided that (1) any such third party's use of, or research concerning, such materials shall not (a) be on behalf of, sponsored with funding received from, or subject to any intellectual property rights granted to any commercial third party nor (b) include any human use or clinical administration without prior written approval of UNIVERSITY and LICENSEE and (2) the UNIVERSITY shall provide written notification to LICENSEE of any such transfer of materials identifying the party to whom such materials were transferred and the materials transferred.

UNIVERSITY shall promptly notify LICENSEE in writing in the event they receive (i) disclosure of any INVENTION (as defined in the Material Transfer Agreement) or (ii) a copy of any proposed manuscript describing, referencing, or including the results of any use of materials transferred under any Material Transfer Agreement from any third party research institution pursuant to any Material Transfer Agreement, and shall include with such notice to LICENSEE a copy of such disclosure or manuscript.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5 Notwithstanding the foregoing, any and all licenses and other rights granted hereunder are limited by and subject to the rights and requirements of the United States Government which arise out of its sponsorship (if any) of the research which led to the conception or reduction to practice' of the INVENTIONS covered by PATENT RIGHTS. To the extent applicable due to any such sponsorship, the United States Government is entitled, as a right, under the provisions of 35 U.S.C. §§ 200-212 and applicable regulations of Title 37 of the Code of Federal Regulations, to a non-exclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on the behalf of the United States Government any of the PATENT RIGHTS throughout the world and LICENSEE agrees to comply and require compliance therewith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6 Nothing herein grants to UNIVERSITY from LICENSEE any right or interest in any JOINT INVENTIONS or any related patent rights owned by LICENSEE, or in any other intellectual property conceived or made by or on behalf of LICENSEE unless set forth in a separate agreement between the Parties. To the extent that a JOINT INVENTION no longer includes any inventors with an obligation to assign their rights to the UNIVERSITY, such JOINT INVENTION and any related PATENT RIGHTS shall no longer be considered owned by the UNIVERSITY but shall be and hereby are automatically and without further action on the part of any inventors, the UNIVERSITY or LICENSEE assigned to and owned exclusively by LICENSEE and no longer shall be subject to the terms of this AGREEMENT. The Parties agree to amend the Patent Rights to reflect such change in ownership.

**ARTICLE 3: CONSIDERATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 As partial consideration for the licenses granted LICENSEE under the FIRST AGREEMENT, LICENSEE has issued directly to The University of North Carolina at Chapel Hill Foundation, Inc. ("the Foundation") on behalf of UNIVERSITY two-hundred twenty nine thousand two hundred and sixty three shares (229,263) of common stock of LICENSEE. LICENSEE'S common stock was issued pursuant to a Stock Purchase Agreement in a form acceptable to UNIVERSITY.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 As partial consideration for the licenses granted LICENSEE under the SECOND AGREEMENT, LICENSEE has paid UNIVERSITY a license issue fee of five thousand dollars ($5,000).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 At all times, the LICENSEE common stock held by Foundation shall be subject to a shareholders agreement in the form set forth in <u>Appendix C</u>. The Foundation agrees to enter into reasonable or customary agreements required by any future equity investors regarding subjecting their shares of LICENSEE common stock to rights of first refusal and co-sale, such rights to terminate on an initial public offering of Company stock pursuant to a registration statement filed pursuant to the Securities Act of 1933, as amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4 LICENSEE shall reimburse UNIVERSITY for reasonable, documented costs ([\*\*\*]) arising out of the patenting of the UNIVERSITY INVENTIONS pursuant to Article 8 of this LICENSE AGREEMENT ("PATENT COSTS") as described in this Section 3.4. The reimbursement of patenting costs shall be non-refundable and shall not be a credit against any other amounts due hereunder except as may be provided for elsewhere in this LICENSE AGREEMENT. Reimbursement of patenting costs under this LICENSE AGREEMENT shall commence and be due within [\*\*\*] ([\*\*\*]) days of billing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5 Beginning on the EFFECTIVE DATE and continuing for the term of this LICENSE AGREEMENT, on a country-by-country and LICENSED PRODUCT-by-LICENSED PRODUCT basis, LICENSEE will pay UNIVERSITY a running royalty of [\*\*\*] percent ([\*\*\*]%) of all NET SALES of LICENSED PRODUCTS sold by LICENSEE, its AFFILIATES and SUBLICENSEES of the foregoing. For clarity, the obligation to pay royalties under this Section 3.5 shall be imposed only once (i) with respect to any sale of any LICENSED PRODUCT, and (ii) with respect to any LICENSED PRODUCT, in each case regardless of whether such LICENSED PRODUCT, or the manufacture, use or sale thereof, is covered by more than one claim contained in the PATENT RIGHTS. LICENSEE shall pay to UNIVERSITY said royalties on the NET SALES of LICENSED PRODUCTS concurrently with the making of [\*\*\*] written reports as provided in Section 4.2 below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.6 In respect to sublicenses granted by LICENSEE under Article 6 below, LICENSEE shall pay to UNIVERSITY an amount equal to [\*\*\*] percent ([\*\*\*]%) of SUBLICENSING REVENUE received by LICENSEE as consideration for the grant of rights to PATENT RIGHTS. All payments based on SUBLICENSING REVENUE shall be made within [\*\*\*] days of receipt of the SUBLICENSING REVENUE.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.7 Should a compulsory license be granted, or be the subject of a possible grant, to a third party under the applicable laws of any country in the LICENSED TERRITORY under the PATENT RIGHTS licensed hereunder, LICENSEE shall notify UNIVERSITY, including any material information concerning such compulsory license, and the running royalty rates payable under Section 3.5 for sales of LICENSED PRODUCTS in such country will be adjusted to equal any lower royalty rate granted to such third party for such country with respect to the sales of such LICENSED PRODUCTS therein (the "COMPULSORY ROYALTY"), provided that during such periods such third parties sell or offer for sale under the compulsory license articles that compete with the LICENSED PRODUCTS then marketed and sold by LICENSEE or its AFFILIATES or SUBLICENSEES in that country.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.8 LICENSEE shall pay UNIVERSITY the following payments within [\*\*\*] ([\*\*\*]) days of LICENSEE, an AFFILIATE, or any SUBLICENSEE of either of the foregoing achieving the indicated milestone for each LICENSED PRODUCT covered by PATENT RIGHTS corresponding to UNIVERSITY INVENTIONS:

Milestone Payment Due <br>[\*\*\*]

Notwithstanding the conduct of clinical trials, submission of applications for regulatory approval, regulatory approval, sale, or marketing of a particular LICENSED PRODUCT for multiple indications, in multiple dosage or delivery forms, or in multiple bundled or combination products, the milestone fees described above shall only be due and paid once with respect to each LICENSED PRODUCT. Amounts paid UNIVERSITY under Section 3.6 with respect to SUBLICENSE REVENUE paid to LICENSEE by a SUBLICENSEE for the achievement of a milestone substantially similar to any of those established above shall be creditable against, and deducted from, the corresponding payment due UNIVERSITY under this Section 3.8.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.9 All fees, royalties, and other payments due to UNIVERSITY under this LICENSE AGREEMENT shall be made in United States Dollars. All royalties owing with respect to NET SALES or sublicensing revenue stated in currencies other than U.S. dollars shall be converted at an exchange rate which is the arithmetic mean of the opening telegraphic transfer selling and buying rate published by the American East Coast edition of the Wall Street Journal on the day preceding the payment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.10 In the event royalty payments or fees are not received by UNIVERSITY when due, LICENSEE shall pay to UNIVERSITY interest and charges at the lower of (a) the then-current prime lending rate as published by the American East Coast edition of the Wall Street Journal or (b) the maximum rate of interest allowed by law on the total royalties or fees overdue.

**ARTICLE 4: REPORTS AND RECORDS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 UNIVERSITY shall promptly notify LICENSEE in writing of any IMPROVEMENT.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 Following the FIRST COMMERCIAL SALE of a LICENSED PRODUCT or receipt of SUBLICENSE REVENUE, LICENSEE agrees to make [\*\*\*] written reports to UNIVERSITY within [\*\*\*] ([\*\*\*]) days following the end of each [\*\*\*] during the term of this LICENSE AGREEMENT, stating in each such report, if and as applicable, (i) the number, description, and aggregate selling prices of LICENSED PRODUCTS sold or otherwise disposed of and deductions taken during the such [\*\*\*] and upon which royalty is payable as provided in Section 3.5 hereof and (ii) the amount of SUBLICENSE REVENUE received. The first such report shall include all such LICENSED PRODUCTS so sold or otherwise disposed of, and all such sublicensing revenue received, prior to the date of such report. Until the FIRST COMMERCIAL SALE of a LICENSED PRODUCT, a report shall be submitted by LICENSEE at the end of each July after the EFFECTIVE DATE of this LICENSE AGREEMENT and will include a written report summarizing LICENSEE'S technical and other efforts made towards such first commercial sale for all LICENSED PRODUCTS under development.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 LICENSEE will keep complete, true and accurate books of account and records, and require AFFILIATES and SUBLICENSEES to do the same, for the purpose of showing the derivation of all amounts payable to UNIVERSITY under this LICENSE AGREEMENT. Such books and records will be kept at LICENSEE's, AFFILIATE's or SUBLICENSEE's principal place(s) of business for at least [\*\*\*] ([\*\*\*]) years following the end of the [\*\*\*] to which they pertain, and will be open at all reasonable times for inspection by an independent certified public accountant reasonably acceptable to LICENSEE, AFFILIATE or SUBLICENSEE acting on behalf of UNIVERSITY for the purpose of verifying LICENSEE's, AFFILIATES' or SUBLICENSEE's royalty statements or LICENSEE's compliance in other respects with this LICENSE AGREEMENT. The representative will be obliged to treat as confidential all relevant matters but shall be free to disclose all conclusions of any such inspection(s) to UNIVERSITY and support such conclusions with underlying confidential information if challenged by LICENSEE, provided that all such disclosures shall be maintained as confidential by such representative and UNIVERSITY with respect to third parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 Inspections made under Section 4.3 shall be at the expense of UNIVERSITY, unless an underpayment to UNIVERSITY exceeding [\*\*\*]% of the amount properly due UNIVERSITY with respect to the audited period is discovered in the course of any such inspection, whereupon all [\*\*\*] costs of such inspection shall be paid by LICENSEE. LICENSEE will promptly pay to UNIVERSITY the full amount of any underpayment, together with interest thereon at the lower of (a) the then-current prime lending rate as published by the American East Coast edition of the Wall Street Journal or (b) the maximum rate of interest allowed by law.

**ARTICLE 5: DUE DILIGENCE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 LICENSEE shall use its commercially reasonable efforts and due diligence to proceed with the research, development, and commercial exploitation of LICENSED PRODUCTS during the term of this LICENSE AGREEMENT. In making any determination regarding such efforts and diligence, UNIVERSITY shall take into account the normal course of such programs conducted with sound and reasonable business practices and judgment, the [\*\*\*], and shall take into account [\*\*\*].

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 In particular, LICENSEE will achieve the performance milestones set forth in Appendix D, which is attached hereto, on the time frames indicated. Notwithstanding the foregoing, the dates or timelines outlined or established for the achievement of such milestones assume that (i) LICENSEE obtains reasonably sufficient funding to achieve such milestones consistent with such dates or timelines and (ii) LICENSEE's product candidates do not cause adverse events in clinical trials or encounter regulatory delays for reasons outside of LICENSEE's reasonable control. LICENSEE and UNIVERSITY shall negotiate in good faith the extension of these dates in the event any matters adversely affect achievement of any stated milestones by the dates or timelines outlined or established therefor. UNIVERSITY'S sole and exclusive remedy with respect to LICENSEE's breach of this Article 5 or failure to achieve the above-referenced milestones shall be its right to terminate this Agreement in accordance with Section 7.2.

**ARTICLE 6: SUBLICENSING**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 LICENSEE may sublicense any or all of the rights licensed hereunder, provided that LICENSEE notifies UNIVERSITY in writing and provides UNIVERSITY with a copy of each sublicense agreement and each amendment thereto within [\*\*\*] ([\*\*\*]) days after their execution, provided that LICENSEE may redact any portions of such agreements disclosing SUBLICENSEES' proprietary information, technology, or research and development plans as reasonably necessary to comply with any confidentiality provisions of such sublicense.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 LICENSEE shall require that all sublicenses be materially consistent with the terms, conditions and limitations of this LICENSE AGREEMENT. UNIVERSITY agrees that all such sublicenses shall survive termination of this LICENSE AGREEMENT and will automatically be assigned to UNIVERSITY upon such termination in the event this LICENSE AGREEMENT is terminated, to the extent (i) provided for in each such sublicense and (ii) such agreement does not impose any obligations on UNIVERSITY in excess of those imposed on UNIVERSITY herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3 Upon execution of each sublicense agreement, LICENSEE agrees to be fully responsible for the performance of its SUBLICENSEES hereunder, provided that the activities of any SUBLICENSEE of LICENSEE shall be deemed the acts of LICENSEE for purposes of satisfying LICENSEE's obligations under Article 5 above.

**ARTICLE 7: TERM AND TERMINATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 The term of this LICENSE AGREEMENT shall begin on the EFFECTIVE DATE and continue until (i) this LICENSE AGREEMENT is terminated as provided herein or (ii) on a country-by-country and LICENSED PRODUCT-by-LICENSED PRODUCT basis, the expiration of the last to expire of the PATENT RIGHTS covering a particular LICENSED PRODUCT in each country in which a patent included in the PATENT RIGHTS and covering such LICENSED PRODUCT may have issued. Upon expiration of this LICENSE AGREEMENT due to the expiration of the last-to-expire of all patents included in the PATENT RIGHTS with respect to a particular country and LICENSED PRODUCT, LICENSEE shall have the perpetual, unrestricted, fully-paid, royalty-free right, with rights of sublicense, to make, use, and sell, lease, or otherwise dispose of such LICENSED PRODUCT in such country.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2 It is expressly agreed that, notwithstanding the provisions of any other paragraph of this LICENSE AGREEMENT, if LICENSEE should materially breach a material provision of this LICENSE AGREEMENT and fail to (i) cure any such breach within ninety (90) days of receipt of written notice from UNIVERSITY describing such breach ("BREACH NOTICE") or (ii) provide written notification to UNIVERSITY that such breach is not curable within such ninety (90) day period, accompanied by a plan to cure such breach, and initiate commercially reasonable efforts to cure such breach consistent with such plan within ninety (90) days of receipt of BREACH NOTICE, then UNIVERSITY will have the right to terminate this LICENSE AGREEMENT or render it nonexclusive immediately upon further written notice to LICENSEE, provided that such further written notice must be given by UNIVERSITY within ten (10) days of the expiration of the ninety (90) period established above. A material breach is a violation of or failure to keep or perform any material covenant, condition, or undertaking of this LICENSE AGREEMENT, including, but not limited to, the failure to deliver to UNIVERSITY any royalty or other payment at the time or times that the same should be due to UNIVERSITY under this LICENSE AGREEMENT, failure to provide reports as specified in Section 4.2, failure to meet or achieve performance milestones in accordance with Section 5.2, and failure to possess and maintain insurance as set forth in Section 11.3. Notwithstanding the foregoing, UNIVERSITY's right to terminate this LICENSE AGREEMENT or render it nonexclusive for failure to meet or achieve performance milestones in accordance with Section 5.2 shall apply only with respect to the particular PATENT RIGHTS to which such failure relates, and in such case this LICENSE AGREEMENT and the exclusivity of the license set forth herein will remain in full force and effect with respect to all other PATENT RIGHTS.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3 If LICENSEE becomes bankrupt, files a petition for or is the subject of a petition for bankruptcy, or is placed in the hands of a receiver, assignee, or trustee for the benefit of creditors, whether by the voluntary act of LICENSEE or otherwise, then this LICENSE AGREEMENT may be terminated or rendered non-exclusive by UNIVERSITY upon written notice to LICENSEE within thirty (30) days of the occurrence of such events.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4 LICENSEE may terminate this LICENSE AGREEMENT at any time upon giving written notice of not less than thirty (30) days to UNIVERSITY. In addition, LICENSEE may terminate this LICENSE AGREEMENT solely with respect to any particular PATENT RIGHTS upon similar written notice, and in such case this LICENSE AGREEMENT will remain in full force and effect with respect to all other PATENT RIGHTS.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5 Upon termination of this LICENSE AGREEMENT in whole or in part, LICENSEE shall provide UNIVERSITY with a written inventory of all LICENSED PRODUCTS subject to such termination that are in the process of manufacture by or on behalf of LICENSEE, in use by LICENSEE, or under LICENSEE'S exclusive control. LICENSEE shall have the privilege of completing the manufacture and disposing of any such LICENSED PRODUCTS within a period of [\*\*\*] following such termination [\*\*\*]. LICENSEE will also have the right to complete performance of all contracts (i) for the marketing, sale, or manufacture of such LICENSED PRODUCTS, (ii) requiring use of UNIVERSITY TECHNOLOGY, any technology claimed in any terminated PATENT RIGHTS, or such LICENSED PRODUCTS within such [\*\*\*] period. All such LICENSED PRODUCTS which are not disposed of as provided above shall be delivered to UNIVERSITY or otherwise disposed of in a reasonable manner determined by UNIVERSITY in its sole reasonable discretion at LICENSEE's sole expense.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.6 Any termination or cancellation under any provision of this LICENSE AGREEMENT shall not relieve LICENSEE of its obligation to pay any royalty or other fees (including attorney's fees pursuant to Section 3.4 hereof) due or owing at the time of such termination or cancellation.

**ARTICLE 8: PATENT PROSECUTION AND MAINTENANCE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 Subject to the remaining Sections of this Article 8, LICENSEE shall bear the cost of all reasonable, documented patent expenses, [\*\*\*], associated with the preparation, filing, prosecuting, issuance and maintenance of U.S. Patent applications and U.S. Patents included within the PATENT RIGHTS. Such filings and prosecution corresponding to UNIVERSITY INVENTIONS shall be by counsel of UNIVERSITY's choosing and shall be in the name of UNIVERSITY. UNIVERSITY shall keep LICENSEE advised as to the prosecution of such applications by forwarding, and directing UNIVERSITY's patent counsel to forward, to LICENSEE copies of all official correspondence, (including, but not limited to, Applications, Office Actions, responses, etc.) relating thereto. LICENSEE shall have the right to comment and advise UNIVERSITY and its counsel as to the conduct of such prosecution and maintenance, provided, however, that UNIVERSITY shall have the right to make the final decisions for all matters associated with such prosecution and maintenance. Notwithstanding the foregoing, UNIVERSITY shall not abandon prosecution of any patent application or maintenance of any issued patent without first, to the extent reasonably possible, giving LICENSEE notice at least [\*\*\*] ([\*\*\*]) days prior to the date on which such patent application or patent will become abandoned, and shall allow LICENSEE to assume prosecution of any such patent application, or maintenance of any such patent, at LICENSEE's own expense and with counsel of its choosing and with LICENSEE having the final decision for all matters associated with prosecution and maintenance. If LICENSEE assumes prosecution of any such patent application or maintenance of any such patent, LICENSEE's obligations for payment under Article 3 based upon such patent application or patent shall terminate at the time that LICENSEE assumes prosecution or maintenance of such patent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 UNIVERSITY shall, [\*\*\*], keep LICENSEE apprised in writing and in advance of incurring any costs with respect to the filing, prosecution, and or maintenance of any PATENT RIGHTS. By concurrent written notification to UNIVERSITY, LICENSEE may elect not to pay expenses associated with prosecuting or maintaining any U.S. PATENT RIGHTS corresponding to UNIVERSITY INVENTIONS, provided that LICENSEE pays for all reasonable, documented costs incurred up to UNIVERSITY's receipt of such notification, to the extent LICENSEE was provided reasonable advance notice of such costs (or a reasonably detailed estimate of such costs). Upon such notice with respect to any such PATENT RIGHTS, UNIVERSITY may file, prosecute, and/or maintain such PATENT RIGHTS at its own expense and for its own benefit and any rights or license granted hereunder with respect to such PATENT RIGHTS shall terminate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3 As regards prosecution and maintenance of foreign patent applications corresponding to the U.S. Patent applications corresponding to UNIVERSITY INVENTIONS, LICENSEE shall designate in writing that country or those countries, if any, in which LICENSEE desires such corresponding patent application(s) to be filed. LICENSEE shall pay all reasonable, documented costs [\*\*\*] associated with the preparation, filing, prosecuting, issuance and maintenance of such designated foreign patent applications and foreign patents pursuant to Section 3.4. All such applications shall be in the UNIVERSITY's name. UNIVERSITY shall keep LICENSEE advised as to the prosecution of such applications by forwarding, and directing UNIVERSITY's patent counsel to forward, to LICENSEE copies of all official correspondence, (including, but not limited to, Applications, Office Actions, responses, etc.) relating thereto. LICENSEE shall have the right to comment and advise UNIVERSITY and its counsel as to the conduct of such prosecution and maintenance, provided, however, that UNIVERSITY shall have the right to make the final decisions for all matters associated with such prosecution and maintenance. Notwithstanding the foregoing, UNIVERSITY shall not abandon prosecution of any foreign patent application or maintenance of any issued foreign patent without first, to the extent reasonably possible, giving LICENSEE notice at least [\*\*\*] ([\*\*\*]) days prior to the date on which such patent application or patent will become abandoned, and shall allow LICENSEE to assume prosecution of any such patent application, or maintenance of any such patent, at LICENSEE's own expense and with counsel of its choosing and with LICENSEE having the final decision for all matters associated with prosecution and maintenance. If LICENSEE assumes prosecution of any such foreign patent application or maintenance of any such foreign patent, LICENSEE's obligations for payment under Article 3 based upon such patent application or patent shall terminate at the time that LICENSEE assumes prosecution or maintenance of such patent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4 By concurrent written notification to UNIVERSITY at least [\*\*\*] ([\*\*\*]) days in advance of any filing or response deadline, or fee due date, LICENSEE may elect not to have a patent application filed in any particular foreign country or not to pay expenses associated with prosecuting or maintaining any patent application or patent in any particular foreign country, in each case corresponding to UNIVERSITY INVENTIONS, provided that LICENSEE pays for all reasonable, documented costs incurred up to UNIVERSITY's receipt of such notification, to the extent LICENSEE was provided reasonable advance notice of such costs (or a reasonably detailed estimate of such costs). Failure to provide written confirmation of LICENSEE's desire to file such a patent application in any particular country or to pay expenses associated with prosecuting or maintaining any such patent application or patent to UNIVERSITY at least [\*\*\*] ([\*\*\*]) days in advance of any filing or response deadline, or fee due date shall be considered by UNIVERSITY to be LICENSEE's notice that it no longer wishes to support such particular patent(s) or patent application(s). Upon such notice (or failure to provide such confirmation) with respect to such PATENT RIGHTS in any foreign country, UNIVERSITY may file, prosecute, and/or maintain such patent applications or patents at its own expense and for its own benefit, and any rights or license granted hereunder with respect to such PATENT RIGHTS, shall terminate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5 Filings and prosecution corresponding to JOINT INVENTIONS shall be by counsel of LICENSEE's choosing and shall be in the name of UNIVERSITY and LICENSEE. LICENSEE shall keep UNIVERSITY advised as to the prosecution of such applications by forwarding, and directing LICENSEE's patent counsel to forward, to UNIVERSITY copies of all official correspondence, (including, but not limited to, Applications, Office Actions, responses, etc.) relating thereto. UNIVERSITY shall provide reasonable assistance to LICENSEE related to the preparation, filing, prosecuting, issuance and maintenance of patent applications and patents corresponding to JOINT INVENTIONS, including, without limitation, providing necessary assignment documents, declarations, power of attorney documents, copies of any supporting data, analysis or reports, and reasonable access to the INVENTORS during normal working hours. UNIVERSITY shall have the right to comment and advise LICENSEE and its counsel as to the conduct of such prosecution and maintenance, provided, however, that LICENSEE shall have the right to make the final decisions for all matters associated with such prosecution and maintenance. Notwithstanding the foregoing, LICENSEE shall not abandon prosecution of any patent application or maintenance of any issued patent corresponding to JOINT INVENTIONS without first, to the extent reasonably possible, giving UNIVERSITY notice at least [\*\*\*] ([\*\*\*]) days prior to the date on which such patent application or patent will become abandoned, and shall allow UNIVERSITY to assume prosecution of any such patent application, or maintenance of any such patent, at UNIVERSITY's own expense and with counsel of its choosing and with UNIVERSITY having the final decision for all matters associated with prosecution and maintenance.

**ARTICLE 9: INFRINGEMENT**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1 If the production, sale, import or use of LICENSED PRODUCTS under this LICENSE AGREEMENT results in any claim for patent infringement against LICENSEE, AFFILIATES, SUBLICENSEEs, or any customer(s) or sublicensee(s) of the foregoing, LICENSEE shall, upon becoming aware of such claim and subject to any applicable confidentiality obligations, promptly notify the UNIVERSITY thereof in writing, setting forth the facts of such claim in reasonable detail. As between the parties to this LICENSE AGREEMENT, LICENSEE shall have the first and primary right [\*\*\*] at its own expense to defend and control the defense of any such claim, by counsel of its own choice. LICENSEE shall be free to enter into a settlement, consent judgment, or other voluntary disposition of any such actions, provided that any settlement, consent judgment or other voluntary disposition of such actions which (i) [\*\*\*], (ii) [\*\*\*], or (iii) [\*\*\*] must be approved by UNIVERSITY, such approval not being unreasonably withheld. UNIVERSITY shall provide LICENSEE notice of such approval or denial of such approval within [\*\*\*] ([\*\*\*]) business days of any request for such approval by LICENSEE, provided that (i) in the event UNIVERSITY wishes to deny such approval, such notice shall include a detailed written description of UNIVERSITY's reasonable objections to the proposed settlement, consent judgment, or other voluntary disposition, and (ii) UNIVERSITY shall be deemed to have approved of such proposed settlement, consent judgment, or other voluntary disposition in the event it fails to provide such notice within such [\*\*\*] ([\*\*\*]) day period in accordance herewith. UNIVERSITY agrees to cooperate with LICENSEE in any reasonable manner deemed by LICENSEE to be necessary in defending any such action. LICENSEE shall reimburse UNIVERSITY for [\*\*\*] out of pocket expenses incurred in providing such assistance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2 In the event that any PATENT RIGHTS licensed to LICENSEE are infringed by a third party, LICENSEE shall have the first, primary right, but not the obligation, to institute, prosecute and control any action or proceeding with respect to such infringement, by counsel of its choice, including any declaratory judgment action arising from such infringement. Subject to Section 9.5, UNIVERSITY shall reasonably cooperate in any such action or proceeding at LICENSEE's sole expense, including joining in such action or proceeding. LICENSEE shall be free to enter into a settlement, consent judgment, or other voluntary disposition of such action, provided that any settlement, consent judgment or other voluntary disposition of such actions which (i) [\*\*\*], (ii) [\*\*\*], or (iii) [\*\*\*] must be approved by UNIVERSITY, such approval not to be unreasonably withheld. UNIVERSITY shall provide LICENSEE notice of its approval or denial of such approval within [\*\*\*] ([\*\*\*]) business days of any request for such approval by LICENSEE, provided that (i) in the event UNIVERSITY wishes to deny such approval, such notice shall include a detailed written description of UNIVERSITY's reasonable objections to the proposed settlement, consent judgment, or other voluntary disposition, and (ii) UNIVERSITY shall be deemed to have approved of such proposed settlement, consent judgment, or other voluntary disposition in the event it fails to provide such notice within such [\*\*\*] ([\*\*\*]) day period in accordance herewith. If LICENSEE recovers monetary damages in the form of lost profits from a third party infringer as a remedy for the infringement of PATENT RIGHTS licensed hereunder, then LICENSEE shall first apply such recovery to the costs and expenses incurred in obtaining or negotiating for such recovery (including but not limited to attorneys' fees), and pay to UNIVERSITY the [\*\*\*] . If LICENSEE recovers monetary damages in the form of an ongoing reasonable royalty as a remedy for the infringement of PATENT RIGHTS and/or consideration for an ongoing license with respect to such PATENT RIGHTS, then, after applying such royalty to the recovery of the costs and expenses incurred in obtaining or negotiating for such royalty (including but not limited to attorneys' fees), the remaining amount of any such royalty shall be [\*\*\*].

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3 If, within [\*\*\*] ([\*\*\*]) months after receiving notice of any alleged infringement of the PATENT RIGHTS by a third party, LICENSEE (i) shall have been unsuccessful in persuading the alleged infringer to desist, (ii) shall not have brought and shall not be diligently prosecuting an infringement action, and (iii) has not entered into settlement discussions with respect to such infringement, or if LICENSEE shall notify UNIVERSITY in writing, at any time prior thereto, of its intention not to undertake any of the foregoing actions with respect to the alleged infringer, then UNIVERSITY shall have the right, but not the obligation, to prosecute, at its own expense and utilizing counsel of its choice, any infringement of the PATENT RIGHTS, and UNIVERSITY may, at its own expense and control, take steps to defend or enforce any patent within the PATENT RIGHTS and recover, for its own account, any damages, awards or settlements resulting therefrom. LICENSEE and/or its AFFILIATES shall cooperate as reasonably requested by UNIVERSITY, including joining in such actions, at the expense of UNIVERSITY.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4 In any challenge to the PATENT RIGHTS brought or declaratory judgment action defended not already addressed by the provisions of this Section 9, LICENSEE shall have the first right, exercisable upon written notice to UNIVERSITY within [\*\*\*] ([\*\*\*]) days of receipt of notice of such action, but not the obligation, to defend such action at the sole expense of LICENSEE. UNIVERSITY shall reasonably cooperate in any such defense at LICENSEE's sole expense, including joining in such actions. If LICENSEE does not so elect, UNIVERSITY may defend but has no obligation to do so.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5 Notwithstanding the foregoing, and without limiting LICENSEE's rights under Section 9.1 or 9.2 above to enter into any settlement, consent judgment, or other voluntary disposition of any legal or equitable action, UNIVERSITY shall be entitled, in its sole discretion and at its own expense, to participate through counsel of its own choosing in any legal action involving INVENTIONS and PATENT RIGHTS. LICENSEE acknowledges that UNIVERSITY may not join in any litigation without the approval of authorized agencies of North Carolina, including the Board of Governors of the University of North Carolina. UNIVERSITY agrees to use its best efforts to obtain such approval promptly in the event that UNIVERSITY is required to be joined in any litigation under this Article 9 to establish standing. Nothing in the foregoing Sections shall be construed in any way which would limit the authority of the Attorney General of North Carolina.

**ARTICLE 10: REPRESENTATIONS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1 UNIVERSITY makes no warranties that any patent will issue on UNIVERSITY TECHNOLOGY or INVENTIONS. UNIVERSITY does not warrant the validity or enforceability of any patent included in the PATENT RIGHTS or that practice under such patents shall be free of infringement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2 UNIVERSITY represents and warrants that, to its actual knowledge and belief, as of EFFECTIVE DATE, (i) the entire right, title, and interest in the patent applications or patents comprising UNIVERSITY INVENTIONS included in the PATENT RIGHTS and the entire right, title, and interest of inventors with an obligation to assign to the UNIVERSITY the patent applications or patents comprising JOINT INVENTIONS included in the PATENT RIGHTS have been assigned to it free and clear of all liens, claims and encumbrances of any inventor or any nongovernmental third party, (ii) that UNIVERSITY has all requisite power and authority to grant the licenses contained in this LICENSE AGREEMENT under said PATENT RIGHTS and UNIVERSITY TECHNOLOGY, (iii) UNIVERSITY has not entered into any agreements other than grants from the U.S. Government which provide for the rights described in Section 2.5, with any third party with respect to the PATENT RIGHTS, the technology claimed therein, nor INVENTIONS, (iv) its execution and performance of this LICENSE AGREEMENT will not result in a breach of any other contract to which it is, or will become, a party, and (v) it has not received any notification that the PATENT RIGHTS are invalid or that the exercise by LICENSEE of the rights granted hereunder will infringe on any patent or other proprietary right of any third party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3 EXCEPT AS PROVIDED IN SECTION 10.2, UNIVERSITY DISCLAIMS ALL WARRANTIES WITH REGARD TO INVENTIONS, PATENT RIGHTS, PRODUCT(S), AND SERVICE(S) LICENSED UNDER THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, ALL WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.4 EXCEPT WITH RESPECT TO BREACHES OF SECTIONS [\*\*\*], AND 12.1, THE INDEMNIFICATION PROVIDED UNDER SECTION 11, AND CLAIMS FOR PATENT INFRINGEMENT, NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY INDIRECT, CONSEQUENTIAL, SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT.

**ARTICLE 11: INDEMNIFICATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1 In exercising its rights under this LICENSE AGREEMENT, LICENSEE shall materially comply with the requirements of any and all applicable laws, regulations, rules and orders of any governmental body having jurisdiction over the exercise of rights under this LICENSE AGREEMENT. LICENSEE further agrees to indemnify and hold UNIVERSITY harmless from and against any costs, expenses, attorney's fees, citation, fine, penalty and liability of every kind and nature which might be imposed directly against UNIVERSITY by reason of any asserted or established violation of any such laws, order, rules and/or regulations by LICENSEE.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2 LICENSEE agrees to indemnify, hold harmless and defend UNIVERSITY, its officers, employees, and agents against any and all claims, suits, losses, damage, costs, fees, and expenses ("LOSSES") asserted by third parties, both government and private, resulting from or arising out of the exercise of LICENSEE's rights under this LICENSE AGREEMENT, provided such LOSSES do not result from the UNIVERSITY'S or its employees', faculty's, students', or other agents or representatives' gross negligence, intentional misconduct, breach of this Agreement, or failure to comply with any applicable laws, rules, or regulations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.3 LICENSEE is required to maintain in force at its sole cost and expense, with reputable insurance companies, insurance coverage in amounts and of types reasonably sufficient to protect against liability under Sections 11.1 and 11.2 above. The UNIVERSITY shall have the right to ascertain [\*\*\*] that such coverage exists, such right to be exercised in a reasonable manner.

**ARTICLE 12: MISCELLANEOUS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.1 Confidentiality.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) LICENSEE shall keep confidential and not disclose any unpublished UNIVERSITY TECHNOLOGY or any patent applications furnished by UNIVERSITY pursuant to Sections 2.1 and 2.2 to third parties during the term of this LICENSE AGREEMENT or any time thereafter, provided that LICENSEE shall have the right to disclose such information under conditions of confidentiality to prospective investors, acquirors, sublicensees, strategic partners, and investment bankers in connection with its financing, acquisition, licensing, development, commercialization, and stockholder relations activities. Notwithstanding the foregoing, disclosure may be made to third parties of any such UNIVERSITY TECHNOLOGY or document related to or embodying PATENT RIGHTS at any time (a) with the prior written consent of UNIVERSITY, (b) after the same shall have become public through no unauthorized act or omission of LICENSEE, or (c) as required by governmental authority or applicable law or regulation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) UNIVERSITY shall keep confidential and not disclose to any third party any information provided to it by LICENSEE (i) as a result of LICENSEE's performance under this LICENSE AGREEMENT or (ii) that may relate to the LICENSEE's research, development, technology(ies), or business. Notwithstanding the foregoing, disclosure may be made to third parties of any such research, development, or technology(ies) at any time (a) with the prior written consent of LICENSEE, (b) after the same shall have become public through no unauthorized act or omission of UNIVERSITY, or (c) as required by governmental authority or applicable law or regulation, provided that UNIVERSITY (1) provides LICENSEE, to the extent practicable, advance written notice of any such disclosure, (2) reasonably assists LICENSEE, as reasonably requested by LICENSEE, in obtaining protective or confidential treatment of such information, and (3) minimizes the extent of any such disclosure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2 **Assignability**. This LICENSE AGREEMENT is binding upon and shall inure to the benefit of the parties hereto, their successors and assigns. However, this LICENSE AGREEMENT shall be personal to LICENSEE, and it is not assignable by LICENSEE to any other person or entity without the written consent of UNIVERSITY, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, (1) LICENSEE shall be free to assign this LICENSE AGREEMENT without such consent (i) to any AFFILIATE of LICENSEE or (ii) in connection with any sale of substantially all of its assets or business (or portion of its assets or business related to the subject matter hereof), merger, acquisition, consolidation, reorganization, or other similar transaction and (2) in the event lenders to the LICENSEE require a security interest in the LICENSE AGREEMENT as a term of any loans to LICENSEE, UNIVERSITY shall (a) consent to the assignment of this LICENSE AGREEMENT to such lenders or any assignee thereof in conjunction with the exercise of their rights under such security interest and (b) enter into any reasonable form of collateral assignment agreement requested by such lenders in conjunction with their exercise of such rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3 **Waiver.** It is agreed that no waiver by either party hereto of any breach or default of any of the covenants or agreements herein set forth shall be deemed a waiver as to any subsequent and/or similar breach or default.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.4 **Use of UNIVERSITY's Name**. The use of the name of UNIVERSITY, or any contraction thereof, in any manner in connection with the exercise of rights under this LICENSE AGREEMENT is expressly prohibited without the prior written consent of UNIVERSITY, provided that, notwithstanding the foregoing, LICENSEE shall have the right to identify UNIVERSITY as the licensor and, under conditions of confidentiality, to disclose the terms of this LICENSE AGREEMENT to prospective investors, acquirors, sublicensees, strategic partners, investment bankers, and regulatory authorities, in connection with its financing, regulatory, licensing, development, and stockholder relations activities or that it may deem to be required in any prospectus, offering memorandum, or other document or filing prepared in connection with its compliance obligations under applicable securities law or other applicable law or regulation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.5 **Independent Contractor Status.** Neither party hereto is an agent, joint venture or representative of the other for any purpose. Neither party shall have the right to obligate or bind the other in any manner.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.6 **Notice.** Any notice required or permitted to be given to the parties hereto shall be in writing and deemed to have been properly given if delivered in person or mailed by first-class mail to the other party at the appropriate address as set forth below. Other addresses may be designated in writing by the parties during the term of this LICENSE AGREEMENT.

---

| | |
|:---|:---|
| UNIVERSITY | LICENSEE |
| Cathy Innes | President |
| Director | Novan, Inc. |
| Office of Technology Development | 4222 Emperor Boulevard |
| [\*\*\*] |  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.7 **Governing Law and Venue**. This LICENSE AGREEMENT shall be interpreted and construed in accordance with the laws of the State of North Carolina. The State and Federal Courts of North Carolina shall have exclusive jurisdiction to hear any legal action arising out of this LICENSE AGREEMENT.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.8 **Complete Agreement**. It is understood and agreed between UNIVERSITY and LICENSEE that, from and after the EFFECTIVE DATE, this LICENSE AGREEMENT constitutes the entire agreement, both written and oral, between the parties with respect to the subject matter hereof and supersedes the FIRST AGREEMENT and the SECOND AGREEMENT and any amendments thereto. For clarity, all patent rights, inventions, modifications, enhancements, improvements, information, know-how and technical data that were subject to the FIRST AGREEMENT or the SECOND AGREEMENT prior to the EFFECTIVE DATE are subject to this LICENSE AGREEMENT. This LICENSE AGREEMENT shall not be amended or modified except by a written agreement signed by all parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.9 **Severability.** In the event that a court of competent jurisdiction holds any provision of this LICENSE AGREEMENT to be invalid, such holding shall have no effect on the remaining provisions of this LICENSE AGREEMENT, and they shall continue in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.10 **Survival of Terms.** The provisions of Sections 2.3, 2.4, 2.6, 3.3, 6.2, 7.1, 7.5, 7.6, 8.5, 12.1, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7, 12.8, 12.9, and 12.10 and Articles 1, 4, 9, 10 and 11 shall survive the expiration or termination of this LICENSE AGREEMENT.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. 11 **Export Controls**. It is understood that UNIVERSITY is subject to United States laws and regulations controlling the export of technical data, computer software, laboratory prototypes, and other commodities that may require a license from the applicable agency of the United States Government and/or may require written assurances by LICENSEE that it will not export data or commodities to certain foreign countries without prior approval of such agency. UNIVERSITY neither represents that a license is required, nor that, if required, it will be issued.

[Signature page to follow.]

IN WITNESS WHEREOF, UNIVERSITY and LICENSEE have executed this LICENSE AGREEMENT on the EFFECTIVE DATE, in duplicate originals, by the duly authorized respective officers. INVENTORS have likewise indicated their acceptance of the terms hereof by signing below.

---

| | | | |
|:---|:---|:---|:---|
| THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL | THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL | NOVAN, INC. | NOVAN, INC. |
| Signature: | /s/ Catherine Innes | Signature: | /s/ Nathan Stasko |
| (SEAL) |  | (SEAL) |  |

---

---

| | | | |
|:---|:---|:---|:---|
| Catherine Innes | Catherine Innes | Nathan Stasko | Nathan Stasko |
| Director | Director | President | President |
| Date: | 6/29/12 | Date: | 7/9/12 |
| Acknowledged and Agreed by: | Acknowledged and Agreed by: |  |  |
| /s/ Mark Schoenfisch | /s/ Mark Schoenfisch |  |  |
| Mark Schoenfisch | Mark Schoenfisch |  |  |

---

**APPENDIX A** 

**PATENT RIGHTS**

**UNIVERSITY INVENTIONS**

[\*\*\*]

**JOINT INVENTIONS**

[\*\*\*]

**APPENDIX B** 

**FORM OF MATERIAL TRANSFER AGREEMENT**

Office of Technology Development

CB# 4105, 308 Bynum Hall

The University of North Carolina at Chapel Hill

Chapel Hill, NC 27599-4105

<>

<>

RE: **MATERIALS TRANSFER AGREEMENT; OUR FILE NO. <>**

Dear <>:

The University of North Carolina at Chapel Hill ("UNC") is engages in research relating to the Material (as defined below) which is considered proprietary to UNC. Furthermore, UNC has granted an exclusive license to commercial rights related to the Material to Novan, Inc. (The "Exclusive Commercial Licensee"), having an address at . UNC agrees to provide your Institution with the Material for the purpose of a scientific collaboration and for Institution's internal research purposes subject to the following conditions:

1. The parties to this Agreement are: UNC and <u><></u> (hereinafter "Institution"). You are also requested to countersign this Agreement signifying your acceptance of its terms. You will be referred to herein as "Scientist."

2. The Material covered by this Agreement includes:

a. <u><></u>;

b. any related biological material or associated know-how and data received by Institution form UNC; and

c. any progeny or unmodified derivatives produced from any of the foregoing by Institution, its employees and/or agents.

3. Institution and Scientists acknowledge that UNC has informed Institution and Scientist that UNC owns certain rights in patent applications relating to the Material, which are licensed exclusively to the Exclusive Commercial Licensee.

4. The Material shall be used solely for research in Scientist's laboratory at Institution, such research to be limited to the studies described in <u>Attachment A</u> hereto. UNC shall be free, in its sole discretion, to distribute the Material to others and to use it for its own purposes.

5. In return for the provision of the Material, Institution shall reimburse <u>UNC $<></u> upon execution of this Agreement to cover costs of preparing the sample of the Material which is to be sent to Institution. Said reimbursement will be made payable to The University of North Carolina at Chapel Hill and will be sent to <u><>> at the address specified by said person.</u>

6. Institution shall not distribute or release the Material to any person other than Institution laboratory personnel under Scientist's direct supervision. Institution shall ensure that no one will be allowed to take or send the Material to any other location, unless written permission is obtained from <u><></u> at UNC. This Material is made available for investigational use only in laboratory animals or *in vitro* experiments. Institution and Scientist agree that the Material will not be used for any other purpose. Neither the Material nor any biological materials treated therewith will be used in human beings.

7. This Agreement and the resulting transfer of Material constitute a license to use the Material solely for its internal not-for-profit academic research purposes. Institution agrees that nothing herein shall be deemed a grant under any UNC patents (either existing or future) or any rights to use the Material for any products or processes for profit-making or commercial purposes. The Material will not be used in research that is on behalf of, sponsored with funding received from, or subject to consulting, licensing, or option obligations or other intellectual property rights granted to any other institution, corporation or business entity unless written permission is obtained from UNC.

8. Institution shall have no rights in the Material other than as provided in this Agreement, and at the request of UNC, Institution and/or Scientist will return all unused Material.

9. Scientist will inform <u><></u> of research results related to the Material by personal written communication. UNC and/or <u><></u> shall be free to use such data and information for any purpose, but will make proper acknowledgment of the work done by Scientist. Institution and Scientist shall provide <u><></u> with a manuscript of any proposed paper or an abstract of any proposed presentation describing any research results at least thirty (30) days prior to submission for publication. At the request of UNC, Institution and Scientist agree to delay the proposed disclosure for an additional ninety (90) days to allow for the filing of a patent application.

10. If the research involving the Material or any other use of the Material by Scientist or Institution results in an invention, discovery, or improvement (whether or not patentable) (an "INVENTION"), Scientist or Institution will promptly disclose the INVENTION, prior to any submission for publication thereof, to Institution's patent administrator, technology transfer, technology commercialization, licensing, or technology development officer or reasonable equivalent thereof ("Technology Transfer Officer") and notify the Technology Transfer Officer of UNC's role as a supplier of Material used. Institution, in cooperation with Scientist, will promptly supply UNC with a copy of the disclosure, in confidence, for evaluation purposes only. Institution, to the extent it is legally able to do so, hereby grants UNC or, if Institution is willing to negotiate directly therewith, the Exclusive Commercial Licensee an option to obtain an exclusive license to INVENTIONS, under reasonable commercial terms, pursuant to good faith negotiations between the parties fairly reflecting the relative contributions of the parties, to commercially make, use, or sell the INVENTION. UNC or the Exclusive Commercial Licensee, as applicable shall have a period of ninety (90) days form the receipt of the disclosure above within which to exercise such option in writing with respect to each INVENTION (the "Option Period"). If the applicable party exercises its option with respect to a particular INVENTION, the applicable party and Institution shall have an additional twelve (12) month period following Institution's and/or Scientist's receipt of the applicable party's exercise notice within which to negotiate in good faith the terms of the license (the "Negotiation Period"). The terms of every such license shall be reasonable and fairly reflect the relative contributions of each party. During the Option Period and Negotiation Period, neither Institution nor Scientist shall offer a license to any other party. If the part to which such option was offered declines its option with respect to such INVENTION, or the parties are unable to reach material agreement on the terms of a license agreement during the Negotiation Period, Institution shall be free to license its rights in such INVENTION to any third party.

11. If Institution desires to use or license the Material for commercial purposes, Institution agrees, in advance of such use, to negotiation in good faith with the Exclusive Commercial Licensee to establish the terms of a commercial license. It is understood by Institution that the Exclusive Commercial Licensee shall have no obligation to grant such a license to Institution or any other third party.

12. THE MATERIAL IS EXPERIMENTAL IN NATURE AND IT IS PROVIDED WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. UNC MAKES NO REPRESENTATION OR WARRANTY THAT THE USE OF THE MATERIAL WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT.

13. In no event shall UNC be liable for any use by institution, its employees and/or agents of the Material or any loss, claim, damage or liability, of whatsoever kind or nature, which may arise from or in connection with this Agreement or the use, handling or storage of the Material. Furthermore, to the extent provided by applicable law, Institution agrees to indemnify UNC and any of its employees and hold it and them harmless from any action, claim, or liability for death, personal injury, or property damage, arising directly or indirectly from Institution's possession, testing, screening, distribution or other use of the Material provided under the Agreement, and/or from Institution's publication or distribution of the test reports, data, and other information relating to said Material.

14. Institution will use the Material in compliance with all law and governmental regulations and guidelines applicable to the Material, and when the Material is used in the United States, Institution and Scientist will comply with current NIH guidelines.

15. This Agreement is not assignable or otherwise transferable, whether by operation of law or otherwise, without the prior written consent of UNC.

16. This Agreement shall be interpreted and construed in accordance with the laws of the State of North Carolina.

After the Original of this Agreement has been signed, in duplicate, by yourself and an authorized representative of Institution, please return them to me; the copy is for your records. The Material will be shipped as soon as possible upon receipt of this signed Agreement.

Sincerely,

Catherine Innes

Director

Office of Technology Development

cathy_inness@unc.edu

---

| |
|:---|
| ACCEPTED AND AGREED TO:<br>SCIENTIST  |
| By: |
| <> |

---

---

| |
|:---|
| INSTITUTION |
| (to be signed only by an authorized signatory of the Institution)  |
| Title: |
| Date: |

---

**APPENDIX C**

**SHAREHOLDER AGREEMENT**

[Intentionally omitted as superseded by the Seventh Amended and Restated Stockholders

Agreement dated December 1, 2015]

**APPENDIX D**

**MILESTONES**

[\*\*\*]

## Exhibit 10.11

**Exhibit 10.11**

**Certain confidential information contained in this exhibit have been omitted by means of redacting a portion of the text and replacing it with [\*\*\*], pursuant to Regulation S-K Item 601(b)(10) of the Securities Act of 1933, as amended. Certain confidential information has been excluded from this exhibit because it is: (i) not material; and (ii) the registrant treats such information as private or confidential.**

**FIRST AMENDMENT TO AMENDED, RESTATED AND CONSOLIDATED LICENSE AGREEMENT**

This FIRST AMENDMENT to the AMENDED, RESTATED AND CONSOLIDATED LICENSE AGREEMENT (this "FIRST AMENDMENT") is entered into this 30th day of November, 2012 (the "EFFECTIVE DATE'') between The University of North Carolina at Chapel Hill having an address at Campus Box 4105, 308 Bynum Hall, Chapel Hill, North Carolina, 27599-4105 ("UNIVERSITY") and Novan, Inc., a corporation organized and existing under the laws of the State of Delaware and having an address at 4222 Emperor Blvd, Suite 470, Durham, NC 27703 ("LICENSEE").

WITNESSETH

WHEREAS, UNIVERSITY entered into a first license agreement with LICENSEE effective July 18, 2007, a FIRST AMENDMENT thereto effective September 30, 2008 and a SECOND AMENDMENT thereto effective October 29, 2010 (such license agreement, as amended by the FIRST AMENDMENT and the SECOND AMENDMENT thereto, the "FIRST AGREEMENT"); and

WHEREAS, UNIVERSITY entered into a second license agreement with LICENSEE effective October 1, 2009 and a FIRST AMENDMENT thereto effective October 29, 2010 (such license agreement, as amended by the FIRST AMENDMENT thereto, the "SECOND AGREEMENT"); and

WHEREAS, UNIVERSITY entered into an AMENDED, RESTATED AND CONSOLIDATED LICENSE AGREEMENT effective June 27, 2012 ("THIRD AGREEMENT") thereby amending, restating and consolidating the FIRST AGREEMENT and the SECOND AGREEMENT into a single agreement; and

WHEREAS, UNIVERSITY and LICENSEE wish to amend the INVENTIONS and PATENT RIGHTS covered by the THIRD AGREEMENT to include inventions owned by UNIVERSITY and closely related to the INVENTIONS currently included under the THIRD AGREEMENT, titled "[**\*\*\*]**" UNIVERSITY File: [**\*\*\***] and "[**\*\*\***]", UNIVERSITY File: [**\*\*\***] (the "ADDED INVENTIONS"); and

WHEREAS, the ADDED INVENTIONS were conceived of by Yuan Lu and Mark Schoenfisch. .

NOW, THEREFORE, in consideration of the premises and mutual promises and covenants contained in this FIRST AMENDMENT and for good and valuable consideration, it is agreed by and between UNIVERSITY and LICENSEE as follows:

2. The term "INVENTIONS" is deemed to include the ADDED INVENTIONS and the items set forth in the attached Appendix A.

3. The term "PATENT RIGHTS" is deemed to include the patent rights set forth in the attached Appendix A.

4. In consideration for amending the INVENTIONS and PATENT RIGHTS to include UNC files: [**\*\*\***] and [**\*\*\***], LICENSEE shall pay UNIVERSITY [**\*\*\***] dollars ($[**\*\*\***]) within [**\*\*\***] ([**\*\*\***]) days of the EFFECTIVE DATE of this FIRST AMENDMENT.

5. Except as expressly amended in this FIRST AMENDMENT, the THIRD AGREEMENT shall continue in full force and effect in accordance with the provisions thereof prior to the effectiveness of this FIRST AMENDMENT.

6. Capitalized terms used herein but not otherwise defined have the meanings assigned to them in the THIRD AGREEMENT.

7. This FIRST AMENDMENT shall be interpreted and construed in accordance with the laws of the State of North Carolina. The State and Federal Courts of North Carolina shall have exclusive jurisdiction to hear any legal action arising out of this FIRST AMENDMENT.

8. This FIRST AMENDMENT may be executed by one or more of the parties to this FIRST AMENDMENT on any number of separate counterparts (including by facsimile transmission or PDF signature), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

*Signature Page to Follow*

IN WITNESS WHEREOF, UNIVERSITY and LICENSEE have executed this FIRST AMENDMENT in duplicate originals, by their respective officers hereunto duly authorized, the day and year first above written. The inventors of the ADDED INVENTION have likewise indicated their acceptance of the terms hereof by signing below.

---

| | | | |
|:---|:---|:---|:---|
| THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL | THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL | NOVAN, INC. | NOVAN, INC. |
| Signature: | /s/ Jacqueline Quay | Signature: | /s/ Jeff Hunter |
| Name: | Jacqueline Quay |  | Jeff Hunter |
| Title: | Interim Director, OTD | Title: | VP of Operations |
| Date: | 12/14/12 | Date: | 12/28/12 |
| Acknowledged and Agreed by: | Acknowledged and Agreed by: |  |  |

---

---

| |
|:---|
| INVENTORS |
| /s/ Yuan Lu |
| Yuan Lu |

---

---

| |
|:---|
| /s/ Mark Schoenfisch |
| Mark Schoenfisch |

---

**APPENDIX A** 

**PATENT RIGHTS**

**UNIVERSITY INVENTIONS** 

**[\*\*\*]**

**JOINT INVENTIONS**

**[\*\*\***]

## Exhibit 10.12

**Exhibit 10.12**

**Certain confidential information contained in this exhibit have been omitted by means of redacting a portion of the text and replacing it with [\*\*\*], pursuant to Regulation S-K Item 601(b)(10) of the Securities Act of 1933, as amended. Certain confidential information has been excluded from this exhibit because it is: (i) not material; and (ii) the registrant treats such information as private or confidential.**

SECOND AMENDMENT TO AMENDED, RESTATED AND CONSOLIDATED LICENSE AGREEMENT

This second amendment (the "Second Amendment") to the Amended, Restated and Consolidated License Agreement dated June 27th, 2012 by and between The University of North Carolina at Chapel Hill ("University") and Novan, Inc. ("Licensee"), as amended by the First Amendment to Amended, Restated and Consolidated License Agreement dated November 30, 2012 (hereinafter referred to as the "Agreement"), is effective as of April 12, 2016.

WHEREAS, the parties now wish to amend the Agreement to update Appendix A of the Agreement to include the Improvement known as [\*\*\*] as a University Invention and;

WHEREAS, the parties agree to be bound by the terms and conditions of the Agreement, as amended herein;

NOW THEREFORE, the parties agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;1. The
 following Improvement is deemed to be included in the University Inventions, and all
 patents and/or patent applications claiming such Improvement are deemed to be included
 in the Patent Rights for all purposes under the Agreement, including but not limited
 to the license granted to Licensee and Its Affiliates pursuant to Section 2.2 of the
 Agreement:

● [\*\*\*]

&nbsp;&nbsp;&nbsp;&nbsp;2. Appendix
 A of the Agreement is hereby deleted in the entirety and replaced with the attached Appendix
 A.

&nbsp;&nbsp;&nbsp;&nbsp;3. Capitalized
 terms used herein have the same meaning as was given them in the Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;4. Other
 than as amended herein, the Agreement remains in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;5. This
 Second Amendment may be executed by one or more of the parties to this Second Amendment
 on any number of separate counterparts (including by facsimile transmission or PDF signature),
 and all of said counterparts taken together shall be deemed to constitute one and the
 same instrument.

[Signatures appear on following page]

IN WITNESS WHEREOF, the parties have executed this Second Amendment to the Agreement, as indicated below.

---

| | |
|:---|:---|
| &nbsp;&nbsp;**THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL** | &nbsp;&nbsp;**NOVAN INC.** |
| &nbsp;&nbsp;/s/ Jacqueline Quay | &nbsp;&nbsp;/s/ Emily K. Hales |
| &nbsp;&nbsp;Jacqueline Quay | &nbsp;&nbsp;Name: Emily K. Hales |
| &nbsp;&nbsp;Director of Licensing,<br> Office of Commercialization<br> and Economic Development | &nbsp;&nbsp;Title: Corporate Counsel |
| &nbsp;&nbsp;4/22/2016 | &nbsp;&nbsp;5/6/2016 |
| &nbsp;&nbsp;Date | &nbsp;&nbsp;Date |
| &nbsp;&nbsp;Acknowledged and Agreed: |  |
| &nbsp;&nbsp;INVENTORS |  |
| &nbsp;&nbsp;/s/ Mark Schoenfisch |  |
| &nbsp;&nbsp;Mark Schoenfisch |  |
| &nbsp;&nbsp;/s/ Robert Soto |  |
| &nbsp;&nbsp;Robert Soto |  |

---

**APPENDIX A** <br> **Patent Rights**

**University Invention**

[\*\*\*]

## Exhibit 10.13

**Exhibit 10.13**

**Certain confidential information contained in this exhibit have been omitted by means of redacting a portion of the text and replacing it with [\*\*\*], pursuant to Regulation S-K Item 601(b)(10) of the Securities Act of 1933, as amended. Certain confidential information has been excluded from this exhibit because it is: (i) not material; and (ii) the registrant treats such information as private or confidential.**

**THIRD AMENDMENT TO AMENDED, RESTATED, AND CONSOLIDATED LICENSE AGREEMENT**

This Third Amendment (the "**Third Amendment**") to the Amended, Restated and Consolidated License Agreement dated June 27<sup>th</sup>, 2012 between The University of North Carolina at Chapel Hill ("**University**") and Novan, Inc. ("**Licensee**"), as amended by the First Amendment to Amended, Restated and Consolidated License Agreement dated November 30<sup>th</sup>, 2012 and further amended by the Second Amendment to Amended, Restated and Consolidated License Agreement dated April 12<sup>th</sup>, 2016 (hereinafter referred to as the "**Agreement**") is entered into as of November 1, 2018 (the "**Third Amendment Effective Date**").

WHEREAS, the parties now wish to amend the Agreement to update Appendix A of the Agreement to reflect the current Patent Rights and to **[**\*\*\***]** in Appendix D of the Agreement; and

WHEREAS, the parties agree to be bound by the terms and conditions of the Agreement, as amended.

NOW, THEREFORE, the parties agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;1. Appendix
 A of the Agreement is hereby deleted in its entirety and replaced with the attached Appendix
 A.

&nbsp;&nbsp;&nbsp;&nbsp;2. Appendix
 D of the Agreement is hereby deleted in its entirety and replaced with the attached Appendix
 D.

&nbsp;&nbsp;&nbsp;&nbsp;3. In
 consideration for **[** \*\*\* **]**, Licensee shall pay University **[** \*\*\* **]** within **[** \*\*\* **]** (**[** \*\*\* **]**) days of the Third Amendment Effective
 Date. Such fee shall not be creditable against any future payments or royalties, provided
 that **[** \*\*\* **]**, such **[** \*\*\* **]** fee shall be fully creditable against
 any payments owed by Licensee to University under Section 3.8 of the Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;4. Capitalized
 terms used herein have the same meaning as was given them in the Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;5. This
 Third Amendment may be executed by one or more of the parties to this Third Amendment
 on any number of separate counterparts, and all of said counterparts taken together shall
 be deemed to constitute one and the same instrument. Facsimile signatures and signatures
 transmitted via pdf shall be treated as original signatures.

&nbsp;&nbsp;&nbsp;&nbsp;6. The
 parties acknowledge and agree that Section 12.7 of the Agreement shall apply to this
 Third Amendment as if fully set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;7. Other
 than as amended herein, the Agreement remains in full force and effect.

*[signature page follows]*

IN WITNESS WHEREOF, the parties have executed this Third Amendment to the Agreement, as indicated below.

---

| | | | |
|:---|:---|:---|:---|
| **THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL** | **THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL** | **NOVAN INC.** | **NOVAN INC.** |
| BY: | /s/ Jacqueline Quay | BY: | /s/ Jeff N. Hunter |
|  | Jacqueline Quay |  |  |
|  | Director of Licensing and Innovation | NAME: Jeff N. Hunter | NAME: Jeff N. Hunter |
|  | Support, OTC |  |  |
|  |  | TITLE: Chief Business Officer | TITLE: Chief Business Officer |
| DATE: | &nbsp;&nbsp;&nbsp;11/1/18 | DATE: | &nbsp;&nbsp;&nbsp;October 31, 2018 |

---

**APPENDIX A**

**PATENT RIGHTS**

**University Inventions**

**[\*\*\*]**

**Joint Inventions**

**[\*\*\*]**

**APPENDIX D**

**MILESTONES**

**[\*\*\*]**

## Exhibit 10.14

**Exhibit 10.14**

**Certain confidential information contained in this exhibit have been omitted by means of redacting a portion of the text and replacing it with [\*\*\*], pursuant to Regulation S-K Item 601(b)(10) of the Securities Act of 1933, as amended. Certain confidential information has been excluded from this exhibit because it is: (i) not material; and (ii) the registrant treats such information as private or confidential.**

**FOURTH AMENDMENT TO AMENDED, RESTATED, AND CONSOLIDATED LICENSE AGREEMENT**

This Fourth Amendment (the **"Fourth Amendment")** to the Amended, Restated and Consolidated License Agreement dated June 27th, 2012 between The University of North Carolina at Chapel Hill **("University")** and Novan, Inc. **("Licensee"),** as amended by the First Amendment to Amended, Restated and Consolidated License Agreement dated November 30th, 2012 and further amended by the Second Amendment to Amended, Restated and Consolidated License Agreement dated April 12th, 2016 and further amended by the Third Amendment to Amended, Restated and Consolidated License Agreement dated November 1, 2018 (hereinafter referred to as the **"Agreement")** is entered into as of November 26, 2018 (the "Fourth Amendment Effective Date").

WHEREAS, the parties now wish to amend the Agreement in recognition to clarify procedures in the event of Licensee bankruptcy;

WHEREAS, the parties agree to be bound by the terms and conditions of the Agreement, as amended;

NOW THEREFORE, the parties agree as follows:

1. Section 7.3 is deleted in the entirety and replaced with the following:

"If LICENSEE becomes bankrupt, files a petition for or is the subject of a petition for bankruptcy, or is place in the hands of a receiver, assignee, or trustee for the benefit of creditors, whether by the voluntary act of LICENSEE or otherwise, then this LICENSE AGREEMENT may be terminated by UNIVERSITY upon written notice to LICENSEE within [\*\*\*] of the occurrence of such events."

2. Capitalized terms used herein have the same meaning as was given them in the Agreement.

3. Facsimile signatures and signatures transmitted via pdf shall be treated as original signatures.

4. Other than as amended herein, the Agreement remains in full force and effect.

IN WITNESS WHEREOF, the parties have executed this amendment to the Agreement, as indicated below.

---

| | |
|:---|:---|
| **THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL** | **LICENSEE** |
| BY: /s/ Jacqueline Quay | BY: /s/ G. Kelly Martin |
| Jacqueline Quay | NAME: G. Kelly Martin |
| Director of Licensing and Innovation Support, OTC | TITLE: Chief Executive Officer |
| DATE: 11/27/2018 | DATE: 11/26/2018 |

---

## Exhibit 10.15

**Exhibit 10.15**

**Certain confidential information contained in this exhibit have been omitted by means of redacting a portion of the text and replacing it with [\*\*\*], pursuant to Regulation S-K Item 601(b)(10) of the Securities Act of 1933, as amended. Certain confidential information has been excluded from this exhibit because it is: (i) not material; and (ii) the registrant treats such information as private or confidential.**

**FIFTH AMENDMENT TO AMENDED, RESTATED,** 

**AND CONSOLIDATED LICENSE AGREEMENT**

This Fifth Amendment (the "**Fifth Amendment**") to the Amended, Restated and Consolidated License Agreement dated June 27th, 2012 between The University of North Carolina at Chapel Hill ("**University**") and Novan, Inc. ("**Licensee**"), as amended by the First Amendment to the Amended, Restated and Consolidated License Agreement dated November 30th, 2012, and amended by the Second Amendment to the Amended, Restated and Consolidated License Agreement dated April 12th, 2016, and amended by the Third Amendment to the Amended, Restated and Consolidated License Agreement dated November 1, 2018, and further amended by the Fourth Amendment to the Amended, Restated and Consolidated License Agreement dated November 26, 2018 (hereinafter referred to collectively as the "**Agreement**") is entered into as of October 27, 2021 (the "**Fifth Amendment Effective Date**").

**WHEREAS**, the parties now wish to amend the Agreement to [\*\*\*] in Appendix D of the Agreement; and

**WHEREAS**, the parties agree to be bound by the terms and conditions of the Agreement, as amended.

**NOW, THEREFORE**, the parties agree as follows:

1. Appendix
 D of the Agreement is hereby deleted in its entirety and replaced with the attached Appendix
 D.

2. In
 consideration for [\*\*\*], Licensee shall pay University [\*\*\*] within [\*\*\*] days of the
 Fifth Amendment Effective Date. Such fee shall not be creditable against any future payments
 or royalties, provided that [\*\*\*], such [\*\*\*] fee shall be fully creditable against any
 payments owed by Licensee to University under Section 3.8 of the Agreement.

3. Capitalized
 terms used herein have the same meaning as was given them in the Agreement.

4. This
 Fifth Amendment may be executed by one or more of the parties to this Fifth Amendment
 on any number of separate counterparts, and all of said counterparts taken together shall
 be deemed to constitute one and the same instrument. Facsimile signatures and signatures
 transmitted via pdf shall be treated as original signatures.

5. Other
 than as amended herein, the Agreement remains in full force and effect.

*[signature page follows]*

IN WITNESS WHEREOF, the parties have executed this Fifth Amendment to the Agreement, as indicated below.

---

| | |
|:---|:---|
| **THE UNIVERSITY OF NORTH** | **NOVAN, INC.** |
| **CAROLINA AT CHAPEL HILL** |  |
| BY: /s/ Jacqueline Quay | BY: /s/ Paula Brown Stafford |
| Jacqueline Quay | Paula Brown Stafford |
| Director of Licensing and Innovation | President & CEO |
| Support, OTC |  |
| DATE: 11/11/2021 | DATE: 11/9/2021 |

---

**APPENDIX D**

MILESTONES

**[\*\*\*]**

## Exhibit 10.16

**Exhibit 10.16**

**SIXTH AMENDMENT TO AMENDED, RESTATED, AND CONSOLIDATED LICENSE AGREEMENT**

This Sixth Amendment (the "**Sixth Amendment**") to the Amended, Restated and Consolidated License Agreement dated June 27, 2012 between The University of North Carolina at Chapel Hill (**University**) and LNHC, Inc. as successor-in-interest to Novan, Inc. (**Licensee**), as amended by the First Amendment to the Amended, Restated and Consolidated License Agreement dated November 30, 2012, and amended by the Second Amendment to the Amended, Restated and Consolidated License Agreement dated April 12, 2016, and amended by the Third Amendment to the Amended, Restated and Consolidated License Agreement dated November 1, 2018, and amended by the Fourth Amendment to the Amended, Restated and Consolidated License Agreement dated November 26, 2018 and amended by the Fifth Amendment to the Amended, Restated and Consolidated License Agreement dated November 9, 2021 (hereinafter referred to collectively as the "**Agreement**") is entered into as of July 26, 2024 (the "**Sixth Amendment Effective Date**").

WHEREAS, the parties now wish to amend the Agreement to extend the date of the commercial sale milestone in Appendix D in consideration for a milestone extension fee(s); and

WHEREAS, the parties acknowledge that Licensee's obligations under section 3.5 of the Agreement with respect to U.S. Patent Numbers 8,282,967 and 8,956,658, end on May 30, 2026;

WHEREAS, the parties agree to be bound by the terms and conditions of the Agreement, as amended;

NOW THEREFORE, the parties agree as follows:

1. In consideration for this Sixth Amendment, Licensee shall pay University the following milestone extension fee(s):

● $150,000 for extension of the first commercial sale milestone in Appendix D to December 31, 2024 (due within 15 days of the Sixth Amendment Effective Date).

● $150,000 for further extension of the first commercial sale milestone in Appendix D to March 31, 2025 (due January 15, 2025 if first commercial sale of a Licensed Product does not occur by December 31, 2024, as described above).

2. Appendix D is deleted in the entirety and replaced with the attached Appendix D.

3. Capitalized terms used herein have the same meaning as was given them in the Agreement.

4. Facsimile signatures and signatures transmitted via pdf shall be treated as original signatures.

5. Other than as amended herein, the Agreement remains in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Sixth Amendment to the Agreement, as indicated below.

---

| | | | |
|:---|:---|:---|:---|
| **THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL** | **THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL** | **LNHC, INC.** | **LNHC, INC.** |
| (SEAL) | /s/ Jacqueline Quay | (SEAL) | /s/ Andrew Reardon |
| Jacqueline Quay | Jacqueline Quay |  |  |
| Director of Licensing and Innovation | Director of Licensing and Innovation | NAME: | Andrew Reardon |
| Support, OTC | Support, OTC |  |  |
|  |  | TITLE: | Chief Legal Officer |
| DATE: | July 29, 2024 | DATE: | July 26, 2024 |

---

**APPENDIX D**

MILESTONES

1. Submission by LICENSEE, any AFFILIATE, or any SUBLICENSEE of the first IND application (or foreign equivalent thereof) with respect to a LICENSED PRODUCT by August 13, 2013. [COMPLETED]

2. Initial administration of a LICENSED PRODUCT to a subject in a PHASE II CLINICAL TRIAL by August 31, 2016. [COMPLETED]

3. Submission of an NDA or BLA (or foreign equivalent of either of the foregoing) by LICENSEE, any AFFILIATE, or any SUBLICENSEE concerning a LICENSED PRODUCT by August 31, 2023. [COMPLETED]

4. First commercial sale of LICENSED PRODUCT by LICENSEE, any AFFILIATE, or any SUBLICENSEE by December 31, 2024, which may be extended to March 31, 2025 upon payment of an additional milestone fee as described in the Sixth Amendment).

Notwithstanding anything to the contrary in this Agreement, these milestones shall be deemed to be satisfied upon the first such achievement thereof with respect to any LICENSED PRODUCT. Such milestones may be satisfied by the achievement thereof by the same or different LICENCED PRODUCTS.

## Exhibit 10.17

**Exhibit 10.17**

**SEVENTH AMENDMENT TO AMENDED, RESTATED, AND CONSOLIDATED LICENSE AGREEMENT**

This Seventh Amendment **Seventh Amendment** to the Amended, Restated and Consolidated License Agreement dated June 27, 2012 between The University of North Carolina at Chapel Hill (**University**) and LNHC, Inc. as successor-in-interest to Novan, Inc. (**Licensee**), as amended by the First Amendment to the Amended, Restated and Consolidated License Agreement dated November 30, 2012, and amended by the Second Amendment to the Amended, Restated and Consolidated License Agreement dated April 12, 2016, and amended by the Third Amendment to the Amended, Restated and Consolidated License Agreement dated November 1, 2018, and amended by the Fourth Amendment to the Amended, Restated and Consolidated License Agreement dated November 26, 2018 and amended by the Fifth Amendment to the Amended, Restated and Consolidated License Agreement dated November 9, 2021 and amended by the Sixth Amendment to the Amended, Restated and Consolidated License Agreement dated July 26, 2024 (hereinafter referred to collectively as the **"Agreement"**) is entered into as of March 12, 2025 (the **"Seventh Amendment Effective Date"**).

WHEREAS, the parties now wish to amend the Agreement to extend the date of the commercial sale milestone in Appendix D in consideration for a milestone extension fee(s); and

WHEREAS, the parties agree to be bound by the terms and conditions of the Agreement, as amended.

NOW THEREFORE, the parties agree as follows:

1. In consideration for this Seventh Amendment, Licensee shall pay University the following milestone extension fee(s):

● $115,000 for extension of the first commercial sale milestone in Appendix D to June 30, 2025 (due within 15 days of the Seventh Amendment Effective Date).

● $115,000 for further extension of the first commercial sale milestone in Appendix D to September 30, 2025 (due July 15, 2025, if first commercial sale of a Licensed Product does not occur by June 30, 2025, as described above).

2. Appendix D is deleted in the entirety and replaced with the attached Appendix D.

3. Capitalized terms used herein have the same meaning as was given them in the Agreement.

4. Facsimile signatures and signatures transmitted via pdf shall be treated as original signatures.

5. Other than as amended herein, the Agreement remains in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Seventh Amendment to the Agreement, as indicated below.

---

| | |
|:---|:---|
| **THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL** | **LNHC, INC.** |
| /s/ Jacqueline Quay,<br>| /s/ Andrew Reardon |
| Jacqueline Quay |  |
| Director of Licensing and Innovation | NAME: Andrew Reardon |
| Support, OTC |  |
|  | TITLE: Secretary |
| DATE: March 14, 2025 | DATE: March 12, 2025 |

---

**APPENDIX D**

MILESTONES

1. Submission by LICENSEE, any AFFILIATE, or any SUBLICENSEE of the first IND application (or foreign equivalent thereof) with respect to a LICENSED PRODUCT by August 13, 2013. [COMPLETED]

2. Initial administration of a LICENSED PRODUCT to a subject in a PHASE II CLINICAL TRIAL by August 31, 2016. [COMPLETED]

3. Submission of an NDA or BLA (or foreign equivalent of either of the foregoing) by LICENSEE, any AFFILIATE, or any SUBLICENSEE concerning a LICENSED PRODUCT by August 31, 2023. [COMPLETED]

4. First commercial sale of LICENSED PRODUCT by LICENSEE, any AFFILIATE, or any SUBLICENSEE by June 30, 2025, which may be extended to September 30, 2025, upon payment of an additional milestone fee as described in the Seventh Amendment.

Notwithstanding anything to the contrary in this Agreement, these milestones shall be deemed to be satisfied upon the first such achievement thereof with respect to any LICENSED PRODUCT. Such milestones may be satisfied by the achievement thereof by the same or different LICENCED PRODUCTS.

## Exhibit 10.18

**Exhibit 10.18**

**<u>LEASE</u>**

**COPPER II 2020, LLC**,

a Delaware limited liability company

as Landlord,

and

**NOVAN, INC.**,

a Delaware corporation,

as Tenant

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
| | | Page |
| 1. | PREMISES, BUILDING, PROJECT, AND COMMON AREAS | 7 |
| 2. | LEASE TERM | 8 |
| 3. | BASE RENT | 10 |
| 4. | ADDITIONAL RENT | 11 |
| 5. | USE OF PREMISES | 18 |
| 6. | SERVICES AND UTILITIES | 28 |
| 7. | REPAIRS | 31 |
| 8. | ADDITIONS AND ALTERATIONS | 33 |
| 9. | COVENANT AGAINST LIENS | 35 |
| 10. | INSURANCE | 36 |
| 11. | DAMAGE AND DESTRUCTION | 39 |
| 12. | NONWAIVER | 41 |
| 13. | CONDEMNATION | 41 |
| 14. | ASSIGNMENT AND SUBLETTING | 42 |
| 15. | SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES | 45 |
| 16. | HOLDING OVER | 48 |
| 17. | ESTOPPEL CERTIFICATES | 48 |
| 18. | SUBORDINATION AND ATTORNMENT | 49 |
| 19. | DEFAULTS; REMEDIES | 50 |
| 20. | COVENANT OF QUIET ENJOYMENT | 55 |
| 21. | SECURITY DEPOSIT/LETTER OF CREDIT | 55 |
| 22. | SUBSTITUTION SPACE | 58 |
| 23. | SIGNS | 58 |
| 24. | COMPLIANCE WITH LAW | 59 |
| 25. | LATE CHARGES | 60 |
| 26. | INTENTIONALLY DELETED | 60 |
| 27. | ENTRY BY LANDLORD | 60 |
| 28. | TENANT PARKING | 61 |
| 29. | MISCELLANEOUS PROVISIONS | 61 |
| EXHIBITS |  |  |
| A | LEGAL DESCRIPTION OF LAND |  |
| B | DEPICTION OF PREMISES |  |
| B-1 | PORTION OF PREMISES TRIGERRING RENT COMMENCEMENT DATE |  |
| C | FORM OF NOTICE OF LEASE TERM DATES |  |
| D | WORK LETTER |  |
| D-1 | LANDLORD'S WORK |  |
| E | RULES AND REGULATIONS |  |
| F | FORM OF TENANT'S ESTOPPEL CERTIFICATE |  |
| G | ENVIRONMENTAL QUESTIONNAIRE |  |
| H | SPECIAL STIPULATIONS |  |
| H-1 | DEPICTION OF OFFER SPACE |  |
| H-2 | LOCATION OF OFF-PREMISES EQUIPMENT |  |
| H-3 | HVAC UNITS IN PREMISES 20 YEARS OR OLDER |  |
| I-1 | FORM OF MEMORANDUM OF LEASE |  |

---

**<u>LEASE</u>**

This Lease (the "**Lease**"), dated as of the date set forth in <u>Section 1</u> of the Summary of Basic Lease Information (the "**Summary**"), below, is made by and between **COPPER II 2020, LLC**, a Delaware limited liability company ("**Landlord**"), and **NOVAN, INC.,** a Delaware corporation ("**Tenant**").

**<u>SUMMARY OF BASIC LEASE INFORMATION</u>**

<u>TERMS OF LEASE</u> <u>DESCRIPTION</u> <br> 1. Lease Date: January 18, 2021 <br> 2. Premises (Article 1).

---

| | | |
|:---|:---|:---|
| 2.1 | Building: | That certain office building containing approximately 102,134 rentable square feet of space located at 4020 Stirrup Creek Drive, Durham, NC 27703. The land upon which the Building is located (the "**Land**") is described in **<u>Exhibit A</u>** of this Lease. |
| 2.2 | Premises: | Approximately 15,463 rentable square feet of space on the first (1st) floor of the Building and commonly known as Suite 110, as depicted in **<u>Exhibit B</u>** to this Lease. |

---

3. Lease Term (Article
2).

---

| | | |
|:---|:---|:---|
| 3.1 | Lease Term: | One Hundred Twenty-Three (123) Lease Months (as hereinafter defined), commencing on the Rent Commencement Date and expiring on the Lease Expiration Date, subject to adjustment and earlier termination as provided in this Lease. |
| 3.2  | Lease Commencement<br> Date:  | The Lease Date. |

---

---

| | |
|:---|:---|
| 3.3 | Rent Commencement Date: |
| 3.4 | Lease Expiration Date: The last day of the One Hundred Twenty-Third (123<sup>rd</sup>) Lease Month after the Rent Commencement Date. |

---

4. Base Rent (Article 3):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | <u>Time</u><br> <u>Period</u><br> <u>(Lease</u><br> <u>Months)</u> | Annual<br> <u>Base Rent</u> [B]<br> [A] = [C] \* RSF in<br> Premises | Monthly<br> Installment<br> <u>of Base Rent</u><br> [B] = [A]/12 | Annual Base<br> Rent<br> per Rentable<br> <u>Square</u><br> <u>Foot</u>[C] |
|  | 1 – 12\* | $471,621.50\* | $39,301.79\* | $30.50 |
|  | 13 - 24 | $485847.46 | $40487.29 | $31.42 |
|  | 25 – 36 | $500382.68 | $41698.56 | $32.36 |
|  | 37 – 48 | $515381.79 | $42948.48 | $33.33 |
|  | 49 – 60 | $530844.79 | $44237.07 | $34.33 |
|  | 61 – 72 | $546771.68 | $45564.31 | $35.36 |
|  | 73 – 84 | $563162.46 | $46930.21 | $36.42 |
|  | 85 – 96 | $580017.13 | $48334.76 | $37.51 |
|  | 97 – 108 | $597490.32 | $49790.86 | $38.64 |
|  | 109 – 120 | $615427.40 | $51285.62 | $39.80 |
|  | 121 – 123 | $633828.37 | $52819.03 | $40.99 |
| Total | 123 | N/A | N/A | N/A |

---

As used herein, the term "**Lease Month**" means each calendar month during the Lease Term after the Rent Commencement Date (and if the Rent Commencement Date does not occur on the first day of a calendar month, the period from the Rent Commencement Date to the first day of the next calendar month shall be included in the first Lease Month for purposes of determining the duration of the Lease Term and the monthly Base Rent rate applicable for such partial month).

\* Provided no Event of Default is then in effect (beyond any applicable notice or cure periods), Base Rent shall be abated during the first three (3) months after the Rent Commencement Date (e.g., if the Rent Commencement Date is September 15, 2021, Base Rent shall be abated until December 15, 2021). Commencing with the first day after the end of the abatement period referred to above, Tenant shall make Base Rent payments for any remaining partial calendar month and on the first day of the first full calendar month thereafter as otherwise provided in this Lease. Notwithstanding such abatement of Base Rent, (i) all other sums due under this Lease, including Additional Rent, Direct Expenses, etc., shall be payable as provided in this Lease, and (ii) any increases in Base Rent set forth in this Lease shall occur on the dates scheduled therefor. Such conditional concession is being offered to Tenant as an inducement for Tenant to execute this Lease and occupy the Premises for the entire Lease Term, and to comply with its agreements contained in this Lease; provided, however, (a) if this Lease is terminated as a result of an Event of Default by Tenant (beyond any applicable notice and cure periods) prior to the expiration of the initial Lease Term, then the unamortized balance of the abated Base Rent hereunder shall become immediately due and payable and Tenant hereby agrees to pay Landlord such abated Base Rent which would otherwise have been payable during the abatement period set forth above (such amortization to be calculated in equal monthly amounts over the length of the initial Lease Term), and (b) upon the occurrence of an Event of Default during the Lease Term, Tenant shall have no further right to any rental abatement as set forth herein and any future right to rental abatement shall be revoked and of no further force and effect.

---

| | | |
|:---|:---|:---|
| 5. | Construction Allowance: | An amount not to exceed $130 per rentable square foot in the Premises, as provided in **<u>Exhibit D</u>** of this Lease. |
| 6. | NNN Lease. | In addition to the Base Rent, Tenant shall be responsible for paying Tenant's Share of Direct Expenses in accordance with the terms of <u>Article 4</u> of the Lease. |
| 7. | Tenant's Share<br> (Article 4).  | Approximately 15.14%, subject to adjustment as provided in Section 1.2 and Article 4. |

---

---

| | | |
|:---|:---|:---|
| 8. | Permitted Use: | The Premises may only be used for any or all of the following uses: general office, research and development, engineering, laboratory, pharmaceutical, and light manufacturing uses for life science and biotechnology purposes (which includes, but is not limited to, producing, using, storing, and generating Hazardous Materials (as defined below) on an ancillary basis to Tenant's primary use of the Premises, to the extent permitted in this Lease), including, but not limited to, administrative offices and other lawful uses reasonably related to or incidental to such specified uses, all (i) consistent with substantially similar life sciences, pharmaceutical, or other similar projects in the Raleigh, North Carolina and Durham, North Carolina areas, and (ii) in compliance with, and subject to, all Applicable Laws (as defined herein), and the terms of this Lease. |
| 9. | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Security Deposit/Letter of Credit<br> (<u>Article 21</u>):<br>| $471,621.50, subject to adjustment as provided in Article 21. |
| 10. | Parking Ratio<br> (<u>Article 28</u>): | Approximately 3 unreserved parking spaces for every 1,000 rentable square feet of the Premises, subject to the terms of <u>Article 28</u> of this Lease. |
| 11. | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Address of Tenant<br> (<u>Section 29.18</u>):<br>| Before April 1, 2021: <br> Novan, Inc. <br> 4105 Hopson Road, Suite 146 <br> Morrisville, North Carolina 27560 <br> Attn: Corporate Secretary <br> Email: <u>corporatesecretary@novan.com</u><br>On or After April 1, 2021: <br> Novan, Inc. <br> 4020 Stirrup Creek Drive, Suite 110 <br> Durham, NC 27703 <br> Attn: Corporate Secretary <br> Email: <u>corporatesecretary@novan.com</u><br>With a copy to:<br>Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P <br> Wells Fargo Capitol Center <br> 150 Fayetteville Street, Ste 2300 <br> Raleigh, North Carolina 27601 <br> Attn: Davis F. Roach <br> Email: [\*\*\*]  |

---

---

| | | |
|:---|:---|:---|
| 12. | Address of Landlord<br> (<u>Section 29.18</u>):  | See <u>Section 29.18</u> of this Lease. |
| 13. | Broker(s)<br> (<u>Section 29.24</u>):  | Lincoln Harris LLC, representing Landlord, and Cushman & Wakefield, representing Tenant. |
| 14. | Guarantor(s): | None |

---

**1.** **PREMISES, BUILDING, PROJECT, AND COMMON AREAS** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.1**  **<u>Premises, Building, Project and Common Areas</u>.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.1 **<u>The Premises</u>.** Subject to the terms of this Lease, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises set forth in <u>Section 2.2</u> of the Summary (the "**Premises**"). The Premises is depicted in **<u>Exhibit B</u>** attached hereto and has the number of rentable square feet as set forth in <u>Section 2.2</u> of the Summary. The parties hereto agree that the lease of the Premises is upon and subject to the terms, covenants and conditions herein set forth, and Tenant covenants as a material part of the consideration for this Lease to keep and perform each and all of such terms, covenants and conditions by it to be kept and performed and that this Lease is made upon the condition of such performance. The parties hereto hereby acknowledge that the purpose of **<u>Exhibit B</u>** is to show the approximate location of the Premises in the "Building," as that term is defined in <u>Section 1.1.2</u>, below, only, and such Exhibit is not meant to constitute an agreement, representation or warranty as to the construction of the Premises, the precise area thereof or the specific location of the "Common Areas," as that term is defined in <u>Section 1.1.3</u>, below, or the elements thereof or of the accessways to the Premises or the "Project," as that term is defined in <u>Section 1.1.2</u>, below. Tenant shall accept the Premises in its presently existing "as-is" condition as of the Lease Date and Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Premises except as otherwise expressly set forth in this Lease or in the work letter attached hereto as **<u>Exhibit D</u>**. Tenant acknowledges that no representations or warranties as to the condition or repair of the Premises have been made by Landlord, unless such are expressly set forth in this Lease. Before Tenant may occupy the Premises to conduct business therein, Tenant shall, at its expense, obtain and deliver to Landlord a certificate of occupancy from the appropriate governmental authority for the Premises or the portion of the Premises that Tenant intends to occupy if Tenant is legally permitted to obtain a certificate of occupancy for only a portion of the Premises, and further provided that Tenant shall not be permitted to occupy any portion of the Premises for which Tenant has not obtained and delivered a certificate of occupancy.

The Premises shall exclude Common Areas, including without limitation exterior faces of exterior walls, the entry, vestibules and main lobby of the Building, lobbies and common lavatories, the common stairways and stairwells, boiler room, sprinkler rooms, mechanical rooms, loading and receiving areas, break area, conference room, exercise area, electric and telephone closets, janitor closets, and pipes, ducts, conduits, wires and appurtenant fixtures and equipment serving exclusively or in common with other parts of the Building.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.2 **<u>The Building and The Project</u>.** The Premises are a part of the building described in <u>Section 2.1</u> of the Summary (the "**Building**"). The term "**Project**," as used in this Lease, shall mean (i) the Building and the Common Areas of the Building, (ii) the land (which is improved with landscaping, parking facilities and other improvements) upon which the Building and the Common Areas are located, and (iii) at Landlord's discretion, any additional real property, areas, land, buildings or other improvements added thereto outside of the Project, which Landlord shall have the right to add to the Project at any time in its sole discretion. The definitions and basic provisions set forth in the Summary are incorporated herein by reference for all purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.3 **<u>Common Areas</u>.** Tenant shall have the non-exclusive right to use in common with other tenants in the Building, and subject to the Rules and Regulations (as defined in <u>Section 5.2</u> of this Lease), those portions of the Project which are provided, from time to time, for use in common by Landlord, Tenant and any other tenants of the Building (such areas, together with such other portions of the Project designated by Landlord, in its discretion, including certain areas designated for the exclusive use of certain tenants, or to be shared by Landlord and certain tenants, are collectively referred to herein as the "**Common Areas**"). Tenant's use of the Common Areas shall be subject to the terms of this Lease and Landlord's rights with respect to the Common Areas. The Common Areas shall be under Landlord's sole control, and the manner in which the Common Areas are maintained and operated shall be at the sole discretion of Landlord, and the use thereof shall be subject to the Rules and Regulations as Landlord may make from time to time. Landlord reserves the right to close temporarily, make alterations or additions to, or change the location of elements of the Project and the Common Areas, provided that, in connection therewith, Landlord shall perform such closures, alterations, additions or changes in a commercially reasonable manner and, in connection therewith, shall use commercially reasonable efforts to minimize any material interference with Tenant's use of and access to the Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.2 <u>Stipulation of Rentable Square Feet of Premises</u>.** For purposes of this Lease, "rentable square feet" of the Premises shall be deemed as set forth in <u>Section 2.2</u> of the Summary. The number of rentable square feet in the Premises and the Project are estimates calculated by Landlord's architect using the Standard Method for Measuring Floor Area in Office Buildings, ANSI/BOMA Z65.1-2017 (the "**BOMA Standards**"). Landlord shall have the right to use its architect's most recent calculations of the number of rentable square feet and usable square feet (if applicable) in the Project from time to time so long as such calculations are consistent with the BOMA Standards. In the event the Project shall contain an amount of rentable square footage different than the amount of rentable square feet referenced in Section 2.1 of the Summary or if the rentable square footage of the Premises or Project otherwise changes for any reason during the Lease Term, the Premises shall be redefined to reflect the actual rentable square footage and Tenant's Share shall be updated to reflect the actual rentable square footage in the Premises and/or the Project, as applicable. For purposes of clarity, Landlord shall not have the right to remeasure the Premises during the Lease Term unless in connection with a relocation, contraction or expansion of the Premises.

**2.** **LEASE TERM** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.1 <u>Lease Term</u>.** The terms and provisions of this Lease shall be effective as of the date of this Lease. The term of this Lease (the "**Lease Term**") shall be as set forth in <u>Section 3.1</u> of the Summary, shall commence on the date set forth in <u>Section 3.3</u> of the Summary (the "**Rent Commencement Date**"), and shall terminate on the date set forth in <u>Section 3.4</u> of the Summary (the "**Lease Expiration Date**") unless this Lease is sooner terminated or extended as hereinafter provided. For purposes of this Lease, the term "**Lease Year**" shall mean each consecutive twelve (12) month period during the Lease Term, commencing on the Rent Commencement Date. At any time during the Lease Term, but no more than once per twelve (12) month period, Landlord may deliver to Tenant a notice in the form as set forth in **<u>Exhibit C</u>**, attached hereto, as a confirmation only of the information set forth therein, which Tenant shall execute and return to Landlord within ten (10) business days following receipt thereof. Notwithstanding anything herein to the contrary, entry into the Premises by any Tenant Party (as hereinafter defined) prior to the Rent Commencement Date shall be subject to all of the provisions of this Lease excepting only those requiring the payment of Base Rent and Additional Rent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.2 <u>Option Term</u>.** Tenant shall have an option to extend the Lease Term for one (1) additional period of five (5) years (the "**Option Period**"), by delivering written notice of the exercise thereof to Landlord no later than twelve (12) months before the expiration of the initial Lease Term. The Base Rent payable for each month during such extended Lease Term (including periodic increases in same) shall be the Prevailing Rental Rate (defined below) at the commencement of the Option Period. As used herein, the "**Prevailing Rental Rate**" shall mean the prevailing net rental rate that a willing tenant would pay, and a willing landlord would accept (both having reasonable knowledge of the relevant factors), for a renewal of a lease of space that is of equivalent quality, size, utility and location in the space in question that is located in comparable buildings (including the Building) located in the Raleigh/Durham, NC metropolitan area, taking into consideration (a) the location, quality, amenities and age of the Building; (b) the use and size of the space in question; (c) the extent of services provided or to be provided by Landlord (if any); (d) the location and/or floor level of the space in question; (e) the amount of any tenant improvement allowances, abatement of rental, or other tenant inducements for the space in question, if any; (f) the fact that a lease may be a "triple net", "base year" or "gross" lease for the space in question; (g) the amount of any brokerage commissions; (h) the credit standing of Tenant as compared to the average credit of other life science tenants leasing space of a similar size in, and in the general vicinity of, the Project; (i) the length of the term for the space in question; (j) the amount and frequency of increases in Base Rent; (k) the extent and condition of the leasehold improvements in the Premises; and (l) the amount of any parking charges of equivalent quality, size, utility and location. Within thirty (30) days after receipt of Tenant's notice to extend, Landlord shall deliver to Tenant written notice of the Prevailing Rental Rate (and periodic increases in the same) and shall advise Tenant of the required adjustment to Base Rent, if any, and the other terms and conditions offered. Tenant shall, within ten (10) business days after receipt of Landlord's notice, notify Landlord in writing whether Tenant (i) accepts Landlord's determination of the Prevailing Rental Rate, (ii) rejects Landlord's determination of the Prevailing Rental Rate and rescinds its election to extend the Lease Term pursuant to this Section 2.2, or (iii) rejects Landlord's determination of the Prevailing Rental Rate and therefore elects to have the Prevailing Rental Rate determined by the arbitration procedure outlined below. If Tenant timely notifies Landlord that Tenant accepts Landlord's determination of the Prevailing Rental Rate, then, within thirty (30) days following the determination of the Prevailing Rental Rate, Landlord and Tenant shall execute an amendment to this Lease extending the Lease Term on the same terms and conditions provided in this Lease, except as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2.1 Base Rent shall be adjusted to the Prevailing Rental Rate, with periodic increases thereto as provided above;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2.2 Tenant shall have no further option to extend the Lease Term unless expressly granted by Landlord in writing; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2.3 Landlord shall lease to Tenant the Premises in its then-current condition, and Landlord shall not provide to Tenant any allowances (e.g., moving allowance, construction allowance, and the like) or other tenant inducements.

If Tenant timely delivers written notice to Landlord that it rejects Landlord's determination of the Prevailing Rental Rate, time being of the essence with respect thereto, and Landlord and Tenant fail to reach agreement on the Prevailing Rental Rate within thirty (30) days following Landlord's receipt of Tenant's rejection notice, then Tenant shall, by written notice to Landlord given prior to the expiration of such thirty (30) day period, elect either to (1) rescind its election to renew the Lease, in which case the Lease shall end on the then-current expiration date and neither Landlord nor Tenant shall have any further obligation or liability under this <u>Section 2.2</u> or (2) require that the determination of the Prevailing Rental Rate be made by brokers (and if Tenant makes such election, Tenant shall be deemed to have irrevocably renewed the Lease Term, subject only to the determination of the Prevailing Rental Rate as provided below). In such event, within fifteen (15) days thereafter, each party shall select a licensed commercial real estate broker with at least ten (10) years' experience in leasing property and buildings in the city or submarket in which the Premises are located that has not represented either party in connection with this Lease or otherwise within the last two (2) years (a "**Qualified Broker**"). The two brokers shall give their opinion of the Prevailing Rental Rate (based upon the same criteria as described in the first paragraph above) within fifteen (15) days after their retention. If such brokers timely reach agreement, such agreed determination shall be final and binding on Landlord and Tenant. In the event the opinions of the two brokers differ and, after good faith efforts for ten (10) days after the expiration of such initial fifteen (15) day period, they cannot mutually agree, the brokers shall immediately and jointly appoint a third Qualified Broker unaffiliated with Landlord or Tenant and who has not represented Landlord or Tenant in any transaction within the five (5) year period immediately preceding the date of such appointment. If the brokers are unable to agree upon such third Qualified Broker, then such third Qualified Broker shall be appointed by the American Arbitration Association upon the request of either Landlord or Tenant (and such appointee shall satisfy the requirement of a Qualified Broker, shall not be affiliated with Landlord or Tenant or have represented Landlord or Tenant in any transaction at any time during the five [5] year period prior to such appointment, and shall be bound by the procedures described in this paragraph). This third broker shall immediately (within ten [10] days) choose either the determination of Landlord's broker or Tenant's broker and such choice of this third broker shall be final and binding on Landlord and Tenant. Each party shall pay its own costs for its real estate broker. Following the determination of the Prevailing Rental Rate by the brokers, the parties shall equally share the costs of any third broker, and shall immediately execute an amendment as set forth above. If Tenant fails to timely notify Landlord in writing that Tenant accepts or rejects Landlord's determination of the Prevailing Rental Rate, time being of the essence with respect thereto, then, at Landlord's option, (1) Tenant's rights under this <u>Section 2.2</u> shall terminate and Tenant shall have no right to extend the Lease Term; or (2) Tenant shall be deemed to have irrevocably renewed the Lease Term and to have accepted Landlord's determination of the Prevailing Rental Rate.

Tenant's rights under this <u>Section 2.2</u> shall terminate, at Landlord's option, if (a) an Event of Default exists (beyond any notice or cure period) as of the date of Tenant's exercise of its rights under this <u>Section 2.2</u> or as of the commencement date of the extended Lease Term, (b) this Lease or Tenant's right to possession of any of the Premises is terminated, (c) Tenant assigns its interest in this Lease or sublets any portion of the Premises to anyone other than a Permitted Transferee, (d) Landlord determines, in its sole but reasonable discretion, that Tenant's financial condition or creditworthiness has materially deteriorated since the Lease Date, or (e) Tenant fails to timely exercise its option under this <u>Section 2.2</u>, time being of the essence with respect to Tenant's exercise thereof.

**3.** **BASE RENT** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.1** Beginning on the Rent Commencement Date, Tenant shall pay, without prior notice or demand, to Landlord or Landlord's agent at the management office of the Project, or, at Landlord's option, at such other place as Landlord may from time to time designate in advance and in writing, (i) by a check for currency which, at the time of payment, is legal tender for private or public debts in the United States of America, or (ii) by electronic funds transfer to the account of Landlord as provided to Tenant, base rent ("**Base Rent**") as set forth in <u>Section 4</u> of the Summary, payable in equal monthly installments as set forth in <u>Section 4</u> of the Summary in advance on or before the first day of each and every calendar month during the Lease Term, without any setoff or deduction whatsoever. The Rent (as defined below) for the first full month of the Lease Term shall be paid on or before the Lease Commencement Date. The monthly Base Rent for any partial month at the beginning of the Lease Term shall equal the product of 1/365 of the annual Base Rent in effect during the partial month and the number of days in the partial month, and such Base Rent payment is due on the Lease Commencement Date; however, if the Rent Commencement Date is not a fixed date that is ascertainable as of the Lease Commencement Date, then such Base Rent payment for any fractional calendar month at the beginning of the Lease Term shall be due by Tenant on the Rent Commencement Date. All other payments or adjustments required to be made under the terms of this Lease that require proration on a time basis shall be prorated on the same basis. Base Rent and Additional Rent (as defined below) shall together be denominated "**Rent**." Without limiting the foregoing, Tenant's obligation to pay Rent shall not be discharged or otherwise affected by any law or regulation now or hereafter applicable to the Premises, or any other restriction on Tenant's use, or (except as expressly provided herein) any casualty or taking, or any failure by Landlord to perform any covenant contained herein, or any other occurrence. Tenant's obligations and covenants contained herein (including, without limitation, the covenant to pay Rent) are independent of the obligations of Landlord under this Lease.

**4.** **ADDITIONAL RENT** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.1 <u>General Terms</u>.** In addition to paying the Base Rent specified in <u>Article 3</u> of this Lease, Tenant shall pay "Tenant's Share" of the annual "Direct Expenses," as those terms are defined in <u>Sections 4.2.2</u> and <u>4.2.6</u> of this Lease, respectively. Such payments by Tenant, together with any and all other amounts payable by Tenant to Landlord pursuant to the terms of this Lease, are hereinafter collectively referred to as the "**Additional Rent**". All amounts due under this <u>Article 4</u> as Additional Rent shall be payable for the same periods and in the same manner as the Base Rent. Without limitation on other obligations of Tenant which survive the expiration of the Lease Term, the obligations of Tenant to pay the Additional Rent provided for in this <u>Article 4</u> shall survive the expiration of the Lease Term.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.2 <u>Definitions of Key Terms Relating to Additional Rent</u>.** As used in this <u>Article 4</u>, the following terms shall have the meanings hereinafter set forth:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.1 "**Direct Expenses**" shall mean "**Operating Expenses**" and "**Tax Expenses**."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.2 "**Expense Year**" shall mean each calendar year in which any portion of the Lease Term falls, through and including the calendar year in which the Lease Term expires, provided that Landlord, upon written notice to Tenant, may change the Expense Year from time to time to any other twelve (12) consecutive month period, and, in the event of any such change, Tenant's Share of Direct Expenses shall be equitably adjusted for any Expense Year involved in any such change.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.3 "**Operating Expenses**" shall mean all commercially reasonable expenses, costs and amounts of every kind and nature which Landlord actually pays or accrues during any Expense Year because of or in connection with the management, maintenance, security, repair, replacement, restoration or operation of the Project, or any portion thereof, including the Common Areas and any Project amenities. Without limiting the generality of the foregoing, Operating Expenses shall specifically include any and all of the following: (a) wages and salaries of all employees at or below the grade of senior building manager engaged in the operation, maintenance or security of the Project, including accounting personnel (which expenses shall be reasonably allocated by Landlord for any such employees who perform a portion of their services at or for any property other than the Project), including taxes, insurance and benefits relating thereto; (b) all supplies, materials and computer software licenses used in the operation, maintenance, repair, replacement, and security of the Project; (c) costs for improvements made to the Project which, although capital in nature, are expected to reduce the normal operating costs (including all utility costs) of the Project, as amortized using a commercially reasonable interest rate over the time period reasonably estimated by Landlord to recover the costs thereof taking into consideration the anticipated cost savings, as determined by Landlord using its good faith, commercially reasonable judgment, capital improvements made in order to comply with any Applicable Law hereafter promulgated by any governmental authority, or any amendment to or any interpretation hereafter rendered with respect to any existing Applicable Law that have the effect of changing the legal requirements applicable to the Project from those currently in effect, as well as capital improvements which enhance the safety or security of the Project or which are made to keep the Common Areas in the same good order or condition as on the Rent Commencement Date, as amortized using a commercially reasonable interest rate over the useful economic life of such improvements as determined by Landlord in its reasonable discretion, but in accordance with Landlord's standard accounting practices, applied consistently and in accordance with Landlord's past practices during its ownership of the Building (collectively, "**Permitted Capital Improvement Expenses**"); (d) the cost of all utilities, other than the cost of any metered or submetered utilities paid separately by other tenants; (e) Landlord's insurance expenses, including the cost of any deductibles; (f) repairs, replacements and general maintenance of the Project; (g) fair market rental and other costs with respect to the management office for the Project and any amenities serving the Project; (h) service, maintenance and management contracts and fees for the operation, maintenance, management, repair, replacement, or security of the Project (including alarm service, window cleaning, janitorial, security, landscape maintenance and elevator maintenance), provided that the management fee payable to Landlord's property manager for management of the Project shall not exceed three percent (3%) of the effective gross income for the Project in the aggregate (the "**Management Fee Cap**"); and (i) payments, fees, dues or other charges payable under any easement, license, operating agreement, declaration, restrictive covenant, matter of record, instrument pertaining to the sharing of costs by the Building, including, without limitation, any covenants, conditions and restrictions affecting the property, and reciprocal easement agreements affecting the property, any parking licenses, any agreements with transit agencies affecting the Property (collectively, "**Underlying Documents**"). Landlord shall have the right with notice to Tenant to allocate costs among different uses of space in the Project if Landlord reasonably determines the costs for operating, maintaining and repairing such different spaces differ from other spaces within the Project. If the Building is or at any time in the future becomes part of a multi-building complex (the "**related complex**"), costs associated with the related complex may be prorated among the Project and the other buildings of the related complex and included in Operating Costs and Tax Expenses hereunder, as reasonably determined by Landlord, or the other buildings within the related complex may be added to the Project. Solely for the purposes of the immediately preceding sentence, the definitions of the terms "Common Area", "Operating Costs" and "Tax Expenses", the word "Project" shall be deemed to be omitted and replaced with "Related Complex."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.4 Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses shall not include costs for (a) capital improvements made to the Project, other than Permitted Capital Improvement Expenses and except for items which are generally considered maintenance and repair items, such as painting and wall covering of Common Areas, replacement of carpet or other floor coverings in Common Areas, and the like; (b) repair, replacements and general maintenance paid by proceeds of insurance or by Tenant or other third parties (other than insurance or other amounts reimbursed to Landlord as additional rent); (c) interest, amortization or other payments on loans to Landlord; (d) depreciation; (e) leasing commissions; (f) legal expenses for services, other than those that benefit the Project tenants generally; (g) renovating or otherwise improving space for specific occupants of the Project or vacant leasable space in the Project, other than costs for repairs, maintenance and compliance with Applicable Laws provided or made available to the Project tenants generally; (h) Tax Expenses; (i) federal income taxes imposed on or measured by the income of Landlord from the operation of the Project; (j) ground lease rent; (k) promotional and advertising costs; (l) costs reimbursed by insurance proceeds or tenants of the Building (other than insurance or other amounts reimbursed to Landlord as additional rent); (m) the cost of any real estate licenses and other industry certifications of Landlord or its property manager or brokers; (n) all costs associated with the operation of the business of the entity which constitutes Landlord or Landlord's Affiliates (as distinguished from the costs of the operation and maintenance of the Project) including, but not limited to, any such entity's general corporate overhead, corporate and/or partnership accounting and legal costs; (o) any cost related to procuring tenants for the leasing of space in the Project, including without limitation, promotional and advertising expenses, tickets to special events, commissions, finders fees, and referral fees, all costs and expenses relating to the negotiation and preparation of any lease, license, sublease or other such document related to the leasing of space in the Project, costs of design, plans, permits, licenses, inspection, utilities, construction and clean-up of tenant improvements to the Premises or the premises of other tenants or other occupants (but not any area constituting Common Areas), the amount of any allowances or credits paid to or granted to tenants or other occupants of the Project; (p) any costs incurred in connection with defects in the original design or original construction of the Project; (q) any cost incurred in connection with upgrading the Project to comply with Applicable Laws in effect as of the Lease Date, including penalties or damages incurred by Landlord as a result of non-compliance as of the Lease Date; (r) the cost of any cleanup, containment, abatement, removal or remediation of Hazardous Materials released in, on or about the Building or the Land in violation of Applicable Laws to the extent either (i) introduced onto the property by Landlord or any of its Affiliates or (ii) covered by a validly issued insurance policy carried by Landlord (and such insurer has actually provided the insurance proceeds to Landlord; provided, however, that any deductible may be included); (s) any fines, costs, late charges, liquidated damages, penalties, tax penalties or related interest charges, imposed on Landlord or Landlord's managing agent incurred as a result of Landlord's or Landlord's managing agent's inability or unwilling to make payments when due, gross negligence or willful misconduct or breach of any lease or other agreement to which Landlord or Landlord's managing agent is a party; (t) political or charitable contributions; (u) costs, for the acquisition and/or leasing of any sculptures, paintings, fountains or other objects of art, including costs incurred with respect to the display of such items (provided, however, that costs incurred to maintain and/or repair the same shall be included in Operating Expenses); (v) any amount paid to a subsidiary or Affiliate of Landlord or Landlord's managing agent in exchange for services (other than Landlord's management fee provided for hereinabove) to the extent such amounts exceed the fair market value for such services; (w) expenses in connection with special services which are provided to one or more specific tenants of the Building and performed at such tenant's cost but which are not made available to all tenants of the Building; (x) if the Building does not have such certifications as of the Lease Date, any expenses incurred by the Landlord in connection with its plans or efforts to obtain or renew any form of certification for energy efficiency or environmental responsibility from organizations or governmental agencies such as the United States Green Building Council's Leadership in Energy and Environmental Design (LEED) certification, Energy Star, Green Globes, etc., including, without limitation, consulting fees, legal fees, architectural, design and/or engineering fees and submission fees (provided, however, re-certification costs associated with any of the foregoing designations are deemed reasonable Operating Expenses); and (y) structural or latent defects associated with the Building and not caused by or related to Tenant's negligence or willful misconduct or Tenant's alterations or improvements to the Premises.

With respect to any calendar year or partial calendar year in which the Project is not occupied to the extent of ninety-five percent (95%) of the rentable area thereof, or Landlord is not supplying comparable services to ninety-five percent (95%) of the rentable area thereof, the Operating Expenses for such period which vary with the occupancy of the Project or level of service shall, for the purposes hereof, be increased to the amount which would have been incurred had the Project been occupied to the extent of ninety-five percent (95%) of the rentable area thereof and Landlord had been supplying comparable services to ninety-five percent (95%) of the rentable area thereof, and, for the purpose of calculating the property management fee, assuming that all leasable space is leased to tenants paying fair market value rent (as contrasted with paying free rent, half rent and the like). Additionally, Landlord may elect to amortize items not required to be amortized under this Lease as well as defer one or more amortized costs to future expense years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.5 <u>Taxes</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.5.1 "**Tax Expenses**" shall mean all federal, state, county, or local governmental or municipal taxes, fees, charges or other impositions of every kind and nature, whether general, special, ordinary or extraordinary (including, without limitation, real estate taxes, general and special assessments, transit taxes, leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales taxes applicable to the receipt of rent, unless required to be paid by Tenant, personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property used in connection with the Project, or any portion thereof), which shall be paid or accrued during any Expense Year (without regard to any different fiscal year used by such governmental or municipal authority) because of or in connection with the ownership, leasing and operation of the Project, or any portion thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.5.2 Tax Expenses shall include, without limitation: (i) any tax on the rent, right to rent or other income from the Project, or any portion thereof, or as against the business of leasing the Project, or any portion thereof; (ii) any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real property tax; (iii) any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Premises or the Rent payable hereunder, including, without limitation, any business or gross income tax or excise tax with respect to the receipt of such rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof; (iv) any assessments or charged from any applicable property owners associations or other authority under any restrictive covenant, declaration of covenants, restrictions, easements, or other matters of record or any private agreement applicable to the Project; and (v) any assessment, tax, fee, levy or charge, upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises or the improvements thereon. Notwithstanding the foregoing, Tax Expenses shall exclude any charges included as part of Operating Expenses and any federal and state taxes on the income of Landlord. However, if the present method of taxation changes so that in lieu of or in addition to the whole or any part of any Tax Expenses, there is levied on Landlord a capital tax directly on the rents or revenues received therefrom or a franchise tax, margin tax, assessment, or charge based, in whole or in part, upon such rents or revenues for the Project, then all such taxes, assessments, or charges, or the part thereof so based, shall be deemed to be included within the term "Tax Expenses" for purposes hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.5.3 Any costs and expenses (including, without limitation, reasonable attorneys' and consultants' fees) actually incurred by Landlord in good faith in attempting to protest, appeal, reduce or minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such expenses are incurred. Tax refunds shall be credited against Tax Expenses and refunded to Tenant regardless of when received, based on the Expense Year to which the refund is applicable, provided that in no event shall the amount to be refunded to Tenant for any such Expense Year exceed the total amount paid by Tenant as Additional Rent under this Article 4 for such Expense Year. The foregoing sentence shall survive the expiration or earlier termination of this Lease. If Tax Expenses for any period during the Lease Term or any extension thereof are increased after payment thereof for any reason, including, without limitation, error or reassessment by applicable governmental or municipal authorities, Tenant shall pay Landlord upon demand Tenant's Share of any such increased Tax Expenses. For property tax purposes, Tenant waives all rights to protest or appeal the appraised value of the Premises, as well as the Project, and all rights to receive notices of reappraisal.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.6 "**Tenant's Share**" is the percentage obtained by dividing (i) the total rentable square feet of the Premises by (ii) the number of rentable square feet of the Project, as determined by Landlord from time to time. Should the rentable square footage of the Premises or Project change at any time during the Lease Term, as a result of a recalculation, reconfiguration or addition to the Project by Landlord, Landlord shall notify Tenant in writing of the new rentable square footage of the Premises and/or Project and the updated calculation of Tenant's Share, which new calculation shall replace the Tenant's Share in effect at such time and shall be used for all relevant calculations under this Lease. The percentage set forth in Section 7 of the Summary is the initial calculation of Tenant's Share, which shall be subject to adjustment based on the calculation in this Section 4.2.6.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.3 <u>Tenant's Audit Right</u>.** For so long as Tenant is not in default under this Lease beyond any applicable notice or cure period, Landlord's books and records pertaining to the calculation of Operating Expenses for any Expense Year within the Lease Term may be audited in order to verify the accuracy of Landlord's determination of Tenant's Share of actual Operating Expenses for the applicable Expense Year by an authorized representative of Tenant at Tenant's expense, at any time within twelve (12) months after the end of the applicable Expense Year, provided that Tenant gives Landlord not less than thirty (30) days' prior written notice of any such audit. For purposes hereof, an authorized representative of Tenant means a bona fide employee of Tenant, any reputable accounting firm with experience auditing the financial records of commercial landlords and engaged by Tenant on a non-contingency fee basis, or any other party reasonably approved in writing by Landlord. In no event will an authorized representative of Tenant include the owner of any office, life sciences, or industrial building in the Research Triangle Park, North Carolina area or any Affiliate of such owner. Prior to commencement of such audit, Tenant shall cause its authorized representative to agree in writing for the benefit of Landlord that such representative will keep the results of the audit confidential and that such representative will not disclose or divulge the results of such audit to anyone other than Tenant, Landlord and the counsel and accountants of Landlord and Tenant who have a need to know such information, except in connection with any dispute between Landlord and Tenant relating to Operating Expenses. Such audit will be conducted during reasonable business hours at Landlord's office where Landlord's books and records are maintained or Landlord shall, if requested by Tenant, provide the applicable documentation to Tenant via a secure, electronic portal acceptable to Landlord (provided that Tenant shall reimburse Landlord for any costs actually incurred by Landlord in making such documentation available via such electronic portal not to exceed $500.00), shall not unreasonably interfere with the conduct of Landlord's business, and shall be conducted only during business hours reasonably designated by Landlord. Tenant shall cause such audit to be completed within thirty (30) days, and upon completion, shall cause a written audit report to be prepared by its authorized representative following any such audit and shall provide Landlord with a copy of such report promptly after receipt thereof by Tenant. If Landlord's calculation of Tenant's Share of Operating Expenses for the audited Expense Year was incorrect, then Tenant will be entitled to a prompt (within thirty [30] days following delivery of the completed audit report) refund of any overpayment or Tenant shall promptly (within thirty [30] days following delivery of the completed audit report) pay to Landlord the amount of any underpayment, as the case may be. Nothing in this Section 4.3 shall be construed to limit, suspend or abate Tenant's obligation to pay Rent when due, including Additional Rent. Tenant hereby acknowledges that Tenant's sole right to audit Landlord's books and records and to contest the amount of Operating Expenses payable by Tenant shall be as set forth in this Section 4.3. Landlord agrees to work with Tenant and its auditor in a good faith and commercially reasonable manner (provided Tenant and such auditor do the same) to resolve any factual inaccuracies in such audit or to resolve any disputes associated with the results of any audit performed by Tenant; provided, however, that Landlord's good faith, reasonable judgment regarding the proper interpretation of this Lease and the proper accounting for Operating Expenses shall be binding on Tenant in connection with any such audit or inspection. If the final resolution of such audit determines that Landlord overcharged Tenant by more than five percent (5%), Landlord shall reimburse the actual, out-of-pocket costs of Tenant's audit in an amount not to exceed $2,500.00. This provision shall survive the expiration or earlier termination of this Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.4 <u>Calculation and Payment of Additional Rent</u>.** Tenant shall pay to Landlord, in the manner set forth in <u>Section 4.4.1</u>, below, and as Additional Rent, Tenant's Share of Direct Expenses for each Expense Year. If the Rent Commencement Date is a day other than the first day of an Expense Year, or if this Lease terminates or expires on a day other than the last day of an Expense Year, then Additional Rent shall be prorated in the manner provided in Section 3.1 above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4.1 <u>Statement of Actual Direct Expenses and Payment by Tenant</u>. By March 31 of each calendar year or as soon thereafter as practicable (Landlord agreeing to use good faith, commercially reasonable efforts to cause the Statement to be delivered by March 31 of each year), Landlord shall deliver to Tenant a statement (the "**Statement**") which shall state the Direct Expenses incurred or accrued for such preceding Expense Year or partial Expense Year, and which shall indicate the amount of Tenant's Share of Direct Expenses. Upon receipt of the Statement for each Expense Year or partial Expense Year during the Lease Term, Tenant shall pay, with its next installment of Base Rent due, the full amount of Tenant's Share of Direct Expenses for such Expense Year, less the amounts, if any, paid during such Expense Year as Estimated Direct Expenses (as defined in <u>Section 4.4.2</u> below), and if Tenant paid more as Estimated Direct Expenses than the actual Tenant's Share of Direct Expenses, Tenant shall receive a credit in the amount of Tenant's overpayment against Rent next due under this Lease. The failure of Landlord to timely furnish the Statement for any Expense Year shall not prejudice Landlord or Tenant from enforcing its rights under this <u>Article 4</u>. Even though the Lease Term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant's Share of Direct Expenses for the Expense Year in which this Lease terminates, Tenant shall pay to Landlord such amount within thirty (30) days, and if Tenant paid more as Estimated Direct Expenses than the actual Tenant's Share of Direct Expenses, Landlord shall, within thirty (30) days, deliver a check payable to Tenant in the amount of the overpayment. The provisions of this <u>Section 4.4.1</u> shall survive the expiration or earlier termination of the Lease Term. Notwithstanding the immediately preceding sentence, Tenant shall not be responsible for Tenant's Share of any Direct Expenses attributable to any Expense Year which are first billed to Tenant more than two (2) calendar years after the Lease Expiration Date, provided that in any event Tenant shall be responsible for Tenant's Share of Direct Expenses levied by any governmental authority or by any public utility companies at any time following the Lease Expiration Date which are attributable to any Expense Year (provided that Landlord delivers Tenant a bill for such amounts within two (2) years following Landlord's receipt of the bill therefor).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4.2 <u>Statement of Estimated Direct Expenses</u>. In addition, Landlord shall give Tenant a yearly expense estimate statement (the "**Estimate Statement**") which shall set forth Landlord's reasonable estimate (the "**Estimate**") of what the total amount of Direct Expenses for the then-current Expense Year shall be and the estimated Tenant's Share of Direct Expenses (the "**Estimated Direct Expenses**"). The Estimate Statement may be included as part of the Statement delivered by Landlord. The failure of Landlord to timely furnish the Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Estimated Direct Expenses under this <u>Article 4</u>, nor shall Landlord be prohibited from revising any Estimate Statement or Estimated Direct Expenses theretofore delivered to the extent necessary. Thereafter, Tenant shall pay, with its next installment of Base Rent due, a fraction of the Estimated Direct Expenses for the then-current Expense Year (reduced by any amounts paid pursuant to the last sentence of this <u>Section 4.4.2</u>). Such fraction shall have as its numerator the number of months which have elapsed in such current Expense Year, including the month of such payment, and twelve (12) as its denominator. Until a new Estimate Statement is furnished (which Landlord shall have the right to deliver to Tenant at any time), Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one-twelfth (1/12) of the total Estimated Direct Expenses set forth in the previous Estimate Statement delivered by Landlord to Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.5 <u>Taxes for Which Tenant Is Directly Responsible</u>.** Tenant shall be liable for and shall pay prior to delinquency, all taxes levied or assessed against Tenant's equipment, furniture, fixtures, betterments, improvements, alterations and any other personal property located in or about the Premises or in the Building or on the Project. If any such taxes for which Tenant is liable are levied or assessed against Landlord or Landlord's property or if the assessed value of Landlord's property is increased by the inclusion of such equipment, furniture, fixtures, betterments, improvements, alterations or other personal property and if Landlord pays the taxes based upon such increase, then Tenant shall pay to Landlord, within thirty (30) days following written request therefor, the part of such taxes for which Tenant is primarily liable hereunder; however, Landlord shall not pay such amount if Tenant notifies Landlord in writing that it will contest the validity or amount of such taxes before Landlord makes such payment, and thereafter diligently proceeds with such contest in accordance with Applicable Law and if the non-payment thereof does not pose a threat of loss or seizure of the Project (or any part thereof) or interest of Landlord therein or impose any fee or penalty against Landlord.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.6 <u>Cap on Controllable Operating Expenses</u>**. Notwithstanding anything contained herein to the contrary, for purposes of determining Tenant's Share of Operating Expenses for each calendar year after the first full calendar year of the Lease Term, in no event shall the cost of Tenant's Share of Controllable Operating Expenses (as defined below) increase by more than five percent (5%) of Tenant's Share of Controllable Operating Expenses for the immediately preceding calendar year of the Lease Term on a cumulative and compounding basis. For purposes of this Lease, "**Controllable Operating Expenses**" shall mean all Operating Expenses other than (i) utility costs (including all taxes, fees, surcharges and other charges and costs imposed in connection therewith); (ii) the cost of complying with new laws or any modifications or additional regulations related to any existing laws which first become effective after the date of this Lease; (iii) the cost of Landlord's insurance; (iv) taxes, assessments and similar charges; (v) management fees (based upon a change in the gross income of the Project; provided, however, no increase in the Management Fee Cap is allowed); (vi) snow and ice removal costs; (vii) maintenance and repair costs (or increases to any costs) incurred in connection with or as a result of adverse weather conditions (including extraordinary landscape maintenance costs, such as those resulting from infestation, storms, drought and other severe weather); (viii) charges, costs and expenses assessed against or attributed to the Project (or any portion thereof) pursuant to any recorded Underlying Documents; (ix) costs incurred in connection with the fire/life safety systems serving the Building; (x) costs incurred in connection with state/county mandated inspections; (xi) third party security costs and trash removal costs which are subject to negotiation or change from time to time; and (xii) costs and expenses associated with emergency repairs required to keep the Building and Common Areas in first class condition. Notwithstanding anything herein to the contrary, in the event the Premises are expanded during the Lease Term, the then current cap on Controllable Operating Expenses set forth herein shall automatically be increased in proportion to the increase in the rentable square footage of the Premises (based upon the rate of Controllable Operating Expenses calculated on a per rentable square foot basis).

**5.** **USE OF PREMISES** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.1 <u>Permitted Use</u>.** Tenant shall use the Premises solely for the Permitted Use set forth in <u>Section 8</u> of the Summary and Tenant shall not use or knowingly permit the Premises or the Project to be used for any other purpose or purposes whatsoever without the prior written consent of Landlord, which may be withheld in Landlord's sole discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.2 <u>Prohibited Uses</u>.** Tenant further covenants and agrees that Tenant shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose contrary to the provisions of the Rules and Regulations set forth in **<u>Exhibit E</u>**, attached hereto and incorporated herein by this reference, as the same may be amended from time to time (the "**Rules and Regulations**"), or in violation of any Underlying Documents or Applicable Laws, including, without limitation, any such laws, ordinances, regulations or requirements relating to hazardous materials or substances, as those terms are defined by Applicable Laws now or hereafter in effect. Tenant shall not do or permit anything to be done in or about the Premises which will damage the reputation of the Project or obstruct or interfere with the rights of other tenants or occupants of the Project, or injure or annoy them or use or allow the Premises to be used for any improper, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises. Tenant shall not suffer or allow any offensive or obnoxious vibration, noise, odor or other undesirable effect to emanate from the Premises, or any machine or other installation therein, or otherwise suffer or allow the same to constitute a disturbance to other tenants or occupants of the Building (acknowledging that Tenant may be using the Premises in a manner that is different from other tenants or occupants of the Building and that Tenant's use of the Premises for the Permitted Use will not be deemed to constitute a disturbance to such other tenants or occupants so long as Tenant is using the Premises in a manner reasonably similar to other similarly situated life science or biotech companies involved in light manufacturing in similarly situated buildings or developments, in accordance with the terms of this Lease, takes appropriate measures in its design of the Premises to ensure that its operations will not unreasonably disturb other tenants or occupants, and otherwise uses commercially reasonable efforts not to disturb such other tenants or occupants of the Building). Tenant shall comply with, and Tenant's rights and obligations under this Lease and Tenant's use of the Premises shall be subject and subordinate to, all recorded easements, covenants, conditions, and restrictions now or hereafter affecting the Project. Additionally, Tenant shall cooperate fully with Landlord at all times and abide by all regulations and requirements that Landlord may reasonably prescribe for the proper functioning and protection of the HVAC, electrical, mechanical and plumbing systems. Notwithstanding the foregoing, in the event of any conflict between any Rules and Regulations and the express terms of this Lease, the terms of this Lease shall control. Landlord shall provide reasonable advance written notice of any changes to the Rules and Regulations, and Landlord shall not institute any changes to the Rules and Regulations that (a) unreasonably and materially prohibit Tenant from using the Premises for the Permitted Use, (b) directly by its terms requires payment of an additional material sum of money, and (c) are not uniformly applicable to the tenants in the Building using the Premises in a manner consistent with the Permitted Use (provided that such changes may affect Tenant or other tenants in different ways based on their use of the premises or rights granted to Tenant or such other tenant(s), and further provided that Landlord shall have the right to waive a rule or regulation for the benefit of a particular tenant or tenants).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.3 <u>Intentionally Omitted</u>.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.4 <u>Hazardous Materials</u>.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.1 <u>Tenant's Obligations</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.1.1 <u>Prohibitions</u>. As a material inducement to Landlord to enter into this Lease with Tenant, Tenant has fully and accurately completed Landlord's Pre-Leasing Environmental Exposure Questionnaire (the "**Environmental Questionnaire**"), which is attached as **<u>Exhibit G</u>**. Tenant hereby represents and warrants that, as of the date hereof and the date of each subsequent Environmental Questionnaire delivered by Tenant to Landlord, the person executing the Environmental Questionnaire on Tenant's behalf has the authority to complete and execute such document on Tenant's behalf and is in the best position to know all Hazardous Materials used by Tenant at the Premises, as well as any other information requested or included within such Environmental Questionnaire. Tenant hereby further represents, warrants and covenants that except for (a) those chemicals or materials, and their respective quantities, specifically listed on the Environmental Questionnaire (as the same may be updated from time to time in accordance with this <u>Section 5.4</u>) or (b) chemicals or materials similar to those disclosed in the Environmental Questionnaire and in quantities that are consistent with the quantities of the chemicals or materials disclosed in the Environmental Questionnaire and which are used in the course of Tenant's standard business operations, and then only in compliance with applicable Environmental Laws (such chemicals or materials in Sections 5.4.1.1(a) and 5.4.1.1(b), are the "**Permitted Hazardous Materials**"), neither Tenant nor Tenant's employees, contractors and subcontractors of any tier, entities with a contractual relationship with Tenant (other than Landlord), or any entity acting as an agent or sub-agent of Tenant (collectively, "**Tenant's Agents**") will produce, use, store or generate any "Hazardous Materials," as that term is defined below, on, under or about the Premises, nor cause or permit any Hazardous Material to be brought upon, placed, stored, manufactured, generated, blended, handled, recycled, used or "Released," as that term is defined below, on, in, under or about the Premises in violation of, or in a manner requiring any cleanup, removal, or remedial action pursuant to applicable Environmental Laws. If any information provided to Landlord by Tenant in writing on the Environmental Questionnaire is false, incomplete, or misleading in any material respect, the same shall be deemed a default by Tenant under this Lease, but subject to applicable notice and cure periods. Tenant shall deliver to Landlord an updated Environmental Questionnaire at least once per year, or in the event of any "Material Change in Tenant's Use of Hazardous Materials" (as hereinafter defined) at the Premises (following Landlord's prior written consent to the same), or at any other time upon Landlord's request if an Event of Default is then in existence or if Landlord, acting in a commercially reasonable manner, has reason to believe that Tenant is using Hazardous Materials in the Premises in a manner that is not in compliance with all applicable Environmental Laws. For purposes of this Section, a "**Material Change in Tenant's Use of Hazardous Materials**" shall mean Tenant initiates a process in the Premises that (i) utilizes one or more new classes of chemistries of Hazardous Materials that are not listed on the most recent Environmental Questionnaire and (ii) is at a scale that produces batches of such Hazardous Materials that are equal to or in excess of 30 kilograms. Tenant shall notify Landlord of any new Hazardous Materials used in its business at the Premises or Project which are not Permitted Hazardous Materials and which such new use will trigger an obligation under applicable Environmental Laws for Tenant to notify a regulatory agency. Landlord's prior written consent shall be required for all such new Hazardous Materials that are not Permitted Hazardous Materials that Tenant desires to use in its Material Change in Tenant's Use of Hazardous Materials, such consent not to be unreasonably withheld so long as such new Hazardous Materials (and the use thereof) that are not Permitted Hazardous Materials comply with all Applicable Laws and Underlying Documents, are reasonably required for the operation of Tenant's business in the Premises, do not violate the terms of any warranties, loan agreements or other agreements to which Landlord is a party and that are applicable to the Building, do not materially increase the risk of damage to the Building or Project, do not materially increase the risk or potential liability of Landlord or Tenant (whether under this Lease or otherwise), and do not materially increase Landlord's insurance costs or other costs associated with the operation of the Project. Tenant shall not install or permit any underground storage tank on the Premises. Tenant shall comply with the terms of this Lease and all Applicable Laws with respect to any Hazardous Materials Tenant brings onto the Premises or the Project. In addition, Tenant agrees that it: (i) shall not cause or suffer to occur, the Release of any Hazardous Materials at, upon, under or within the Premises or any contiguous or adjacent premises in violation of applicable Environmental Laws; and (ii) shall not engage in activities at the Premises related to Hazardous Materials that are not in compliance with Applicable Laws, the terms and conditions of this Lease, or that are reasonably likely to result in, give rise to, or lead to the imposition of material liability upon Tenant or Landlord or the creation of an environmental lien or use restriction upon the Premises. For purposes of this Lease, "**Hazardous Materials**" means all flammable explosives, petroleum and petroleum products, waste oil, radon (not including naturally occurring radon), radioactive materials, toxic pollutants, asbestos, polychlorinated biphenyls ("**PCBs**"), medical waste, chemicals known to cause cancer or reproductive toxicity, pollutants, contaminants, hazardous wastes, toxic substances or related materials, including without limitation any chemical, element, compound, mixture, solution, substance, object, waste or any combination thereof, which is or may be hazardous to human health, safety or to the environment due to its radioactivity, ignitability, corrosiveness, reactivity, explosiveness, toxicity, carcinogenicity, infectiousness or other harmful or potentially harmful properties or effects, or defined as, regulated as or included in, the definition of "hazardous substances," "hazardous wastes," "hazardous materials," or "toxic substances" under any Environmental Laws. For purposes of this Lease, "**Release**" or "**Released**" or "**Releases**" shall mean any release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing, or other movement of Hazardous Materials into the environment. Notwithstanding the foregoing, any airborne or waste water emission/release of a Hazardous Material that occurs in the ordinary course of Tenant's business and in accordance with requirements of applicable Environmental Laws shall not constitute a Release for purposes of this Lease.

Any use or storage of Hazardous Materials by Tenant permitted pursuant to this Article 5 shall not exceed Tenant's proportionate share (measured on a per floor basis), based on the standards of the BMBL (as defined below), of similarly classed Hazardous Materials. Notwithstanding the foregoing to the contrary, in no event shall Tenant or anyone claiming by, through or under Tenant perform work at or above the risk category Biosafety Level 2 as established by the Department of Health and Human Services ("**DHHS**") and as further described in the DHHS publication Biosafety in Microbiological and Biomedical Laboratories (5th Edition) (as it may be or may have been further revised, the "**BMBL**") or such nationally recognized new or replacement standards as Landlord may reasonably designate. Tenant shall comply with all applicable provisions of the standards of the BMBL to the extent applicable to Tenant's operations in the Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.1.2 <u>Allocation of Control Area</u>. Landlord hereby grants to Tenant the right to use, for no additional fee or expense, one (1) of the four (4) "Control Areas" (as defined in Section 202 of the applicable edition of the North Carolina State Building Code, and more particularly addressed in Section 414 of the applicable edition of the North Carolina State Building Code) within the Building. The control area allocated to the Tenant pursuant to this Section 5.4.1.2 is hereinafter referred to as the "**Premises Control Area**" and shall be located within the Premises. Tenant shall be solely responsible for ensuring that the Premises Control Area complies with all specifications required under Applicable Law and for ensuring that it does not use the Premises Control Area in such a way that Tenant would be using more than one (1) control area within the Building or in a way that such use would violate any Applicable Laws. Tenant's use, manufacturing, creation, release and storage of Hazardous Materials within the Premises Control Area shall be subject to all applicable provisions of this Lease (including, without limitation, the obligation to disclose all such Hazardous Materials in the Environmental Questionnaire). For purposes of clarity, nothing in this Section 5.4.1.2 is intended to limit the provisions of Section 5.4 of this Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.1.3 <u>Notices to Landlord</u>. Unless Tenant is required by Applicable Laws to give earlier notice to Landlord, Tenant shall notify Landlord in writing as soon as reasonably possible but in no event later than two (2) business days after Tenant having knowledge of (i) the occurrence of any actual, alleged or threatened Release of any Hazardous Material in, on, under, from, about or in the vicinity of the Premises (whether past or present), regardless of the source or quantity of any such Release of which Tenant has or reasonably should have actual knowledge, or (ii) Tenant becomes aware of any regulatory actions, inquiries, inspections, investigations, directives, or any cleanup, compliance, enforcement or abatement proceedings (including any threatened or contemplated investigations or proceedings, but excluding any routinely scheduled compliance inspections of the Premises with applicable governmental authorities and which are solely applicable to Tenant) relating to or potentially affecting the Premises, or (iii) Tenant becomes aware of any claims by any person or entity relating to any Hazardous Materials in, on, under, from, about or in the vicinity of the Premises, whether relating to damage, contribution, cost recovery, compensation, loss or injury. Collectively, the matters set forth in clauses (i), (ii) and (iii) above are hereinafter referred to as "**Hazardous Materials Claims**". Tenant shall promptly forward to Landlord copies of all written orders, notices, permits, applications and other communications and reports in connection with any Hazardous Materials Claims. Additionally, Tenant shall promptly advise Landlord in writing of Tenant's discovery of any occurrence or condition on, in, under or about the Project that could subject Tenant or Landlord to any liability, or restrictions on ownership, occupancy, transferability or use of the Premises under any Environmental Laws (as defined below). Tenant shall not enter into any legal proceeding or other action, settlement, consent decree or other compromise with respect to any Hazardous Materials Claims without first notifying Landlord of Tenant's intention to do so and affording Landlord the opportunity to join and participate, as a party if Landlord so elects, in such proceedings and in no event shall Tenant enter into any agreements which are binding on Landlord or the Premises without Landlord's prior written consent. Landlord shall have the right to appear at and participate in, any and all legal or other administrative proceedings concerning any Hazardous Materials Claim. For purposes of this Lease, "**Environmental Laws**" means all applicable present and future laws, including principles of common law, relating to the protection of human health, safety, wildlife or the environment, including, without limitation, (i) all requirements pertaining to reporting, licensing, permitting, investigation and/or remediation of emissions, discharges, Releases, or threatened Releases of Hazardous Materials, whether solid, liquid, or gaseous in nature, into the air, surface water, groundwater, or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of Hazardous Materials; and (ii) all requirements pertaining to the health and safety of employees or the public. Environmental Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 USC § 9601, et seq., the Hazardous Materials Transportation Authorization Act of 1994, 49 USC § 5101, et seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, and Hazardous and Solid Waste Amendments of 1984, 42 USC § 6901, et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 USC § 1251, et seq., the Clean Air Act of 1966, 42 USC § 7401, et seq., the Toxic Substances Control Act of 1976, 15 USC § 2601, et seq., the Safe Drinking Water Act of 1974, 42 USC §§ 300f through 300j, the Occupational Safety and Health Act of 1970, as amended, 29 USC § 651 et seq., the Oil Pollution Act of 1990, 33 USC § 2701 et seq., the Emergency Planning and Community Right-To-Know Act of 1986, 42 USC § 11001 et seq., the National Environmental Policy Act of 1969, 42 USC § 4321 et seq., the Federal Insecticide, Fungicide and Rodenticide Act of 1947, 7 USC § 136 et seq., North Carolina Oil Pollution and Hazardous Substances Control Act, N.C. Gen. Stat. § 143-215.75 et seq., North Carolina Inactive Hazardous Sites Act, N.C. Gen. Stat. § 130A-310, North Carolina Water and Air Resources Act, N.C. Gen. Stat. § 143-211 et seq., 15A N.C. Admin. Code Subchapter 2L, , and any other state or local law counterparts, as amended, as such Applicable Laws, are in effect as of the Lease Commencement Date, or thereafter adopted, published, or promulgated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.1.4 <u>Releases of Hazardous Materials</u>. If any Release of any Hazardous Material in, on, under, from or about the Premises shall occur at any time during the Lease and/or if any other Hazardous Material condition exists at the Premises as a result of the acts or omissions of Tenant that requires response actions to cause the Premises to comply with Environmental Laws (even if a notice of violation of the same has not been delivered), in addition to notifying Landlord as specified above, Tenant, at its own sole cost and expense, shall (i) immediately comply with any and all reporting requirements imposed pursuant to any and all Environmental Laws, (ii) provide a written certification to Landlord indicating that Tenant has complied with all applicable reporting requirements, (iii) take any and all necessary investigation, corrective and remedial action in accordance with any and all applicable Environmental Laws, utilizing an environmental consultant reasonably approved by Landlord, all in accordance with the provisions and requirements of this <u>Section 5.4</u>, including, without limitation, <u>Section 5.4.4</u>, and (iv) take such additional investigative, remedial and corrective actions as Landlord shall in its reasonable discretion deem necessary such that the Premises are remediated to a condition allowing unrestricted use of the Premises under applicable Environmental Laws (i.e. to a level that will allow any future use of the Premises, including residential, without any engineering controls or deed restrictions), all in accordance with the provisions and requirements of this <u>Section 5.4</u>. Landlord may, as required by any and all Environmental Laws, report the Release of any Hazardous Material to the appropriate governmental authority, identifying Tenant as potentially being the responsible party. Tenant shall deliver to Landlord copies of all written administrative orders, notices, demands, directives or other communications directed to Tenant from any governmental authority with respect to any Release of Hazardous Materials in, on, under, from, or about the Premises, together with copies of all investigation, assessment, and remediation plans and reports prepared by or on behalf of Tenant in response to any such regulatory order or directive. Notwithstanding the foregoing, if Tenant provides Landlord with substantial proof that a Release in the Premises was caused by another tenant or occupant in the Project and in Landlord's reasonable opinion such cause violates the terms of such tenant's or occupant's lease or other occupancy agreement, then Landlord shall use good faith, commercially reasonable efforts to cause such tenant or occupant to remediate or otherwise remedy such Release to the extent Landlord has the ability to do so under such lease or occupancy agreement; provided, however, that such commercially reasonable efforts shall not require Landlord to put such tenant or occupant in default under its lease or other agreement, terminate any such agreement, nor pursue any litigation against such tenant or occupant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.1.5 <u>Indemnification</u>. Without limiting in any way Tenant's obligations under any other provision of this Lease, Tenant shall be solely responsible for and shall protect, defend, indemnify and hold the Landlord Parties harmless from and against any and all claims, judgments, losses, damages, costs, expenses, penalties, enforcement actions, taxes, fines, remedial actions, liabilities (including, without limitation, actual attorneys' fees, litigation, arbitration and administrative proceeding costs, expert and consultant fees and laboratory costs) including, without limitation, consequential damages and sums paid in settlement of claims, which arise during or after the period beginning on the Lease Commencement Date and ending upon the expiration of the Lease Term, whether foreseeable or unforeseeable, directly or indirectly arising out of or attributable to the presence, use, generation, manufacture, treatment, handling, refining, production, processing, storage, Release or presence of Hazardous Materials in, on, under or about the Premises by Tenant, except to the extent such liabilities result from the gross negligence or willful misconduct of Landlord following the Lease Commencement Date. The foregoing obligations of Tenant shall include, including without limitation: (i) the costs of any required or necessary removal, repair, cleanup or remediation of the Premises, and the preparation and implementation of any closure, removal, remedial or other required plans; (ii) judgments for personal injury or property damages; and (iii) all costs and expenses incurred by Landlord in connection therewith. It is the express intention of the parties to this Lease that Tenant assumes all such liabilities, and holds Landlord harmless from all such liabilities, associated with the environmental condition of the Premises, arising on or after the date Tenant takes possession of the Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.1.5.1 Landlord warrants and represents to Tenant that, to Landlord's knowledge, as of the Lease Date and except as otherwise disclosed in that certain Phase I Environmental Site Assessment prepared by Ramboll US Corporation (Project Number 1690016903) and dated January 2020, Landlord has not received a summons, citation, directive, letter or other written communication from any state agency, the U.S. Government, or a tenant or adjacent landowner or tenant concerning a violation of any applicable Environmental Laws, which has not be remedied on or prior to the Lease Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.1.6 <u>Compliance with Environmental Laws</u>. Without limiting the generality of Tenant's obligation to comply with Applicable Laws as otherwise provided in this Lease, Tenant shall, at its sole cost and expense, comply with all Environmental Laws. Tenant shall obtain and maintain any and all necessary permits, licenses, certifications and approvals appropriate or required for the use, handling, storage, and disposal of any Hazardous Materials used, stored, generated, transported, handled, blended, or recycled by Tenant on the Premises or elsewhere on the Project. Landlord shall have a continuing right, without obligation, to require Tenant to obtain, and to review and inspect any and all such permits, licenses, certifications and approvals, together with copies of any and all Hazardous Materials management plans and programs, any and all Hazardous Materials risk management and pollution prevention programs, and any and all Hazardous Materials emergency response and employee training programs respecting Tenant's use of Hazardous Materials.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.2 <u>Assurance of Performance</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.2.1 <u>Environmental Assessments In General</u>. Landlord may, but shall not be required to, engage from time to time such contractors as Landlord determines to be appropriate to perform "Environmental Assessments," as that term is defined below, to ensure Tenant's compliance with the requirements of this Lease with respect to Hazardous Materials; provided, however, that the foregoing right shall be subject to the notice requirement in <u>Section 27</u> if Landlord enters the Premises to perform such assessment. For purposes of this Lease, "**Environmental Assessment**" means an assessment including, without limitation: (i) an environmental site assessment conducted in accordance with the then-current standards of the American Society for Testing and Materials and meeting the requirements for satisfying the "all appropriate inquiries" requirements; and (ii) sampling and testing of the Premises based upon potential recognized environmental conditions or areas of concern or inquiry identified by the environmental site assessment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.2.2 <u>Costs of Environmental Assessments</u>. All reasonable costs and expenses incurred by Landlord in connection with any such Environmental Assessment initially shall be paid by Landlord; provided that if any such Environmental Assessment shows that Tenant has failed to comply with the provisions of this <u>Section 5.4</u>, then all of the costs and expenses of such Environmental Assessment shall be reimbursed by Tenant as Additional Rent within thirty (30) days after receipt of written demand therefor (and reasonable documentation of Tenant's failure to comply with its obligations under this <u>Section 5.4</u>, which may be satisfied by Landlord's delivery of the Environmental Assessment).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.3 <u>Tenant's Obligations upon Surrender</u>. At the expiration or earlier termination of the Lease Term, Tenant, at Tenant's sole cost and expense, shall: (i) cause an Environmental Assessment of the Premises to be conducted in accordance with <u>Section 15.3</u>; (ii) cause all Hazardous Materials to be removed from the Premises and disposed of in accordance with all Environmental Laws and as necessary to allow the Premises to be used for any purpose; and (iii) cause to be removed all containers installed or used by Tenant or Tenant's Agents to store any Hazardous Materials on the Premises, and cause to be repaired any damage to the Premises caused by such removal.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.4 <u>Clean-up</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.4.1 <u>Environmental Reports; Clean-Up</u>. If any written report, including any report containing results of any Environmental Assessment (an "**Environmental Report**") shall indicate (i) the presence of any Hazardous Materials as to which Tenant has a removal or remediation obligation under this <u>Section 5.4</u>, and (ii) that as a result of same, the investigation, characterization, monitoring, assessment, repair, closure, remediation, removal, or other clean-up (the "**Clean-up**") of any Hazardous Materials is required, Tenant shall promptly prepare and submit to Landlord within thirty (30) days after receipt of the Environmental Report a comprehensive plan, subject to Landlord's written approval, specifying the actions to be taken by Tenant to perform the Clean-up so that the Premises are restored to the conditions required by this Lease. Upon Landlord's approval of the Clean-up plan, Tenant shall, at Tenant's sole cost and expense, without limitation on any rights and remedies of Landlord under this Lease, immediately implement such plan with a consultant reasonably acceptable to Landlord and proceed to Clean-Up Hazardous Materials in accordance with all Applicable Laws and as required by such plan and this Lease. If, within thirty (30) days after receiving a copy of such Environmental Report, Tenant fails either (a) to complete such Clean-up, or (b) with respect to any Clean-up that cannot be completed within such thirty-day period, fails to proceed with diligence to prepare the Clean-up plan and complete the Clean-up as promptly as practicable, then Landlord shall have the right, but not the obligation, and without waiving any other rights under this Lease, to carry out any Clean-up recommended by the Environmental Report or required by any governmental authority having jurisdiction over the Premises, and recover all of the costs and expenses thereof from Tenant as Additional Rent, payable within ten (10) business days after receipt of written demand therefor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.4.2 <u>No Rent Abatement</u>. Tenant shall continue to pay all Rent due or accruing under this Lease during any Clean-up, and shall not be entitled to any reduction, offset or deferral of any Base Rent or Additional Rent due or accruing under this Lease during any such Clean-up.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.4.3 <u>Surrender of Premises</u>. Tenant shall complete any Clean-up prior to surrender of the Premises upon the expiration or earlier termination of this Lease, and shall fully comply with all Environmental Laws and requirements of any governmental authority with respect to such completion, including, without limitation, fully comply with any requirement to file a risk assessment, mitigation plan or other information with any such governmental authority in conjunction with the Clean-up prior to such surrender. Tenant shall obtain and deliver to Landlord a letter or other written determination from the overseeing governmental authority confirming that the Clean-up has been completed in accordance with all requirements of such governmental authority and that no further response action is required for the unrestricted use of the Premises ("**Closure Letter**"). Upon the expiration or earlier termination of this Lease, Tenant shall also be obligated to close all permits obtained in connection with Hazardous Materials in accordance with Applicable Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.4.4 <u>Failure to Timely Clean-Up</u>. Should any Clean-up for which Tenant is responsible not be completed, or should Tenant not receive the Closure Letter and any governmental approvals required under Environmental Laws in conjunction with such Clean-up prior to the expiration or earlier termination of this Lease, and Tenant's failure to receive the Closure Letter is prohibiting Landlord from leasing the Premises or any part thereof to a third party, or prevents the occupancy or use of the Premises or any part thereof by a third party, then, subject to any extension of time of such deadline if such failure is due to an event of Force Majeure (as defined in <u>Section 29.10</u> of this Lease), Tenant shall be liable to Landlord as a holdover tenant (as more particularly provided in <u>Article 16</u>) until Tenant has fully complied with its obligations under this <u>Section 5.4</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.5 <u>Confidentiality</u>. Unless compelled to do so by Applicable Law, Tenant agrees that Tenant shall not disclose, discuss, disseminate or copy any information, data, findings, communications, conclusions and reports regarding the environmental condition of the Premises to any Person (other than Tenant's consultants, attorneys, property managers and employees that have a need to know such information), including any governmental authority, without the prior written consent of Landlord. In the event Tenant reasonably believes that disclosure is compelled by Applicable Law, it shall provide Landlord ten (10) days' advance notice of disclosure of confidential information so that Landlord may attempt to obtain a protective order. Tenant may additionally release such information to bona fide prospective purchasers or lenders, subject to any such parties' written agreement to be bound by the terms of this <u>Section 5.4</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.6 <u>Copies of Environmental Reports</u>. Within thirty (30) days of receipt thereof, Tenant shall provide Landlord with a copy of any and all environmental assessments, audits, studies and reports regarding Tenant's activities with respect to the Premises, or ground water beneath the land upon which the Building is located, or the environmental condition or Clean-up thereof. Tenant shall be obligated to provide Landlord with a copy of such materials without regard to whether such materials are generated by Tenant or prepared for Tenant, or how Tenant comes into possession of such materials.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.7 <u>Signs, Response Plans, Etc</u>. Tenant shall be responsible for posting on the Premises any signs required under applicable Environmental Laws. Tenant shall also complete and file any business response plans or inventories required by any Applicable Laws. Tenant shall concurrently file a copy of any such business response plan or inventory with Landlord.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.8 <u>Survival</u>. Each covenant, agreement, representation, warranty and indemnification made by Tenant set forth in this <u>Section 5.4</u> shall survive the expiration or earlier termination of this Lease and shall remain effective until all of Tenant's obligations under this <u>Section 5.4</u> have been completely performed and satisfied

**6.** **SERVICES AND UTILITIES** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.1 <u>Utility Services and Landlord Services.</u>** Landlord shall provide or cause to be provided the mains, conduits and other facilities necessary to supply water, gas, electricity, telephone service and sewage service to the Premises. Tenant shall however, be responsible at its expense, to make provisions for connecting or hooking up to such utilities, directly with the appropriate utility company providing such service. Landlord shall, in a manner reasonably consistent with other comparable first-class commercial office and lab properties in the market, provide (a) routine maintenance, painting and electrical lighting service for all Common Areas in the manner and to the extent deemed by Landlord to be standard, (b) ice and snow removal for all driveways and parking in the Common Areas in the manner and to the extent deemed by Landlord to be standard when taking into account comparable first-class commercial office and lab properties in the market, and (c) sealing, re-topping, and striping all driveways and parking lots in the manner and to the extent deemed by Landlord to be standard when taking into account comparable first-class commercial office and lab properties in the market, all of which shall be included in Operating Expenses. Landlord may, in its sole discretion, provide additional services not enumerated herein, which shall also be included in Operating Expenses. Notwithstanding anything in this Lease to the contrary, Tenant acknowledges that if Landlord or Landlord's property manager elects to provide security services to the Common Areas, neither Landlord nor Landlord's property manager represents, guarantees or assumes responsibility that Tenant will be secure from any actions, proceedings, damages or expenses relating to such security officers, and in no event shall Landlord have any responsibility, or be deemed to have elected, to provide security services for the Premises. Neither Landlord nor Landlord's property manager shall have any obligation to hire, maintain or provide such security services, which may be withdrawn or changed at any time with or without notice to Tenant or any other person and without liability to Landlord or Landlord's property manager. Without limiting the generality of the foregoing, Tenant acknowledges that LANDLORD MAKES NO REPRESENTATION OR WARRANTY REGARDING WHETHER OR NOT LANDLORD WILL PROVIDE SECURITY SERVICES, OR IF SO, WHAT FORM OF SECURITY SERVICES WILL BE PROVIDED.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.2 <u>Tenant Provided Services and Utilities</u>.** Except as otherwise expressly set forth in <u>Section 6.1</u>, above, Tenant will be responsible, at its sole cost and expense, for the furnishing of all other services and utilities to the Premises including, without limitation, internet, telephone, janitorial and security services.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2.1 Landlord shall not provide janitorial or trash services for the Premises. Tenant shall be solely responsible for performing all security within the Premises and entrance thereof, janitorial and trash services and other cleaning of the Premises, and for the storage, removal, disposal, handling and transporting of all Hazardous Materials, biohazardous waste and other waste from the Premises, all in compliance with Applicable Laws. Tenant's responsibilities with respect to trash services shall include the obligation to place, provide and maintain its own dumpster (including any required screening) for the disposal of Tenant's ordinary office waste in a location designated by Landlord in the Project. In the event Tenant's janitorial service is provided by a third-party janitorial service, and not by employees of Tenant, such service shall be a janitorial service approved in advance by Landlord, but such approval shall not be unreasonably withheld, conditioned, or delayed. The janitorial and cleaning of the Premises shall be adequate to maintain the Premises in a first-class condition. For purposes of clarity and notwithstanding anything in this Lease to the contrary, Tenant shall be solely responsible for any security within the Premises and entry of the Premises and for any security system to protect against unauthorized entry into the Premises, and Landlord shall have no obligations as to the foregoing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2.2 Subject to Applicable Laws and the other provisions of this Lease (including, without limitation, the Rules and Regulations, and except in the event of an emergency), Tenant shall have access to the Building, the Premises and the Common Areas of the Building, other than Common Areas requiring access with a Building engineer or Landlord representative (including, without limitation, the fire/sprinkler rooms in the Building, which shall require coordination with Landlord prior to Tenant having access to the same), twenty-four (24) hours per day, seven (7) days per week, every day of the year. Notwithstanding the foregoing or anything in this Lease to the contrary, Landlord shall have the absolute right at all times, including an emergency situation, to limit, restrict or prevent access to the Building in response to an actual, suspected, perceived, or publicly or privately announced health or security threat.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2.3 Tenant shall promptly pay all charges and deposits for electricity, water, gas, heat, light, power, telephone, internet service, cable television, other telecommunications and other utilities supplied to the Premises, including without limitation any surcharges and taxes thereon, whether part of Operating Expenses or as provided under this Article 6. Tenant shall pay all costs and expenses for any separately metered utilities provided exclusively to the Premises directly to the applicable service provider. Tenant shall pay all actual out-of-pocket costs and expenses, without mark-up, for utility charges that are based on a check- or sub-metering based on Landlord's reading of such meters and directly to Landlord, including without limitation utility charges for power, gas and water serving the heating, ventilation and air conditioning ("**HVAC**") system of the Building (which may be measured by the control management system of the Building based on air volume provided to each tenant space). Additional Rent for such utilities may be reasonably estimated monthly by Landlord, based on actual readings of sub- and "check" meters where applicable, and shall be paid monthly by Tenant within thirty (30) days after being billed by Landlord. Tenant's use of electricity and any other utility shall never exceed the capacity of the feeders to the Building or the risers or wiring installation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.3 <u>Metering</u>.** Landlord may install devices to separately meter or submeter any utility use (or use other reasonable industry standard methods to reasonably estimate such use and/or provide documentation to evidence such estimates). Landlord shall also have the option of billing Tenant directly for its use of any such utility service and in such event Tenant shall pay the cost directly to Landlord, within thirty (30) days after Tenant's receipt of an invoice therefor, at the rates charged by the public utility company furnishing the same, including the cost of installing, testing and maintaining metering devices required or installed in connection with such utility.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.4 <u>Interruption of Use</u>.** Tenant agrees that, to the extent permitted pursuant to Applicable Laws, Landlord shall not be liable for damages, by abatement of Rent or otherwise, for failure to furnish or delay in furnishing any service (including telephone and telecommunication services), or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by breakage, repairs, replacements, or improvements, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building or Project, by any riot or other dangerous condition, emergency, accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause; and such failures or delays or diminution shall never be deemed to constitute an eviction or disturbance of Tenant's use and possession of the Premises or relieve Tenant from paying Rent or performing any of its obligations under this Lease. Furthermore, Landlord shall not be liable under any circumstances for a loss of, or injury to, property or for injury to, or interference with, Tenant's business, including, without limitation, loss of profits, however occurring, through or in connection with or incidental to a failure to furnish any of the services or utilities as set forth in this <u>Article 6</u>.

Notwithstanding the foregoing, if any interruption in utility service occurs that is solely caused by the negligence or intentional misconduct of Landlord and Tenant is prevented from using, and does not use, all or a material portion of the Premises because of the continued unavailability of any such service for a period of five (5) consecutive days following Landlord's receipt from Tenant of a written notice regarding such unavailability, the restoration of which is within Landlord's reasonable control, and such unavailability was not caused by a Tenant Party, a governmental directive, Force Majeure, or the failure of public utilities to furnish necessary services, then Tenant shall, as its exclusive remedy, be entitled to a per diem abatement of Base Rent and Additional Rent for each consecutive day (after such five [5] consecutive day period) that Tenant is so prevented from using the Premises or an applicable material portion thereof as a result of such interruption until such service is restored (provided that, in the event such interruption prevents the use of only a material portion of the Premises, the abatement of Base Rent and Additional Rent shall be limited to the ratio of the rentable square feet of the Premises that is unusable bears to the total rentable square footage of the Premises); provided, however, that Landlord or Tenant (provided that Tenant's right shall be subject to the terms and conditions of this Lease) may, but shall not be obligated to, temporarily provide or arrange for a substitute service reasonably comparable to such interrupted service, in which event no such abatement shall occur. Tenant shall reasonably cooperate with Landlord to restore any such interrupted services.

**7.** **REPAIRS** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.1 <u>Tenant Repairs</u>.** Except as expressly included as Landlord's responsibility in Section 7.2 below, Tenant shall, at Tenant's own expense, keep the Premises in good order, repair and condition (ordinary wear and tear excepted) at all times during the Lease Term, including, without limitation, repairs and replacements related to all improvements, fixtures, furnishings, HVAC systems, and mechanical, utility and other building systems and equipment located within the Premises (including, without limitation, plumbing fixtures and equipment such as dishwashers, and garbage disposals) or serving the Premises exclusively, all windows and doors of the Premises, and frames, glass, molding and hardware, all walls, floors, ceilings, interior doors, exterior doors and interior windows, exterior glass, lighting and fixtures of the Premises. In addition, Tenant shall, at Tenant's own expense, but under the supervision and subject to the prior reasonable approval of Landlord, and within any reasonable period of time specified by Landlord, promptly and adequately repair all damage to the Premises and replace or repair all damaged, broken, or worn fixtures and appurtenances located therein. If (a) Tenant fails to commence to make such repairs or replacements within fourteen (14) days after the occurrence of such damage or to thereafter diligently pursue the completion thereof (or, in the case of an emergency, such shorter period of time as is reasonable given the circumstances), or (b) notwithstanding such diligence, Tenant fails to complete such repairs or replacements within thirty (30) days after the occurrence of such damage (or, in the case of an emergency, such shorter period of time as is reasonable given the circumstances), then Landlord may make the same at Tenant's cost. Notwithstanding the foregoing, if any such damage occurs outside of the Premises, or if such damage occurs inside the Premises but is visible from the exterior of the Premises, or affects the Building's systems (other than those exclusively serving the Premises) and/or Building's structure, or any other area outside the Premises, then Landlord may elect to repair such damage at Tenant's expense at any time prior to Tenant commencing or completing such repairs but after notice to Tenant (that can be via e-mail) unless in the event of an emergency (in which event no such notice shall be required), rather than having Tenant repair such damage. In such event where Landlord is permitted to make sure repairs and replacements and does make such repairs and replacements, then Tenant shall pay Landlord the cost thereof, including a percentage of the cost thereof (to be uniformly established for the Building and/or the Project) sufficient to reimburse Landlord for all overhead, general conditions, fees and other costs or expenses arising from Landlord's involvement with such repairs and replacements forthwith upon being billed for same. Tenant shall secure, pay for, and keep in force contracts with appropriate and reputable service companies reasonably approved by Landlord providing for the regular maintenance of all HVAC, mechanical, building and utility systems serving the Premises. As part of such obligation Tenant shall, at its own cost and expense, enter into a regularly scheduled preventive maintenance/service contract with a maintenance contractor for servicing all HVAC equipment. The maintenance contractor and the contract must be approved by Landlord in its reasonable discretion. The service contract must include all services suggested by the equipment manufacturer within the operation/maintenance manual and must become effective (and a copy thereof delivered to the Landlord) within thirty (30) days of the date Tenant takes possession of the Premises. In the event Tenant fails to provide Landlord a copy of the service contract which meets the requirements of this Section 7.1 within such 30-day period and such failure continues for five (5) business days after written notice from Landlord, Tenant shall pay to Landlord a late delivery fine of One Hundred and 00/100 Dollars ($100.00) for each month, or portion thereof, following such 30-day period in which Tenant fails to deliver the same. Tenant shall furnish proof reasonably satisfactory to Landlord at least once per year that all such systems and equipment are being serviced in accordance with the maintenance/service contract. Landlord reserves the right to request such proof once per twelve months. Landlord also reserves the right to inspect all HVAC equipment with twenty-four (24) hours' written notice once per quarter unless in the event of an emergency (in which event no notice shall be required and the foregoing limitation shall not apply). Within the three (3) month period preceding Tenant's vacating the Premises for any reason, whether due to expiration or earlier termination of the Lease Term, or otherwise, Tenant shall have the systems and equipment checked and serviced to insure proper functioning and shall furnish Landlord satisfactory proof thereof upon request. Tenant shall warrant the HVAC unit is insured against theft and vandalism in its insurance policy as required by Section 10.3. In the event that, at any time during the Lease Term, the cost of repair of the HVAC system or any HVAC unit exceeds the remaining economic life of such system or unit (as determined by Landlord in its reasonable discretion), the equipment will be replaced at Tenant's sole cost and expense, except as otherwise expressly provided herein. Notwithstanding the foregoing, if Tenant is required to replace the HVAC system or any HVAC unit at any time and such replacement is not made as part of the Work, covered by any warranty then in effect (Tenant agreeing to look to any warranty then in effect rather than Landlord) or paid for using the proceeds of the HVAC Contribution, then provided an Event of Default is not then in existence, Tenant has maintained the HVAC system and/or applicable HVAC unit throughout the Lease Term in accordance with the terms of this Lease (including, without limitation, a regularly schedule preventative maintenance/service contract as required in this Section 7.1), and further provided that replacement of the HVAC system is not required as a result of the negligent acts or omissions or intentional misconduct of Tenant, its agents, employees, patrons, contractors, subcontractors or invitees, such replacement shall initially be performed by Landlord and Tenant shall thereafter reimburse Landlord for all such replacement costs by paying to Landlord on a monthly basis and as Additional Rent (payable at the same time and in the same manner as Base Rent and Direct Expenses) the amortized amount of the total replacement costs incurred by Landlord as a result of such replacement over the remaining Lease Term (as the same may be extended), which amortization shall be calculated on a straight line basis over the anticipated useful life of such HVAC system or unit (as determined by the manufacturer of such item or Landlord's engineers). Tenant shall not have any responsibility for the unamortized portion of such replacement costs which remain at the end of the Lease Term (as the same may be extended). Additionally, Tenant shall contract for and pay directly for pest control or alarm services for the Premises at Tenant's sole expense. Tenant must coordinate all access to roof or utility rooms through Landlord. When applicable, all repairs and replacements done by Tenant shall be performed by licensed contractors with general liability insurance and workman's compensation insurance, and with a permit when required by state and local codes. Landlord shall reserve the right to inspect all work (subject to the notice requirements of Section 27 in the event Landlord has to enter the Premises in connection with such inspection) and, except in connection with any emergency repairs performed by Tenant, to approve the equipment and materials to be installed prior to work being performed, such approval not to be unreasonably withheld, conditioned or delayed (provided the parts, equipment replacements and materials satisfy the requirements in the following sentence). All repair parts, equipment replacements and materials used must be equal to the size, capacity and quality of the original parts, equipment and materials.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.2 <u>Landlord Repairs</u>.** Notwithstanding the foregoing, Landlord shall be responsible, at Landlord's sole cost and expense (but which shall be subject to reimbursement through Operating Expenses to the extent such costs or expenses constitute Operating Expenses), for repairs (including as a result of any and all structural or latent defects associated with or in the Building and not caused by Tenant's negligence or willful misconduct or Tenant's alterations or improvements to the Premises) to the exterior walls, window systems, foundation and roof (including roof membrane) of the Building, the structural components of the Building, and the base building systems and equipment serving the Building generally (but not exclusively serving the Premises), all sprinkler systems, smoke detection systems, and fire suppression systems serving the Building generally (but not exclusively serving the Premises), the Building's connections to and from utility mains, and Common Areas, except to the extent that such repairs are required due to the negligence or willful misconduct of Tenant; provided, however, that if such repairs are due to the negligence or willful misconduct of Tenant, Landlord shall nevertheless make such repairs at Tenant's expense. Subject to the terms of <u>Article 27</u>, below, Landlord may, but shall not be required to, enter the Premises at all reasonable times and upon reasonable prior notice to make such repairs, alterations, improvements or additions to the Premises or to the Project or to any equipment located in the Project as Landlord shall desire or deem necessary or as Landlord may be required to do by governmental or quasi-governmental authority or court order or decree. Landlord represents and warrants to Tenant that, to the actual knowledge of Landlord as of the Lease Date, (a) Landlord has not received written notice from any governmental authority that the mechanical, electrical, or plumbing systems generally serving the Building (as opposed to those exclusively serving the Premises) are in violation of any Applicable Laws in effect as of the Lease Date, which violations have not been cured, and (b) the mechanical, electrical, and plumbing systems, wiring, and fixtures servicing the Building generally (rather than such systems exclusively serving the Premises) are in good working order as of the Lease Date, and (c) the roof and roof membrane serving the Building are, as of the Lease Date, in good working order for the purposes for which they are used as of the Lease Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.3 <u>Floor Load-Heavy Machinery</u>**. Tenant shall not place a load upon any floor of the Premises exceed the floor load per square foot of area which such floor was designed to carry (as the same may be increased based upon the Work performed by the Tenant in accordance with the terms of this Lease) and which is permitted by Applicable Law. Landlord reserves the right to prescribe the weight and determine the locations for heavy equipment or items, which shall in all cases be placed in the Building so as to distribute weight in a manner reasonably acceptable to Landlord which may include the use of such supporting devices as Landlord may require. Business machines and mechanical equipment shall be placed and maintained by Tenant at Tenant's expense in a setting sufficient in Landlord's reasonable judgment to absorb and prevent vibration, noise and annoyance, and proper placement of all such machines and equipment shall be Tenant's sole responsibility. Except as otherwise specifically and expressly approved by Landlord as part of the Work, Tenant shall not move any safe, heavy machinery, heavy equipment, freight or fixtures in excess of 4,000 pounds into or out of the Building without Landlord's prior written consent. Any such moving shall be at the sole risk of Tenant and Tenant will defend, indemnify and save Landlord and the Landlord Parties harmless against and from any liability, loss, injury, claim or suit resulting directly or indirectly from such moving.

**8.** **ADDITIONS AND ALTERATIONS** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.1 <u>Landlord's Consent to Alterations</u>.** Except as otherwise approved by Landlord as part of the Work, Tenant may not make any improvements, alterations, additions or changes to the Premises or any mechanical, plumbing or HVAC facilities or systems pertaining to the Premises (collectively, the "**Alterations**") without first procuring the prior written consent of Landlord to such Alterations, which consent shall be requested by Tenant not less than ten (10) business days prior to the commencement thereof, and which consent shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, Landlord's consent shall not be required for any Alteration that satisfies all of the following criteria (each a "**Permitted Alteration**"): (a) will not affect the mechanical, electrical, or plumbing systems of the Building (other than any such systems exclusively serving the Premises), (b) will not affect the structure of the Building, and (c) is not visible from outside the Premises or Building. Permitted Alterations shall be subject to all other terms of this Section 8.1. It shall be deemed reasonable for Landlord to withhold its consent to any Alteration which would (i) adversely affect the mechanical, electrical or plumbing systems or equipment of the Building, (ii) affect the exterior of the Premises, the Building or the Project or (iii) adversely affect the quiet enjoyment of other tenants or occupants of the Project, or the provision of services to other occupants of the Project. Further, Landlord may condition its consent to any alteration or addition that requires Landlord's consent on Tenant's obtaining a letter of credit, bond or other form of security satisfactory to Landlord, in its reasonable discretion (based on Tenant's demonstrated ability to pay for the costs of such alterations or additions), to ensure Tenant's compliance with its obligations hereunder. Notwithstanding anything to the contrary in this Article 8, Landlord and Tenant acknowledge and agree that the Work and the plans associated therewith shall be subject to the approval procedure under **<u>Exhibit D</u>** rather than the approval procedures in this Article 8. Except if Landlord otherwise specifically and expressly approves of the installation of Special Equipment as part of the Work (but such exception shall be limited solely to Landlord's approval of the installation of the Special Equipment approved by Landlord as part of the Work, and shall still be subject to the other applicable provisions of this Lease other than the requirement for Landlord's approval), no electrical, electronic, electromagnetic or other similar lab equipment (collectively, the "**Special Equipment**") shall be installed or used in the Premises, except in accordance with this Article 8 and other applicable provisions of this Lease (including <u>Exhibit D</u>, to the extent installed by Tenant as part of the Work). All Special Equipment shall be installed at Tenant's cost, in accordance with this Lease, and shall be electrically filtered and insulated so that there is no interference in the Project with telephonic, video, fiberoptic, data processing, radio, television or other similar communication, transmission or reception currently or hereafter used in the Project. All portions of the Premises used for examination, diagnosis, testing or therapy shall be properly shielded and shall at all times comply with all Applicable Laws, and all Special Equipment shall be removed by Tenant upon the expiration or earlier termination of this Lease unless otherwise expressly agreed to by Landlord in writing. All alterations, additions, and improvements shall be constructed, maintained, and used by Tenant, at its risk and expense, in accordance with all Applicable Laws; Landlord's consent to or approval of any alterations, additions or improvements (or the plans therefor) shall not constitute a representation or warranty by Landlord, nor Landlord's acceptance, that the same comply with sound architectural and/or engineering practices or with all Applicable Laws, and Tenant shall be solely responsible for ensuring all such compliance. Upon prior written notice to Tenant, Landlord shall have the option of charging an oversight fee for any alterations or improvements that Landlord oversees or performs on behalf of Tenant, which fee shall be in the amounts specified in <u>Section 8.4</u> of this Lease. Landlord and Tenant hereby acknowledge and agree that all alterations, improvements, fixtures, equipment and/or appurtenances which may be installed or placed in or about the Premises (excluding Tenant's trade fixtures, furniture, Special Equipment or non-affixed office equipment), from time to time, shall be at the sole cost of Tenant and shall be and become part of the Premises and the property of Landlord (subject to the provisions of <u>Section 15</u>).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.2** Prior to commencing any Alterations affecting air distribution or disbursement from ventilation systems serving Tenant or the Building, including without limitation the installation of Tenant's exhaust systems, Tenant shall provide Landlord with a third party report from a consultant, and in a form reasonably acceptable to Landlord, showing that such work will not adversely affect the ventilation systems or air quality of the Building (or of any other tenant in the Building) and shall, upon completion of such work, shall provide Landlord with a certification reasonably satisfactory to Landlord from such consultant confirming that no such adverse effects have resulted from such work.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.3 <u>Manner of Construction</u>.** Landlord may impose, as an express condition of its consent (at the time said consent is given) to any and all Alterations or repairs of the Premises or about the Premises, such requirements as Landlord in its reasonable discretion may deem desirable, including, but not limited to, the requirement that Tenant utilize for such purposes only contractors, subcontractors, materials, mechanics and materialmen selected by Tenant and approved by Landlord (which approval shall not be unreasonably withheld, conditioned or delayed), the requirement that upon Landlord's request at the time Landlord approves said Alterations, Tenant shall, at Tenant's expense, remove such Alterations upon the expiration or any early termination of the Lease Term. Tenant shall construct such Alterations and perform such repairs in a good and workmanlike manner, in conformance with any and all applicable federal, state, county or municipal laws, rules and regulations and pursuant to a valid building permit, issued by the city in which the Building is located (or other applicable governmental authority), and shall use materials of a quality that is at least equal to the quality designated by Landlord as the minimum standard for the Building, and in such manner as to cause a minimum disruption to the other occupants of the Project and interfere with other construction in progress and with the transaction of business in the Project. Landlord may designate reasonable rules, regulations and procedures for the performance of all such work in the Building (including insurance requirements for contractors) and, to the extent reasonably necessary to avoid disruption to the occupants of the Building, shall have the right to designate the time when such work may be performed. Tenant shall not use (and upon notice from Landlord shall cease using) contractors, services, workmen, labor, materials or equipment that, in Landlord's reasonable judgment, would disturb labor harmony with the workforce or trades engaged in performing other work, labor or services in or about the Building or the Common Areas. Tenant shall provide Landlord with the identities, mailing addresses and telephone numbers of the general contractor primarily responsible for performing the work prior to beginning such construction and Landlord may post on and about the Premises notices of non-responsibility pursuant to Applicable Laws. Upon completion of any Alterations (or repairs), Tenant shall deliver to Landlord final lien waivers from all contractors, subcontractors and materialmen who performed such work. In addition to Tenant's obligations under <u>Article 9</u> of this Lease, upon completion of any Alterations, Tenant shall deliver to the Project construction manager a reproducible copy of the "**as built**" drawings of the Alterations as well as all permits, approvals and other documents issued by any governmental agency in connection with the Alterations. Landlord shall make its construction rules and pre-approved vendor list available to Tenant upon its request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.4 <u>Payment for Alterations</u>.** If Tenant orders any work directly from Landlord in connection with any Alteration, Tenant shall pay to Landlord an amount equal to four percent (4%) of the cost of such work to compensate Landlord for all overhead, general conditions, fees and other costs and expenses arising from Landlord's involvement with such work; provided, however, Landlord must give Tenant a reasonable opportunity to review all pricing of any such requested work (which review shall be considered completed at the time Tenant authorizes Landlord to perform the work on Tenant's behalf). If Tenant does not order any work directly from Landlord in connection with any Alteration, Tenant shall reimburse Landlord for Landlord's reasonable, actual, out-of-pocket costs and expenses actually incurred in connection with Landlord's review of the work associated with such Alteration(s) including an oversight fee in the amount of three percent (3%) of the total costs of such Alteration(s), up to but not to exceed a total payment by Tenant to Landlord of $40,000 per Alteration or set of Alterations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.5 <u>Construction Insurance</u>.** In addition to the requirements of <u>Article 10</u> of this Lease, in the event that Tenant makes any Alterations, prior to the commencement of such Alterations, Tenant shall provide Landlord with evidence that Tenant carries "Builder's All Risk" insurance in an amount reasonably approved by Landlord covering the construction of such Alterations, and such other insurance as Landlord may reasonably require, it being understood and agreed that all of such Alterations shall be insured by Tenant pursuant to <u>Article 10</u> of this Lease immediately upon completion thereof. In addition, Tenant's contractors and subcontractors shall be required to carry Commercial General Liability Insurance in an amount approved by Landlord and otherwise in accordance with the requirements of <u>Article 10</u> of this Lease and such general liability insurance shall name the Landlord Parties as additional insureds. In addition, Tenant's contractors and subcontractors shall be required to carry workers compensation insurance with a waiver of subrogation in favor of the Landlord Parties.

**9.** **COVENANT AGAINST LIENS** 

All work performed, materials furnished, or obligations incurred by or at the request of a Tenant Party shall be deemed authorized and ordered by Tenant only, and Tenant shall not permit any mechanic's or construction liens to be filed against the Premises or the Project in connection therewith. Tenant acknowledges that Landlord may post notice on the Premises of non-responsibility for such liens and, in such event, Tenant shall so advise all contractors, materialmen, suppliers and other persons performing work or providing services and/or supplies to the Premises on behalf of Tenant. Notwithstanding any term or provision herein to the contrary, for all work performed, materials furnished, or obligations incurred by or at the request of a Tenant Party other than any work to be performed by Landlord pursuant to this Lease, Tenant or Tenant's contractor must appoint a lien agent (as defined in NCGS 44A-7, naming the Tenant in the "Owner Information" section and the Premises in the "Project Property" section of the Appointment of Lien at www.LiensNC.com), and Tenant must provide to Landlord such mechanics lien agent entry number as assigned by LiensNC.com, at or prior to the earlier of (i) the date any work is commenced within the Premises by or on behalf of any Tenant Party, (ii) Landlord paying any allowance money to Tenant relative to the Premises, (iii) Tenant entering into a contract with a construction contractor relative to the Premises, and (iv) the date any building permit is obtained relative to the Premises. Within twenty (20) days after final completion of any such work, Tenant shall deliver to Landlord final unconditional lien waivers from all contractors, subcontractors and materialmen who performed such work and contracted directly with Tenant in a form reasonably approved by Landlord. If a lien is filed against the Premises, then Tenant shall, within ten (10) days after Landlord has delivered notice of the filing thereof to Tenant (or such earlier time period as may be necessary to prevent the forfeiture of the Premises, the Project or any interest of Landlord therein or the imposition of a civil or criminal fine with respect thereto), either (a) pay the amount of the lien and cause the lien to be released of record, or (b) diligently contest such lien and deliver to Landlord a bond or other security reasonably satisfactory to Landlord. If Tenant fails to timely take either such action, then Landlord may pay the lien claim, and any amounts so paid, including expenses and interest, shall be paid by Tenant to Landlord as Additional Rent within ten (10) days after Landlord has invoiced Tenant therefor. Landlord and Tenant acknowledge and agree that their relationship is and shall be solely that of "landlord-tenant" (thereby excluding a relationship of "owner-contractor," "owner-agent" or other similar relationships) and that Tenant is not authorized to act as Landlord's common law agent or construction agent in connection with any work performed in the Premises. Accordingly, all materialmen, contractors, artisans, mechanics, laborers and any other persons now or hereafter contracting with Tenant, any contractor or subcontractor of Tenant or any other Tenant Party for the furnishing of any labor, services, materials, supplies or equipment with respect to any portion of the Premises, at any time from the date hereof until the end of the Lease Term, are hereby charged with notice that they look exclusively to Tenant to obtain payment for same. Nothing herein shall be deemed a consent by Landlord to any liens being placed upon the Premises, the Project or Landlord's interest therein due to any work performed by or for Tenant or deemed to give any contractor or subcontractor or materialman any right or interest in any funds held by Landlord to reimburse Tenant for any portion of the cost of such work. Tenant shall defend, indemnify and hold harmless Landlord and its agents and representatives from and against all claims, demands, causes of action, suits, judgments, damages and expenses (including attorneys' fees) in any way arising from or relating to the failure by any Tenant Party to pay for any work performed, materials furnished, or obligations incurred by or at the request of a Tenant Party. This indemnity provision shall survive termination or expiration of this Lease. For purposes of this Lease, a "**Tenant Party**" means each of Tenant; any assignees claiming by, through or under Tenant; any subtenants claiming by, through or under Tenant; and any of their respective agents, contractors, officers, employees, licensees, guests and invitees (collectively, "**Tenant Parties**").

**10.** **INSURANCE** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.1 <u>Indemnification and Waiver</u>.** Tenant hereby assumes all risk of damage to property or injury to persons in, upon or about the Premises from any cause whatsoever (including, but not limited to, any personal injuries resulting from a slip and fall in, upon or about the Premises) and agrees that Landlord, its property manager(s), asset manager(s), lenders, partners, subpartners and their respective officers, agents, servants, employees, and independent contractors (collectively, "**Landlord Parties**") shall not be liable for, and are hereby released from any responsibility for, any damage either to person or property or resulting from the loss of use thereof, which damage is sustained by Tenant or by other persons claiming through Tenant. Subject to the provisions of Section 10.5, Tenant shall defend, indemnify, and hold harmless Landlord and the Landlord Parties from and against all claims, demands, liabilities, causes of action, suits, judgments, damages, and expenses (including reasonable attorneys' fees) arising from any injury to or death of any person or the damage to or theft, destruction, loss, or loss of use of, any property or inconvenience (a "**Loss**") (a) occurring in or on the Project (other than within the Premises) to the extent caused by the negligence or willful misconduct of any Tenant Party, (b) occurring in the Premises, (c) arising out of the installation, operation, maintenance, repair or removal of any property of any Tenant Party located in or about the Project, including without limitation any Off-Premises Equipment, or (d) any breach by Tenant of the terms of this Lease. **It being agreed that clauses (b) and (c) of this indemnity are intended to indemnify Landlord and its agents against the consequences of their own negligence or fault, even when Landlord or its agents are jointly, comparatively, contributively, or concurrently negligent with Tenant, and even though any such claim, cause of action or suit is based upon or alleged to be based upon the strict liability of Landlord or its agents; however, such indemnity shall not apply to the sole or gross negligence or willful misconduct of Landlord and its agents.** Should Landlord be named as a defendant in any suit brought against Tenant in connection with or arising out of Tenant's occupancy of the Premises, Tenant shall pay to Landlord its reasonable costs and expenses incurred in such suit, including without limitation, its actual professional fees such as reasonable appraisers', accountants' and attorneys' fees. The provisions of this <u>Section 10.1</u> shall survive termination or expiration of this Lease with respect to any event, matter or circumstances first occurring prior to such termination or expiration and shall not terminate or be waived, diminished or affected in any manner by any abatement or apportionment of Rent under any provision of this Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.2 <u>Tenant's Compliance With Landlord's Property Insurance</u>.** Tenant shall, at Tenant's expense, comply with all insurance company requirements pertaining to the use of the Premises. If Tenant's conduct or use of the Premises causes any increase in the premium for such insurance policies (as reasonably evidenced by documentation from Landlord) then Tenant shall reimburse Landlord as Additional Rent for any such increase within ten (10) days following Landlord's written request therefor. Tenant, at Tenant's expense, shall comply with all rules, orders, regulations or requirements of the American Insurance Association (formerly the National Board of Fire Underwriters) and with any similar body.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.3 <u>Tenant's Insurance</u>.** Tenant shall maintain the following coverages in the following amounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3.1 Commercial General Liability Insurance on an occurrence form covering the insured against claims of bodily injury, personal and advertising injury and property damage (including loss of use thereof) arising out of Tenant's operations, products/completed operations, and contractual liability including a Broad Form endorsement covering the insuring provisions of this Lease and the performance by Tenant of the indemnity agreements set forth in <u>Section 10.1</u> of this Lease, and including, solely on a claims-made basis, products and completed operations coverage, for limits of liability of not less than:

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| | |
|:---|:---|
| Bodily Injury and | $5,000,000 each occurrence |
| Property Damage Liability | $5,000,000 annual aggregate |
| Personal and Advertising Injury Liability | $5,000,000 each occurrence |
|  | $5,000,000 annual aggregate |
|  | 0% Insured's participation |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3.2 Property Insurance covering (i) all office furniture, business and trade fixtures, office equipment, free-standing cabinet work, movable partitions, merchandise and all other items of Tenant's property on the Premises installed by, for, or at the expense of Tenant, and (ii) any other improvements, alterations, and betterments in the Premises and any Off-Premises Equipment permitted by Landlord (without implying any consent by Landlord to the installation thereof) (the "**New Improvements**"). Such insurance shall be written on a "special" or "all risks" of physical loss or damage basis (including, but not limited to, sprinkler leakage, ordinance and law, sewer back-up, flood, earthquake, windstorm and collapse coverage), for the full replacement cost value (subject to reasonable deductible amounts not to exceed $75,000) new without deduction for depreciation of the covered items and in amounts that meet any co-insurance clauses of the policies of insurance and shall include coverage for damage or other loss caused by fire or other peril including, but not limited to, vandalism and malicious mischief, theft, water damage of any type, including sprinkler leakage, bursting or stoppage of pipes, and explosion. Such policy shall be written on a no coinsurance form or contain an agreed amount endorsement with respect to all property identified in subsections (i) and (ii) above waiving all co-insurance provisions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3.3 Business interruption insurance for sixteen (16) months plus Extra Expense insurance in such amounts as will reimburse Tenant for actual direct or indirect loss of earnings attributable to the risks outlined in <u>Section 10.3.2</u> above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3.4 Worker's Compensation and Employer's Liability or other similar insurance pursuant to all applicable state and local statutes and regulations. The policy will include a waiver of subrogation in favor of the Landlord Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3.5 Contractual liability insurance sufficient to cover Tenant's indemnity obligations hereunder (but only if such contractual liability insurance is not already included in Tenant's commercial general liability insurance policy).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.4 <u>Form of Policies</u>.** The minimum limits of policies of insurance required of Tenant under this Lease shall in no event limit the liability of Tenant under this Lease. Such insurance shall (i) name Landlord, its subsidiaries and affiliates and any other party the Landlord so specifies, as an additional insured, as applicable, including without limitation Landlord's property manager, asset manager, and lender(s), if any; (ii) cover the liability assumed by Tenant under this Lease; (iii) be issued by an insurance company having a rating of not less than A:VIII in Best's Insurance Guide or which is otherwise acceptable to Landlord and licensed to do business in the State of North Carolina; (iv) be primary insurance as to all claims thereunder and provide that any insurance carried by Landlord is excess and is non-contributing with any insurance required of Tenant; (v) be in form and content reasonably acceptable to Landlord; and (vi) provide that said insurer shall provide written notice to Landlord and any mortgagee of Landlord, to the extent such names are furnished to Tenant, thirty (30) days prior to the cancellation of or material change to such policy; provided, however, that if Tenant's insurer will not agree to provide such notice, then Tenant shall be responsible for providing such notice to Landlord. Tenant shall deliver said policy or policies or certificates thereof to Landlord on or before the earlier to occur of (A) the Lease Commencement Date, and (B) the date upon which Tenant is first provided access to the Premises, and at least ten (10) days before the expiration dates thereof. In the event Tenant shall fail to procure such insurance, or to deliver such policies or certificate within ten (10) days after written notice from Landlord, Landlord may, at its option, procure such policies for the account of Tenant, and the cost thereof shall be paid to Landlord as Additional Rent within five (5) days after delivery to Tenant of bills therefor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.5 <u>Subrogation</u>.** Landlord and Tenant each waives any claim it might have against the other for any damage to or theft, destruction, loss, or loss of use of any property, to the extent the same is insured against under any insurance policy of the types described in this Article 10 that covers the Project, the Premises, Landlord's or Tenant's fixtures, personal property, leasehold improvements, or business, or is required to be insured against under the terms hereof, **regardless of whether the negligence of the other party caused such Loss**. Additionally, Tenant waives any claim it may have against Landlord for any Loss to the extent such Loss is caused by a terrorist act. Each party shall cause its insurance carrier to endorse all applicable policies waiving the carrier's rights of recovery under subrogation or otherwise against the other party. Notwithstanding any provision in this Lease to the contrary, Landlord, its agents, employees and contractors shall not be liable to Tenant or to any party claiming by, through or under Tenant for (and Tenant hereby releases Landlord and its servants, agents, contractors, employees and invitees from any claim or responsibility for) any damage to or destruction, loss, or loss of use, or theft of any property of any Tenant Party located in or about the Project, caused by casualty, theft, fire, third parties or any other matter or cause**, regardless of whether the negligence of any party caused such loss in whole or in part**. Tenant acknowledges that Landlord shall not carry insurance on, and shall not be responsible for damage to, any property of any Tenant Party located in or about the Project.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.6 <u>Additional Insurance Obligations</u>.** Tenant shall carry and maintain during the entire Lease Term, at Tenant's sole cost and expense, increased amounts of insurance to the extent required by any lender or mortgagee on the Building.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.7 <u>Landlord Insurance</u>.** Landlord shall keep in force during the Lease Term (i) commercial general liability insurance against any and all claims for bodily injury and property damage occurring in or about the Building or the Common Areas having a combined single limit of not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate, and (ii) property insurance for fire, casualty and special causes of loss in such amounts and coverages as Landlord deems appropriate or is otherwise required of Landlord by its lender or applicable law, but in no event less than the lesser of (a) at least one hundred percent (100%) percent of the replacement cost of the Building and permanent improvements therein (but such insurance may provide for a commercially reasonable deductible) or (b) the maximum insurable value of the Building (but such insurance may provide for a commercially reasonable deductible) provided that, in no event, shall Landlord be required to insure New Improvements or office furniture, business and trade fixtures, Off-Premises Equipment, office equipment, free-standing cabinet work, movable partitions, merchandise and all other items of Tenant's property on the Premises installed by, for, or at the expense of Tenant.

**11.** **DAMAGE AND DESTRUCTION** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.1 <u>Repair of Damage to Premises by Landlord</u>.** Tenant shall promptly notify Landlord of any damage to the Premises resulting from fire or any other casualty. If the Premises or any Common Areas serving or providing access to the Premises shall be damaged by fire or other casualty and neither party elects to terminate this Lease as a result of such casualty when explicitly allowed pursuant to this Lease, Landlord shall promptly and diligently, subject to reasonable delays for insurance adjustment or other matters beyond Landlord's reasonable control, and subject to all other terms of this <u>Article 11</u>, restore such Common Areas and the Premises to substantially the same condition as existed prior to the casualty, except for modifications required by zoning and building codes and other laws or by the holder of a mortgage on the Building or Project or any other modifications to the Common Areas deemed desirable by Landlord, which are consistent with the character of the Project, provided that access to or the use of the Premises shall not be materially impaired. Notwithstanding the foregoing, Landlord shall not be required to repair or replace any improvements, alterations or betterments within the Premises (which shall be reasonably promptly and with due diligence after the Premises is habitable repaired and restored by Tenant at Tenant's sole cost and expense) or any furniture, equipment, trade fixtures or personal property of Tenant or others in the Premises or the Project, and Landlord's obligation to repair or restore the Premises shall be limited to the extent of the insurance proceeds actually received by Landlord for the casualty in question. If this Lease is terminated under the provisions of this Article 11, Landlord shall be entitled to the full proceeds of the insurance policies providing coverage for all alterations, improvements and betterments in the Premises (and, if Tenant has failed to maintain insurance on such items as required by this Lease, Tenant shall pay Landlord an amount equal to the proceeds Landlord would have received had Tenant maintained insurance on such items as required by this Lease). To the extent permitted pursuant to Applicable Laws, Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's business resulting in any way from such damage or the repair thereof; provided however, that if such fire or other casualty shall have damaged the Premises or Common Areas necessary to Tenant's occupancy, and the Premises, or a material portion of the Premises, are not occupied by Tenant as a result thereof, then during the time and to the extent the Premises are unfit for occupancy, the Rent shall be abated in proportion to the ratio that the amount of rentable square feet of the Premises which is unfit for occupancy for the purposes permitted under this Lease bears to the total rentable square feet of the Premises, unless Tenant or a Tenant Party caused such damage, in which case Tenant shall continue to pay Base Rent and Additional Rent without abatement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.2 <u>Landlord's Option to Repair</u>.** Notwithstanding the terms of <u>Section 11.1</u> of this Lease, Landlord may elect not to rebuild and/or restore the Premises, Building and/or Project, and instead terminate this Lease, by notifying Tenant in writing of such termination within sixty (60) days after the date of discovery of the damage, such notice to include a termination date giving Tenant sixty (60) days to vacate the Premises, but Landlord may so elect only if the Building or Project shall be damaged by fire or other casualty or cause, whether or not the Premises are affected, and one or more of the following conditions is present: (i) in Landlord's reasonable judgment, repairs cannot reasonably be completed within one hundred eighty (180) days after the date of discovery of the damage (when such repairs are made without the payment of overtime or other premiums); (ii) the holder of any mortgage on the Building or Project or ground lessor with respect to the Building or Project shall require that the insurance proceeds or any portion thereof be used to retire the mortgage debt, or shall terminate the ground lease, as the case may be; (iii) at least One Hundred Thousand and 00/100 Dollars ($100,000.00) of damage is not fully covered by Landlord's insurance policies; (iv) the damage occurs during the last twelve (12) months of the Lease Term; or (v) any owner of any other portion of the Project, other than Landlord, does not intend to repair the damage to such portion of the Project; provided, however, that if Landlord does not elect to terminate this Lease pursuant to Landlord's termination right as provided above, and the repairs cannot, in the reasonable opinion of Landlord, be completed within two hundred seventy (270) days after the date of such damage, Tenant may elect, within sixty (60) days after the date of such damage, to terminate this Lease by written notice to Landlord effective as of the date specified in the notice, which date shall not be less than thirty (30) days nor more than sixty (60) days after the date such notice is given by Tenant. Notwithstanding the provisions of this <u>Section 11.2</u>, Tenant shall have the right to terminate this Lease under this <u>Section 11.2</u> only if each of the following conditions is satisfied: (a) the damage to the Project by fire or other casualty was not caused by the negligence or intentional act of Tenant or its partners or subpartners and their respective officers, agents, servants, employees, and independent contractors; and (b) as a result of the damage, Tenant cannot conduct its business in the Premises in a manner reasonably comparable to that conducted immediately prior to such casualty. In addition, if the damage to the Premises occurs during the last twelve (12) months of the Lease Term, Tenant has not exercised a renewal or extension option to extend the Lease Term past such scheduled expiration date, and such repairs will take more than ninety (90) days after the date of such damage to complete, Tenant may elect, within sixty (60) days after the date of such damage, to terminate this Lease by written notice to Landlord, which termination shall be effective as of the date specified in such notice (provided that such specified termination date will not be less than thirty [30] days nor more than sixty [60] days after the date such notice is delivered by Tenant).

**12.** **NONWAIVER** 

No provision of this Lease shall be deemed waived by either party hereto unless expressly waived in a writing signed thereby. The waiver by either party hereto of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of any subsequent breach of same or any other term, covenant or condition herein contained. The subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a waiver of any breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular Rent so accepted, regardless of Landlord's knowledge of such breach at the time of acceptance of such Rent. No acceptance of a lesser amount than the Rent herein stipulated shall be deemed a waiver of Landlord's right to receive the full amount due, nor shall any endorsement or statement on any check or payment or any letter accompanying such check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the full amount due. No receipt of monies by Landlord from Tenant after the termination of this Lease shall in any way alter the length of the Lease Term or of Tenant's right of possession hereunder, or after the giving of any notice shall reinstate, continue or extend the Lease Term or affect any notice given Tenant prior to the receipt of such monies, it being agreed that after the service of notice or the commencement of a suit, or after final judgment for possession of the Premises, Landlord may receive and collect any Rent due, and the payment of said Rent shall not waive or affect said notice, suit or judgment.

**13.** **CONDEMNATION** 

If the whole or any part of the Premises, Building or Project shall be taken by power of eminent domain or condemned by any competent authority for any public or quasi-public use or purpose, or if any adjacent property or street shall be so taken or condemned, or reconfigured or vacated by such authority in such manner as to require the use, reconstruction or remodeling of any part of the Premises, Building or Project, or if Landlord shall grant a deed or other instrument in lieu of such taking by eminent domain or condemnation and any portion of the Building is not suitable for its intended use, Landlord shall have the option to terminate this Lease effective as of the date possession is required to be surrendered to the authority. Tenant shall not because of such taking assert any claim against Landlord or the authority for any compensation because of such taking and Landlord shall be entitled to the entire award or payment in connection therewith, except that Tenant shall have the right to file any separate claim available to Tenant for any taking of Tenant's personal property and fixtures belonging to Tenant and removable by Tenant upon expiration of the Lease Term pursuant to the terms of this Lease, and for moving expenses, so long as such claims do not diminish the award available to Landlord, its ground lessor with respect to the Building or Project or its mortgagee, and such claim is payable separately to Tenant. All Rent shall be apportioned as of the date of such termination. If any part of the Premises shall be taken, and this Lease shall not be so terminated, the Rent shall be proportionately abated. Notwithstanding anything to the contrary contained in this <u>Article 13</u>, in the event of a temporary taking of all or any portion of the Premises for a period of ninety(90) days or less, and provided that such temporary taking does not materially preclude or unreasonably diminish Tenant's ability to conduct business from the Premises, then this Lease shall not terminate but the Base Rent and the Additional Rent shall be abated for the period of such taking in proportion to the ratio that the amount of rentable square feet of the Premises taken bears to the total rentable square feet of the Premises. Landlord shall be entitled to receive the entire award made in connection with any such temporary taking, provided, however, that Tenant shall be entitled to a share of the award for any loss of fixtures and improvements and for moving and other reasonable expenses that do not otherwise reduce Landlord's recovery and is payable separately to Tenant.

**14.** **ASSIGNMENT AND SUBLETTING** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.1 <u>Transfers</u>.** Except as provided in Section 14.6, Tenant shall not, without the prior written consent of Landlord, (a) assign, transfer, or encumber this Lease or any estate or interest herein, whether directly or by operation of law, (b) permit any other entity to become Tenant hereunder by merger, consolidation, or other reorganization, (c) if Tenant is an entity other than a corporation whose stock is publicly traded, permit the transfer of an ownership interest in Tenant so as to result in a change in the current direct or indirect control of Tenant, (d) sublet any portion of the Premises, (e) grant any license, concession, or other right of occupancy of any portion of the Premises, (f) permit the use of the Premises by any parties other than Tenant or Tenant's visitors (which visitors shall use the Premises solely for purposes of visiting the Premises), or (g) sell or otherwise transfer, in one or more transactions, a majority of Tenant's assets (any of the events listed in Section 14.1(a) through 14.1(g) being a "**Transfer**" and any person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a "**Transferee**"). If Tenant requests Landlord's consent to a Transfer, then, at least fifteen (15) days prior to the effective date of the proposed Transfer, Tenant shall provide Landlord with a written description of all terms and conditions of the proposed Transfer, copies of the proposed documentation, and the following information about the proposed Transferee: name and address of the proposed Transferee and any entities and persons who own, control or direct the proposed Transferee; reasonably satisfactory information about its business and business history; its proposed use of the Premises; banking, financial, and other credit information; and general references sufficient to enable Landlord to determine the proposed Transferee's creditworthiness and character. Concurrently with Tenant's notice of any request for consent to a Transfer, Tenant shall pay to Landlord a fee of One Thousand Five Hundred and 00/100 Dollars ($1,500.00) to defray Landlord's expenses in reviewing such request, and Tenant shall also reimburse Landlord within thirty (30) days upon request for its reasonable attorneys' fees and other out-of-pocket expenses actually incurred in connection with considering any request for consent to a Transfer. Any Transfer made without Landlord's prior written consent shall, at Landlord's option, be null, void and of no effect, and shall, at Landlord's option, constitute a default by Tenant under this Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.2 <u>Landlord's Consent</u>.** Landlord shall not unreasonably withhold, condition, or delay its consent to any assignment of Tenant's entire interest in this Lease or subletting of the Premises, provided that the proposed transferee (a) has a Tangible Net Worth equal to or greater than the Tangible Net Worth of Tenant as of the Lease Date or the proposed date of such assignment or sublease, whichever is greater, (b) will use the Premises for the Permitted Use (thus, excluding, without limitation, uses for credit processing and telemarketing) and will not use the Premises in any manner that would conflict with any exclusive use agreement or other similar agreement entered into by Landlord with any other tenant of the Project, (c) will not use the Premises, Building or Project in a manner that would materially increase Operating Expenses or the pedestrian or vehicular traffic to the Premises, Building or Project, (d) is not a governmental or quasi-governmental entity, or subdivision or agency thereof, or any other entity entitled to the defense of sovereign immunity, (e) is not another occupant of the Project or the related complex or an Affiliate of such occupant, unless Landlord is not able to accommodate the space need of the proposed transferee, (f) is not currently and has not in the past been involved in litigation with Landlord or any of its Affiliates, and (g) is not a person or entity with whom Landlord is then, or has been within the six (6) month period prior to the time Tenant seeks to enter into such assignment or subletting, negotiating to lease space in the Project or the related complex or any Affiliate of any such person or entity, unless Landlord was not able to accommodate the space need of the proposed transferee; otherwise, Landlord may withhold its consent in its sole discretion. Additionally, Landlord may withhold its consent in its sole discretion to any proposed Transfer if any Event of Default by Tenant then exists. Any Transfer made while an Event of Default exists hereunder, irrespective whether Landlord's consent is required hereunder with respect to the Transfer, shall be voidable by Landlord in Landlord's sole discretion. In agreeing to act reasonably, Landlord is agreeing to act in a manner consistent with the standards followed by large institutional owners of commercial real estate and Landlord is permitted to consider the financial terms of the Transfer and the impact of the Transfer on Landlord's own leasing efforts and the value of the Project. Landlord may condition its consent to a Transfer that requires its consent on a reasonable increase in the Letter of Credit (or replacement security deposit, as applicable) or, if commercially reasonable based on the credit or Tangible Net Worth of the applicable assignee, receipt of a guaranty from a suitable party. Landlord shall not be required to act reasonably in considering any request to pledge or encumber this Lease or any interest therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.3 <u>Conditions to Consent</u>**. If Landlord consents to a proposed Transfer, then the proposed transferee shall deliver to Landlord a written agreement whereby it expressly assumes Tenant's obligations hereunder; however, any transferee of less than all of the space in the Premises shall be liable only for obligations under this Lease that are properly allocable to the space subject to the Transfer for the period of the Transfer. No Transfer shall release Tenant from its obligations under this Lease, but rather Tenant and its transferee shall be jointly and severally liable therefor. Landlord's consent to any Transfer shall not waive Landlord's rights as to any subsequent Transfers and no subtenant of any portion of the Premises shall be permitted to further sublease any portion of its subleased space. If an Event of Default occurs while the Premises or any part thereof are subject to a Transfer, then Landlord, in addition to its other remedies, may collect directly from such transferee all rents becoming due to Tenant and apply such rents against Rent. Tenant authorizes its transferees to make payments of rent directly to Landlord upon receipt of notice from Landlord to do so following the occurrence of an Event of Default hereunder. Tenant shall pay for the cost of any demising walls or other improvements necessitated by a proposed subletting or assignment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.4 <u>Attornment by Subtenants</u>**. Each sublease by Tenant hereunder shall be subject and subordinate to this Lease and to the matters to which this Lease is or shall be subordinate, and each subtenant by entering into a sublease is deemed to have agreed that in the event of termination, re-entry or dispossession by Landlord under this Lease, Landlord may, at its option, take over all of the right, title and interest of Tenant, as sublandlord, under such sublease, and such subtenant shall, at Landlord's option, attorn to Landlord pursuant to the then executory provisions of such sublease, except that Landlord shall not be (a) liable for any previous act or omission of Tenant under such sublease, (b) subject to any counterclaim, offset or defense that such subtenant might have against Tenant, (c) bound by any previous modification of such sublease not approved by Landlord in writing or advance rent which such subtenant might have paid for more than the current month to Tenant, and all such advanced rent shall remain due and owing, notwithstanding such advance payment, (d) bound by any security or advance rental deposit made by such subtenant which is not delivered or paid over to Landlord and with respect to which such subtenant shall look solely to Tenant for refund or reimbursement, or (e) obligated to perform any work in the subleased space or to prepare it for occupancy, and in connection with such attornment, the subtenant shall execute and deliver to Landlord any instruments Landlord may reasonably request to evidence and confirm such attornment. Each subtenant or licensee of Tenant shall be deemed, automatically upon and as a condition of its occupying or using the Premises or any part thereof, to have agreed to be bound by the terms and conditions set forth in this Section 14.4. The provisions of this Section 14.4 shall be self-operative, and no further instrument shall be required to give effect to this provision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.5 <u>Cancellation and Additional Compensation</u>**. If this Lease is assigned by Tenant or if the Tenant sublets the Premises for rent in excess of the Rent payable hereunder (or the Rent allocable to the subleased portion of the Premises, as applicable), Tenant shall pay to Landlord, immediately upon receipt thereof and as Additional Rent, one-half of the excess of (1) all compensation received by Tenant for a Transfer less the actual out-of-pocket costs reasonably incurred by Tenant with unaffiliated third parties (i.e., brokerage commissions, tenant finish work and legal fees associated with the assignment or sublease in question) in connection with such Transfer (such costs shall be amortized on a straight-line basis over the term of the Transfer in question) over (2) the Rent allocable to the portion of the Premises covered thereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.6 <u>Permitted Transfers</u>**. Notwithstanding Section 14.1, provided there is no Event of Default under this Lease then in existence, Tenant may Transfer all or part of its interest in this Lease or all or part of the Premises (a "**Permitted Transfer**") to the following types of entities (a "**Permitted Transferee**") without the written consent of Landlord:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) an Affiliate of Tenant, but only so long as such transferee remains an Affiliate of Tenant and Tenant's obligations hereunder are assumed by such Affiliate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) any corporation, limited partnership, limited liability partnership, limited liability company or other business entity acquiring all or substantially all of Tenant's assets, so long as (1) Tenant's obligations hereunder are assumed by the entity acquiring such assets, and (2) the proposed transferee satisfies the Tangible Net Worth/Credit Threshold as of the effective date of the Permitted Transfer.

Tenant shall promptly notify Landlord of any such Permitted Transfer at least ten (10) business days prior to such Permitted Transfer. Tenant shall remain liable for the performance of all of the obligations of Tenant hereunder, or if Tenant no longer exists because of a merger, consolidation, or acquisition, the surviving or acquiring entity shall expressly assume in writing the obligations of Tenant hereunder. The Permitted Transferee shall comply with all of the terms and conditions of this Lease, including the Permitted Use, and the use of the Premises by the Permitted Transferee may not violate any other agreements affecting the Premises or the Project, Landlord or other tenants of the Project. No later than ten days after the effective date of any Permitted Transfer, Tenant agrees to furnish Landlord with (a) copies of the instrument effecting any of the foregoing Transfers, (b) documentation establishing Tenant's satisfaction of the requirements set forth above applicable to any such Transfer, and (b) evidence of insurance as required under this Lease with respect to the Permitted Transferee. The occurrence of a Permitted Transfer shall not waive Landlord's rights as to any subsequent Transfers, and any subsequent Transfer by a Permitted Transferee shall be subject to the terms of this Section 14. As used herein, the term "**Tangible Net Worth/Credit Threshold**" shall mean (i) the proposed Permitted Transferee has a Tangible Net Worth equal to or greater than the Tangible Net Worth of Tenant as of the Lease Date, as evidenced by financial statements reasonably acceptable to Landlord (including audited financial statements, if available), and (ii) if the proposed Permitted Transferee has been assigned a Corporate Debt Rating, then such proposed Permitted Transferee's Corporate Debt Rating satisfies the Corporate Debt Rating Requirement. As used herein, "**Tangible Net Worth**" means the excess of total assets over total liabilities, in each case as determined in accordance with generally accepted accounting principles consistently applied ("**GAAP**"), excluding, however, from the determination of total assets all assets that would be classified as goodwill under GAAP. "**Corporate Debt Rating**" shall mean either a general corporate debt rating or an unsecured corporate debt rating by either Standard & Poor's Corporation ("**S&P**") or Moody's Investor Service ("**Moody's**"), and "**Corporate Debt Rating Requirement**" shall mean a Corporate Debt Rating of BBB or better (as determined by S&P) and Baa2 or better (as determined by Moody's). For purposes of this Lease, "**Affiliate**" means any person or entity which, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the party in question.

**15.** **SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.1 <u>Surrender of Premises</u>.** No act or thing done by Landlord or any agent or employee of Landlord during the Lease Term shall be deemed to constitute an acceptance by Landlord of a surrender of the Premises unless such intent is specifically acknowledged in writing by Landlord. The delivery of keys to the Premises to Landlord or any agent or employee of Landlord shall not constitute a surrender of the Premises or effect a termination of this Lease, whether or not the keys are thereafter retained by Landlord, and notwithstanding such delivery Tenant shall be entitled to the return of such keys at any reasonable time upon request until this Lease shall have been properly terminated. The voluntary or other surrender of this Lease by Tenant, whether accepted by Landlord or not, or a mutual termination hereof, shall not work a merger, and at the option of Landlord shall operate as an assignment to Landlord of all subleases or subtenancies affecting the Premises or terminate any or all such sublessees or subtenancies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.2 <u>Removal of Tenant Property by Tenant</u>.** Upon the expiration of the Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject to the provisions of this <u>Article 15</u>, quit and surrender possession of the Premises to Landlord in as good order and condition as when Tenant took possession and as thereafter improved by Landlord and/or Tenant, reasonable wear and tear and damages caused by (or repairs necessitated by) Landlord's failure to perform its repair and maintenance obligations excepted. Upon such expiration or termination, Tenant shall, without expense to Landlord, remove or cause to be removed from the Premises all debris and rubbish, and such items of furniture, equipment, free-standing cabinet work, movable partitions that do not require any demolition to remove, any cabling, wiring, improvements (except for any Non-Removable Work, as hereinafter defined), additions (except for any Non-Removable Work), alterations (except for any Non-Removable Work) and other articles of personal property owned by Tenant or installed or placed by Tenant at its expense in the Premises, and such similar articles of personal property of any other persons claiming under Tenant, as Landlord may, in its sole discretion, require to be removed, and Tenant shall repair at its own expense all damage to the Premises and Building resulting from such removal. Tenant shall repair all damage caused by the removal of the items described above. Notwithstanding the foregoing, Tenant shall not be required to remove any Alterations (excluding Special Equipment and Off-Premises Equipment) installed by Tenant in the Premises unless, Landlord elects by written notice to Tenant at the time Landlord consents to such Alteration (or prior to the expiration of the Lease Term with respect to the Permitted Alterations, unless Tenant notified Landlord of such Permitted Alterations prior to the installation thereof and requested Landlord's agreement that such Permitted Alterations [or any specific portion thereof] not be removed [which request may not be made more than one [1] time for any such Permitted Alteration except in connection with a second notice as expressly provided below], and Landlord specifically and expressly agreed in writing that such Permitted Alteration does not have to be removed; provided, however, if Landlord does not respond within fifteen (15) business days to any such notice and request from Tenant, then Tenant shall be permitted to deliver a second notice to Landlord requesting Landlord's agreement that such Permitted Alterations not be removed, and if Landlord does not respond to such second notice within five (5) business days after receipt thereof, Landlord shall be deemed to have responded that such a Permitted Alteration does not need to be removed at the end of the Lease Term provided such second notice includes the following statement in bold, capital letters in the heading of such notice: "**FAILURE OF LANDLORD TO RESPOND TO THIS NOTICE WITHIN FIVE (5) BUSINESS DAYS WILL BE DEEMED TO BE AN AGREEMENT BY LANDLORD THAT THE PERMITTED ALTERATIONS LISTED IN THIS NOTICE WILL NOT HAVE TO BE REMOVED AT THE END OF THE LEASE TERM**"), to have Tenant remove such Alteration, in which event, notwithstanding any contrary provisions respecting Alterations contained in this Lease, Tenant shall remove such Alteration on or prior to the expiration or earlier termination of the Lease Term and repair any damage to the Premises resulting from the removal of the same. Additionally, notwithstanding anything herein to the contrary, Tenant shall not be required to demolish or restore any portion of the Work, except for those items listed on <u>Section 6</u> of **<u>Exhibit H</u>** (all portions of the Work that are not listed on <u>Section 6</u> of **<u>Exhibit H</u>** are called the "**Non-Removable Work**"). Landlord shall have the right to waive any requirement that Tenant remove an Alteration upon the expiration of the Lease Term, provided, however, that any such waiver shall be made no later in time than the date that is one (1) year prior to the end of the then current Lease Term. In no event shall any work performed by Landlord be deemed to be Tenant's personal property, it being the intent that Tenant's personal property includes only trade fixtures, those items that are not built into the Premises in a manner to make them non-removable without damage to the Premises, and items that have not been constructed or installed by Landlord. If Tenant fails to remove any property, including any of the property described above, then Landlord may, at Landlord's option, (a) deem such items to have been abandoned by Tenant, the title thereof shall immediately pass to Landlord at no cost to Landlord, and such items may be appropriated, sold, stored, destroyed, or otherwise disposed of by Landlord without notice to Tenant and without any obligation to account for such items; any such disposition shall not be considered a strict foreclosure or other exercise of Landlord's rights in respect of the security interest granted hereunder or otherwise, (b) remove such items, perform any work required to be performed by Tenant hereunder, and repair all damage caused by such work, and if such removal or work was required to be performed by Tenant, Tenant shall reimburse Landlord on demand as Additional Rent for any expenses which Landlord may incur in effecting compliance with Tenant's obligations hereunder (including collection costs and attorneys' fees), plus interest thereon at the Default Rate, or (c) elect any of the actions described in clauses (a) and (b) above as Landlord may elect in its sole discretion. The provisions of this Section 15.2 shall survive the expiration or earlier termination of this Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.3 <u>Environmental Assessment</u>.** Prior to the expiration of the Lease (or within thirty (30) days after any earlier termination), Tenant shall clean and otherwise decommission all interior surfaces (including floors, walls, ceilings, and counters), piping, supply lines, waste lines and plumbing in or serving the Premises, and all exhaust or other ductwork in or serving the Premises, in each case that has carried, released or otherwise been exposed to any Hazardous Materials due to Tenant's use or occupancy of the Premises, and shall otherwise clean the Premises so as to permit the Environmental Assessment called for by this <u>Section 15.3</u> to be issued. Prior to the expiration of this Lease (or within thirty (30) days after any earlier termination), Tenant, at Tenant's expense, shall obtain for Landlord a report (an "**Environmental Assessment**") addressed to Landlord (and, at Tenant's election, Tenant) by a reputable licensed environmental consultant or industrial hygienist that is designated by Tenant and acceptable to Landlord in Landlord's reasonable discretion, which report shall be based on the environmental consultant's inspection of the Premises and shall state, to the Landlord's reasonable satisfaction, that (a) the Hazardous Materials described in the first sentence of this paragraph, to the extent, if any, existing prior to such decommissioning, have been removed in accordance with Applicable Laws; (b) all Hazardous Materials described in the first sentence of this paragraph, if any, have been removed in accordance with Applicable Laws from the interior surfaces of the Premises (including floors, walls, ceilings, and counters), piping, supply lines, waste lines and plumbing, and all such exhaust or other ductwork in the Premises, may be reused by a subsequent tenant or disposed of in compliance with Applicable Laws without incurring special costs or undertaking special procedures for demolition, disposal, investigation, assessment, cleaning or removal of such Hazardous Materials and without giving notice in connection with such Hazardous Materials; and (c) the Premises may be reoccupied for office, research and development, or laboratory use, demolished or renovated without incurring special costs or undertaking special procedures for disposal, investigation, assessment, cleaning or removal of Hazardous Materials described in the first sentence of this paragraph and without giving notice in connection with Hazardous Materials. Further, for purposes of clauses (b) and (c), "special costs" or "special procedures" shall mean costs or procedures, as the case may be, that would not be incurred but for the nature of the Hazardous Materials as Hazardous Materials instead of non-hazardous materials. The report shall also include reasonable detail concerning the clean-up measures taken, the clean-up locations, the tests run and the analytic results. Tenant shall submit to Landlord the scope of the proposed Environmental Assessment for Landlord's reasonable review and approval at least thirty (30) days prior to commencing the work described therein or at least sixty (60) days prior to the expiration of the Lease Term, whichever is earlier. Landlord shall use commercially reasonable efforts to remind Tenant of the requirement to complete the Environmental Assessment in accordance with this Section 15.3 prior to the expiration of the Lease Term; provided, however, that such obligation shall not have any affect on Tenant's obligation to complete the Environmental Assessment.

If Tenant fails to perform its obligations under this <u>Section 15.3</u> without limiting any other right or remedy, Landlord may, on five (5) business days' prior written notice to Tenant perform such obligations at Tenant's expense if Tenant has not commenced to do so within said five (5) day period, and Tenant shall within ten (10) days of written demand reimburse Landlord for all reasonable out-of-pocket costs and expenses incurred by Landlord in connection with such work. Tenant's obligations under this <u>Section 15.3</u> shall survive the expiration or earlier termination of this Lease. In addition, at Landlord's election, Landlord may inspect the Premises and/or the Project for Hazardous Materials at Landlord's cost and expense within sixty (60) days of Tenant's surrender of the Premises at the expiration or earlier termination of this Lease. Tenant shall pay for all such costs and expenses incurred by Landlord in connection with such inspection if such inspection reveals that a release or threat of release of Hazardous Materials exists at the Project or Premises as a result of the acts or omission of Tenant, its officers, employees, contractors, and agents (except to the extent resulting from (i) Hazardous Materials existing in the Premises as at the delivery of possession to Tenant (in which event Landlord shall be responsible for any Clean-up, as provided in this Lease), or (ii) the acts or omissions of Landlord or Landlord's agents, employees or contractors). The provisions of this Section 15.3 shall survive the expiration or earlier termination of this Lease.

**16.** **HOLDING OVER** 

If Tenant fails to vacate the Premises at the end of the Lease Term, then Tenant shall be a tenant at sufferance and, in addition to all other damages and remedies to which Landlord may be entitled for such holding over, (a) Tenant shall pay, in addition to the other Rent, Base Rent equal to the greater of 150% of the Rent payable during the last month of the Lease Term, and (b) Tenant shall otherwise continue to be subject to all of Tenant's obligations under this Lease. The provisions of this <u>Article 16</u> shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law. If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord harmless from all loss, costs (including reasonable attorneys' fees) and liability resulting from such failure, including any claims made by any succeeding tenant founded upon such failure to surrender, and any lost profits or other consequential damages to Landlord resulting therefrom.

**17.** **ESTOPPEL CERTIFICATES** 

From time to time, Tenant shall furnish to any party designated by Landlord, within fifteen (15) days after Landlord has made a written request therefor, a certificate signed by Tenant confirming and containing such factual certifications and representations as to this Lease as Landlord may reasonably request. Unless otherwise required by Landlord's mortgagee or a prospective purchaser or mortgagee of the Project, the initial form of estoppel certificate to be signed by Tenant is attached hereto as **<u>Exhibit F</u>**. Failure of Tenant to timely execute, acknowledge and deliver such estoppel certificate or other instruments shall conclusively constitute an acceptance of the Premises and an acknowledgment by Tenant that statements included in the estoppel certificate are true and correct, without exception, and such acknowledge may be relied upon by Landlord, Landlord's mortgagee and any prospective purchaser or mortgagee. In such event, Tenant shall be estopped from denying the truth of the presumed facts. At any time during the Lease Term, but no more than once per calendar year unless requested in connection with a proposed sale of the Building or Project, any financing or refinancing, or during any period in which Tenant is in default under this Lease, Landlord may require Tenant to provide Landlord with a current financial statement and financial statements of the two (2) years prior to the current financial statement year. Such statements shall be prepared in accordance with generally accepted accounting principles and, if such is the normal practice of Tenant, shall be audited by an independent certified public accountant. Landlord agrees to keep such statement(s) confidential and will not disclose such statement(s) to unaffiliated third parties (other than Landlord's partners, attorneys, accountants, lenders and property manager) except in connection with any proposed sale or financing transactions, in any litigation between Landlord and Tenant or to the extent required by any Applicable Law. Notwithstanding the foregoing, Landlord shall not have any right to request financial statements from Tenant during any period in which Tenant is an entity that is domiciled in the United States of America, having securities funded through a public securities exchange subject to regulation by the United States of America and publicly traded over exchanges based in the United States, and such Tenant's financial statements are readily available at no cost to Landlord.

**18.** **SUBORDINATION AND ATTORNMENT** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.2 <u>Attornment</u>.** Tenant shall attorn to any party succeeding to Landlord's interest in the Premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power of sale, termination of lease, or otherwise (such party, a "**Successor Landlord**"), and Tenant agrees that it will (a) be liable to and recognize any Successor Landlord as the owner and lessor of the Premises upon the same terms and conditions as are contained in the Lease and (b) pay rent and all other amounts due under the Lease directly to the Successor Landlord. Such attornment shall be effective and self-operative without the execution of any further documents; provided, that upon a Successor Landlord's request, Tenant shall execute such agreements confirming such attornment as such party may reasonably request, provided that such agreement includes that such agreement includes a commercially reasonable non-disturbance provision in favor of Tenant and, if such agreement is requested prior to Successor Landlord's acceptance of this Lease, a commercially reasonable provision that such Successor Landlord will accept this Lease following purchase, foreclosure, deed in lieu of foreclosure or otherwise as long as no Event of Default then exists under this Lease (which may provide for commercially reasonable protections for the benefit of such Successor Landlord related to any matters arising prior to such Successor Landlord's acceptance of this Lease).

**19.** **DEFAULTS; REMEDIES** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.1 <u>Events of Default</u>.** The occurrence of any of the following shall constitute a default of this Lease (each an "**Event of Default**") by Tenant:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.1.1 Any failure by Tenant to pay any Rent or any other charge required to be paid under this Lease, or any part thereof, within five (5) business days of notice of nonpayment from Landlord, provided, Landlord shall not be required to provide notice of nonpayment more than twice during any twelve (12) consecutive month period and the third failure to pay Rent when due during a twelve (12) consecutive month period shall constitute an immediate Event of Default without any notice from Landlord; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.1.2 Except where a specific time period is otherwise set forth for Tenant's performance in this Lease, in which event the failure to perform by Tenant within such time period shall be a default by Tenant under this <u>Section 19.1.2</u>, any failure by Tenant to observe or perform any other provision, covenant or condition of this Lease to be observed or performed by Tenant where such failure continues for thirty (30) days after written notice thereof from Landlord to Tenant (or such longer period of time as may be reasonably necessary if such default is of a nature that it cannot reasonably be cured within such initial thirty [30] day period, provided Tenant has commenced such cure during the initial 30-day period and is diligently prosecuting the cure to completion such cure period not to exceed 90 days in the aggregate); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.1.3 Abandonment of the Premises by Tenant and failure to timely perform any obligation under this Lease regarding the security, maintenance, cleanliness or operation of the Premises which failure continues for more than five (5) business days after notice from Landlord; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.1.4 Tenant fails to procure, maintain and deliver to Landlord evidence of the insurance policies and coverages as required under Section 10.3; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.1.5 Tenant fails to pay and release of record, or diligently contest and bond around, any mechanic's or construction lien filed against the Premises or the Project for any work performed, materials furnished, or obligation incurred by or at the request of a Tenant Party, within the time and in the manner required by Article 9; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.1.6 The failure by Tenant to observe or perform according to the provisions of Articles 14, 17 (but solely as to Tenant's obligation to provide an estoppel certificate as further set forth in Article 17) or 18 of this Lease where such failure continues for more than five (5) business days after written notice from Landlord to Tenant;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.1.7 The failure by Tenant to observe or perform according to the provisions of Article 5 of this Lease where such failure continues for more than five (5) business days after written notice thereof from Landlord to Tenant (or such longer period of time as may be reasonably necessary if such default is of a nature that it cannot reasonably be cured within such initial five [5] business day period, provided Tenant has commenced such cure during the initial 5-business day period and is diligently prosecuting the cure to completion such cure period not to exceed 90 days in the aggregate); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.1.8 The filing of a petition by or against Tenant or any guarantor under this Lease (a) in any bankruptcy or other insolvency proceeding; (b) seeking any relief under any state or federal debtor relief law; (c) for the appointment of a liquidator or receiver for all or substantially all of Tenant's property or for Tenant's interest in this Lease; (d) for the reorganization or modification of Tenant's capital structure in connection with a bankruptcy, insolvency, judicial reorganization or other similar judicial proceeding; or (e) in any assignment for the benefit of creditors proceeding; however, if such a petition is filed against Tenant, then such filing shall not be an Event of Default unless Tenant fails to have the proceedings initiated by such petition dismissed within ninety (90) days after the filing thereof

The notice periods provided herein are in lieu of, and not in addition to, any notice periods provided by law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.2 <u>Remedies Upon Default</u>.** Upon the occurrence of any Event of Default by Tenant, Landlord shall have, in addition to any other remedies available to Landlord at law or in equity (all of which remedies shall be distinct, separate and cumulative), the option to pursue any one or more of the following remedies, each and all of which shall be cumulative and nonexclusive, without any separate notice or demand whatsoever, and all of which shall be exercised in accordance with Applicable Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.2.1 Landlord may, immediately or at any time thereafter, elect to terminate this Lease in accordance with Applicable Law by giving Tenant written notice thereof, in which event Tenant shall pay to Landlord the sum of (1) all Rent accrued hereunder through the date of termination, (2) all amounts due under <u>Section 19.2.6</u>, and (3) an amount equal to (but in no event less than zero) (a) the total Rent that Tenant would have been required to pay for the remainder of the Lease Term discounted to present value at a per annum rate equal to the "Prime Rate" as published on the date this Lease is terminated by The Wall Street Journal in its listing of "Money Rates" minus one percent, minus (b) the then present fair market rental value of the Premises for such period, similarly discounted, and as determined in a commercially reasonable manner.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.2.2 Landlord may, to the extent permitted by Applicable Law, terminate Tenant's right to possess the Premises without terminating this Lease by giving written notice thereof to Tenant, in which event Tenant shall pay to Landlord (a) all Rent and other amounts accrued hereunder to the date of termination of possession, (b) all amounts due from time to time under <u>Section 19.2.6</u>, and (c) all Rent and other net sums required hereunder to be paid by Tenant during the remainder of the Lease Term, diminished by any net sums thereafter received by Landlord through reletting the Premises during such period, after deducting all reasonable costs incurred by Landlord in reletting the Premises. Landlord shall not be liable for, nor shall Tenant's obligations hereunder be diminished because of, Landlord's failure to relet the Premises or to collect rent due for such reletting. Tenant shall not be entitled to the excess of any consideration obtained by reletting over the Rent due hereunder. Reentry by Landlord in the Premises shall not affect Tenant's obligations hereunder for the unexpired Lease Term; rather, Landlord may, from time to time, bring an action against Tenant to collect amounts due by Tenant, without the necessity of Landlord's waiting until the expiration of the Lease Term. Unless Landlord delivers written notice to Tenant expressly stating that it has elected to terminate this Lease, all actions taken by Landlord to dispossess or exclude Tenant from the Premises shall be deemed to be taken under this <u>Section 19.2.2</u>. If Landlord elects to proceed under this <u>Section 19.2.2</u>, it may at any time elect to terminate this Lease under <u>Section 19.2.1</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.2.3 Landlord may perform any act Tenant is obligated to perform under the terms of this Lease (and enter upon the Premises in connection therewith if necessary) in Tenant's name and on Tenant's behalf, without being liable for any claim for damages therefor and without waiving Landlord's right based upon such Event of Default of Tenant and without releasing Tenant from any obligations hereunder, and Tenant shall reimburse Landlord, as Additional Rent, on demand for any expenses which Landlord actually incurs in thus effecting compliance with Tenant's obligations under this Lease (including, but not limited to, collection costs and legal expenses), plus interest thereon at the Default Rate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.2.4 Landlord may suspend any services required to be provided by Landlord hereunder without being liable for any claim for damages therefor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.2.5 Intentionally deleted.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.2.6 Upon any Event of Default, Tenant shall pay to Landlord as Additional Rent all reasonable amounts, costs, losses and/or expenses incurred, abated or foregone by Landlord (including court costs and reasonable attorneys' fees and expenses) in (a) obtaining possession of the Premises, (b) removing, storing and/or disposing of Tenant's or any other occupant's property, (c) repairing the Premises (ordinary wear and tear excepted) and restoring the Premises to the condition in which the Premises is required to be in at the time of Tenant's surrender of the Premises, as set forth in this Lease (including, without limitation, removal of Alterations, improvements and/or Special Equipment, as set forth in this Lease), (d) if Tenant is dispossessed of the Premises and this Lease is not terminated, reletting all or any part of the Premises (including brokerage commissions and the cost of tenant finish work, provided that Tenant's responsibility for such tenant finish work will not include any amounts directly paid by a substitute tenant and shall be limited to a percentage of such costs calculated as a fraction, with the numerator being the number of months remaining in the then current Lease Term [or which would have been remaining had this Lease not been terminated] as of the date Landlord enters into the new lease with the substitute tenant, and the denominator being the number of full months of the term of such new lease), (e) performing Tenant's obligations under this Lease which Tenant failed to perform, (f) enforcing, or advising Landlord of, its rights, remedies, and recourses arising out of the default, and (g) securing this Lease, including all reasonable attorneys' fees and unamortized commissions, allowances (including, without limitation, the Construction Allowance), and if this Lease or any amendment hereto contains any abated Rent granted by Landlord as an inducement or concession to secure this Lease or amendment hereto, the remaining unamortized amount of all Rent so abated (and such abated amounts shall be payable immediately by Tenant to Landlord, without any obligation by Landlord to provide written notice thereof to Tenant, and Tenant's right to any abated rent accruing following such Event of Default shall immediately terminate), such amortization to be calculated on a straight line basis over the length of the initial Lease Term or the then current Lease Term to which such costs applied. To the full extent permitted by law, Landlord and Tenant agree the federal and state courts of the state in which the Premises are located shall have exclusive jurisdiction over any matter relating to or arising from this Lease and the parties' rights and obligations under this Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.2.7 Landlord shall at all times have the rights and remedies (which shall be cumulative with each other and cumulative and in addition to those rights and remedies available under <u>Sections 19.2.1</u>, <u>19.2.2</u>, or <u>19.2.3</u>, above, or any law or other provision of this Lease), without prior demand or notice except as required by Applicable Law, to seek any declaratory, injunctive or other equitable relief, and specifically enforce this Lease, or restrain or enjoin a violation or breach of any provision hereof. The provisions of this <u>Section 19.2.7</u> are not dependent upon the occurrence of a default.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.2.8 Nothing herein shall limit or prejudice the right of Landlord to prove and obtain in a proceeding for bankruptcy, insolvency, arrangement or reorganization, by reason of the termination, an amount equal to the maximum allowed by a statute of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount is greater to, equal to, or less than the amount of the loss or damage which Landlord has suffered.

Notwithstanding anything in this Lease to the contrary, in the event Landlord terminates this Lease or Tenant's right to possession pursuant to Section 19.2.1 or Section 19.2.2, Landlord shall use good faith, commercially reasonable efforts to mitigate any damages caused by Tenant under this Lease. The parties agree that any duty imposed on Landlord to mitigate damages (whether at law or under this Lease) shall be satisfied in full if Landlord uses reasonable efforts to lease the Premises to another tenant (a "**Substitute Tenant**") in accordance with the following criteria: (a) Landlord shall have no obligation to solicit or entertain negotiations with any Substitute Tenant for the Premises until 30 days following the date upon which Landlord obtains full and complete possession of the Premises, including the relinquishment by Tenant of any claim to possession of the Premises by written notice from Tenant to Landlord; (b) Landlord shall not be obligated to lease or show the Premises on a priority basis or offer the Premises to any prospective tenant when other space in the Project or related complex is or soon will be available; (c) Landlord shall not be obligated to lease the Premises to a Substitute Tenant for less than the current fair market value of the Premises, as determined by Landlord in its sole discretion, nor will Landlord be obligated to enter into a new lease for the Premises under other terms and conditions that are unacceptable to Landlord under Landlord's then-current leasing policies; (d) Landlord shall not be obligated to enter into a lease with a Substitute Tenant: (1) whose use would violate any restriction, covenant or requirement contained in the lease of another tenant in the Project or the related complex; (2) whose use would adversely affect the reputation of the Project or related complex; (3) whose use would require any addition to or modification of the Premises, Project or related complex in order to comply with Applicable Law, including, without limitation, building codes; (4) whose Tangible Net Worth is less than Tenant's Tangible Net Worth as of the Lease Date and who does not have, in Landlord's sole, but reasonable, opinion, the creditworthiness to be an acceptable tenant; (5) that is a governmental entity, or quasi-governmental entity, or subdivision or agency thereof, or any other entity entitled to the defense of sovereign immunity; (6) that does not meet Landlord's reasonable standards for tenants of the Project or related complex or is otherwise incompatible with the character of the occupancy of the Project, as reasonably determined by Landlord; (7) whose use does not comply with the Permitted Use; (8) whose use or occupancy would result in an increase in the insurance premiums for the Project; or (9) whose use would result in utilization of more parking spaces on the Project in excess of the number previously utilized by Tenant; and (e) Landlord shall not be required to expend any amount of money to alter, remodel or otherwise make the Premises suitable for use by a Substitute Tenant unless Landlord, in Landlord's commercially reasonable discretion, determines any such expenditure is financially prudent in connection with entering into a lease with the Substitute Tenant.

Further, notwithstanding anything in this Lease to the contrary, (i) Landlord shall in no event be entitled to accelerate Rent except as expressly permitted herein, and (ii) in no event shall Tenant be liable for any consequential damages or lost profits, except as set forth in Section 16 above or in connection with any damages arising under Section 5.4.1.5 of this Lease or any damages caused by Tenant's failure to surrender the Premises in the condition required by this Lease if such failure actually delays Landlord's ability to re-lease the Premises to a third party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.3 <u>Subleases of Tenant</u>.** Whether or not Landlord elects to terminate this Lease on account of any default by Tenant, as set forth in this <u>Article 19</u>, Landlord shall have the right to terminate any and all subleases, licenses, concessions or other consensual arrangements for possession entered into by Tenant and affecting the Premises or may, in Landlord's sole discretion, succeed to Tenant's interest in such subleases, licenses, concessions or arrangements. In the event of Landlord's election to succeed to Tenant's interest in any such subleases, licenses, concessions or arrangements, Tenant shall, as of the date of notice by Landlord of such election, have no further right to or interest in the rent or other consideration receivable thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.4 <u>Efforts to Relet</u>.** No re-entry or repossession, repairs, maintenance, changes, alterations and additions, reletting, appointment of a receiver to protect Landlord's interests hereunder, or any other action or omission by Landlord shall be construed as an election by Landlord to terminate this Lease or Tenant's right to possession, or to accept a surrender of the Premises, nor shall same operate to release Tenant in whole or in part from any of Tenant's obligations hereunder, unless express written notice of such intention is sent by Landlord to Tenant. Tenant hereby irrevocably waives (a) any right otherwise available under any law to redeem or reinstate this Lease and (b) any and all rights now or hereafter existing to redeem by order or judgment of any court or by any legal process or writ, Tenant's right of occupancy of the Premises after any termination of this Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.5 <u>Cumulative Remedies</u>**. Any and all remedies of Landlord set forth in this Lease: (a) shall be in addition to any and all other remedies Landlord may have at law or in equity, (b) shall be cumulative, and (c) may be pursued successively or concurrently as Landlord may elect. The exercise of any remedy by Landlord shall not be deemed an election of remedies or preclude Landlord from exercising any other remedies in the future.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.6 <u>Landlord Default</u>**. Notwithstanding anything to the contrary set forth in this Lease, Landlord shall not be in default in the performance of any obligation required to be performed by Landlord pursuant to this Lease unless Landlord fails to perform such obligation within thirty (30) days after the receipt of notice from Tenant specifying in detail Landlord's failure to perform; provided, however, if the nature of Landlord's obligation is such that more than thirty (30) days are required for cure of such failure, then Landlord shall not be in default under this Lease if it shall commence such performance within such thirty (30) day period and thereafter diligently pursue the same to completion. Except where the provisions of this Lease grant Tenant an express, exclusive remedy, or expressly deny Tenant a remedy, Tenant's exclusive remedy for Landlord's failure to perform its obligations under this Lease shall be limited to damages, injunctive relief, or specific performance; in each case, Landlord's liability or obligations with respect to any such remedy shall be limited as provided in <u>Section 29.13</u>.

**20.** **COVENANT OF QUIET ENJOYMENT** 

Landlord covenants that Tenant, on paying the Rent, charges for services and other payments herein reserved and on keeping, observing and performing all the other terms, covenants, conditions, provisions and agreements herein contained on the part of Tenant to be kept, observed and performed, shall, during the Lease Term, peaceably and quietly hold and enjoy the Premises without interference by any persons lawfully claiming by or through Landlord, but not otherwise, subject to the terms, covenants, conditions, provisions and agreements hereof and all matters of record as of the date of this Lease which are applicable to the Premises. The foregoing covenant is in lieu of any other covenant express or implied.

**21.** **SECURITY DEPOSIT/LETTER OF CREDIT** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Tenant shall, simultaneously with the execution and delivery of this Lease, deliver to Landlord, as collateral for the full performance by Tenant of all of its obligations under this Lease and for all losses and damages Landlord may suffer as a result of any default by Tenant under this Lease, a standby, unconditional, irrevocable and transferrable letter of credit (the "**Letter of Credit**") in the amount of $471,621.50 (the "**Letter of Credit Amount**"), naming Landlord and its successors and assigns as the beneficiary, in a form reasonably approved by Landlord and containing the terms required herein, and issued by a federally insured banking or lending institution (i.e., insured by the FDIC) with a retail banking branch located within the continental United States reasonably acceptable to Landlord. The Letter of Credit shall specifically provide for multiple and partial draws, shall be extended annually, without amendment, for additional one-year periods, shall have a term that is self-renewing until thirty (30) days after the expiration of the Lease Term and shall by its terms be transferable by the beneficiary thereunder for a transfer fee not to exceed $250.00 payable by Tenant. Tenant shall be solely responsible for all cost of transferring the Letter of Credit. If an Event of Default is then in existence, Landlord, at Landlord's option, may make a demand for payment under the Letter of Credit in an amount equal to the amounts then due and owing to Landlord under this Lease or such other amount that Landlord has suffered or reasonably estimates it will suffer as a result of the applicable Event of Default by Tenant under this Lease. In the event that Landlord draws upon the Letter of Credit, Tenant shall present to Landlord a replacement Letter of Credit in the full Letter of Credit Amount satisfying all of the terms and conditions of this paragraph within ten (10) business days after receipt of notice from Landlord of such draw; provided, however, that Tenant shall have an additional five (5) business days to present such replacement Letter of Credit if Tenant has commenced such cure during the initial 10-business day period and is diligently pursuing such replacement Letter of Credit. Tenant's failure to do so (or to give a cash security deposit in such amount) within such 10-business day period will immediately constitute an Event of Default hereunder without any further notice and cure period, and upon such default Landlord shall be entitled to immediately exercise all rights and remedies available to it hereunder, at law or in equity. In the event that the Letter of Credit has an expiration date earlier than the expiration date of this Lease (whether by reason of a stated expiration date or a notice or termination or non-renewal given by the issuing bank) or the Letter of Credit or issuer do not otherwise meet the requirements of this <u>Article 21</u>, and Tenant has not presented to Landlord a replacement Letter of Credit which complies with the terms and conditions of this Lease on or before thirty (30) days prior to the expiration date of any such Letter of Credit then held by Landlord, then Landlord shall have the right to draw upon the Letter of Credit then held by Landlord and any such amount paid to Landlord by the issuer of the Letter of Credit shall be held in a segregated account by Landlord as security for the performance of Tenant's obligations hereunder, provided, however, that Tenant's failure to present a replacement Letter of Credit to Landlord on or before thirty (30) days prior to the expiration date of any such Letter of Credit then held by Landlord shall not be deemed an Event of Default unless Tenant's failure to present such replacement letter of credit continues for fifteen (15) business days after receipt of written notice from Landlord of such failure. Any interest earned on such amounts shall be the property of Landlord. Landlord's election to draw under the Letter of Credit when an Event of Default then exists (or as otherwise expressly permitted in this Section 21) and to hold the proceeds of the drawing under the Letter of Credit in a segregated account shall not be deemed a cure of any default by Tenant hereunder and shall not relieve Tenant from its obligation to present to Landlord a replacement Letter of Credit which complies with the terms and conditions of this Lease; provided, however, nothing herein shall permit Landlord to hold more than the Letter of Credit Amount at one time (as may be decreased in accordance with this Lease). Tenant acknowledges that any proceeds of a draw made under the Letter of Credit and thereafter held in a segregated account by Landlord may be used by Landlord to cure or satisfy any obligation of Tenant hereunder as if such proceeds were instead proceeds of a draw made under a Letter of Credit that remained outstanding and in full force and effect at the time such amounts are applied by Landlord to cure or satisfy any such obligation of Tenant. Tenant hereby affirmatively disclaims any interest Tenant has, may have, claims to have, or may claim to have in any proceeds properly drawn by Landlord in accordance with the terms of this Lease under the Letter of Credit and held in accordance with the terms hereof. Without limiting the generality of the foregoing, Tenant expressly acknowledges and agrees that at the end of the Lease Term (whether by expiration or earlier termination hereof), and if an Event of Default is not then in existence or Tenant is not otherwise in default (provided that Tenant shall continue to have the right to cure any such default prior to the expiration of any notice and cure period applicable to such default), Landlord shall return to the issuer of the Letter of Credit or its successor (or as such issuer may direct in writing) any remaining and unapplied proceeds of any prior draws made under the Letter of Credit, and Tenant shall have no rights, residual or otherwise, in or to such proceeds. No condition or term of this Lease shall be deemed to render the Letter of Credit conditional so as to justify the issuer of the Letter of Credit in failing to honor a drawing upon such Letter of Credit in a timely manner. Tenant hereby acknowledges and agrees that Landlord is entering into this Lease in material reliance upon the ability of Landlord to draw upon the Letter of Credit upon the occurrence of any Event of Default by Tenant under this Lease or upon the occurrence of any of the other events described in this <u>Article 21</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In addition to the foregoing, Landlord will have the right to require Tenant to have a new Letter of Credit issued in accordance with the above requirements from a different issuer if either the original Issuer is placed on an FDIC "watch list", if the FDIC or similar state or federal banking regulatory agency is appointed as receiver or conservator for such issuer, if the issuer of the Letter of Credit is no longer insured by the FDIC, or if the issuer of the Letter of Credit at any time does not have its long-term, unsecured and unsubordinated debt obligations rated in the highest category by at least two of Fitch Ratings Ltd. ("**Fitch**"), Moody's Investors Service, Inc. ("**Moody's**") and Standard & Poor's Ratings Services ("**S&P**") or their respective successors (which shall mean AAA from Fitch, Aaa, from Moody's and AAA from S&P). Such new Letter of Credit must comply with the foregoing requirements and must be issued within thirty (30) days of Landlord's written demand therefore. A failure to obtain such replacement Letter of Credit (or to deposit a cash security deposit for the applicable amount with Landlord) by such date shall be an Event of Default under this Lease for which the shall be no notice or grace or cure periods being applicable thereto other than the aforesaid thirty (30) day period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Landlord is not required to keep any amounts drawn on the Letter of Credit separate from its general accounts. To the fullest extent permitted by applicable law, Tenant agrees that the provisions of this <u>Article 21</u> shall supersede and replace all statutory rights of Tenant under applicable law regarding the retention, application or return of security deposits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Landlord and Tenant acknowledge and agree that in no event or circumstance shall the Letter of Credit or any renewal thereof or substitute therefor or any cash held by Landlord after a draw upon the Letter of Credit be deemed to be or treated as a "security deposit" within the meaning of North Carolina law. The parties hereto: (A) recite that the Letter of Credit and/or any cash held by Landlord after a draw upon the Letter of Credit, as the case may be, is not intended to serve as a security deposit and any and all laws, rules and regulations applicable to security deposits in the commercial context ("**Security Deposit Laws**") shall have no applicability or relevance thereto; and (B) waive any and all rights, duties and obligations either party may now or, in the future, will have under, relating to or arising from the Security Deposit Laws. If Landlord transfers its interest in the Building and transfers the Letter of Credit (or any proceeds thereof then held by Landlord) in whole or in part to the transferee, Landlord shall, without any further agreement between the parties hereto, thereupon be released by Tenant from all liability therefor. The provisions of this <u>Article 21</u> shall apply to every transfer or assignment of all or any part of the Letter of Credit to a new landlord. In connection with any such transfer of the Letter of Credit by Landlord, Tenant shall, at Tenant's sole cost and expense, execute and submit to the issuer of the Letter of Credit such applications, documents and instruments as may be necessary to effectuate such transfer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Tenant acknowledges and agrees that Tenant has no property interest whatsoever in the Letter of Credit or the proceeds thereof and that, in the event Tenant becomes a debtor under any chapter of the Bankruptcy Code, neither Tenant, any trustee, nor Tenant's bankruptcy estate shall have any right to restrict or limit Landlord's claim and/or rights to the Letter of Credit and/or the proceeds thereof by application of Section 502(b)(6) of the Bankruptcy Code, and that the Landlord may apply the Letter of Credit to its state law damages without limiting or reducing in any way, its claim for damages resulting from the rejection of this Lease under Section 502(b)(6) of the Bankruptcy Code. Tenant further covenants and warrants that it will neither assign nor encumber the Letter of Credit or any part thereof and that neither Landlord nor its successors or assigns will be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Notwithstanding anything herein to the contrary, provided an Event of Default is not then in existence and in the event either (i) Tenant's SB206 product candidate receives market approval from the U.S. Food and Drug Administration and Tenant has secured at least Fifty Million and 00/100 Dollars ($50,000,000.00) of equity investment in excess of Tenant's equity capital as of October 28, 2020, or (ii) Tenant reaches and maintains a market capitalization (i.e., the total amount of the outstanding shares of Tenant's stock multiplied by the then-current market price of one share of Tenant's stock) of at least Two Hundred Million and 00/100 Dollars ($200,000,000.00) for each day over a period of three (3) consecutive full calendar months during the Lease Term, and Tenant has delivered written notice to Landlord of either of the events described in (i) or (ii) above, together with documentation satisfactory to Landlord evidencing the occurrence of such event(s), the balance of the Letter of Credit (or the balance of the cash security deposit if the security deposit is then held in cash) shall reduce to an amount equal to $353,716.11 or Tenant may substitute a Letter of Credit in the amount of $353,716.11 in lieu of the Letter of Credit then held by Landlord. Following such reduction in the Letter of Credit, Landlord shall (at no cost to Landlord) (x) accept from the issuer of the Letter of Credit an amendment to the Letter of Credit changing the Letter of Credit to $353,716.11, but which does not otherwise amend or modify the same, or a substitute Letter of Credit in the amount of $353,716.11, provided that such amendment or replacement Letter of Credit is in a form reasonably acceptable to Landlord and otherwise complies with the terms of this <u>Article 21</u>, and (y) execute and deliver to the issuer of the Letter of Credit such commercially reasonable instruments in a form reasonably acceptable to Landlord as may be reasonably required by such issuer to effectuate such reduction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) Additionally, provided an Event of Default is not then in existence, Tenant has paid all Rent before default or the due date for such Rent and no Event of Default has occurred under this Lease during the first three (3) Lease Years of the initial Lease Term, and Tenant has delivered a written request for Landlord to acknowledge (and Landlord has made such acknowledgement in writing, which it shall not unreasonably withhold, condition, or delay) that all Rent has been paid on time and no Event of Default has occurred, the balance of the Letter of Credit shall reduce to an amount equal to $117,905.37, or Tenant may substitute a Letter of Credit in the amount of $117,905.37 in lieu of the Letter of Credit then held by Landlord. In such event, Landlord shall (at no cost to Landlord) (i) accept from the issuer of the Letter of Credit an amendment to the Letter of Credit changing the Letter of Credit to $117,905.37, but which does not otherwise amend or modify the same, or a substitute Letter of Credit in the amount of $117,905.37, provided that such amendment or replacement Letter of Credit is in a form reasonably acceptable to Landlord and otherwise complies with the terms of this <u>Article 21</u>, and (ii) execute and deliver to the issuer of the Letter of Credit such commercially reasonable instruments in a form reasonably acceptable to Landlord as may be reasonably required by such issuer to effectuate such reduction. If Tenant defaulted in delivering any payment of Rent or otherwise commits an Event of Default during the first three (3) Lease Years of the initial Lease Term, then Tenant's right to a reduction of the Letter of Credit under this grammatical paragraph shall automatically be null and void and of no further force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) Notwithstanding anything herein to the contrary, Tenant reserves the right to replace the Letter of Credit with a cash security deposit in the full amount of the Letter of Credit at any time during the Lease Term upon not less than fifteen (15) days' prior written notice. Upon Tenant delivering such cash security deposit to Landlord, the Letter of Credit shall be returned to Tenant.

**22.** **SUBSTITUTION SPACE** 

Intentionally Omitted.

**23.** **SIGNS** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**23.1 <u>Interior Signage</u>.** All letters and numerals on doors or other signs on the Premises shall be in the standard form of graphics for the Building, and no others shall be used or permitted without Landlord's prior written consent. Furthermore, Tenant shall not place signs on or in the Premises which are visible from outside the Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**23.2 <u>Prohibited Signage and Other Items</u>.** Landlord shall allow Tenant, at Tenant's sole cost and expense, to place building signage above the front entrance of the Premises subject to the following terms and conditions: (a) Landlord must approve of the plans and specifications for such signage prior to Tenant's installation thereof; (b) the exact location of the signage above the entrance of the Premises shall be approved by Landlord; (c) Tenant shall be solely responsible for obtaining all permits, licenses or other approvals required in connection with Tenant's installation of such signage; and (d) Tenant's installation of such signage shall comply with Landlord's signage criteria (as the same may be amended from time to time; provided, however, that such signage criteria shall not require Tenant to reduce or remove any signage expressly granted to Tenant in this Article 23 unless required by Applicable Laws or the Underlying Documents or be enforced against Tenant in a discriminatory manner as compared to other tenants' use of similar signage at the Building) and rules and regulations for the Project, all Applicable Laws and Underlying Documents. Tenant shall also have the right, subject to the conditions provided in subsections (a) through (d) above, to install signage at the rear entrance of the Premises that identifies Tenant's shipping and receiving area. Any signs, notices, logos, pictures, names or advertisements which are installed and that have not been separately approved by Landlord may be removed without notice by Landlord at the sole expense of Tenant. Except as to the signage expressly permitted in this <u>Section 23.2</u> at the front and rear entrances of the Premises, Tenant may not install any signs on the exterior or roof of the Premises, the Project or the Common Areas. Any signs, window coverings, or blinds (even if the same are located behind the Landlord-approved window coverings for the Building), or other items visible from the exterior of the Premises or Building, shall be subject to the prior approval of Landlord, in its sole discretion. Tenant shall not place or install any projections, antennae, aerials, or similar devices inside or outside of the Building, without the prior written approval of Landlord. Tenant shall be solely responsible for ensuring any signage complies with all Applicable Laws and Underlying Documents, and Tenant shall remove all such signage upon the expiration or earlier termination of this Lease and repair any damage caused by such removal.

**24.** **COMPLIANCE WITH LAW** 

Tenant shall not do anything or suffer anything to be done in or about the Premises or the Project which will conflict with any law, statute, ordinance or other governmental rule, regulation or requirement now in force or which may hereafter be enacted or promulgated (collectively, "**Applicable Laws**"). At its sole cost and expense, Tenant shall promptly comply with all such Applicable Laws which relate to (i) the Premises and/or Tenant's use thereof, (ii) any Alterations or tenant improvements, or (iii) the Building outside of the Premises, but as to the Building (and as to any improvements to exterior walls, structural floors), only to the extent such obligations are triggered by alterations or improvements made by or on behalf of a Tenant Party, or Tenant's use of the Premises for non-general office use. Except as otherwise expressly made Landlord's obligations hereunder, Tenant shall be responsible, at its sole cost and expense, to make all alterations to the Premises as are required to comply with the Applicable Laws to the extent such compliance is Tenant's obligation pursuant this <u>Article 24</u> or elsewhere in this Lease. The judgment of any court of competent jurisdiction or the admission of Tenant in any judicial action, regardless of whether Landlord is a party thereto, that Tenant has violated any of said governmental measures, shall be conclusive of that fact as between Landlord and Tenant. Landlord shall comply with all Applicable Laws relating to the Common Areas, provided that compliance with such Applicable Laws is not the responsibility of Tenant under this Lease, and provided further that Landlord's failure to comply therewith would prohibit Tenant from obtaining or maintaining a certificate of occupancy for the Premises, or would unreasonably and materially affect the safety of Tenant's employees or create a significant health hazard for Tenant's employees, or would otherwise materially and adversely affect Tenant's use of or access to the Premises. Further, notwithstanding anything in this Lease to the contrary, as between Landlord and Tenant, (a) Tenant shall bear the risk of complying with Title III of the Americans With Disabilities Act of 1990, any state laws governing handicapped access or architectural barriers, and all rules, regulations, and guidelines promulgated under such laws, as amended from time to time (the "**Disabilities Acts**") in the Premises, and (b) Landlord shall bear the risk of complying with the Disabilities Acts in the Common Areas of the Project, other than compliance that is necessitated by the use of the Premises for other than for non-general office use or as a result of any alterations or additions, including any initial tenant improvement work, made by or on behalf of a Tenant Party (which risk and responsibility shall be borne by Tenant). Landlord shall be permitted to include in Operating Expenses any costs or expenses incurred by Landlord under this <u>Article 24</u>. Landlord represents and warrants that, to Landlord's knowledge as of the Lease Date, Landlord has not received any written notice from any governmental authority that the Common Areas or the Building are in violation of the Disabilities Act or other Applicable Laws, which have not been remedied prior to the date hereof.

**25.** **LATE CHARGES** 

All past due payments required of Tenant hereunder that are received after five (5) days of when due shall bear interest from the date due until paid at the lesser of twelve percent (12%) per annum or the maximum lawful rate of interest (such lesser amount is referred to herein as the "**Default Rate**"); additionally, Landlord, in addition to all other rights and remedies available to it, may charge Tenant a late fee for such past due payments that are received after five (5) days of when due that is equal to the greater of (a) five percent (5%) of the delinquent payment, or (b) $250, to reimburse Landlord for its cost and inconvenience incurred as a consequence of Tenant's delinquency. In no event, however, shall the charges permitted under this Article 25 or elsewhere in this Lease, to the extent they are considered to be interest under Applicable Law, exceed the maximum lawful commercial rate of interest. Notwithstanding the foregoing, the late fee and interest referenced above shall not be charged with respect to the first occurrence (but not any subsequent occurrence) during any 12-calendar month period that Tenant fails to make any payment of Additional Rent when due, until five (5) days after Landlord delivers written notice of such delinquency to Tenant. The late charge shall be deemed Additional Rent and the right to require it shall be in addition to all of Landlord's other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlord's remedies in any manner.

**26.** **INTENTIONALLY DELETED** 

**27.** **ENTRY BY LANDLORD** 

Landlord reserves the right at all reasonable times and upon not less than twenty-four (24) hours' prior notice (which notice may be provided verbally or by email) to Tenant (except in the case of an emergency, in which event no prior notice shall be required, but Landlord shall use commercially reasonable efforts to provide the notice prior to entry to the extent practicable) to enter the Premises to (i) inspect the Premises; (ii) show the Premises to prospective purchasers, or to current or prospective mortgagees, ground or underlying lessors or insurers or, during the last twelve (12) months of the Lease Term, to prospective tenants; (iii) post notices of nonresponsibility (to the extent applicable pursuant to then Applicable Law); or (iv) alter, improve or repair the Premises or the Building, or for structural alterations, repairs or improvements to the Building or the Building's systems and equipment. Landlord may make any such entries without the abatement of Rent. In an emergency, Landlord shall have the right to use any means that Landlord may deem proper to open the doors in and to the Premises, but in non-emergency situations Tenant may provide a representative to accompany Landlord during any such entry. Additionally, notwithstanding anything herein to the contrary, Landlord agrees to comply with any commercially reasonable security and privacy procedures or measures, as applicable, that Tenant may have in place and for which Tenant has provided to Landlord in writing, except to the extent any emergency does not permit such compliance or such procedures do not permit Landlord to fulfill its obligations under this Lease. Any entry into the Premises by Landlord in the manner hereinbefore described shall not be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an actual or constructive eviction of Tenant from any portion of the Premises. In exercising the rights provided in this Article 27, Landlord shall use commercially reasonable efforts to minimize any interference with Tenant's occupancy of the Premises or the conduct of Tenant's business therein.

**28.** **TENANT PARKING** 

Tenant shall have the nonexclusive right, without the payment of any parking charge or fee (other than as a reimbursement of Operating Expenses to the extent provided in <u>Article 4</u> of this Lease, above), commencing on the Rent Commencement Date, to use the amount of unreserved parking spaces set forth in <u>Section 10</u> of the Summary, on a monthly basis throughout the Lease Term, which parking spaces shall pertain to the on-site parking lot (or facilities) serving the Building. Tenant and the Tenant Parties shall not in any event be entitled to use more parking spaces than those allocated to Tenant pursuant to Section 10 of the Summary. Notwithstanding the foregoing, Tenant shall be responsible for the full amount of any taxes imposed by any governmental authority in connection with the renting of such parking spaces by Tenant or the use of the parking facility by Tenant. Unless specified to the contrary above, the parking spaces provided hereunder shall be provided on an unreserved, "first-come, first served" basis. Tenant's continued right to use the parking spaces is conditioned upon Tenant abiding by all rules and regulations which are prescribed from time to time for the orderly operation and use of the parking facility where the parking spaces are located (including any access control, sticker or other identification system established by Landlord and the prohibition of vehicle repair and maintenance activities in the parking facilities), and shall cooperate in seeing that Tenant's employees and visitors also comply with such rules and regulations. Landlord may refuse to permit any person who violates such rules and regulations to park in the parking facility, and any violation of the rules and regulations shall subject the car to removal from the parking facility. Tenant's use of the Project parking facility shall be at Tenant's sole risk and Tenant acknowledges and agrees that Landlord shall have no liability whatsoever for damage to the vehicles of Tenant, its employees and/or visitors, or for other personal injury or property damage or theft relating to or connected with the parking rights granted herein or any of Tenant's, its employees' and/or visitors' use of the parking facilities, it being expressly agreed and understood Landlord has no duty to insure any of said motor vehicles (including the contents thereof) and Landlord is not responsible for the protection and security of such vehicles. Landlord shall not be responsible for enforcing Tenant's parking rights against any third parties. **NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS LEASE, LANDLORD SHALL HAVE NO LIABILITY WHATSOEVER FOR ANY PROPERTY DAMAGE OR LOSS WHICH MIGHT OCCUR ON THE PARKING AREA OR AS A RESULT OF OR IN CONNECTION WITH THE PARKING OF MOTOR VEHICLES IN ANY OF THE PARKING SPACES**.

**29.** **MISCELLANEOUS PROVISIONS** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.1 <u>Terms; Captions</u>.** The words "**Landlord**" and "**Tenant**" as used herein shall include the plural as well as the singular. The necessary grammatical changes required to make the provisions hereof apply either to corporations or partnerships or individuals, men or women, as the case may require, shall in all cases be assumed as though in each case fully expressed. The captions of Articles and Sections are for convenience only and shall not be deemed to limit, construe, affect or alter the meaning of such Articles and Sections.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.2 <u>Binding Effect</u>.** Subject to all other provisions of this Lease, each of the covenants, conditions and provisions of this Lease shall extend to and shall, as the case may require, bind or inure to the benefit not only of Landlord and of Tenant, but also of their respective heirs, personal representatives, successors or assigns, provided this clause shall not permit any assignment by Tenant contrary to the provisions of <u>Article 14</u> of this Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.3 <u>No Air Rights</u>.** No rights to any view or to light or air over any property, whether belonging to Landlord or any other person, are granted to Tenant by this Lease. If at any time any windows of the Premises are temporarily darkened or the light or view therefrom is obstructed by reason of any repairs, improvements, maintenance or cleaning in or about the Project, the same shall be without liability to Landlord and without any reduction or diminution of Tenant's obligations under this Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.4 <u>Modification of Lease</u>.** Should any current or prospective mortgagee or ground lessor for the Building or Project require a modification of this Lease, which modification will not cause an increased cost or expense to Tenant or in any other way materially and adversely change the rights and obligations of Tenant hereunder, then and in such event, Tenant agrees that this Lease may be so modified and agrees to execute whatever documents are reasonably required therefor and to deliver the same to Landlord within ten (10) business days following a request therefor. At the request of Landlord or any mortgagee or ground lessor, Tenant agrees to execute a short form of Lease and deliver the same to Landlord within ten (10) business days following the request therefor. Landlord shall reimburse Tenant for any reasonable and actual out-of-pocket attorney fees incurred by Tenant in connection with the review of any such modification of this Lease, not to exceed Three Thousand and 00/100 Dollars ($3,000.00).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.5 <u>Transfer of Landlord's Interest</u>.** Tenant acknowledges that Landlord has the right to transfer all or any portion of its interest in the Project or Building and in this Lease, and Tenant agrees that in the event of any such transfer, and following Landlord's successor's written assumption of the obligations of landlord hereunder, Landlord shall automatically be released from all liability under this Lease and Tenant agrees to look solely to such transferee for the performance of Landlord's obligations hereunder after the date of transfer and such transferee shall be deemed to have fully assumed and be liable for all obligations of this Lease to be performed by Landlord, including the return of any Letter of Credit (or security deposit, as applicable), and Tenant shall attorn to such transferee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.6 <u>Prohibition Against Recording</u>.** In the event this Lease, a copy or any notice or memorandum thereof shall be recorded by Tenant without Landlord's consent, then such recording shall immediately constitute an Event of Default by Tenant entitling Landlord to any and all rights and remedies to which it may be entitled in connection therewith. Further, Tenant grants to Landlord a power of attorney to execute and record a release releasing any such recorded instrument of record that was recorded without the prior written consent of Landlord, which power is coupled with an interest and is irrevocable. Notwithstanding the foregoing, at any time following the Lease Commencement Date, at the request of Landlord or Tenant, Landlord and Tenant shall execute a memorandum of lease in the form attached hereto as <u>Exhibit I-1</u>; provided, however, that Tenant hereby requests that the parties execute the form of such memorandum of lease concurrently with this Lease and that Landlord delivers its wet-ink, executed and notarized version of such memorandum of lease to Tenant for Tenant to record on or promptly after the Lease Commencement Date. All costs of preparation and recording such memorandum shall be borne by the party requesting the memorandum. Following the expiration or earlier termination of the Lease Term, Tenant shall, within five (5) business days after written request from Landlord, execute a release of any recorded memorandum of lease or such other written acknowledgement of the expiration or termination of this Lease reasonably acceptable to Landlord and in recordable form. If Tenant fails to execute and deliver any such release or other instrument prior to the expiration of such five (5) business day period, Tenant grants to Landlord a power of attorney to unilaterally execute and record a release or termination of the memorandum of lease and releasing such memorandum of record, which power is coupled with an interest and is irrevocable. If any conflict exists or arises between the terms of this Lease and the terms of such memorandum, the terms of this Lease shall prevail.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.7 <u>Landlord's Title</u>.** Landlord's title is and always shall be paramount to the title of Tenant. Nothing herein contained shall empower Tenant to do any act which can, shall or may encumber the title of Landlord.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.8 <u>Relationship of Parties</u>.** Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint venturer or any association between Landlord and Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.9 <u>Application of Payments</u>.** Landlord shall have the right to apply payments received from Tenant pursuant to this Lease, regardless of Tenant's designation of such payments, to satisfy any obligations of Tenant hereunder, in such order and amounts as Landlord, in its sole discretion, may elect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.10 <u>Time of Essence</u>.** Time is of the essence with respect to the performance of every provision of this Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.11 <u>Partial Invalidity</u>.** If any term, provision or condition contained in this Lease shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, provision or condition to persons or circumstances other than those with respect to which it is invalid or unenforceable, shall not be affected thereby, and each and every other term, provision and condition of this Lease shall be valid and enforceable to the fullest extent possible permitted by law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.12 <u>No Warranty</u>.** In executing and delivering this Lease, Tenant has not relied on any representations, including, but not limited to, any representation as to the amount of any item comprising Additional Rent or the amount of the Additional Rent in the aggregate or that Landlord is furnishing the same services to other tenants, at all, on the same level or on the same basis, or any warranty or any statement of Landlord which is not set forth herein or in one or more of the exhibits attached hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.13 <u>Landlord Exculpation</u>.** The liability of Landlord or the Landlord Parties to Tenant for any default by Landlord under this Lease or arising in connection herewith or with Landlord's operation, management, leasing, repair, renovation, alteration or any other matter relating to the Project or the Premises shall be limited solely and exclusively to an amount which is equal to the interest of Landlord in the Building (including rental income and insurance/condemnation proceeds). Neither Landlord, nor any of the Landlord Parties shall have any personal liability therefor, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. The limitations of liability contained in this Section 29.13 shall inure to the benefit of Landlord's and the Landlord Parties' present and future partners, beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective partners, heirs, successors and assigns. Under no circumstances shall any present or future partner of Landlord (if Landlord is a partnership), or trustee or beneficiary (if Landlord or any partner of Landlord is a trust), have any liability for the performance of Landlord's obligations under this Lease. Notwithstanding any contrary provision herein, neither Landlord nor the Landlord Parties, not Tenant (except with respect to any holdover tenancy) shall be liable under any circumstances for consequential or indirect damages, including without limitation injury or damage to, or interference with, Tenant's business, including but not limited to, loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, in each case, however occurring.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.14 <u>Entire Agreement</u>.** It is understood and acknowledged that there are no oral agreements between the parties hereto affecting this Lease and this Lease constitutes the parties' entire agreement with respect to the leasing of the Premises and supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements and understandings, if any, between the parties hereto or displayed by Landlord to Tenant with respect to the subject matter thereof, and none thereof shall be used to interpret or construe this Lease. None of the terms, covenants, conditions or provisions of this Lease can be modified, deleted or added to except in writing signed by the parties hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.15 <u>Right to Lease</u>.** Landlord reserves the absolute right to effect such other tenancies in the Project as Landlord in the exercise of its sole business judgment shall determine to best promote the interests of the Building or Project. Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant or type or number of tenants shall, during the Lease Term, occupy any space in the Building or Project.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.16 <u>Force Majeure</u>.** Other than for Tenant's obligations under this Lease that can be performed by the payment of money (e.g., payment of Rent and maintenance of insurance), whenever a period of time is herein prescribed for action to be taken by either party hereto, such party shall not be liable or responsible for, and there shall be excluded from the computation of any such period of time, any delays directly or indirectly due to strikes, riots, acts of God, pandemics, epidemic, public health emergency, shortages of labor or materials, war, terrorist acts or activities, public emergencies, government actions, governmental laws, regulations, or restrictions, or any other causes of any kind whatsoever which are beyond the control of such party (collectively, a "**Force Majeure**"). If any such Force Majeure shall cause a party's performance hereunder to be delayed or prevented, such responsible party shall notify the other party in writing specifying such Force Majeure as soon as reasonably possible; provided, however, that such notice shall not be a condition to the extension of the period of time to perform the obligation affected by such Force Majeure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.17 <u>Intentionally Deleted</u>.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.18 <u>Notices</u>.** All notices, demands, statements, designations, approvals or other communications (collectively, "**Notices**") given or required to be given by either party to the other hereunder or by law shall be in writing, shall be (A) sent by United States certified or registered mail, postage prepaid, return receipt requested ("**Mail**"), (B) delivered by a nationally recognized overnight courier, (C) delivered personally, or (D) sent by facsimile or electronic mail transmission during normal business hours followed by a confirmatory letter sent by the next business day in another manner permitted hereunder. Any Notice shall be sent, transmitted, or delivered, as the case may be, to Tenant at the appropriate address set forth in <u>Section 11</u> of the Summary, or to such other place as Tenant may from time to time designate in a Notice to Landlord, or to Landlord at the addresses set forth below, or to such other places as Landlord may from time to time designate in a Notice to Tenant. All Notices shall be effective upon delivery (which, in the case of delivery by facsimile or electronic mail transmission, shall be deemed to occur at the time of delivery indicated on the electronic confirmation of the facsimile or email so long as the confirmatory letter referenced above is sent in the manner required) to the address of the addressee (even if such addressee refuses delivery thereof). As of the date of this Lease, any Notices to Landlord must be sent, transmitted, or delivered, as the case may be, to the following addresses:

Copper II 2020, LLC

c/o Lincoln Harris LLC

4725 Piedmont Row Drive, Suite 800

Charlotte, North Carolina 28210

Attn: John W. Harris III

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.19 <u>Joint and Several</u>.** If there is more than one Tenant, the obligations imposed upon Tenant under this Lease shall be joint and several. All unperformed obligations of Tenant hereunder not fully performed at the end of the Lease Term shall survive the end of the Lease Term, including payment obligations with respect to Rent and all obligations concerning the condition and repair of the Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.20 <u>Authority</u>.** Landlord and Tenant each hereby represents and warrants on behalf of itself that it is a duly formed and existing entity qualified to do business in the State of North Carolina and that said party has full right and authority to execute and deliver this Lease and that each person signing on behalf of said party is authorized to do so.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.21 <u>Legal Fees; Cost of Suit</u>.** In any suit, action, proceeding or arbitration involving this Lease the prevailing party shall be entitled to recover from the losing party the prevailing party's reasonable attorneys' fees and expenses incurred therein. Each party represents and warrants that this Lease is entered into primarily for business or commercial purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.22 <u>Governing Law; WAIVER OF TRIAL BY JURY</u>.** This Lease shall be construed and enforced in accordance with the laws of the State of North Carolina. Landlord and Tenant agree that any action arising out of this Lease (except an action for possession by Landlord, which may be brought in whatever manner or place provided by law) shall be brought in the Trial Court, Superior Court Department, in the county where the Premises are located. In any legal proceeding regarding this Lease, including enforcement of any judgments, Tenant irrevocably and unconditionally (1) submits to the jurisdiction of the courts of law in the county or district in which the Premises are located; (2) accepts the venue of such courts and waives and agrees not to plead any objection thereto; and (3) agrees that (a) service of process may be effected at the address specified for Tenant in this Lease, or at such other address of which Landlord has been properly notified in writing, and (b) nothing herein will affect Landlord's right to effect service of process in any other manner permitted by applicable law. TO THE MAXIMUM EXTENT PERMITTED BY LAW, TENANT (ON BEHALF OF ITSELF AND ITS RESPECTIVE SUCCESSORS, ASSIGNS AND SUBTENANTS) AND LANDLORD EACH, AFTER CONSULTATION WITH COUNSEL, KNOWINGLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LITIGATION OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE ARISING OUT OF OR WITH RESPECT TO THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.23 <u>Submission of Lease</u>.** Submission of this instrument for examination or signature by Tenant does not constitute a reservation of, option for or option to lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.24 <u>Brokers</u>.** Landlord and Tenant hereby warrant to each other that it has had no dealings with any real estate broker or agent in connection with the negotiation of this Lease, excepting only the real estate brokers or agents specified in <u>Section 13</u> of the Summary (the "**Brokers**"), and that it knows of no other real estate broker or agent which represented said party who is entitled to a commission in connection with this Lease. Landlord and Tenant each agree to indemnify and defend the other party against and hold the indemnified party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, costs and expenses (including without limitation reasonable attorneys' fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of any dealings with any real estate broker or agent, other than the Brokers, occurring by, through, or under the indemnifying party. Landlord agrees to pay a fee to the Brokers in such amounts and at the time and manner as specified pursuant to a separate agreement or separate agreements entered into by Landlord with such Brokers. The terms of this <u>Section 29.24</u> shall survive the expiration or earlier termination of the Lease Term.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.25 <u>Independent Covenants</u>.** This Lease shall be construed as though the covenants herein between Landlord and Tenant are independent and not dependent and Tenant hereby expressly waives the benefit of any statute to the contrary and agrees that if Landlord fails to perform its obligations set forth herein, Tenant shall not be entitled to make any repairs or perform any acts hereunder at Landlord's expense or to any setoff of the Rent or other amounts owing hereunder against Landlord.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.26 <u>Project or Building Name, Address and Signage</u>.** Landlord shall have the right at any time to change the name and/or address of the Project or Building and to install, affix and maintain any and all signs on the exterior and on the interior of the Project or Building as Landlord may, in Landlord's sole discretion, desire. Tenant shall not use the name of the Project or Building or use pictures or illustrations of the Project or Building in advertising or other publicity or for any purpose other than as the address of the business to be conducted by Tenant in the Premises, without the prior written consent of Landlord.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.27 <u>Counterparts.</u>** This Lease may be executed in counterparts with the same effect as if both parties hereto had executed the same document. Both counterparts shall be construed together and shall constitute a single lease. To facilitate execution of this Lease, the parties may execute and exchange, by telephone facsimile or electronic mail PDF, counterparts of the signature pages.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.28 <u>Confidentiality</u>.** Tenant acknowledges that the content of this Lease and any related documents are confidential information. Tenant shall keep such confidential information confidential and shall not disclose such confidential information to any person or entity other than Tenant's lawyers, accountants, auditors, agents, lenders, and prospective purchasers/investors for reasonable business purposes and their respective employees to the extent any such parties have a need to know of the terms of this Lease or such related documents, provided that such parties to whom Tenant is permitted hereunder to disclose such terms and conditions are advised by Tenant of the confidential nature of such terms and conditions and agree to maintain the confidentiality thereof (in each case, prior to disclosure). Tenant shall also be permitted to disclose such confidential information as may be reasonably necessary to enforce the terms and conditions of this Lease and to the extent that such disclosure is required by law (including but not limited to as may be required by applicable securities laws) or court order or by discovery rules in any legal proceeding, provided that Tenant shall only disclose the minimum amount of information required to comply with such law or court order and notify Landlord within a reasonable period of time prior to such disclosure (unless such notice is expressly prohibited by such law or court order). Nothing contained in this Lease is intended to prohibit Tenant from filing this Lease, any key terms, or other information with the Securities and Exchange Commission ("**SEC**"), but only to the extent that Tenant is required to do so pursuant to rules, regulations, or requests from the SEC or otherwise pursuant to Applicable Laws and provided that Tenant shall only disclose the minimum amount of information required to comply with such law, rule, regulation or request. In connection with any required filing with the SEC of this Lease, Tenant shall provide to the Landlord a copy of the proposed filing and the parties shall work cooperatively in good faith, with Tenant taking into consideration Landlord's suggestions, regarding the text of the disclosure as well as information for which Tenant will seek to obtain confidential treatment (if any). Tenant shall be liable for any disclosures made in violation of this Section by Tenant or by any entity or individual to whom the terms of and conditions of this Lease were disclosed or made available by Tenant. The consent by Landlord to any disclosures shall not be deemed to be a waiver on the part of Landlord of any prohibition against any future disclosure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.29 <u>Development of the Project</u>.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;29.29.1 <u>Subdivision</u>. Landlord reserves the right to subdivide all or a portion of the buildings and Common Areas. Tenant agrees to execute and deliver, upon demand by Landlord and in the form requested by Landlord, any additional documents needed to conform this Lease to the circumstances resulting from a subdivision and any all maps in connection therewith. Notwithstanding anything to the contrary set forth in this Lease, the separate ownership of any buildings and/or Common Areas by an entity other than Landlord shall not affect the calculation of Direct Expenses or Tenant's payment of Tenant's Share of Direct Expenses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;29.29.2 <u>Construction of Property and Other Improvements</u>. Tenant acknowledges that portions of the Project and/or adjacent property owned by Landlord or an affiliate of Landlord may be under construction following Tenant's occupancy of the Premises, and that such construction may result in levels of noise, dust, obstruction of access, etc. which are in excess of that present in a fully constructed project. Tenant hereby waives any and all rent offsets or claims of constructive eviction which may arise in connection with such construction. Provided, however, that Landlord shall use commercially reasonable efforts to minimize any disruption with the conduct of Tenant's business within the Premises. Upon request from Tenant, Landlord will inform Tenant of the general construction schedule for any work to be performed by Landlord at the Project which materially and adversely affects access to the Premises during Tenant's regular business hours.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.30 <u>No Violation</u>.** Landlord and Tenant each hereby warrant and represent that its execution of this Lease shall not cause said party to be in violation of any agreement, instrument, contract, law, rule or regulation by which said party is bound.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.31 <u>Arms'-Length Negotiation; No Reliance</u>.** Landlord and Tenant agree that they have both had the opportunity to retain legal counsel to review, revise, and negotiate this Lease on their individual behalf. Landlord and Tenant stipulate that this Lease has been reviewed and revised by both Landlord and Tenant and their respective legal counsel and that the Lease is the result of an arms'-length negotiation and compromise. Landlord and Tenant further stipulate that they are both sophisticated individuals or business entities capable of understanding and negotiating the terms of the Lease. The normal rule of construction that any ambiguities be resolved against the drafting party shall not apply to the interpretation of this Lease or any exhibits or amendments hereto. Further, Tenant disclaims any reliance upon any and all representations, warranties or agreements not expressly set forth in this Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.32 <u>Landlord's Fees</u>**. Whenever Tenant requests Landlord to take any action not required of Landlord hereunder or give any consent required or permitted under this Lease, Tenant will reimburse Landlord for Landlord's reasonable, out-of-pocket costs payable to third parties and incurred by Landlord in reviewing and taking the proposed action or consent, including reasonable engineers' or architects' fees and reasonable and out-of-pocket attorneys' fees, within thirty (30) days after Landlord's delivery to Tenant of a statement of such costs. Tenant will be obligated to make such reimbursement without regard to whether Landlord consents to any such proposed action.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.33 <u>Transportation Management</u>.** Tenant shall fully comply with all present or reasonable future programs intended to manage parking, transportation or traffic in and around the Project and/or the Building, and in connection therewith, Tenant shall take responsible action for the transportation planning and management of all employees located at the Premises by working directly with Landlord, any governmental transportation management organization or any other transportation-related committees or entities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.34 <u>Exhibits</u>.** All exhibits, schedules and attachments attached hereto are incorporated herein by this reference.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.35 <u>Prohibited Persons and Transactions</u>.** Tenant represents and warrants that neither Tenant nor any of its affiliates, nor any of their respective partners, members, shareholders or other equity owners, and none of their respective employees, officers, directors, representatives or agents is, nor will they become, a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Assets Control ("**OFAC**") of the Department of the Treasury (including those named on OFAC's Specially Designated Nationals and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not Transfer this Lease to, contract with or otherwise engage in any dealings or transactions or be otherwise associated with such persons or entities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.36 <u>No Construction Contract</u>.** Landlord and Tenant acknowledge and agree that this Lease, including all exhibits a part hereof, is not a construction contract or an agreement collateral to or affecting a construction contract.

*[Signatures provided on following page]*

IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed the day and date first above written.

---

| | |
|:---|:---|
| <u>LANDLORD:</u><br>| <u>TENANT:</u> <br>|
| **COPPER II 2020, LLC,** | **NOVAN, INC.,** |
| a Delaware limited liability company | a Delaware corporation |
| By: /s/ John W. Harris III | By: /s/ Paula Brown Stafford |
| Name: John W. Harris III | Name: Paula Brown Stafford |
| Its: Authorized Signatory | Its: President and CEO |

---

**FIRST AMENDMENT TO LEASE**

THIS FIRST AMENDMENT TO LEASE (this "**First Amendment**") is made and entered into as of the <u>18th</u> day of March, 2021 (the "**First Amendment Effective Date**") by and between **COPPER II 2020, LLC**, a Delaware limited liability company ("**Landlord**") and **NOVAN, INC.**, a Delaware corporation ("**Tenant**").

**W I T N E S S E T H:**

**WHEREAS**, Landlord and Tenant entered into that certain Lease dated January 18, 2021 (the "**Lease**"), for the lease of approximately 15,463 rentable square feet of space known as Suite 110 (the "**Existing Premises**") in the building having an address of 4020 Stirrup Creek Drive, Durham, North Carolina 27703 (the "**Building**"), all as more particularly described in the Lease; and

**WHEREAS**, Landlord and Tenant desire to enter into this First Amendment to expand the Existing Premises, as more particularly set forth in this First Amendment.

**NOW, THEREFORE,** in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby covenant and agree as follows:

1. **<u>Recitals; Capitalized Terms</u>**. The recitals set forth above are true and complete and are incorporated herein by this reference. All capitalized terms not defined in this First Amendment shall have the meanings ascribed to them in the Lease.

2. **<u>Expansion Premises</u>**. Effective immediately, Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, that certain space located in the Building adjacent to the Existing Premises and containing approximately 160 rentable square feet of space (the "**Expansion Premises**") on the terms and conditions of the Lease, as amended hereby. Accordingly, from and after the Expansion Premises Commencement Date, (a) the term "Premises" shall refer collectively to the Existing Premises and the Expansion Premises and (b) notwithstanding anything to the contrary in the Lease, as amended hereby, the Premises shall be deemed to contain (and the Net Rentable Area of the Premises shall be deemed to be) 15,623 rentable square feet. The term for the Expansion Premises shall commence immediately and shall expire coterminously with the Lease Term. Notwithstanding the foregoing, Tenant's obligations to pay Base Rent on the Expansion Premises shall not commence until the Rent Commencement Date. Tenant hereby accepts the Expansion Premises in its "**as is, where is**" condition and Landlord shall have no obligation to alter, remodel, improve, repair or decorate the Expansion Premises or any part thereof. Further, Tenant hereby agrees that there are no representations or warranties of any kind, express or implied, by Landlord regarding the Expansion Premises.

3. **<u>Rent</u>**. Section 4 of the Summary of Basic Lease Provisions as set forth in the Lease is hereby deleted in its entirety and replaced with the following:

Base Rent (Article 3):

---

| | | | |
|:---|:---|:---|:---|
| <u>Time Period</u><br> <u>(Lease</u><br> <u>Months)</u> | Annual<br> <u>Base Rent</u> [B]<br> [A] = [C] \* RSF in<br> Premises | Monthly<br> Installment<br> <u>of Base Rent</u><br> [B] = [A]/12 | Annual Base<br> Rent<br> per Rentable<br> <u>Square</u><br> <u>Foot</u>[C] |
| 1 – 12\* | $476,501.50\* | $39,708.45\* | $30.50 |
| 13 - 24 | $490874.66 | $40906.22 | $31.42 |
| 25 – 36 | $505560.28 | $42130.02 | $32.36 |
| 37 – 48 | $520714.59 | $43392.88 | $33.33 |
| 49 – 60 | $536337.59 | $44694.80 | $34.33 |
| 61 – 72 | $552429.28 | $46035.77 | $35.36 |
| 73 – 84 | $568989.66 | $47415.80 | $36.42 |
| 85 – 96 | $586018.73 | $48834.89 | $37.51 |
| 97 – 108 | $603672.72 | $50306.06 | $38.64 |
| 109 – 120 | $621795.40 | $51816.28 | $39.80 |
| 121 – 123 | $640386.77 | $53365.56 | $40.99 |
| 123 | N/A | N/A | N/A |

---

As used herein, the term "**Lease Month**" means each calendar month during the Lease Term after the Rent Commencement Date (and if the Rent Commencement Date does not occur on the first day of a calendar month, the period from the Rent Commencement Date to the first day of the next calendar month shall be included in the first Lease Month for purposes of determining the duration of the Lease Term and the monthly Base Rent rate applicable for such partial month).

\* Provided no Event of Default is then in effect (beyond any applicable notice or cure periods), Base Rent shall be abated during the first three (3) months after the Rent Commencement Date (e.g., if the Rent Commencement Date is September 15, 2021, Base Rent shall be abated until December 15, 2021). Commencing with the first day after the end of the abatement period referred to above, Tenant shall make Base Rent payments for any remaining partial calendar month and on the first day of the first full calendar month thereafter as otherwise provided in this Lease. Notwithstanding such abatement of Base Rent, (i) all other sums due under this Lease, including Additional Rent, Direct Expenses, etc., shall be payable as provided in this Lease, and (ii) any increases in Base Rent set forth in this Lease shall occur on the dates scheduled therefor. Such conditional concession is being offered to Tenant as an inducement for Tenant to execute this Lease and occupy the Premises for the entire Lease Term, and to comply with its agreements contained in this Lease; provided, however, (a) if this Lease is terminated as a result of an Event of Default by Tenant (beyond any applicable notice and cure periods) prior to the expiration of the initial Lease Term, then the unamortized balance of the abated Base Rent hereunder shall become immediately due and payable and Tenant hereby agrees to pay Landlord such abated Base Rent which would otherwise have been payable during the abatement period set forth above (such amortization to be calculated in equal monthly amounts over the length of the initial Lease Term), and (b) upon the occurrence of an Event of Default during the Lease Term, Tenant shall have no further right to any rental abatement as set forth herein and any future right to rental abatement shall be revoked and of no further force and effect.

4. **<u>Tenant's Share.</u>** Effective immediately, Tenant's Share (as set forth in Section 7 of the Summary of Basic Lease Information of the Lease and defined in Section 4.2.6 of the Lease) is hereby increased to 15.30%. Notwithstanding the foregoing, Tenant's Share shall continue to be subject to adjustment as provided in Section 1.2 and Article 4 of the Lease.

5. **<u>Construction Allowance</u>**. The Construction Allowance will be calculated based on the total rentable square footage of the Premises, as expanded by the Expansion Premises.

6. **<u>Depiction of Premises and Offer Space.</u>** Effective immediately, (a) <u>Exhibit B</u> attached to the Lease is hereby deleted in its entirety and replaced with **<u>Exhibit B</u>** attached hereto and incorporated herein by reference, and (b) <u>Exhibit H-1</u> attached to the Lease is hereby deleted in its entirety and replaced with **<u>Exhibit H-1</u>** attached hereto and incorporated herein by reference.

7. **<u>Landlord's Work.</u>** Tenant acknowledges and agrees that Landlord has completed Landlord's Work (as defined in the Lease).

8. **<u>Cross-Default.</u>** In addition to the Events of Default currently listed in the Lease, it shall be an Event of Default under the Lease, as amended hereby, if Tenant commits a default under any lease, license or other agreement related to the Project or any other property in the vicinity of the Project that is entered into by Landlord and Tenant (or their respective affiliates) within one (1) year after the original Lease Date of the Lease (i.e., January 18, 2021), which default continues beyond the expiration of any applicable notice and cure period provided in such lease, license or agreement.

9. **<u>Brokerage</u>**. Tenant represents and warrants to Landlord that neither Tenant nor any of its representatives, employees or agents have consulted or negotiated with any broker or finder with regard to this First Amendment except Cushman & Wakefield ("**Tenant's Broker**"). Tenant shall indemnify, defend and hold Landlord (and its partners, joint venturers, affiliates, shareholders, and property managers, and their respective officers, directors, employees, and agents) harmless from and against any and all loss, liability, damage, claim, judgment, cost or expense (including, without limitation, reasonable attorneys' fees and court costs) suffered or incurred by Landlord as a result of a breach by Tenant of the representation and warranty contained in the first sentence of this Section 9. Landlord represents and warrants that Lincoln Harris LLC ("**Landlord's Broker**") has acted as agent for Landlord in connection with this First Amendment. Landlord shall indemnify Tenant (and its partners, joint venturers, affiliates, shareholders, and property managers, and their respective officers, directors, employees, and agents) and hold Tenant harmless from any and all loss, liability, damage, claim, judgment, cost or expense (including, without limitation, reasonable attorneys' fees and court costs) suffered or incurred by Tenant as a result of a breach by Landlord of the representation and warranty contained in the immediately preceding sentence. Landlord shall pay any commission due to Landlord's Broker and Tenant's Broker in connection with this First Amendment in accordance with the terms and conditions of a separate written agreement regarding such fees. The provisions of this Section 9 shall survive the expiration or earlier termination of the Lease, as amended hereby.

10. **<u>Miscellaneous</u>**. Tenant shall keep this First Amendment and the terms and information set forth herein confidential in accordance with the terms of Section 29.28 of the Lease. Except as modified by this First Amendment, all of Landlord's and Tenant's other rights, obligations and covenants with respect to the Lease shall remain in full force and effect. The Lease, as amended by this First Amendment, contains the entire agreement between Landlord and Tenant concerning the Premises, and there are no other agreements, either oral or written, regarding the lease of the Premises by Tenant (any prior agreements being merged into this First Amendment). If any inconsistency exists or arises between the terms of this First Amendment and the terms of the Lease, the terms of this First Amendment shall prevail. This First Amendment shall be governed by the laws of the State in which the Premises are located. This First Amendment may be executed in multiple counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one document. To facilitate execution of this First Amendment, the parties hereto may execute and exchange, by telephone facsimile or electronic mail PDF, counterparts of the signature pages. Signature pages may be detached from the counterparts and attached to a single copy of this First Amendment to physically form one document. The terms, provisions, covenants and conditions contained in the Lease, as amended by this First Amendment, shall apply to, inure to the benefit of, and be binding upon Landlord and Tenant and upon their respective heirs, legal representatives, successors and permitted assigns. Time is of the essence with respect to all obligations under this First Amendment. In the event any term or provision of this First Amendment is determined by appropriate judicial authority to be illegal or otherwise invalid, such provision shall be given its nearest legal meaning or be construed or deleted as such authority determines, and the remainder of this First Amendment shall remain in full force and effect.

(Remainder of page intentionally left blank; signatures on following page)

**IN WITNESS WHEREOF**, the parties hereto have executed this First Amendment as of the day and year first written above.

---

| | |
|:---|:---|
| **TENANT:** | **TENANT:** |
| **NOVAN, INC.,** | **NOVAN, INC.,** |
| a Delaware corporation | a Delaware corporation |
| By: | /s/ Paula Brown Stafford |
| Name: | Paula Brown Stafford |
| Title: | President and CEO |
| **LANDLORD:** | **LANDLORD:** |
| **COPPER II 2020, LLC,** | **COPPER II 2020, LLC,** |
| Delaware limited liability company | Delaware limited liability company |
| By: | /s/ John W Harris III |
| Name: | John W. Harris III |
| Title: | Authorized Signatory |

---

## Exhibit 10.19

**Exhibit 10.19**

**SECOND AMENDMENT TO LEASE**

THIS SECOND AMENDMENT TO LEASE (this "Second Amendment") is made and entered into as of the 23<sup>rd</sup> day of November, 2021 (the "Second Amendment Effective Date") by and between COPPER II 2020, LLC, a Delaware limited liability company ("Landlord") and NOVAN, INC., a Delaware corporation ("Tenant").

**WITNESSETH:**

**WHEREAS,** Landlord and Tenant entered into that certain Lease dated January 18, 2021, as amended by that certain First Amendment to Lease dated March 18, 2021 (collectively, the **"Lease"),** for the lease of approximately 15,623 rentable square feet of space known as Suite 110 (the **"Existing Premises")** in the building having an address of 4020 Stirrup Creek Drive, Durham, North Carolina 27703 (the **"Building"),** all as more particularly described in the Lease;

**WHEREAS,** the Rent Commencement Date occurred on October 18, 2021;

**WHEREAS,** Landlord delivered two (2) Offer Notices relating to Tenant's right of first offer to lease Suites 107 and 114 on August 12, 2021, and Tenant declined to exercise the right of first offer applicable to Suite 114 but elected to exercise its right of first offer with respect to a portion of the space depicted as Suite 107 in the Lease, which space is defined herein as the Expansion Premises; and

**WHEREAS,** Landlord and Tenant desire to enter into this Second Amendment to expand the Existing Premises, as more particularly set forth in this Second Amendment.

**NOW, THEREFORE,** in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby covenant and agree as follows:

1. **<u>Recitals; Capitalized Terms.</u>** The recitals set forth above are true and complete and are incorporated herein by this reference. All capitalized terms not defined in this Second Amendment shall have the meanings ascribed to them in the Lease.

2. **<u>Expansion Premises.</u>** Commencing on the Expansion Premises Commencement Date (as hereinafter defined), Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, that certain space located in the Building adjacent to the Existing Premises and containing approximately 3,642 rentable square feet of space and depicted as the "Expansion Premises" on **<u>Exhibit A</u>** attached hereto and incorporated herein by this reference (the **"Expansion Premises")** on the terms and conditions of the Lease, as amended hereby. The Expansion Premises shall be considered part of Suite 110 of the Building as of the Expansion Premises Commencement Date. Accordingly, from and after the Expansion Premises Commencement Date, (a) the term "Premises" shall refer collectively to the Existing Premises and the Expansion Premises and (b) notwithstanding anything to the contrary in the Lease, as amended hereby, the Premises shall be deemed to contain (and the Net Rentable Area of the Premises shall be deemed to be) 19,265 rentable square feet. The term for the Expansion Premises shall commence on the date Landlord tenders possession of the Expansion Premises to Tenant (the **"Expansion Premises Commencement Date")** and shall expire coterminously with the Lease Term, which is currently scheduled to expire on January 31, 2032. Notwithstanding the foregoing, Tenant's obligations to pay Rent on the Expansion Premises shall not commence until the date that is nine (9) months after the Second Amendment Effective Date (the **<u>"EP</u>** **<u>Rent Commencement Date"</u>** or **<u>"EPRCD"</u>);** provided, however, Tenant's obligation to begin paying Additional Rent (including, without limitation, Tenant's Share of Direct Expenses, as adjusted to account for the Expansion Premises) shall commence on the date Tenant begins occupying any portion of the Expansion Premises for purposes of conducting business therein, but specifically excluding occupancy for construction purposes, if such date occurs prior to the EP Rent Commencement Date. Landlord shall deliver possession of the Expansion Premises to Tenant within five (5) business days following the Second Amendment Effective Date and Tenant shall accept possession of the Expansion Premises as of the date of such delivery. If Landlord is unable to tender possession of the Expansion Premises by such date, then (a) the validity of this Second Amendment shall not be affected or impaired thereby, (b) Landlord shall not be in default hereunder or be liable for damages therefor, and (c) Tenant shall accept possession of the Expansion Premises when Landlord tenders possession thereof to Tenant; provided that Tenant's obligation to pay Base Rent and any Additional Rent for the Expansion Premises shall be abated during any period prior to Landlord tendering possession to Tenant as contemplated hereunder.

3. **<u>Rent.</u>** Commencing on the EP Rent Commencement Date and continuing throughout the rest of the initial Lease Term, in addition to Additional Rent and all other amounts due under the Lease, Tenant shall pay Base Rent for the entire Premises, as expanded by the Expansion Premises, pursuant to the terms of the Lease in the amounts set forth below:

---

| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Time Period** | &nbsp;&nbsp;**Annual Base Rent** | &nbsp;&nbsp;**Monthly Base** **Rent** | &nbsp;&nbsp;&nbsp;**Annual Base Rent** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Time Period** | | | &nbsp;&nbsp;&nbsp;**per RSF** |
| &nbsp;&nbsp;EPRCD - October 31, 2022 | &nbsp;&nbsp;$587582.50 | &nbsp;&nbsp;$48965.21 | &nbsp;&nbsp;&nbsp;$30.50 |
| &nbsp;&nbsp;November 1, 2022 - October 31, 2023 | &nbsp;&nbsp;$605209.98 | $50434.16 | &nbsp;&nbsp;&nbsp;$31.42 |
| &nbsp;&nbsp;November 1, 2023 - October 31, 2024 | &nbsp;&nbsp;$623366.27 | $51947.19 | &nbsp;&nbsp;&nbsp;$32.36 |
| &nbsp;&nbsp;November 1, 2024 - October 31, 2025 | &nbsp;&nbsp;$642067.26 | $53505.61 | &nbsp;&nbsp;&nbsp;$33.33 |
| &nbsp;&nbsp;November 1, 2025 - October 31, 2026 | &nbsp;&nbsp;$661329.28 | $55110.77 | &nbsp;&nbsp;&nbsp;$34.33 |
| &nbsp;&nbsp;November 1, 2026 - October 31, 2027 | &nbsp;&nbsp;$681169.16 | $56764.10 | &nbsp;&nbsp;&nbsp;$35.36 |
| &nbsp;&nbsp;November 1, 2027 - October 31, 2028 | &nbsp;&nbsp;$701604.23 | $58467.02 | &nbsp;&nbsp;&nbsp;$36.42 |
| &nbsp;&nbsp;November **1,** 2028 - October 31, 2029 | &nbsp;&nbsp;$722652.36 | $60221.03 | &nbsp;&nbsp;&nbsp;$37.51 |
| &nbsp;&nbsp;November 1, 2029 - October 31, 2030 | &nbsp;&nbsp;$744331.93 | $62027.66 | &nbsp;&nbsp;&nbsp;$38.64 |
| &nbsp;&nbsp;November 1, 2030 - October 31, 2031 | &nbsp;&nbsp;$766661.89 | $63888.49 | &nbsp;&nbsp;&nbsp;$39.80 |
| &nbsp;&nbsp;November 1, 2031 - January 31, 2032 | &nbsp;&nbsp;$789661.75 | &nbsp;&nbsp;$65805.15 | &nbsp;&nbsp;&nbsp;$40.99 |

---

Tenant shall also continue to pay Additional Rent (including, without limitation, Tenant's Share of Direct Expenses) and all other amounts due under the Lease with respect to the Premises, as expanded by the Expansion Premises. All such Base Rent, Additional Rent and other amounts due under the Lease shall be paid at the time and in the manner provided in the Lease.

Notwithstanding anything herein to the contrary, Tenant shall continue paying Base Rent and Additional Rent for the Existing Premises at the time and in the manner provided in the Lease during the period preceding the EP Rent Commencement Date.

4. **<u>Tenant's Share.</u>** Effective as of the earlier of the EP Rent Commencement Date or the date Tenant begins occupying any portion of the Expansion Premises for purposes of conducting business therein, and specifically excluding occupancy of any portion of the Expansion Premises for construction purposes, Tenant's Share (as set forth in Section 7 of the Summary of Basic Lease Information of the Lease and defined in Section 4.2.6 of the Lease) is hereby increased to 18.86%. Notwithstanding the foregoing, Tenant's Share shall continue to be subject to adjustment as provided in Section 1.2 and Article 4 of the Lease.

**5. <u>Expansion Premises Construction Allowance and</u>**  **<u>Expansion Premises Improvements.</u>** Notwithstanding anything to the contrary in the Lease or this Second Amendment, Tenant shall accept the Expansion Premises in its **"AS IS, WHERE IS"** condition, without relying on any representation, covenant or warranty by Landlord related to the condition of the Expansion Premises, and Landlord shall not be required to perform any alterations, remodeling, improvements, demolition work or tenant finish-work therein, or to provide any allowances therefor or to provide to Tenant any other tenant inducement, except for the Expansion Premises Construction Allowance (as hereinafter defined), which shall be subject to the terms and conditions provided in **<u>Exhibit B</u>** attached to this Second Amendment and incorporated herein by this reference. Further, Tenant hereby agrees that there are no representations or warranties of any kind, express or implied, by Landlord regarding the Expansion Premises. Notwithstanding the foregoing, Tenant shall have the right to perform certain improvements to the Expansion Premises following Landlord's delivery of possession of the Expansion Premises to Tenant, which improvements to the Expansion Premises shall be performed at Tenant's sole cost and expense (subject to Tenant's right to payment of the Expansion Premises Construction Allowance) in accordance with the terms and conditions of **<u>Exhibit B</u>** of this Second Amendment.

6. **<u>Tenant's Right of First Offer.</u>** Effective immediately, Tenant's right of first offer applicable to Suite 107 is hereby null and void and of no further force and effect. Accordingly, the "Offer Space", as defined in Section 1 of Exhibit H to the Lease, is hereby amended to mean "the space within the Building which is adjacent to the Premises and depicted as Suite 114 on <u>Exh</u><u>ibit H-1</u>". Tenant acknowledges and agrees that Landlord provided an Offer Notice to Tenant for Suite 114 in accordance with the terms of the Lease and Tenant declined to exercise its right of first offer with respect to such space. Accordingly, Landlord shall have the right to lease such space to a third party, subject to any express obligation of Landlord to re-offer such space to Tenant pursuant to the provisions of Section 1 of Exhibit H to the Lease.

7. **<u>Security Deposit/Letter of Credit.</u>** Tenant shall, simultaneously with the execution and delivery of this Second Amendment, deliver to Landlord, consistent with the terms of Section 21 of the Lease, evidence in a form reasonably approved by Landlord that the Letter of Credit has been adjusted to increase the Letter of Credit Amount consistent with the terms of this Section 7. Tenant shall increase the Letter of Credit Amount by $111,081.00 to reflect additional security of twelve (12) months Base Rent for the Expansion Premises on a per-square foot basis (i.e. $30.50 per square foot annually x 3,642 square feet comprising the Expansion Premises). Accordingly, all references to "$353,716.11" in Section 21(f) of the Lease are hereby changed to "$437,026.86," and all references to "$117,905.37" in Section 21(g) of the Lease are hereby changed to "$145,675.63."

8. **<u>Early</u>** **<u>Occupancy.</u>** Landlord acknowledges and agrees that Tenant may, prior to commencing the Expansion Premises Improvements, use the Expansion Premises as a staging or storage area in connection with Tenant's construction of the Work in the Existing Premises. Tenant's use of the Expansion Premises solely as a staging or storage area as provided in the immediately preceding sentence shall not constitute occupancy of the Expansion Premises for purposes of conducting business therein, but any other use of the Expansion Premises prior to the EP Rent Commencement Date other than construction of the Expansion Premises Improvements shall constitute occupancy of the Expansion Premises for purposes of conducting business therein.

9. **<u>Brokerage.</u>** Tenant represents and warrants to Landlord that neither Tenant nor any of its representatives, employees or agents have consulted or negotiated with any broker or finder with regard to this Second Amendment except Cushman & Wakefield **("Tenant's Broker").** Tenant shall indemnify, defend and hold Landlord (and its partners, joint venturers, affiliates, shareholders, and property managers, and their respective officers, directors, employees, and agents) harmless from and against any and all loss, liability, damage, claim, judgment, cost or expense (including, without limitation, reasonable attorneys' fees and court costs) suffered or incurred by Landlord as a result of a material breach by Tenant of the representation and warranty contained in the first sentence of this Section 9. Landlord represents and warrants that Lincoln Harris LLC **("Landlord's Broker")** has acted as agent for Landlord in connection with this Second Amendment. Landlord shall indemnify Tenant (and its partners, joint venturers, affiliates, shareholders, and property managers, and their respective officers, directors, employees, and agents) and hold Tenant harmless from any and all loss, liability, damage, claim, judgment, cost or expense (including, without limitation, reasonable attorneys' fees and court costs) suffered or incurred by Tenant as a result of a material breach by Landlord of the representation and warranty contained in the immediately preceding sentence. Landlord shall pay any commission due to Landlord's Broker and Tenant's Broker in connection with this Second Amendment in accordance with the terms and conditions of a separate written agreement regarding such fees. The provisions of this Section 9 shall survive the expiration or earlier termination of the Lease, as amended hereby.

10. **<u>Miscellaneous.</u>** Tenant shall keep this Second Amendment and the terms and information set forth herein confidential in accordance with the terms of Section 29.28 of the Lease. Except as modified by this Second Amendment, all of Landlord's and Tenant's other rights, obligations and covenants with respect to the Lease shall remain in full force and effect. The Lease, as amended by this Second Amendment, contains the entire agreement between Landlord and Tenant concerning the Premises, and there are no other agreements, either oral or written, regarding the lease of the Premises by Tenant (any prior agreements being merged into this Second Amendment). If any inconsistency exists or arises between the terms of this Second Amendment and the terms of the Lease, the terms of this Second Amendment shall prevail. This Second Amendment shall be governed by the laws of the State in which the Premises are located. This Second Amendment may be executed in multiple counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one document. To facilitate execution of this Second Amendment, the parties hereto may execute and exchange, by telephone facsimile or electronic mail PDF, counterparts of the signature pages. Signature pages may be detached from the counterparts and attached to a single copy of this Second Amendment to physically form one document. The terms, provisions, covenants and conditions contained in the Lease, as amended by this Second Amendment, shall apply to, inure to the benefit of, and be binding upon Landlord and Tenant and upon their respective heirs, legal representatives, successors and permitted assigns. Time is of the essence with respect to all obligations under this Second Amendment. In the event any term or provision of this Second Amendment is determined by appropriate judicial authority to be illegal or otherwise invalid, such provision shall be given its nearest legal meaning or be construed or deleted as such authority determines, and the remainder of this Second Amendment shall remain in full force and effect.

(Remainder of page intentionally left blank; signatures on following page)

**IN WITNESS WHEREOF,** the parties hereto have executed this Second Amendment as of the day and year first written above.

---

| | |
|:---|:---|
| **TENANT:** | **TENANT:** |
| **NOVAN, INC.,** | **NOVAN, INC.,** |
| a Delaware corporation | a Delaware corporation |
| By: | /s/ Paula Brown Stafford |
| Name: | Paula Brown Stafford |
| Title: | President and Chief Executive Officer |
| **LANDLORD:** | **LANDLORD:** |
| **COPPER II 2020, LLC,** | **COPPER II 2020, LLC,** |
| a Delaware limited liability company | a Delaware limited liability company |
| By: | /s/ John W. Harris III |
| Name: | John W. Harris III |
| Title: | Authorized Signatory |

---

**<u>Exhibit A</u>**

Depiction of Expansion Premises

![](img006.jpg)

**<u>Exhibit B</u>**

**<u>WORK LETTER (EXPANSION PREMISES IMPROVEMENTS)</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. **<u>Acceptance of Premises.</u>** Tenant acknowledges and agrees that it shall accept the Expansion Premises in its **"AS IS"** condition as of Landlord's delivery of possession of the Expansion Premises and the Expansion Premises Commencement Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2. <u>EP Space Plans.</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 **<u>Preparation and Delivery</u>.** On or before the tenth (30<sup>th</sup>) business day following the Second Amendment Effective Date (such date is referred to herein as the **"<u>EP Space Plans Delivery Deadline</u>"),** Tenant shall deliver to Landlord a space plan prepared by a design consultant reasonably acceptable to Landlord (for purposes of the Expansion Premises Improvements, the **"<u>Architect</u>")** depicting the improvements to be installed in the Expansion Premises (the **"<u>EP Space Plans</u>").** Landlord hereby acknowledges and consents to Tenant contracting with MHA Works as the Architect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 **<u>Approval Process.</u>** Landlord shall notify Tenant in writing whether it approves of the submitted EP Space Plans within five (5) business days after Tenant's submission thereof, which acceptance shall not be unreasonably withheld, conditioned, or delayed provided that they comply with all Applicable Laws and are reasonably consistent with Tenant's intended use of, and ancillary functions at, the Expansion Premises, do not depict any matter which would (a) adversely affect (in the reasonable discretion of Landlord) the Building's structure or the Building's systems (including the Building's restrooms or mechanical rooms), or (b) affect (in the reasonable discretion of Landlord) the Common Areas, the exterior appearance of the Project, or the provision of services to other occupants of the Project (Landlord acknowledging that the Off-Premises Equipment will affect the exterior of the Project). If Landlord has comments concerning such EP Space Plans, then Landlord shall notify Tenant in writing thereof specifying in reasonable detail the reasons for such disapproval and the concerns or comments in connection therewith, in which case Tenant shall, within three (3) business days after such notice, reasonably revise such EP Space Plans in consideration of Landlord's objections and submit to Landlord for its review and approval. Landlord shall notify Tenant in writing whether it approves of the resubmitted EP Space Plans within three (3) business days after its receipt thereof. This process shall be repeated until the EP Space Plans have been finally approved by Landlord and Tenant. If Landlord fails to notify Tenant of its disapproval of and that it has comments or concerns with the initial EP Space Plans within five (5) business days (or, in the case of resubmitted EP Space Plans, within three [3] business days) after the submission thereof, then Landlord shall be deemed to have approved the EP Space Plans in question.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.**  **<u>EP Working Drawings.</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 **<u>Preparation and Delivery</u>.** On or before the tenth (10<sup>th</sup>) business day following the date on which the EP Space Plans are approved (or deemed approved) by Landlord and Tenant (such date is referred to herein as the **"EP Working Drawings Delivery Deadline"),** Tenant shall provide to Landlord for its approval the initial set of final working drawings, prepared by the Architect, of all improvements that Tenant proposes installing in the Expansion Premises; such working drawings shall include the partition layout, ceiling plan, electrical outlets and switches, telephone outlets, drawings for any modifications to the mechanical, electrical, life safety and plumbing and any other systems of the Building, and detailed plans and specifications for the construction of the improvements called for under this **<u>Exhibit</u>** **<u>B</u>** in accordance with all Applicable Laws and suitable for permitting and construction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 **<u>Approval Process.</u>** As to each set of EP Working Drawings submitted, Landlord shall notify Tenant whether it approves of the submitted working drawings within ten (10) business days after Tenant's submission thereof, which approval shall be given or withheld by Landlord in accordance with the standards set forth in Section 3.3. If Landlord has comments concerning such working drawings, then Landlord shall notify Tenant in writing thereof specifying in reasonable detail the reasons for such disapproval and the concerns or comments in connection therewith, in which case Tenant shall, within three (3) business days after such notice, reasonably revise such working drawings in consideration of Landlord's objections and submit the revised working drawings to Landlord for its review and approval. Landlord shall notify Tenant in writing whether it approves of the resubmitted working drawings within five (5) business days after its receipt thereof. This process shall be repeated until the working drawings have been finally approved by Tenant and Landlord. If Landlord fails to notify Tenant that it disapproves of and/or has comments or concerns with the initial working drawings within ten (10) business days (or, in the case of resubmitted working drawings, within five [5] business days) after the submission thereof, then Landlord shall be deemed to have approved the working drawings in question.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 **<u>Landlord's Approval; Performance of Expansion Premises Improvements.</u>** If any of Tenant's proposed construction work will affect the Building's structure or the Building's systems, then the working drawings pertaining thereto must be approved by the Landlord's engineer of record. Landlord shall coordinate the review and approval of its Project engineer and shall use commercially reasonable efforts to ensure that such approval shall coincide with Landlord's review and approval process set forth in Section 3.2. Landlord's approval of such working drawings shall not be unreasonably withheld, conditioned, or delayed (and Landlord shall use commercially reasonable efforts to cause its engineer not to unreasonably withhold, condition or delay its approval of any working drawings requiring such engineer's approval), provided that (a) they comply with all Applicable Laws and are reasonably consistent with Tenant's intended use of, and ancillary functions at, the Expansion Premises, (b) the improvements depicted thereon do not (1) adversely affect (in the reasonable discretion of Landlord) the Building's structure or the Building's systems (including the Project's restrooms or mechanical rooms), or (2) affect (in the reasonable discretion of Landlord) (A) the exterior appearance of the Project, (B) the appearance of the Project's common areas or elevator lobby areas or (C) the provision of services to other occupants of the Project, (c) such working drawings are sufficiently detailed to allow construction of the improvements and associated work in a good and workmanlike manner, and (d) the improvements depicted thereon conform to the rules and regulations promulgated from time to time by Landlord for the construction of tenant improvements (a copy of which has been delivered to Tenant). As used herein, **"EP Working Drawings"** means the final working drawings approved by Landlord and Tenant, as amended from time to time by any approved changes thereto, and **"Expansion Premises Improvements"** means all improvements to be constructed in accordance with and as indicated on the EP Working Drawings, together with any work required by governmental authorities to be made to other areas of the Project as a result of the improvements indicated by the EP Working Drawings. Landlord's approval of the EP Working Drawings shall not be a representation or warranty of Landlord that such drawings are adequate for any use or comply with any Applicable Law, but shall merely be the consent of Landlord thereto. Landlord shall, at Tenant's request, sign the EP Working Drawings to evidence its review and approval thereof. After the final version of the EP Working Drawings have been approved, Tenant shall cause the Expansion Premises Improvements to be performed substantially in accordance with the EP Working Drawings. **LANDLORD MAKES NO WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE EP SPACE PLANS, THE EP WORKING DRAWINGS OR THE EXPANSION PREMISES IMPROVEMENTS (OR ANY OTHER SERVICES PROVIDED BY THE ARCHITECT, TENANT'S CONTRACTOR OR ANY OF THEIR SUBCONTRACTORS). ALL IMPLIED WARRANTIES BY LANDLORD WITH RESPECT TO THE EP SPACE PLANS, EP WORKING DRAWINGS OR THE EXPANSION PREMISES IMPROVEMENTS (OR ANY OTHER SERVICES PROVIDED BY THE ARCHITECT, TENANT'S CONTRACTOR OR ANY OF THEIR SUBCONTRACTORS), INCLUDING BUT NOT LIMITED TO THOSE OF HABITABILITY, MERCHANTABILITY, MARKETABILITY, QUALITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE EXPRESSLY NEGATED AND WAIVED. WITHOUT LIMITING THE FOREGOING, LANDLORD SHALL NOT BE RESPONSIBLE FOR ANY FAILURE OF THE EXPANSION PREMISES IMPROVEMENTS. LANDLORD WILL NOT BE RESPONSIBLE FOR, OR HAVE CONTROL OR CHARGE OVER, THE ACTS OR OMISSIONS OF THE ARCHITECT OR ITS AGENTS OR EMPLOYEES. LANDLORD IS NOT ACTING AS A CONTRACTOR AND IS NOT GUARANTEEING THE EP SPACE PLANS, THE EP WORKING DRAWINGS OR THE EXPANSION PREMISES IMPROVEMENTS, TENANT'S SOLE RECOURSE WITH RESPECT THERETO BEING THE PURSUIT OF TENANT'S REMEDIES UNDER THE CONSTRUCTION CONTRACT (as defined below) OR IN TENANT'S ARCHITECT'S AGREEMENT.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. **<u>Contractors; Performance of Work.</u>** The Expansion Premises Improvements shall be performed only by a licensed contractor **("General Contractor")** and licensed subcontractors. Landlord shall have the right to require that any contractors and/or subcontractors performing work on the life safety systems or to the roof of the Building be on Landlord's approved contractor list. Additionally, Landlord may require that the General Contractor be approved in writing by Landlord, which approval shall not be unreasonably withheld, conditioned, or delayed. Landlord hereby acknowledges and consents to Tenant contracting with McDonald York Building Company as the General Contractor. The General Contractor shall be required to procure and maintain insurance covering the General Contractor and all subcontractors against such risks, in such amounts, and with such companies as Landlord may reasonably require. Certificates of such insurance, with paid receipts therefor, must be received by Landlord before the Expansion Premises Improvements are commenced. The Expansion Premises Improvements shall be performed in a good and workmanlike manner free of defects, shall substantially conform with the EP Working Drawings, and shall be performed in such a manner and at such times as and not to interfere with or delay Landlord's other contractors, the operation of the Project, and the occupancy thereof by other tenants. Tenant, Tenant's Project Manager, and General Contractor shall contact Landlord and schedule time periods during which they (or any subcontractors) may use Project facilities in connection with the Expansion Premises Improvements (e.g., elevators, excess electricity, etc.). Tenant shall use (and cause its contractors and subcontractors to use) commercially reasonable efforts to commence and complete the Expansion Premises Improvements as soon as reasonably possible, and shall diligently prosecute the Expansion Premises Improvements to completion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.**  **<u>Construction Contracts.</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 **<u>Tenant's General Contractor.</u>** Tenant shall enter into a construction contract with a general contractor selected by Tenant and approved by Landlord in a form acceptable to Tenant's representative for the Expansion Premises Improvements, which shall comply with the provisions of this Section 5 and provide for, among other things, (a) a one-year warranty for all defective Expansion Premises Improvements; (b) a requirement that Tenant's General Contractor maintain, on behalf of the General Contractor and all subcontractors, commercial general liability insurance of not less than a combined single limit of$5,000,000, naming Landlord, Landlord's property management company, Landlord's Mortgagee, Tenant, and each of their respective Affiliates as additional insureds; (c) a requirement that the contractor perform the Expansion Premises Improvements in substantial accordance with the EP Working Drawings (and such plans and drawings are specifically referenced and/or itemized in the Contract) and in a good and workmanlike manner; (d) a requirement that the General Contractor is responsible for daily cleanup work and final clean up (including removal of debris); and (e) those items described in Section 5.2 below (collectively, the **"Approval Criteria").** Tenant shall provide Landlord with a copy of the proposed contract with the General Contractor and Landlord shall have three (3) business days after receipt thereof to notify Tenant whether it approves the proposed construction agreements, such approval shall not be unreasonably withheld, conditioned, or delayed provided such contract complies with the terms of this **<u>Exhibit B</u>** and any applicable provisions of the Lease, as amended by this Second Amendment. If Landlord has comments concerning the proposed construction agreement (in which case such draft of the construction agreement shall be deemed disapproved by Landlord), then it shall specify in writing and in reasonable detail the reasons for such disapproval and comments or concerns, in which case Tenant shall revise the proposed construction agreement to reasonably address the Landlord's comments and resubmit the proposed construction agreement to Landlord within two (2) business days after Landlord notifies Tenant of its objections thereto, following which Landlord shall have two (2) business days to notify Tenant whether it approves the revised construction agreement. If Landlord fails to notify Tenant that it has comments or concerns with the construction agreements within three (3) business days after the initial construction agreements or two (2) business days after the revised construction agreements (as the case may be) are delivered to Landlord, then Landlord shall be deemed to have approved the construction agreements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 **<u>All Construction Contract.</u>** Unless otherwise agreed in writing by Landlord and Tenant, each of Tenant's construction contracts with the General Contractor shall: (a) provide a schedule and sequence of construction activities and completion reasonably acceptable to Landlord **("Construction Schedule"),** (b) be in a contract form that satisfies the Approval Criteria, (c) require the contractor and each subcontractor to name Landlord, Landlord's property management company, Landlord's Mortgagee, and Tenant as additional insured on such contractor's insurance maintained in connection with the construction of the Expansion Premises Improvements, (d) be assignable following an Event of Default by Tenant under the Lease, as amended by this Second Amendment, to Landlord and Landlord's Mortgagees, (e) contain at least a one-year warranty for all workmanship and materials, and (f) require the General Contractor to obtain extended warranties for all air handling units, chillers (and associated VFD's) and generators (if any) installed in the Expansion Premises as part of the Expansion Premises Improvements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. **<u>Change Orders.</u>** Tenant may initiate changes in the Expansion Premises Improvements. Each such change must receive the prior written approval of Landlord, such approval shall be granted or withheld in accordance with the standards set forth in Section 3.3 above. Tenant shall, upon completion of the Expansion Premises Improvements, furnish Landlord with accurate architectural, mechanical, electrical and plumbing "as built" plans of the Expansion Premises Improvements as constructed in both blueprint and electronic CADD format, which plans shall be incorporated into this **<u>Exhibit B</u>** by this reference for all purposes. If Tenant requests any changes to the Expansion Premises Improvements described in the EP Working Drawings, then such increased costs and any additional design costs incurred in connection therewith as the result of any such change shall be added to the Total EP Construction Costs. Tenant shall provide Landlord with a copy of the proposed change and Landlord shall have five (5) business days of receipt thereof to notify Tenant whether it approves the proposed change, such approval shall be granted or withheld in accordance with the standards set forth in Section 3.3 above. If Landlord has comments concerning the proposed change (in which case such initially proposed change shall be deemed disapproved by Landlord pending such comments being addressed), then it shall specify in writing reasonable detail the reasons for such comments or concerns, in which case Tenant shall revise the proposed change request to reasonably address the Landlord's comments and resubmit the requested change to Landlord within two (2) business days after Landlord notifies Tenant of its comments thereto, following which Landlord shall have five (5) business days to notify Tenant whether it approves the revised change request. If Landlord fails to notify Tenant that it has comments or concerns with the change request within five (5) business days after submission of such change request or revised change request (as the case may be) to Landlord, then Landlord shall be deemed to have approved the change request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. **<u>Definitions.</u>** As used herein **"Substantial Completion," "Substantially Completed,"** and any derivations thereof mean the Expansion Premises Improvements in the Expansion Premises are substantially completed (as reasonably determined by Landlord and the Architect) in accordance with the final version of the EP Working Drawings (inclusive of all phases of the Expansion Premises Improvements), which shall be deemed to have occurred once Tenant has (a) obtained a permanent certificate of occupancy for the entire Premises, inclusive of the Expansion Premises, from the applicable governmental authority and delivered proof of the same to Landlord, (b) delivered to Landlord certification from the Architect that the Expansion Premises Improvements have been completed in a good and workmanlike manner and substantially in accordance with the EP Working Drawings, and in accordance with all applicable laws, on the appropriate AIA form or another form approved by Landlord, and (c) completed commissioning of all MEP equipment and systems installed by Tenant, as evidenced by an approved final inspection from the applicable governmental authority. Within thirty (30) days following Substantial Completion of the Expansion Premises Improvements, Tenant shall deliver to Landlord the following reports: (i) commissioning checklists and start-up reports for all HVAC systems and equipment and Tenant's generator, all signed by factory certified representatives of the manufacturers of such equipment; (ii) a certified TAB report for all HVAC systems; and (iii) a final commissioning report that all HVAC and emergency power systems are functioning properly. Substantial Completion shall have occurred even though minor details of construction (i.e., aesthetic/architectural defects as defined in the punchlist prepared pursuant to Section 8 below), decoration, and landscaping remain to be completed.

(3) **<u>Walk-Through; Puncblis</u>t.** When Tenant considers the Expansion Premises Improvements in the Premises to be Substantially Completed, Tenant will notify Landlord and within three business days thereafter, Landlord's representative and Tenant's representative shall conduct a walk- through of the Premises and identify any necessary touch-up work, repairs and minor completion items that are necessary for final completion of the Expansion Premises Improvements. Neither Landlord's representative nor Tenant's representative shall unreasonably withhold, condition or delay his or her agreement on punchlist items. Tenant shall use reasonable efforts to cause the General Contractor performing the Expansion Premises Improvements to complete all punchlist items within thirty (30) days after agreement thereon.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. **<u>Excess Costs</u>.** Tenant shall pay the entire amount by which the Total EP Construction Costs (hereinafter defined) exceed the Expansion Premises Construction Allowance (hereinafter defined) (such excess amount being referred to herein as the **"Excess Amount").** Upon approval of the EP Working Drawings and selection of a contractor, Tenant shall promptly execute a work order agreement which identifies such drawings and itemizes the Total EP Construction Costs and sets forth the Expansion Premises Construction Allowance. As used herein, **"Total EP Construction Costs"** means the entire cost of performing the Expansion Premises Improvements, including design of and space planning for the Expansion Premises Improvements and preparation of the EP Working Drawings and the final "as-built" plan of the Expansion Premises Improvements, costs of construction labor and materials, electrical usage during construction, additional janitorial services, standard building directory and suite tenant signage, related taxes and insurance costs, licenses, permits, certifications, surveys and other approvals required by Applicable Law, and the construction supervision fee referenced in Section 11 of this Exhibit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. **<u>Expansion Premises Construction Allowance.</u>** Landlord shall provide to Tenant a construction allowance not to exceed $115 per rentable square foot in the Expansion Premises (i.e., a total maximum allowance of $418,830.00) (the **"Expansion Premises Construction Allowance")** to be applied toward the Total EP Construction Costs, as adjusted for any changes to the Expansion Premises Improvements. No disbursement of the Expansion Premises Construction Allowance shall be made by Landlord until Tenant has first made payment to the General Contractor from its own funds (and provided reasonable evidence thereof to Landlord). Thereafter, Landlord shall pay to Tenant the Expansion Premises Construction Allowance, to be applied solely toward the remaining Total EP Construction Costs and not in reimbursement of the Excess Amount paid by Tenant, in four disbursements (but not more than once in any calendar month) in accordance with the following draw schedule: (a) up to 25% of the Expansion Premises Construction Allowance within thirty (30) days after Tenant (i) delivers a written request for such payment to Landlord, (ii) has completed construction of 25% of the Expansion Premises Improvements in accordance with the EP Working Drawings (as evidenced by a written certification from Tenant's Architect that such 25% portion of the Expansion Premises Improvements have been completed in a good and workmanlike manner and in accordance with all applicable laws, which certification shall be on a form approved by Landlord and provided to Landlord simultaneously with such draw request), (iii) provides Landlord with conditional or partial lien waivers, as the case may be, from the General Contractor and all contractors, subcontractors and materialmen who performed the Expansion Premises Improvements and contracted directly with Tenant, fully executed, acknowledged and in a form reasonably approved by Landlord, and (iv) provides Landlord with copies of all invoices in connection with such Expansion Premises Improvements for which Tenant is seeking reimbursement and proof of payment of the same; (b) an additional 25% of the Expansion Premises Construction Allowance within thirty (30) days after Tenant (i) delivers a written request for such payment to Landlord, (ii) has completed construction of 50% of the Expansion Premises Improvements in accordance with the EP Working Drawings (as evidenced by a written certification from Tenant's Architect that 50% of the Expansion Premises Improvements have been completed in a good and workmanlike manner and in accordance with all applicable laws, which certification shall be on a form approved by Landlord and provided to Landlord simultaneously with such draw request), (iii) provides Landlord with conditional or partial lien waivers, as the case may be, from the General Contractor and all contractors, subcontractors and materialmen who performed the Expansion Premises Improvements and contracted directly with Tenant, fully executed, acknowledged and in a form reasonably approved by Landlord, and (iv) provides Landlord with copies of all invoices in connection with such Expansion Premises Improvements for which Tenant is seeking reimbursement and proof of payment of the same; (c) an additional 25% of the Expansion Premises Construction Allowance within thirty (30) days after Tenant (i) delivers a written request for such payment to Landlord, (ii) has completed construction of 75% of the Expansion Premises Improvements in accordance with the EP Working Drawings (as evidenced by a written certification from Tenant's Architect that 75% of the Expansion Premises Improvements have been completed in a good and workmanlike manner and in accordance with all applicable laws, which certification shall be on a form approved by Landlord and provided to Landlord simultaneously with such draw request), (iii) provides Landlord with conditional or partial lien waivers, as the case may be, from the General Contractor and all contractors, subcontractors and materialmen who performed the Expansion Premises Improvements and contracted directly with Tenant, fully executed, acknowledged and in a form reasonably approved by Landlord, and (iv) provides Landlord with copies of all invoices in connection with such Expansion Premises Improvements for which Tenant is seeking reimbursement and proof of payment of the same; and (d) the remaining portion of the Expansion Premises Construction Allowance to which Tenant is entitled hereunder within thirty (30) days after the satisfaction of each of the following conditions: (i) Tenant's written request to Landlord for payment of such remaining portion of the Expansion Premises Construction Allowance, (ii) Landlord's receipt of final, unconditional lien waivers from the General Contractor and all contractors, subcontractors and materialmen who performed the Expansion Premises Improvements and contracted directly with Tenant, fully executed, acknowledged and in a form reasonably approved by Landlord, (iii) Landlord's receipt of copies of all invoices related to the costs for which Tenant is seeking reimbursement and proof of payment of same, (iv) Landlord's receipt of the Architect's certification that the Expansion Premises Improvements have been finally completed in a good and workmanlike manner and in accordance with all applicable laws, including any punch-list items, on the appropriate AIA form or another form approved by Landlord, (v) Tenant's delivery to Landlord of the permanent certificate of occupancy issued for the Premises, as expanded by the Expansion Premises, (vi) Tenant's occupancy of the Premises, as expanded by the Expansion Premises, (vii) Tenant's delivery to Landlord of the "as built" plans for the Expansion Premises Improvements as constructed (and as set forth above) to Landlord's construction representative (set form below), and (viii) Landlord's receipt of an estoppel certificate confirming such factual matters as Landlord or Landlord's Mortgagee may reasonably request. Each application for payment from Tenant hereunder satisfying all of the conditions required for such payment is hereinafter referred to as a **"Completed Application for Payment"** solely for purposes of this Second Amendment. If, however, the Completed Application for Payment is incomplete or incorrect, Landlord's payment of such request shall be deferred until thirty (30) days following Landlord's receipt of the corrected Completed Application for Payment. Notwithstanding anything to the contrary contained in this Exhibit, Landlord shall not be obligated to make any disbursement of the Expansion Premises Construction Allowance during the pendency of any of the following: (A) Landlord has received written notice of any unpaid claims relating to any portion of the Expansion Premises Improvements or materials in connection therewith, other than claims which will be paid in full from such disbursement, (B) there is an unbonded lien outstanding against the Project or the Premises or Tenant's interest therein by reason of work done, or claimed to have been done, or materials supplied or specifically fabricated, claimed to have been supplied or specifically fabricated, to or for Tenant or the Premises, as expanded by the Expansion Premises, (C) the conditions to the disbursement of the Expansion Premises Construction Allowance are not satisfied, or (D) an Event of Default by Tenant exists. After the final completion of the Expansion Premises Improvements and a reconciliation by Landlord of the Expansion Premises Construction Allowance and the Total Construction Costs applicable to the Expansion Premises Improvements and provided no Event of Default then exists, Tenant may use any excess portion of the Expansion Premises Construction Allowance (not to exceed fifty percent [50%] of the total Expansion Premises Construction Allowance) remaining after payment of the Total Construction Costs applicable to the Expansion Premises Improvements towards payment of the Total Construction Costs applicable to the Work to the Existing Premises performed by Tenant pursuant to Exhibit D of the Lease; provided, however, that Landlord shall not be required to disburse such excess amount to Tenant if Tenant has not satisfied the conditions related to the payment of the Construction Allowance with respect to such portion of the Work, as provided in Section 10 of Exhibit D of the Lease. Such excess amount requested by Tenant in connection with the payment of the Total Construction Costs applicable to the Work in the Existing Premises shall be disbursed by Landlord in accordance with Section 10 of Exhibit D of the Lease and within thirty (30) days after Landlord's receipt of a Completed Application for Payment (as such term is used in Exhibit D of the Lease) with respect to the applicable portion of the Work. The Expansion Premises Construction Allowance must be used (that is, the Expansion Premises Improvements must be fully complete and the Expansion Premises Construction Allowance disbursed) within twelve (12) months following the EP Rent Commencement Date (the **"Outside EPCA Disbursement Date")** or shall be deemed forfeited with no further obligation by Landlord with respect thereto, time being of the essence with respect thereto. Notwithstanding the foregoing, if Tenant is delayed from completing the Expansion Premises Improvements as a result of an event of Force Majeure occurring prior to the Outside EPCA Disbursement Date, the Outside EPCA Disbursement Date shall be extended by one (1) day for each day of delay caused by such Force Majeure. Tenant shall notify Landlord of any such event of Force Majeure in accordance with the provisions of Section 29.17 of the Lease and shall use commercially reasonable efforts to limit any delay to the completion of the Expansion Premises Improvements caused by such Force Majeure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. **<u>Right of Inspection</u>**. Landlord or its Affiliate or agent may inspect the Expansion Premises Improvements and coordinate the relationship between the Expansion Premises Improvements, the Project and the Building's Systems. Landlord and Landlord's representative, Affiliate or agent shall notify Tenant upon entering the Premises (including the Expansion Premises), shall use commercially reasonable efforts not to unreasonably interfere with the Expansion Premises Improvements or activities at the Premises (including the Expansion Premises) and shall fully abide by all site safety and security requirements provided to Landlord in writing, including without limitation, all requirements and governmental guidance related to the COVID-19 pandemic. Tenant shall pay to Landlord a construction supervision fee equal to four percent (4%) of the total Expansion Premises Construction Allowance disbursed to Tenant (exclusive of the construction supervision fee). The construction supervision fee shall be paid directly to Landlord out of the proceeds of the Expansion Premises Construction Allowance prior to distribution to Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. **<u>Construction Representatives</u>.** Landlord's and Tenant's representatives for coordination of construction and approval of change orders will be as follows, provided that either party may change its representative upon written notice to the other:

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| | |
|:---|:---|
| Landlord's Representative: | Copper II 2020, LLC |
|  | c/o Lincoln Harris LLC |
|  | 5400 Trinity Road, Suite 200 Raleigh, NC 27607 |
|  | Attn: Paul Pierron |
|  | Telephone: 919.215.4872 |
|  | Email: Paul.Pierron@lincolnharris.com |
| Tenant's Representative: | Andrew Novak |
|  | c/o Novan, Inc. |
|  | 4105 Hopson Road |
|  | Morrisville, NC 27560 |
|  | Telephone: 919.485.8080 |
|  | Facsimile: 919.237.9212 |
|  | Email: anovak@novan.com |
| With a copy to: | G. Wayne Fuller Jr., PE |
|  | c/o MultiCore International, Inc. |
|  | 4220 Old Gun Road East |
|  | Midlothian, VA 23113 |
|  | Telephone: (804) 513-7727 |
|  | Email: wfuller@multicore-int.com |

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Tenant's Project Manager will provide assistance to Tenant with respect to the Expansion Premises Improvements and acting as a liaison between and among Tenant and Landlord during the performance of the Expansion Premises Improvements. Tenant hereby notifies Landlord that Tenant's Project Manager does not have the authority to direct or agree to a change in the scope, cost or timeframe for performing of the Expansion Premises Improvements or otherwise bind Tenant, except as otherwise expressly set forth herein or expressly stated by Tenant or Tenant's representative.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. **<u>Miscellaneous.</u>** To the extent not inconsistent with this Exhibit, Articles 8, 10 and 15 of the Lease shall govern the performance of the Expansion Premises Improvements and Landlord's and Tenant's respective rights and obligations regarding the improvements installed pursuant thereto. For purposes of clarity, the provisions of this <u>Exhibit B</u> are intended to apply to the Expansion Premises Improvements only and are not intended to modify Exhibit D of the Lease or any other provisions of the Lease related to Tenant's performance of the Work in the Existing Premises. Accordingly, any terms defined in this <u>Exhibit B</u> shall not modify any defined terms set forth in Exhibit D of the Lease.

## Exhibit 10.20

**Exhibit 10.20**

**<u>THIRD AMENDMENT TO LEASE</u>**

This THIRD AMENDMENT TO LEASE (this "**<u>Amendment</u>**"), dated as of October 17, 2023 (the "**<u>Effective Date</u>**"), is made and entered into by and between **TBC STIRRUP CREEK OWNER LLC**, a Delaware limited liability company ("**<u>Landlord</u>**"), and **LNHC, INC.**, a Delaware corporation ("**<u>Tenant</u>**" or "**<u>LNHC</u>**").

**<u>WITNESSETH:</u>**

WHEREAS, Landlord's predecessor-in-interest with respect to the Lease (defined below) and Novan, Inc., a Delaware corporation ("**<u>Original Tenant</u>**" or "**<u>Novan</u>**"), entered into that certain Lease dated January 18, 2021 (the "**<u>Original Lease</u>**"), as amended by that certain First Amendment to Lease dated March 18, 2021, as further amended by that certain Second Amendment to Lease dated November 23, 2021 (collectively, the "**<u>Lease</u>**") for the lease of space known as Suite 110 in the building having an address of 4020 Stirrup Creek Drive, Durham, North Carolina 27703, all as more particularly described in the Lease;

WHEREAS, on or about the Effective Date, Original Tenant has assigned to Tenant, and Tenant has assumed, the Lease (the "**<u>Assignment</u>**") in the bankruptcy sale to LNHC of all or substantially all of the assets of Novan and certain of the assets of its subsidiary, EPI Health LLC, a South Carolina limited liability company ("**<u>EPI</u>**", and together with Novan, the "**<u>Debtors</u>**"), in the Debtors' chapter 11 bankruptcy cases filed in the United States Bankruptcy Court for the District of Delaware (the "**<u>Bankruptcy Court</u>**") and jointly administered under case no. 23-10937 (the "**<u>Bankruptcy Cases</u>**"); and

WHEREAS, Landlord and Tenant desire to enter into this Amendment on the terms and conditions contained herein.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. **<u>Capitalized Terms</u>**. All capitalized terms used and not otherwise defined in this Amendment shall have the respective meanings ascribed to them in the Original Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. **<u>Assumed Contract</u>**. As of the Effective Date, the Lease shall be deemed an "Assumed Contract" with a $0.00 "Cure Amount," and designated on the "Assumed Contract List" pursuant to and as such terms are defined in that certain (i) *Order (I) Approving the Asset Purchase Agreement, (II) Authorizing the Sale of the Debtors' Development Assets and Certain of the Commercial Assets Free and Clear of All Encumbrances to LNHC, Inc., (III) Authorizing the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases, and (IV) Granting Related Relief*, entered by the Bankruptcy Court in the Bankruptcy Cases on September 12, 2023 at docket number 291 ("**<u>Sale Order</u>**"); and (ii) *Amended and Restated Asset Purchase Agreement*, dated September 1, 2023, by and among Novan, EPI and LNHC (as the designee of Ligand Pharmaceuticals Incorporated), and attached as Exhibit A to the Sale Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. **<u>Assumption of Liabilities</u>**. From and after the Effective Date, Tenant shall be responsible for all the obligations and liabilities of "Tenant" under the Lease (as amended hereby), whether monetary or non-monetary, including, but not limited to, obligations that are not yet known, liquidated or due and owing under the Lease as of the Effective Date which will be billed in the ordinary course pursuant to the terms of the Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. **<u>Condition of Premises</u>**. Landlord makes no representations or warranties, express or implied, concerning the condition of the Premises and Tenant hereby accepts the Premises in their "**AS-IS**" condition as of the Effective Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. **<u>Insurance; Certificate of Occupancy</u>**. Before Tenant may occupy the Premises, (a) Tenant shall deliver to Landlord certificates of insurance from Tenant satisfying all requirements of the Lease, and (b) if required by Applicable Law, Tenant shall deliver to Landlord a new certificate of occupancy for the Premises from the applicable governmental authority (in accordance with Section 1.1.1 of the Original Lease).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. **<u>Brokerage</u>**. Tenant represents and warrants to Landlord that neither Original Tenant nor Tenant has dealt with any broker or agent in connection with the negotiation or execution of this Amendment. In no event shall Landlord be liable for any leasing or brokerage commission with respect to the negotiation and execution of the Assignment or this Amendment. Tenant shall indemnify, defend and hold Landlord harmless from and against all costs, expenses, attorneys' fees and other liability for commissions or other compensation claimed by any broker or agent claiming the same by, through or under Original Tenant or Tenant with respect to the Assignment or this Amendment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. **<u>Notices</u>**. The addresses and/or other contact information set forth below shall supersede and replace any addresses and/or contact information for notice set forth in the Lease, pursuant to Section 29.18 therein.

---

| | |
|:---|:---|
| Landlord: | TBC Stirrup Creek Owner LLC <br> c/o Lincoln Harris LLC |
|  | 5400 Trinity Road, Suite 200 |
|  | Raleigh, NC 27607 |
|  | Attention: Property Manager – 4020 Stirrup |
| with a copy to: | TBC Stirrup Creek Owner LLC <br> c/o Goldman Sachs & Co. |
|  | 2001 Ross Avenue, Suite 2800 |
|  | Dallas, TX 75201 |
|  | Attention: Asset Manager – 4020 Stirrup |
| Tenant: | LNHC, Inc. |
|  | 3911 Sorrento Valley Boulevard, Suite 110 <br> San Diego, CA 92121 |
|  | Attention: President |
| with copies to: | Ligand Pharmaceuticals Incorporated |
|  | 3911 Sorrento Valley Boulevard, Suite 110 <br> San Diego, CA 92121 |
|  | Attention: General Counsel |
|  | -and- |
|  | Ligand Pharmaceuticals Incorporated |
|  | 3911 Sorrento Valley Boulevard, Suite 110 <br> San Diego, CA 92121 |
|  | Attention: Chief Financial Officer |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. **<u>Letter of Credit</u>**. Within 30 calendar days following the Effective Date, Tenant shall provide Landlord with a replacement Letter of Credit in the Letter of Credit Amount ($471,621.50) complying with the terms of Section 21 of the Original Lease. Following Landlord's approval of the replacement Letter of Credit, Tenant shall deliver the original to Goldman Sachs & Co., 2001 Ross Avenue, Suite 2800, Dallas, TX 75201, Attention: Keri Duran. Sections 21(f), 21(g) and 21(h) to the Original Lease are hereby deleted in their entirety. Upon Landlord's acceptance of Tenant's replacement Letter of Credit pursuant to this Paragraph 8, Landlord shall provide its consent to, and/or use its reasonable efforts to cooperate with the Original Tenant in the surrender, cancellation and/or termination of the Original Tenant's Letter of Credit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. **<u>Guaranty</u>**. Tenant shall, simultaneously with the execution and delivery of this Amendment, deliver to Landlord a Guaranty by Ligand Pharmaceuticals Incorporated in the form of Exhibit A attached hereto. Tenant consents to the terms and provisions of such guaranty.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. <u>Miscellaneous</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Except as set forth herein, nothing contained in this Amendment shall be deemed to amend or modify in any respect the terms of the Lease and such terms shall remain in full force and effect as modified hereby. If there is any inconsistency between the terms of this Amendment and the terms of the Lease, the terms of this Amendment shall be controlling and prevail.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) This Amendment contains the entire agreement of the parties with respect to its subject matter and all prior negotiations, discussions, representations, agreements and understandings heretofore had among the parties with respect thereto are merged herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) This Amendment may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by facsimile, email or other electronic transfer shall be effective as delivery of a manually executed counterpart to this Amendment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) This Amendment shall not be binding upon Landlord or Tenant unless and until each of Landlord and Tenant shall have delivered a fully executed counterpart of this Amendment to the other.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) An original, copy, facsimile, electronic signature (including, but not limited to, DocuSign), pdf or other electronically transmitted copy of an undersigned's signature shall be sufficient to execute this Amendment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) This Amendment shall be binding upon and inure to the benefit of Landlord and Tenant and their successors and permitted assigns. This Amendment may not be amended or modified except by an instrument in writing signed by Landlord and Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) This Amendment shall be governed by the laws of the State of North Carolina without giving effect to conflict of laws principles thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) The captions, headings, and titles in this Amendment are solely for convenience of reference and shall not affect its interpretation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The submission of this Amendment by Landlord to Tenant for examination and/or execution shall not be construed as an offer and shall not in any manner bind Landlord and Tenant shall not have any rights under this Amendment, and no obligations on Landlord shall arise under this Amendment, unless and until Landlord executes a copy of this Amendment and delivers it to Tenant.

[end of page; signature pages follow.]

IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of the Effective Date.

---

| | |
|:---|:---|
| **LANDLORD:** | **LANDLORD:** |
| **TBC STIRRUP CREEK OWNER LLC**, a Delaware limited liability company | **TBC STIRRUP CREEK OWNER LLC**, a Delaware limited liability company |
| TBC Stirrup Creek JV LLC, a Delaware limited liability company, its sole member | TBC Stirrup Creek JV LLC, a Delaware limited liability company, its sole member |
| LH Stirrup Research LLC, a Delaware limited liability company, its operating member | LH Stirrup Research LLC, a Delaware limited liability company, its operating member |
| Lincoln Harris LLC, a Delaware limited liability company, its manager | Lincoln Harris LLC, a Delaware limited liability company, its manager |
| The Harris Group of Carolinas, Inc., a North Carolina corporation, its operating managing member | The Harris Group of Carolinas, Inc., a North Carolina corporation, its operating managing member |
| By: | ![](img007.jpg) |
|  | Name: John W. Harris III |
|  | Title: Authorized Signatory |

---

---

| | |
|:---|:---|
| TENANT | TENANT |
| LNHC, INC., a Delaware corporation | LNHC, INC., a Delaware corporation |
| By: | ![](img008.jpg) |
|  | Name: Matthew Korenberg |
|  | Title: President |

---

**<u>JOINDER</u>**

Original Tenant consents to the execution of this Amendment. Original Tenant agrees and acknowledges that Original Tenant shall have no further right, title or interest in the interest of "Tenant" under the Lease (as amended hereby).

Executed as of the Effective Date.

---

| | |
|:---|:---|
| **ORIGINAL TENANT:** | **ORIGINAL TENANT:** |
| **NOVAN, INC. a Delaware corporation** | **NOVAN, INC. a Delaware corporation** |
| By: | ![](img009.jpg) |
|  | Name: Paula B. Stafford |
|  | Title: President and CEO |

---

**<u>EXHIBIT A</u>**

**<u>FORM OF GUARANTY</u>**

**<u>GUARANTY</u>**

In connection with Landlord's consent to the assumption and assignment (the "**<u>Assignment</u>**") of the Lease (defined below) from Novan, Inc., a Delaware corporation ("**<u>Original Tenant</u>**"), to LNHC, Inc., a Delaware corporation (together with its permitted successors and assigns, "**<u>Tenant</u>**"), **LIGAND PHARMACEUTICALS INCORPORATED**, a Delaware corporation ("**<u>Guarantor</u>**"), hereby unconditionally and irrevocably guarantees the complete and timely performance of each obligation of Original Tenant and Tenant (and any successors or assignee of Tenant) under the Lease, any extensions or renewals of and amendments to the Lease and to all new leases entered into by Landlord, its Affiliates, successors or assignees and Tenant, its Affiliates, successors or assignees relating to space in the Project or any related complex. This Guaranty is an absolute, primary, and continuing, guaranty of payment and performance (not collection) and is independent of Tenant's obligations under the Lease. Guarantor (and if this Guaranty is signed by more than one person or entity, each Guarantor hereunder) shall be primarily liable, jointly and severally, with Original Tenant, Tenant and any other guarantor of Tenant's obligations. Guarantor waives any right to require Landlord to (a) join Original Tenant or Tenant with Guarantor in any suit arising under this Guaranty, (b) proceed against or exhaust any security given to secure Original Tenant's or Tenant's obligations under the Lease, (c) exercise any rights under Landlord's remedies pursuant to the Lease, (d) take any action pursuant to applicable forcible entry and detainer statutes, or (e) pursue or exhaust any other person (including Original Tenant and Tenant) or any other remedy in Landlord's power. As used herein, "**<u>Lease</u>**" means the Lease dated January 18, 2021 between Original Tenant and Landlord's predecessor-in-interest thereto, as amended by First Amendment to Lease dated March 18, 2021, Second Amendment to Lease dated November 23, 2021, as amended by Third Amendment to Lease dated on or about the date hereof, and as may be further amended from time to time. Capitalized terms used but not defined herein shall have the meanings given to them in the Lease.

Until all of Tenant's obligations to Landlord have been discharged in full, Guarantor shall have no right of subrogation against Tenant. Landlord may, without notice or demand and without affecting Guarantor's liability hereunder, from time to time, compromise, extend, renew or otherwise modify any or all of the terms of the Lease by amendment, novation or otherwise (including a new lease, to the extent a court of competent jurisdiction determines any of the foregoing constitutes a new lease), or fail to perfect, or fail to continue the perfection of, any security interests granted under the Lease. Without limiting the generality of the foregoing, if Tenant elects to increase the size of the leased premises, extend or renew the lease term, or otherwise expand Tenant's obligations under the Lease, Tenant's execution of such lease documentation shall constitute Guarantor's consent thereto (and such increased obligations of Tenant under the Lease shall constitute a guaranteed obligation hereunder); Guarantor hereby waives any and all rights to consent thereto. Guarantor waives any right to participate in any security now or hereafter held by Landlord. Guarantor hereby waives all presentments, demands for performance, notices of nonperformance, protests, notices of protest, dishonor and notices of acceptance of this Guaranty, and waives all notices of existence, creation or incurring of new or additional obligations from Tenant to Landlord. Guarantor further waives all defenses afforded guarantors or based on suretyship or impairment of collateral under applicable Law, other than payment and performance in full of Tenant's obligations under the Lease. The liability of Guarantor under this Guaranty will not be affected by (a) the release or discharge of Original Tenant or Tenant from, or impairment, limitation or modification of, Tenant's obligations under the Lease in any bankruptcy, receivership, or other debtor relief proceeding, whether state or federal and whether voluntary or involuntary; (b) the rejection or disaffirmance of the Lease in any such proceeding; or (c) the cessation from any cause whatsoever of the liability of Original Tenant or Tenant under the Lease.

Guarantor shall not, without the prior written consent of Landlord, (a) assign or transfer this Guaranty or any estate or interest herein, whether directly or by operation of law, (b) permit any other entity to become Guarantor hereunder by merger, consolidation, or other reorganization, (c) if Guarantor is an entity other than a corporation whose stock is publicly traded, permit the transfer of an ownership interest in Guarantor so as to result in a change in the current direct or indirect control of Guarantor, or (d) sell or otherwise transfer, in one or more transactions, a majority of Guarantor's assets. If Guarantor violates the foregoing restrictions or otherwise defaults under this Guaranty, Landlord shall have all available remedies at law and in equity against Guarantor and Tenant. Without limiting the generality of the foregoing, Landlord may (1) declare an immediate Event of Default under the Lease, (2) require both or either (at Landlord's election) of Guarantor or Tenant to deliver to Landlord additional security for the obligations of Tenant and Guarantor under the Lease and the Guaranty, respectively, which additional security may be in the form of an irrevocable letter of credit in form and substance satisfactory to Landlord, and in an amount to be determined by Landlord in its reasonable discretion, and (3) increase by 25% the amount of Base Rent payable by Tenant under the Lease, with such increased Base Rent to continue until Guarantor cures such violation or default, to compensate Landlord, for among other things, the reasonable estimate in the diminution in the fair market value of the Project. Landlord and Tenant agree that Landlord's damages resulting from Guarantor's default under this Guaranty are difficult, if not impossible, to determine and the Base Rent increase as provided above is a fair estimate of those damages which has been agreed to in an effort to cause the amount of such damages to be certain. Any and all remedies set forth in this Guaranty: (A) shall be in addition to any and all other remedies Landlord may have at law or in equity, (B) shall be cumulative, and (C) may be pursued successively or concurrently as Landlord may elect. The exercise of any remedy by Landlord shall not be deemed an election of remedies or preclude Landlord from exercising any other remedies in the future.

Notwithstanding the foregoing, Guarantor may permit any other entity to become Guarantor hereunder and/or permit the transfer of an ownership interest in Guarantor (each a "**<u>Permitted Guarantor Change</u>**") without the written consent of Landlord, provided the new Guarantor is:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) any corporation, limited partnership, limited liability partnership, limited liability company or other business entity acquiring all or substantially all of Guarantor's assets, so long as (A) Guarantor's obligations hereunder are assumed by the entity acquiring such assets; and (B) the proposed transferee has tangible net worth of no less than $250,000,000.00 as of the effective date of the Permitted Guarantor Change.

Guarantor shall promptly notify Landlord of any such Permitted Guarantor Change. Guarantor shall remain liable for the performance of all of the obligations of Guarantor hereunder, or if Guarantor no longer exists because of a merger, consolidation, or acquisition, the surviving or acquiring entity shall expressly assume in writing the obligations of Guarantor hereunder. No later than ten days after the effective date of any Permitted Guarantor Change, Guarantor agrees to furnish Landlord with (i) copies of the instrument effecting any of the foregoing Permitted Guarantor Changes, and (ii) documentation establishing Guarantor's satisfaction of the requirements set forth above applicable to any such Permitted Guarantor Change.

Guarantor represents and warrants to Landlord, as a material inducement to Landlord to consent to the Assignment, that (a) this Guaranty and each instrument securing this Guaranty have been duly executed and delivered and constitute legally enforceable obligations of Guarantor; (b) there is no action, suit or proceeding pending or, to Guarantor's knowledge, threatened against or affecting Guarantor, at law or in equity, or before or by any governmental authority, which might result in any materially adverse change in Guarantor's business or financial condition; (c) execution of this Guaranty will not render Guarantor insolvent; (d) Guarantor expects to receive substantial benefits from Tenant's financial success; (e) this Guaranty may reasonably be expected directly or indirectly to benefit Guarantor; and (f) the financial statements or other financial information pertaining to Guarantor or its Affiliates delivered to Landlord in connection with the negotiation of the Lease or pursuant to this Guaranty are and will be based upon and are consistent in all material respects with the information contained in the Guarantor's books and records, have been or will be prepared and reviewed by Guarantor, based on GAAP consistently applied throughout the periods indicated (except as may be indicated in the notes thereto) and fairly present, in all material respects, the financial position of the Guarantor as of the date thereof and the results of its respective operations for the periods then ended, except as otherwise noted therein; provided that the interim financial statements are subject to customary recurring year-end adjustments, which in the aggregate are not material, and lack footnotes and other presentation items. Guarantor shall pay to Landlord all out-of-pocket costs incurred by Landlord in enforcing this Guaranty (including, without limitation, reasonable attorneys' fees and expenses). The obligations of Tenant under the Lease to execute and deliver estoppel and financial statements, as therein provided, shall be deemed to also require the Guarantor hereunder to do so and provide the same relative to Guarantor following written request by Landlord in accordance with the terms of the Lease. All notices and other communications given pursuant to, or in connection with, this Guaranty shall be delivered in the same manner required in the Lease. All notices or other communications addressed to Guarantor shall be delivered at the address set forth below. This Guaranty shall be binding upon the heirs, legal representatives, successors and assigns of Guarantor and shall inure to the benefit of Landlord's successors and assigns.

This Guaranty will be governed by and construed in accordance with the laws of the State in which the Premises (as defined in the Lease) are located. The proper place of venue to enforce this Guaranty will be the county or district in which the Premises are located. In any legal proceeding regarding this Guaranty, including enforcement of any judgments, Guarantor irrevocably and unconditionally (a) submits to the jurisdiction of the courts of law in the county or district in which the Premises are located; (b) accepts the venue of such courts and waives and agrees not to plead any objection thereto; and (c) agrees that (1) service of process may be effected at the address specified herein, or at such other address of which Landlord has been properly notified in writing, and (2) nothing herein will affect Landlord's right to effect service of process in any other manner permitted by applicable law.

Guarantor acknowledges that it and its counsel have reviewed and revised this Guaranty and that the rule of construction to the effect that any ambiguities are to be resolved against the drafting party will not be employed in the interpretation of this Guaranty or any document executed and delivered by Guarantor in connection with the transactions contemplated by this Guaranty.

The representations, covenants and agreements set forth herein will continue and survive the termination of the Lease or this Guaranty. The masculine and neuter genders each include the masculine, feminine and neuter genders. This instrument may not be changed, modified, discharged or terminated orally or in any manner other than by an agreement in writing signed by Guarantor and Landlord. The words "Guaranty" and "guarantees" will not be interpreted to limit Guarantor's primary obligations and liability hereunder.

TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAWS, GUARANTOR KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS GUARANTY, ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS LEASE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN), OR ACTION BETWEEN LANDLORD AND GUARANTOR OR ANY EXERCISE BY LANDLORD OR GUARANTOR OF ANY OF THEIR RESPECTIVE RIGHTS UNDER THIS GUARANTY OR IN ANY WAY RELATING TO THE PREMISES. THIS WAIVER IS A MATERIAL INDUCEMENT FOR LANDLORD TO CONSENT TO THE ASSIGNMENT. THIS WAIVER SURVIVES THE EXPIRATION OR TERMINATION OF THE LEASE AND THIS GUARANTY.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

Executed as of____________, 2023.

---

| |
|:---|
| **LIGAND PHARMACEUTICALS INCORPORATED, a** |
| Delaware corporation |
| By: |
| Name: |
| Title: |

---

---

| | |
|:---|:---|
| For all notices to Guarantor: | For all notices to Guarantor: |
| Ligand Pharmaceuticals Incorporated | Ligand Pharmaceuticals Incorporated |
| 3911 Sorrento Valley Boulevard, Suite 110 <br> San Diego, CA 92121 | 3911 Sorrento Valley Boulevard, Suite 110 <br> San Diego, CA 92121 |
| Attention: | Chief Financial Officer |
| -and- | -and- |
| Ligand Pharmaceuticals Incorporated | Ligand Pharmaceuticals Incorporated |
| 3911 Sorrento Valley Boulevard, Suite 110 <br> San Diego, CA 92121 | 3911 Sorrento Valley Boulevard, Suite 110 <br> San Diego, CA 92121 |
| Attention: | General Counsel |
| -with a copy to: | -with a copy to: |
| Morgan, Lewis & Bockius LLP <br> 101 Park Avenue | Morgan, Lewis & Bockius LLP <br> 101 Park Avenue |
| New York, NY 10178 | New York, NY 10178 |
| Attention: | Craig A. Wolfe, Esq. |
|  | Jason R. Alderson, Esq. |

---

**<u>JOINDER</u>**

The undersigned, of behalf of its successors and assigns, consents to the execution of this Guaranty and agrees to be bound by the terms and conditions thereof.

Executed as of____________, 2023.

---

| | |
|:---|:---|
| **TENANT:** | **TENANT:** |
| **LNHC, INC.**, a Delaware corporation | **LNHC, INC.**, a Delaware corporation |
| By: |  |
|  | &nbsp;&nbsp;&nbsp;Name: Matthew Korenberg |
|  | &nbsp;&nbsp;&nbsp;Title: President |

---

## Exhibit 10.21

**Exhibit 10.21**

**Certain confidential information contained in this exhibit have been omitted by means of redacting a portion of the text and replacing it with [\*\*\*], pursuant to Regulation S-K Item 601(b)(10) of the Securities Act of 1933, as amended. Certain confidential information has been excluded from this exhibit because it is: (i) not material; and (ii) the registrant treats such information as private or confidential.**

**CONTRACT MANUFACTURING AGREEMENT**

This Contract Manufacturing Agreement (the "**Agreement**")

made and executed as of this 12<sup>th</sup>

day of February, 2025

(hereinafter referred to as "**Date of Agreement**")

by and between

**LNHC, INC.,**

a company organized under the laws of the State of Delaware in the United States of America,

with its principal offices at 4020 Stirrup Creek Drive, Suite 110, Durham, NC 27703 U.S.A.

(hereinafter "**COMPANY**"),

and

**Orion Corporation,**

a company organised under the laws of Finland,

(Business Identity Code FI 19992126),

with its principal offices at Orionintie 1, 02200 Espoo, Finland

(hereinafter referred to as "**ORION**").

Each of COMPANY and ORION referred to herein after as a "**Party**" and collectively as the "**Parties**".

**WITNESSETH**

---

| | |
|:---|:---|
| WHEREAS, | COMPANY is engaged in the business of the development, registration and licensing of pharmaceutical products and ORION is engaged in the business of, *inter alia*, manufacturing pharmaceutical products; |

---

WHEREAS, COMPANY now desires to have ORION manufacture for, and supply to COMPANY, the Product (as defined below) on a non-exclusive basis; and

WHEREAS, ORION, subject to the terms and conditions of this Agreement, desires to so manufacture for and supply the Product to COMPANY.

NOW, THEREFORE, COMPANY and ORION, in consideration of the premises and of the mutual agreement, covenants and conditions hereinafter set forth, agree and covenant as follows:

1. DEFINITIONS

1.1. In
 this Agreement the following capitalized words and expressions bear the meanings set
 out below:

**"Affiliate"** means any entity which, directly or indirectly, controls, is controlled by, or is under common control with a Party. For the purpose of this definition, "control" shall mean the direct or indirect ownership of more than fifty percent (50%) of the outstanding voting stock of a subject entity, or such other relationship as in fact results in actual control over the management, business and affairs of a subject entity.

**"API"** means the active pharmaceutical ingredient required for the Manufacture of the Product hereunder and designated as the "Active" ingredient of the Product in Schedule 1.

**"Approved Facility"** means each of ORION's manufacturing facilities located at Turku (Tengstrominkatu 8, 20380 Turku, Finland) and Salo (Joensuunkatu 7 B, 24100 Salo, Finland), Finland.

**"Business Day"** means a day (not being a Saturday or Sunday) on which banks are open for business in Finland and the United States of America.

**"Certificate of Analysis"** means a certificate supplied with delivered Product, which states details of the relevant Product batch(es) covered by the certificate and contains the agreed manufacturing data.

**"Current Good Manufacturing Practices" or "cGMPs"** means all applicable standards relating to manufacturing practices for intermediates, drug substances, active pharmaceutical ingredients, or finished pharmaceutical products, including without limitation (i) the principles detailed in the U.S. Current Good Manufacturing Practices, 21 C.F.R. Parts 210 and 211, the Quality System Regulation, 21 C.F.R. 820, The Rules Governing Medicinal Products in the European Community, Volume IV Good Manufacturing Practice for Medicinal Products, and the Good Manufacturing Practices promulgated by the International Conference on Harmonisation, including without limitation Q7A Good Manufacturing Practice Guidance For Active Pharmaceutical Ingredients (ICH Q7A), (ii) the principles promulgated by any applicable governmental or regulatory authority having jurisdiction over the manufacture of the Product, in the form of laws, rules, or regulations, and (iii) the principles promulgated by any applicable governmental or regulatory authority having jurisdiction over the manufacture of the Product, in the form of guidance documents (including but not limited to advisory opinions, compliance policy guides, and guidelines); in each case as in effect at the Date of Agreement and as amended, promulgated, or accepted by any applicable governmental or regulatory authority from time to time during the term of this Agreement.

**"Confidential Information"** means any and all information, documentation, know-how and data disclosed and/or made available under this Agreement by or on behalf of a Party to the other Party relating to the Product, the business affairs, trade secrets and/or other activities of such Party and/or its Affiliates, which may include but may not be limited to specifications, ideas, know-how, formulas, technology, practices, processes, methods of production, manufacturing processes documentation, manufacturing formulae, instructions, specifications, standards and analytical procedures, whether technical or non-technical, verbal or written, patented or patentable, as well as product samples and specifications. This Agreement shall be without prejudice to any confidentiality obligations of the Parties in regards of information, documentation, know-how, data, inventions, improvements, modifications, adaptations, enhancements, new applications or materials that constitute confidential information of such Party under the Prior Supply Agreement, which agreement and related obligations shall remain in force in accordance with the Prior Supply Agreement. For clarity, should any Confidential Information disclosed hereunder overlap with confidential information provided for the purposes of the Prior Supply Agreement, such information may be protected by both this Agreement and the Prior Supply Agreement. The terms of this Agreement shall be deemed Confidential Information of both Parties.

**"Country of Manufacture"** means Finland.

"**Data**" means any and all data, documentation, designs, materials, results and information, in any form, conceived, derived, reduced to practice, made, created, written, designed or developed by or on behalf of ORION, alone or together with COMPANY, in connection with the Manufacture of any Product hereunder, applicable technology transfer agreements or arising as a result thereof, and specifically relating to: (a) the business of COMPANY or its Affiliates; (b) licensees, customers and other suppliers of COMPANY, as it relates to any Product; (c) each Product and the development and Manufacture thereof, including any Improvements; or (d) any Intellectual Property Rights of COMPANY.

"**Encumbrance**" means any charge, claim, community property interest, pledge, condition, equitable interest, lien (statutory or other), option, security interest, mortgage, easement, encroachment, right of way, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.

**"Improvements"** means any and all inventions, improvements, modifications, adaptations, enhancements or new applications related to the Product or the techniques or processes involved in its Manufacture which are conceived, derived, reduced to practice, made or developed by or on behalf of ORION, alone or together with COMPANY, in connection with the Manufacture of the Product hereunder or arising as a result thereof.

**"Independent Improvements"** means any and all inventions, improvements, modifications, adaptations, enhancements or new applications, techniques or processes conceived, derived, reduced to practice, made or developed by ORION in connection with the Manufacture of the Product hereunder or arising as a result thereof other than the Improvements and which ORION can prove: (1) are independent of the Improvements, (2) the use and/or application of which in no way exploits or utilises any of the Improvements, COMPANY's IPRs or COMPANY's Confidential Information, and (3) the use of which can be done independently of each of the Improvements, COMPANY's IPR and COMPANY's Confidential Information.

**"Intellectual Property Rights"** or **"IPRs"** means all inventions, patent applications, patents, registered or unregistered design rights, copyrights, database rights, trade marks, trade names, know-how and other industrial or intellectual property rights of whatever kind and all rights of a similar nature throughout the world.

**"Manufacture"** shall mean the manufacture of Product and assurance and verification of Product quality and compliance of the Product to the Product Specification (in accordance with the Quality Agreement and applicable marketing authorization), including but not limited to the quality control and quality assurance, packaging (if any) and storage of the Product.

**"ORION Background"** shall mean inventions, processes, know-how, trade secrets, and any related intellectual property including analytical methods, procedures, techniques, manuals, financial information, computer expertise and any software, each of which ORION (i) owns or controls prior to the Date of Agreement (or the effective date of the Prior Supply Agreement) and/or (ii) acquires or develops independently of this Agreement or the Prior Supply Agreement. Any improvements to ORION Background shall be considered ORION Background.

**"Product"** shall mean the pharmaceutical product identified in Schedule 1.

**"Product Specification"** means the agreed specifications for the Product set out in Schedule 1.

**"Quality Agreement"** means the agreement between ORION and COMPANY, which sets out the roles and responsibilities of each Party with respect to Manufacture of the Product(s), to be entered into between the Parties pursuant to this Agreement.

**"Separable Improvement**" means an Improvement that constitutes: (i) an equipment update to any equipment other than COMPANY Equipment or (ii) a manufacturing process or technique that, in each case (i) and (ii), is separable from, and capable of being used independently of, COMPANY's IPR and COMPANY's Confidential Information, and does not rely upon, incorporate or reference any of COMPANY's IPR or COMPANY's Confidential Information.

2. Steering
 committee

2.1. Upon
 execution of this Agreement, the Parties will promptly establish a steering committee
 (the "**Steering Committee**") to perform the functions specifically assigned
 to the Steering Committee under this Agreement. The Steering Committee will be comprised
 of an equal number of members from each Party, initially four (4) in total, all of whom
 are and shall be full time employees of the appointing Party. Each Party may, in its
 sole discretion, replace its assigned representatives at any time as necessary, by providing
 written notice to the other Party of such change.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The
 Steering Committee will (i) provide general oversight regarding the Parties' performance
 of their respective obligations under this Agreement; (ii) review metrics regarding key
 performance indicators such as order fulfilment and on-time delivery; (iii) review and
 respond to Change Order Requests, as more particularly described in Section 4.15; (iv)
 attempt to resolve any disputes between the Parties, as more particularly described in
 Section 25.2; (v) act as the point of information exchange between the Parties; and (vi)
 make any other decisions expressly assigned to the Steering Committee by this Agreement
 and perform other functions as appropriate to further the purposes of this Agreement
 as allocated to it in writing by the Parties. Each Party will use good faith efforts
 to facilitate and assist the efforts of the Steering Committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) All
 decisions of the Steering Committee shall be made by unanimous consent and documented
 in writing. In the event the Steering Committee is unable to reach agreement on a matter
 within the Steering Committee's authority, the issue shall be resolved by first
 escalating the matter to a senior executive of each Party, and then following the dispute
 resolution provisions in Section 25.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The
 Steering Committee shall meet at least every twelve (12) months during the term of this
 Agreement, and such annual meetings shall be in-person unless otherwise agreed upon by
 the Steering Committee. The location of the annual meetings of the Steering Committee
 to be held in-person shall alternate between the reasonable locations selected by each
 Party. Each Party shall bear all the expenses of its representatives on the Steering
 Committee. Either Party may call additional meetings of the Steering Committee (which
 may be by telephone or video conference) by providing written notice of the meeting to
 the other Party at least five (5) Business Days in advance of such meeting, provided
 that the members of the Steering Committee may waive the notice requirement at any time.
 Responsibility for keeping the minutes of Steering Committee meetings shall alternate
 between COMPANY and ORION.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Other
 than with respect to approving Change Order Requests, the Steering Committee does not
 have the authority to amend or waive compliance with this Agreement.

3. FORECASTING

Subject to Section 21.2 below, COMPANY shall by the end of each month furnish ORION with a [\*\*\*] forecast concerning COMPANY's anticipated demand for Products. Such rolling forecast shall be regarded as a good faith estimate of COMPANY'S demand for Products but shall not be deemed binding on COMPANY, provided that the first [\*\*\*] of each such forecast shall be deemed a binding order (in respect of which COMPANY shall be obliged to send ORION a separate binding Purchase Order, which shall be subject to confirmation by ORION pursuant to Section 4).

4. manufacture
 and supply of product

4.1. COMPANY
 hereby appoints ORION, on a non-exclusive basis, to Manufacture and supply the Product
 to COMPANY during the term of this Agreement.

4.2. ORION
 shall Manufacture and supply to COMPANY, and COMPANY undertakes to purchase from ORION,
 the Product during the term of this Agreement in accordance with the terms and conditions
 of this Agreement, the Quality Agreement, and applicable law.

4.3. ORION
 shall Manufacture and supply to COMPANY the amounts of Product pursuant to purchase orders
 issued by COMPANY and accepted by ORION ()"**Purchase Orders** "). Each
 Purchase Order shall contain, at a minimum:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) a
 description of the Product;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the
 quantity of Product being purchased;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the
 delivery date for the Product (as determined in accordance with this Agreement);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the
 price of the Product (as determined in accordance with this Agreement); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) any
 other terms relating to the purchase of the Product referred to in that order.

4.4. ORION
 shall, within [\*\*\*] from receipt of any order from COMPANY, accept or reject such order
 by providing notice to COMPANY. If ORION rejects an order within such [\*\*\*],
 ORION must provide written notice specifying the reason for the rejection, provided that
 ORION cannot reject any order that is consistent with the binding portion of any forecast
 provided by COMPANY pursuant to Section 3, and to the extent COMPANY requests an amount
 in an order that exceeds the binding portion of a forecast, but not an amount in excess
 of [\*\*\*] of such binding portion, then ORION shall use commercially reasonable efforts
 to accept such order. Any order that is in accordance with any such forecast or that
 is not rejected in writing by ORION in accordance with this Section 4.4 shall be deemed
 accepted by ORION and shall be a Purchase Order subject to the terms of this Agreement.
 Notwithstanding anything in the foregoing, ORION shall not have the obligation to accept
 or Manufacture and supply any amount of Product which requests less than the minimum
 lead-time specified in Section 4.6.

4.5. The
 Product shall be Manufactured only at an Approved Facility. ORION may change the location
 of Manufacture upon the prior written consent of COMPANY such consent not to be unreasonably
 withheld or delayed (any such new location approved by COMPANY shall be deemed added
 to the definition of Approved Facility without any additional action hereunder). ORION
 shall be responsible for all transfer actions, and bear all costs and expenses related
 thereto, including costs to move Company Equipment (as defined below) and registration
 change costs, unless otherwise agreed in writing by the Parties.

4.6. ORION
 shall Manufacture and supply Product in accordance with Purchase Orders. Delivery of
 Product ordered shall take place within [\*\*\*] days from the date of
 ORION's order acceptance pursuant to Section 4.2. Purchase orders shall be placed
 in full batch sizes (or multiples thereof) only with the understanding that ORION may
 over-deliver so as to meet the full batch sizes to the extent a Purchase Order requests
 an amount other than a full batch size in fulfilling its delivery obligations hereunder.
 Notwithstanding any of the aforesaid, the Parties shall separately agree on the delivery
 time for the first batch(es) of Product ordered by COMPANY. Further, ORION shall have
 no delivery obligation in the event COMPANY has not complied with the forecasting obligation
 set forth in Section 3.

4.7. The
 Product shall be delivered FCA (Incoterms 2020) the Approved Facility at Salo, Finland
 (Incoterms 2020). Title to Product shall pass to COMPANY upon delivery. Payment term
 is [\*\*\*] from the date of ORION's invoice. Overdue amounts shall accrue interest
 at the rate of the lower of: [\*\*\*]

4.8. COMPANY shall during
 the term of this Agreement but not more often than once per [\*\*\*] (unless agreed otherwise or if in connection with a "for
 cause" audit), be entitled, free of charge but otherwise at its sole expense and upon reasonable advance notice and
 during normal business hours, to audit the Approved Facilities. COMPANY will however not be required to pay for "for
 cause" audits in the event of identified non-compliance by ORION. Such audit right shall include the right to audit
 and inspect all inventory of Product, API, and Materials located at the Approved Facility. ORION agrees to cooperate and assist
 COMPANY (and to require any ORION Affiliate to cooperate and assist COMPANY) in connection with any audits performed pursuant
 to this Section 4.8. COMPANY's rights under this Section 4.8 shall be in addition to any audit rights under the Quality
 Agreement.

4.9. Without prejudice to
 COMPANY's other obligations under this Agreement, COMPANY agrees during each calendar year of the Initial Period beginning
 with [\*\*\*] to purchase certain minimum amounts of Product from ORION set forth in Schedule 4 (hereinafter "**Minimum Purchase Requirement** ").

4.10. In the event that COMPANY
 purchases from ORION a quantity of Product less than the Minimum Purchase Requirement, then COMPANY shall, within [\*\*\*] of
 receiving a written request from ORION at COMPANY's option either a) place an order for the shortfall of purchased products
 against the Minimum Purchase Requirements or b) effect compensation payment within [\*\*\*] after written agreement by the Parties
 as to the applicable amount of such payment (hereinafter "**Shortfall** "). Failure of COMPANY to effect timely
 payment of the Shortfall or place an order for the shortfall shall entitle ORION to terminate the Agreement pursuant to the
 terms set forth in Section 13.3.

4.11. COMPANY shall at its
 cost be responsible for procuring the API and delivering to ORION appropriate amounts of API based on accepted Purchase Orders.
 COMPANY shall provide ORION with all information available to COMPANY regarding known or potential hazards associated with
 the use of API. ORION shall not be liable to COMPANY nor be deemed to have breached this Agreement for errors, delays or other
 consequences arising solely from COMPANY's failure to timely provide API to ORION, and any such failure by COMPANY which
 causes a delay in ORION's ability to Manufacture and deliver the Product in the agreed schedule shall automatically
 extend the same by a time period reasonably commensurate to take into account such failure. COMPANY shall retain title to
 API until it is Manufactured into Product. ORION shall handle, store, and use API in accordance with the applicable specifications,
 cGMPs, and all applicable laws and regulations. API may only be used by ORION for the Product. In the event that ORION loses,
 destroys or damages any API such that it cannot be used in connection with Product, ORION shall reimburse COMPANY for COMPANY's
 expenses incurred in connection with procuring and shipping API to replace such lost, destroyed or damaged API.

4.12. [Reserved.]

4.13. In case ORION does not
 deliver Product conforming to the Agreed Quality (as defined in Section 6.1 below) within the delivery time specified in Section
 4.4, including the [\*\*\*] shelf life requirement for Product, due to reasons other than (i) Force Majeure (as defined in Section
 16 herein below), (ii) a quality issue relating to API supplied by COMPANY, (iii) a non-delivery or late delivery of API supplied
 by COMPANY, or (iv) any other reason not attributable to ORION, its Affiliates or subcontractors, ORION shall be liable for
 liquidated damages towards COMPANY. In the event any Product has less than [\*\*\*] of available shelf life at release by Orion,
 the discount specified in Schedule 4 applicable to such Product with reduced shelf life shall apply to any amounts payable
 for such Product. Without limiting COMPANY's rights to a price reduction for failure to provide the [\*\*\*] shelf life
 of Product set forth on Schedule 4, the amount of such liquidated damages [\*\*\*] of the order value price for the delayed part
 of the delivery. COMPANY shall have the right to a credit from future payments to ORION in the amount corresponding to such
 liquidated damages.

4.14. The
 Parties agree that the equipment listed on Schedule 2 is located in an Approved Facility
 as of the Date of Agreement and is owned by COMPANY. Such equipment, together with any
 other machinery, equipment, furnishings, fixtures furnished by COMPANY to ORION or paid
 for in whole or in part by COMPANY (including if COMPANY reimburses ORION for all or
 a portion of the cost of any such items), together with (a) additions to, substitutions
 for, replacements of and accessions to any of the foregoing items, (b) attachments, components,
 parts (including spare parts) and accessories installed thereon or affixed thereto, and
 (c) intellectual property rights in connection with the foregoing, shall be referred
 to herein collectively as the "**Company Equipment**." The Company Equipment
 is and will at all times remain the property of COMPANY and be held by ORION on a bailment-at-will
 basis.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Only
 COMPANY has any right, title or interest in and to the Company Equipment, except for
 ORION's limited right, subject to COMPANY's sole discretion, to use the Company
 Equipment in the performance of ORION's obligations under this Agreement. Except
 to the extent required to Manufacture the Product, ORION shall not use the Company Equipment
 for any purpose. ORION shall not comingle Company Equipment with the property of ORION
 or with that of a person or entity other than COMPANY or ORION, and ORION shall not move
 any Company Equipment from the applicable Approved Facility without the prior written
 approval by COMPANY. COMPANY may, at any time, for any reason, retake possession of any
 Company Equipment. Upon COMPANY's request Company Equipment will be promptly released
 to COMPANY or delivered to COMPANY by ORION, at the sole cost, expense and liability
 of COMPANY. ORION's continued holding of Company Equipment after demand has been
 made by COMPANY for delivery may substantially impair the value thereof, and, accordingly,
 COMPANY will be entitled to seek a court order of possession without any need or proving
 damages or a bond. To the fullest extent permitted by law, ORION shall not allow any
 Encumbrance to be imposed on or attach to the Company Equipment through ORION or as a
 result of ORION's action or inaction, and ORION hereby waives any Encumbrance that
 it may have or acquire in the Company Equipment, including any Encumbrance that is automatically
 imposed or attached by operation of law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If
 the bailment relationship described in this Section 4.14 is deemed to be a secured financing
 transaction, ORION grants to COMPANY a continuing security interest in any rights or
 interests it may have in the Company Equipment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) ORION
 shall bear the risk of loss of and damage to Company Equipment while at the applicable
 Approved Facility. ORION shall, at its own expense, for the benefit of COMPANY, insure
 all Company Equipment with full and extended coverage for all losses, for its full replacement
 value. ORION shall, at its sole cost and expense, maintain, repair, refurbish and replace
 Company Equipment damaged while in ORION's possession, including as described in
 the terms set forth on Schedule 2. All replacement parts, additions, improvements and
 accessories for such Company Equipment will automatically become COMPANY's property
 upon their incorporation into or attachment to the Company Equipment. All replacements
 of Company Equipment will also be COMPANY's property. ORION shall replace any missing
 components of or inserts to any Company Equipment. Notwithstanding the foregoing COMPANY
 shall be responsible for breakage of Company Equipment during production (other than
 due to the misuse or negligence of ORION) as well as normal maintenance of Company Equipment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) ORION
 will maintain a written inventory of all Company Equipment that sets forth a description
 and the location of all Company Equipment utilizing COMPANY's SAP system and coding.
 ORION shall immediately sign any documents reasonably requested by COMPANY to evidence
 all of COMPANY's rights to and interests in Company Equipment. ORION grants to
 COMPANY a limited and irrevocable power of attorney, coupled with an interest, to execute
 and record on ORION's behalf any documents with respect to Company Equipment that
 are reasonably necessary to reflect COMPANY's interest in the Company Equipment.

4.15. Each
 Party may, from time to time, submit to the other Party a request for changes to the
 Product Specification or to any other key assumptions regarding the Manufacture of the
 Product, including without limitation the use of any particular vendor or raw material
 supplier (any such request, a "**Change Order Request** "). Each Change
 Order Request shall be approved in writing by COMPANY prior to its implementation. If,
 in the Steering Committee's reasonable judgment, ORION can implement the requested
 changes in a Change Order Request without requiring additional resources, ORION will
 implement the Change Order Request at no additional cost to COMPANY. Otherwise, ORION
 will provide COMPANY with a written change order proposal (a "**Change Order Proposal** ")
 in response to the Change Order Request, including price change and time required to
 implement the requested change(s). COMPANY may, at its discretion, accept or reject any
 Change Order Proposal. Each Party will use reasonable efforts to respond as expeditiously
 as possible to Change Order Requests and Change Order Proposals. The Steering Committee
 shall attempt to resolve any disputes regarding a Change Order Request or Change Order
 Proposal. Any Change Order Request implemented by ORION or Change Order Proposal accepted
 by COMPANY shall be referred to herein as a "**Change Order**."

4.16. Without
 limiting COMPANY's rights in Section 16.2, upon the expiration of this Agreement
 or as separately agreed, ORION shall, at COMPANY's request at any time and at COMPANY's
 expense, reasonably cooperate with COMPANY and with COMPANY and any third party designated
 by COMPANY (a "**New Manufacturer**") to effectuate the royalty-free and
 limited transfer of manufacturing know-how from ORION to COMPANY or such New Manufacturer,
 as appropriate, to enable COMPANY or the New Manufacturer to manufacture and package
 the affected Products. ORION agrees to use commercially reasonable efforts to enable
 COMPANY or such New Manufacturer to Manufacture Products. COMPANY acknowledges that the
 activities and obligations of ORION described in this Section 4.16 are subject to reasonable
 payment obligations and requires a separate technology transfer agreement between the
 Parties.

5. MATERIALS

5.1. ORION
 shall be responsible for procuring, at its sole cost and expense all necessary packaging
 and other materials (excluding API) for the Product (hereinafter "**Materials** ").
 ORION shall ensure that all Materials conform to the respective Material specifications
 set forth on Schedule 1 (hereinafter referred to as "**Material Specification** ")
 and shall allow no changes or deviations from the Material Specification without the
 prior written consent of COMPANY, such consent not to be unreasonably withheld or delayed.

5.2. For
 the avoidance of doubt, the Parties agree that the price for the Materials, and all costs
 and expenses incurred by ORION in fulfilling its obligations under this Section 5 shall
 be deemed included in the Supply Price (as defined below) payable by COMPANY for the
 Product. COMPANY acknowledges that ORION will order Materials based upon the first [\*\*\*] of COMPANY's forecast
 referred to in Section 3, and agrees to reimburse ORION for the costs and for other
 expenses (including destruction costs) incurred in connection with any Materials
 rendered obsolete or unusable other than due to negligence on ORION's
 part.

5.3. ORION
 shall maintain a safety stock of raw materials and packaging components (the "**Safety Stock**") in the amounts set forth on Schedule 3. ORION shall provide immediate
 written notice to COMPANY if the Safety Stock falls below the quantities required by
 this Section 5.3. Annually during the term of this Agreement, the Parties shall, via
 the Steering Committee, meet to discuss whether the quantities of Safety Stock should
 be adjusted.

6. PRODUCT
QUALITY

6.1. ORION
 represents and warrants that all amounts of Product delivered and supplied to COMPANY
 under this Agreement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Shall
 have been Manufactured only in the Approved Facility in accordance with, and shall otherwise
 comply with, (i) the terms and conditions of this Agreement and the Quality Agreement,
 (ii) current Good Manufacturing Practices (cGMPs), (iii) all applicable laws and regulations
 in the Country of Manufacture and the European Union, and (iv) the regulations of the
 U.S. Food and Drug Administration (FDA) and the Pharmaceuticals and Medical Devices Agency
 of Japan (PMDA);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) shall
 meet the Product Specification; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) shall
on the date of delivery have, at minimum, [\*\*\*] of shelf life remaining (items (a), (b), and (c) collectively referred to
as "**Agreed Quality** ").

6.2. ORION
 shall test each batch of Product Manufactured pursuant to this Agreement in accordance with the procedures set out in the
 Product Specification before delivery. ORION shall furnish COMPANY with a Certificate of Analysis for each batch of Product
 delivered. Each Certificate of Analysis shall set forth the items tested, the applicable Product Specification, and the test
 results for each batch delivered. Each Certificate of Analysis shall also meet any applicable requirements of the Quality
 Agreement.

6.3. COMPANY
 shall notify ORION within [\*\*\*] after the receipt of the Product if COMPANY finds out that a Product delivered does not comply
 with the Agreed Quality. Any claims by COMPANY regarding Product delivered shall specify the nature and basis for the claim
 and cite relevant ORION's batch control numbers or other information to enable specific identification of Product involved.
 ORION agrees to review any written claim made by COMPANY regarding the quality of the Product and provide COMPANY with the
 results of such review within [\*\*\*] after ORION's receipt of such written claim.

6.4. If
 the review and testing by ORION referred to in Section 6.3 confirms that a claimed quantity
 of Product did not as of the date of delivery meet the Agreed Quality in accordance with
 this Agreement, then COMPANY shall have the right to reject such quantity of Product
 in case of negligence or wilful misconduct by ORION during the production of Product,
 and shall at ORION's expense dispose of or deliver such quantity involved to such
 destination as ORION shall direct in writing, provided that such directions are in compliance
 with applicable environmental laws and regulations, and ORION shall, as COMPANY's
 sole and exclusive remedy, at ORION's option, either make a replacement delivery
 of conforming Product free of charge as soon as practicable or reimburse COMPANY for
 any payments made for such non-conforming Product; provided that for clarity the foregoing
 shall not limit or affect COMPANY's rights and remedies under Section 8 (Liability
 and Indemnity) and Section 13 (Term and Termination). In the event that ORION fails to
 timely deliver product in accordance with Section 4.6, or fails to deliver Product conforming
 to the Agreed Quality, in each case, on more than one occasion, the Parties agree to
 cause the Steering Committee to meet promptly to discuss and address such matters.

6.5. If
 the Parties hereto fail to agree as to whether a delivered quantity of Product complies
 with the Agreed Quality, then the Parties agree to have the batch in dispute tested and
 further analysed by an independent testing laboratory selected by agreement between the
 Parties, unless otherwise agreed by the Parties. Should said laboratory's testing determine
 that delivered Product do not comply with the Agreed Quality, then ORION shall bear all
 costs for the independent laboratory testing, and Section 6.4 shall be applied. However,
 if said quantity of Product is determined by the independent laboratory to have met the
 Agreed Quality, then COMPANY shall bear all costs of the independent laboratory testing.
 Such laboratory's testing results shall serve as an expert opinion and shall be
 without prejudice to any remedies available to either Party under this Agreement.

6.6. The
 Parties shall enter into a separate Quality Agreement prior to the first delivery of
 Product under this Agreement. Such Quality Agreement shall be incorporated by reference
 into this Agreement.

7. PRICE
AND TERMS OF PAYMENT

7.1. COMPANY
 shall pay to ORION for the Manufacture and supply of Product the price set forth in Schedule
 4 of this Agreement applicable to the amount of Product set forth therein (hereinafter
 "**Supply Price** "). Subject to the terms set forth in Schedule 4, the
 Supply Price shall be subject to review over the term of this Agreement as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Changes
 in Material costs. ORION shall decrease, and shall have the right to increase the Supply
 Price once per calendar year, to reflect any verifiable changes in ORION's cost
 of Material used for the Manufacture of Products. ORION shall notify COMPANY of any increase
 or decrease by 31 October in a calendar year and upon such notification the increase
 or decrease shall be effective from the beginning of the following calendar year, provided
 that the Supply Price shall never increase or decrease by more than [\*\*\*]
 over the Supply Price then in effect. Should a Party identify a new source of supply
 of a Material it shall notify the other Party thereof in writing and, subject to both
 Parties agreeing upon the change of Material, and, as the case may be, supplier thereof
 (including agreeing on the division of costs and benefits connected with such change),
 such change shall be implemented as soon as reasonable after the necessary marketing
 authorisations have been obtained.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Changes in other Manufacturing and supply costs. ORION shall decrease and shall have the right to increase the Supply Price once per calendar year, to reflect any changes in ORION'S direct verifiable manufacturing and supply costs other than costs of Materials. ORION shall notify COMPANY of any increase or decrease by 31 October in a calendar year and upon such notification the increase shall be effective from the beginning of the following calendar year, provided that the Supply Price shall never increase by more than [\*\*\*] over the Supply Price then in effect. The benefits of any costs savings achieved by ORION shall be divided between the Parties on a [\*\*\*] COMPANY–[\*\*\*] ORION basis.

8. LIABILITY
AND INDEMNITY

8.1. Subject
 to the terms of this Agreement, ORION agrees to defend, indemnify and hold COMPANY, its
 officers, employees, agents, and Affiliates harmless from and against all losses, damages,
 and costs (including reasonable attorneys' fees) (collectively "**Losses** ")
 claimed by any third party in connection with a claim, suit, demand, action or proceeding
 for (a) personal injury, death or damage to physical property to the extent attributable
 to the negligence or willful misconduct or breach of or failure to comply with this Agreement
 by ORION, its employees or directors; or (b) infringement of third party intellectual
 property rights to the extent attributable to ORION; in each case, except to the extent
 any such Losses are indemnifiable by COMPANY pursuant to Section 8.2 or otherwise attributable
 to the negligence of COMPANY.

8.2. Subject
 to the terms of this Agreement, COMPANY agrees to defend, indemnify and hold ORION, its
 officers, employees, agents, and Affiliates harmless from and against all Losses claimed
 by any third party in connection with a claim, suit, demand, action or proceeding for
 (a) personal injury, death or damage to physical property to the extent attributable
 to (i) the development, registration, commercialization and/or end-user's use of
 the Product; or (ii) the negligence or willful misconduct or breach of or failure to
 comply with this Agreement by COMPANY, its employees or directors; or (b) for infringement
 of third party intellectual property rights to the extent attributable to COMPANY (such
 as the COMPANY's Product, API or the use thereof); in each case, except to the
 extent any such Losses are indemnifiable by ORION pursuant to Section 8.1 or otherwise
 attributable to the negligence of ORION.

8.3. With
 respect to any indemnification obligation under this Agreement, the following conditions
 must be met for such indemnification obligation to become applicable:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The
 Party to be indemnified shall notify the indemnifying Party promptly in writing of any
 claim which may give rise to an obligation on the part of the indemnifying Party hereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the
 indemnifying Party shall be allowed to timely undertake the sole control of the defense
 of any such action and claim, including all negotiations for the settlement, or compromise
 of such claim or action at its sole expense, provided that the indemnifying Party shall
 obtain the written consent of the indemnified Party, which shall not be unreasonably
 withheld, prior to ceasing to defend, settling or otherwise disposing of any claim if
 as a result thereof the indemnified Party would become subject to injunctive or other
 equitable relief or if the indemnified Party may reasonably object to such disposition
 of such claim based on a continuing adverse effect on the indemnified Party; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the
 Party to be indemnified shall at the expense of the indemnifying Party render reasonable
 assistance, information, co-operation and authority to permit the indemnifying Party
 to defend such action.

8.4. In no event shall either Party be liable under or in connection with this Agreement for any indirect, punitive, incidental, special, exemplary or consequential damages, or for any lost profits, lost business, or lost goodwill. In no event shall ORION's liability for any damages or other liability of any kind or nature for an action exceed the amount paid or payable to ORION under this Agreement during the [\*\*\*]. These limitations in the preceding two sentences shall, however, not apply: (i) to a Party's indemnification obligations pursuant to Section 8.1 or 8.2 above, (ii) with respect to any breaches of confidentiality by a Party, or (iii) in the event a Party infringes or misappropriates the intellectual property rights of the other Party.

8.5. Without
 prejudice to Section 8.1 or 8.2, in the event a Party faces product liability or patent
 infringement litigation, actual or threatened and involving such Party's activities
 related to the Product, such Party shall without delay notify the other Party thereof
 in writing. As of such notice, (a) the Party facing such actual or threatened litigation
 shall have the right to suspend further supply and/or purchase of the Product, and/or
 (b) COMPANY can require ORION, and ORION agrees to comply with such requirement, to suspend
 the Manufacturing, supply and/or services related to, and/or other activities involving,
 the Product to the extent this is deemed necessary or advisable by COMPANY (upon having
 consulted its legal advisors) or required by a court ordered injunction, or an arbitrator(s)
 award or order (whether interim or final) to prevent or limit actual or possible damages,
 liability or injury to COMPANY and/or ORION. In the event a Party does not abide with
 such request, then all Manufacture, supply, purchase of, and/or other activities involving
 the Product thereafter by such Party shall be at the sole risk and responsibility of
 such Party in relation to such litigation or threat of litigation for so long as it continues.
 Such request and compliance therewith shall be deemed a temporary suspension of the Parties'
 obligations under this Agreement and the Parties hereto agree, upon the written request
 of either Party to discuss in good faith possible means of resolving the situation, which
 means may include but not be limited to the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) to
 terminate this Agreement for mutual convenience and to make a final transition accounting
 and settlement for outstanding payments and expenses, to which each Party is entitled
 under the terms of this Agreement at that time;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) to
 modify the Agreement to reasonably resolve the situation affecting the Parties at that
 time; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) to
 seek to enter into an alternative manufacture and supply arrangement for the Product.

8.6. Without
 limiting the foregoing, in the event COMPANY faces patent infringement litigation in
 any territory, actual or threatened and involving COMPANY's activities related
 to the Product, COMPANY shall without delay notify ORION thereof in writing, and at ORION's
 request the Parties shall promptly discuss in good faith whether to suspend the Manufacturing,
 supply and/or services related to, and/or other activities involving the Product under
 this Agreement or other possible means of resolving the situation. If COMPANY neglects
 to notify ORION or requires ORION to continue such activities, then subject to Section
 8.1 all such activities by ORION shall be at the sole risk and responsibility of COMPANY
 in relation to such litigation or threat of litigation for so long as it continues, and
 it is the responsibility of COMPANY to stop all delivery of Product to the territory
 facing such claims until such time litigation or threat of litigation has been satisfactorily
 resolved.

8.7. Each Party shall, at its own cost and expense, maintain insurance during the term of this Agreement and for a period of [\*\*\*] after expiration or termination of this Agreement, including product liability insurance, with respect to its activities hereunder, which insurance shall be in such amounts and subject to such deductibles as the Parties may agree based upon standards prevailing in the industry at the time, Either Party may satisfy its obligations under this Section 8.7 through self-insurance.

9. CERTAIN
UNDERTAKINGS OF ORION; IMPROVEMENTS

9.1. During
 and after the term of this Agreement, ORION shall not:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) use
 for any purpose other than the proper performance under this Agreement, or exploit, transfer,
 disclose or make available to any third party, any part of COMPANY's intellectual
 property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) manufacture
 or supply products, which have been Manufactured exploiting and/or using any part of
 COMPANY's intellectual property or COMPANY Equipment (without the prior written
 consent of COMPANY), for or to any third party; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) incorporate
 any intellectual property of ORION or any third party to any Product or its Manufacture
 that COMPANY does not have an unrestricted right to use (without COMPANY's prior
 written consent) or use ORION Background in the Manufacture of the Product in a way that
 would restrict the COMPANY's right to use the Product or Manufacturing process.

9.2. ORION represents and warrants that has, and shall throughout the term of this Agreement maintain, all manufacturing licenses, permits and authorizations that are issued by regulatory authorities in the Country of Manufacture and that are required for fulfilling its obligations under this Agreement, it being expressly acknowledged that in the event a regulatory authority imposes new requirements as a prerequisite for maintaining such licenses, permits or authorizations that were not foreseen at the Date of Agreement, and that would require ORION to make physical or equipment modifications to the Approved Facility with financial investments beyond ordinary repair and maintenance, then the Parties shall discuss such requirements (including a possible cost sharing arrangement) in good faith for a period of [\*\*\*], whereafter termination of this Agreement upon [\*\*\*] notice thereof shall constitute COMPANY's sole and exclusive remedy for ORION's failure to so maintain such licenses, permits, or authorizations (without limiting COMPANY's indemnification rights under Section 8).

9.3. Any
 and all Improvements and Data shall be the sole and exclusive property of COMPANY. Notwithstanding
 anything to the contrary herein, any and all Improvements and Data shall be deemed the
 Confidential Information of COMPANY and COMPANY shall be deemed the disclosing party
 with respect thereto. ORION agrees to assign and hereby assigns to COMPANY all right,
 title and interest in and to Improvements, Data and all Intellectual Property Rights
 appurtenant thereto. ORION will provide reasonable assistance to COMPANY (and shall cause
 its employees, Affiliates and subcontractors to do so as well), at COMPANY's expense,
 in obtaining, enforcing and defending COMPANY's ownership of Improvements and Data
 and appurtenant Intellectual Property Rights. ORION shall ensure that all of its employees,
 Affiliates and subcontractors providing services under this Agreement are subject to
 binding obligations which are sufficient to enable ORION to assign all Intellectual Property
 Rights in Improvements and Data to COMPANY in accordance with this Section 9.3. ORION
 will promptly inform COMPANY in writing of all Improvements and Data and provide COMPANY
 with written materials related to such Improvements and Data. ORION shall not disclose,
 implement or use any Improvement or Data without the prior written consent of COMPANY.
 COMPANY shall control the prosecution and enforcement of Intellectual Property Rights
 related to Improvements and Data. COMPANY shall have and ORION agrees to grant and hereby
 grants to COMPANY a non-exclusive, royalty-free, fully paid-up, world-wide, transferable
 right and license, with the right to grant sub-licenses, under any and all Independent
 Improvements for the research, development, manufacture, promotion, marketing, distribution
 and/or sale of Product.

9.4. All
 ORION Background remains the exclusive property of ORION. Any Independent Improvements
 shall be the sole and exclusive property of ORION, subject to the license granted to
 COMPANY in Section 9.3. ORION shall have and COMPANY agrees to grant and hereby grants
 ORION a non-exclusive, non-sublicensable, royalty-free, fully paid-up, world-wide, perpetual,
 non-transferable right and license, under any and all Separable Improvements, solely
 for use by ORION as part of its internal manufacturing processes.

10. REPRESENTATIONS
AND WARRANTIES

10.1. In
 addition to the representations and warranties otherwise set forth in this Agreement,
 ORION and COMPANY represent and warrant, as applicable, that: (a) neither the execution,
 delivery, and performance of this Agreement nor the Manufacture of Product hereunder
 will violate any agreement with a third party to which ORION or COMPANY is a party; (b)
 it has not and will not use, in the performance of its obligations hereunder, the services
 of any persons who have been, or are in the process of being, debarred or suspended under
 21 U.S.C. §335(a) or (b) or other similar law, and neither ORION/COMPANY nor any
 of its officers, employees or consultants acting or providing services under this Agreement,
 including but not limited to generating and compiling the documents, data and information
 for the marketing authorization file, has been convicted of an offense under any law
 cited as a ground for debarment, denial of approval or suspension under 21 U.S.C. §
 335(a) or other similar law; (c) ORION will not pledge or otherwise transfer, without
 COMPANY's prior written consent, any work-in process or finished goods inventory
 of Products or API other than to COMPANY as provided in this Agreement and that all transfers
 of Product to COMPANY or provision of API to ORION shall be free and clear of any liens
 or other Encumbrances; and (d) there is no claim, suit, proceeding or other investigation
 pending, or to the knowledge of ORION/COMPANY, threatened, which is likely to prevent
 or materially affect ORION's or COMPANY's ability to perform its obligations
 hereunder.

10.2. EXCEPT
 AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY PROVIDES ANY REPRESENTATIONS OR
 WARRANTIES, WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED, REGARDING ANY SUBJECT MATTER
 OF THIS AGREEMENT AND EACH PARTY HEREBY DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES,
 WHETHER WRITTEN OR ORAL, EXPRESS AND IMPLIED, INCLUDING REGARDING TITLE, VALIDITY, PATENTABILITY,
 ENFORCEABILITY OF PATENT RIGHTS, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR
 A PARTICULAR PURPOSE, AND FREEDOM FROM INFRINGEMENT OF THIRD PARTY RIGHTS, AND ANY WARRANTIES
 ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES.

11. NO
IMPLIED RIGHTS

Unless otherwise expressly agreed herein, nothing in this Agreement shall effect, or purport to effect any transfer or conveyance, express or implied, of any right, title, ownership, license or other interest to ORION in COMPANY's Confidential Information or Intellectual Property Rights other than the non-exclusive, non-sublicensable, non-transferable right to use such Confidential Information and COMPANY's Intellectual Property Rights that cover the Product for the sole and limited purpose of, and to the extent necessary for, performing its obligations pursuant to this Agreement.

12. CONFIDENTIALITY

12.1. Each
 Party shall itself, and shall cause its directors, officers and employees (hereinafter
 "**Employees** "), to hold and treat all Confidential Information disclosed
 to it by or on behalf of the other Party in the strictest confidence and not, and cause
 its Employees not to, publish it or disclose it to any third party, nor use such Confidential
 Information for any purposes other than the proper performance of its obligations or
 exercise of its rights pursuant to this Agreement, without the express prior written
 consent of the disclosing Party.

12.2. Each
 Party shall make available the other Party's Confidential Information only to those
 of its Employees and its Affiliates' Employees who strictly need to know that Confidential
 Information for the purpose of this Agreement, provided that such Employees are bound
 to confidentiality and non-use obligations materially no less stringent that those included
 herein, and such Party shall remain responsible and liable for any and all uses of such
 Confidential Information by such Employees.

12.3. Notwithstanding
 anything to the contrary set forth herein, no information disclosed or otherwise made
 available under this Agreement shall constitute Confidential Information for the purposes
 hereof to the extent the same:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) is
 or becomes generally available to the public through no breach of this Agreement by the
 receiving Party or any of its Employees;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) was
 lawfully in the receiving Party's possession and reduced to writing prior to the
 time of disclosure of the same information to the receiving Party by or on behalf of
 the disclosing Party;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) is
 obtained by the receiving Party from a third party lawfully entitled to possession of
 such information and under no obligation of confidentiality towards the disclosing Party
 or its Affiliates in respect of such information; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) is
 or has been independently developed by or for the receiving Party without reference to,
 aid from or reliance upon information obtained by the receiving Party from the disclosing
 Party under this Agreement.

12.4. In
 the event a receiving Party or its Employee is required under law or regulation or order
 of government or judicial authority to disclose all or any part of the disclosing Party's
 Confidential Information, such Party shall a) promptly and without delay notify the disclosing
 Party of the existence, terms and circumstances surrounding such requirement so that
 the disclosing Party may, at its sole discretion, seek a protective order or other appropriate
 relief or remedy or waive compliance with the terms hereof and b) if disclosure of such
 information is required, disclose such information only to the minimum extent so required
 to be disclosed. If and whenever any Confidential Information is disclosed in accordance
 with this Section 12.4, such disclosure shall not cause any such information to cease
 to be Confidential Information. Notwithstanding anything to the contrary in this Section
 12.4, COMPANY shall be permitted to disclose the terms of this Agreement, including the
 Quality Agreement, as required under applicable laws or orders or requests given by competent
 authorities in connection with communications with, or filings to, any governmental or
 regulatory authority concerning any Product.

12.5. This
 Section 12 shall survive the termination or expiration of this Agreement for whatsoever reason and shall continue in full
 force and effect for (i) [\*\*\*] after such termination or expiration, or (ii) [\*\*\*] from the Date of Agreement, whichever is
 longer.

**13.** **TERM AND TERMINATION** 

13.1. This
 Agreement shall become effective on the Date of Agreement and continue in full force and effect for an initial period of [\*\*\*]
 (hereinafter "**Initial Period** "). The Agreement shall thereafter be automatically renewed for successive
 [\*\*\*] periods unless a notice of non-renewal is provided by either of the Parties in writing at least [\*\*\*] before the end
 of the Initial Period or any consecutive [\*\*\*] period.

13.2. This
 Agreement may be terminated immediately by either of the Parties upon written notice if the other Party becomes insolvent,
 is adjudged bankrupt, applies for judicial or extra-judicial settlement with its creditors, makes an assignment for the benefit
 of its creditors, voluntarily files for bankruptcy or has a receiver or trustee or the like in bankruptcy appointed by reason
 of its insolvency, or in the event an involuntary bankruptcy action is filed against the other Party and not dismissed within
 [\*\*\*], or if the other Party becomes the subject of liquidation or dissolution proceedings or otherwise discontinues business.

13.3. In
 the event a Party breaches any of the terms or conditions of this Agreement (the "**Defaulting Party**") the
 other Party (the "**Non-Defaulting Party**") may give written notice of such breach to the Defaulting Party,
 specifying the nature of the breach and requesting a cure. If the Defaulting Party fails to fully cure or to take appropriate
 action reasonably acceptable to the Non-Defaulting Party to cure such breach within [\*\*\*] days of receipt of written notice
 from the Non-Defaulting Party, then the Non-Defaulting Party shall be entitled to terminate this Agreement upon written notice
 to the Defaulting Party, such termination to be effective upon the Defaulting Party's receipt of such notice.

13.4. For
 the avoidance of doubt, neither Party may terminate this Agreement before the expiration
 of the Initial Period other than pursuant to Section 13.2 or Section 13.3.

14. EFFECT
OF TERMINATION

14.1. Termination
 of this Agreement, for whatever reason, shall be without prejudice to any rights, claims
 or obligations of either Party which may have accrued prior to the effective date of
 such termination.

14.2. In
 the event of termination of this Agreement for whatever reason, save for breach of the
 Agreement by ORION, ORION shall be reimbursed by COMPANY in full without any set off
 or counterclaim in respect of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) any
 unpaid amounts existing as of the date of termination for any Product already delivered;
 and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any
 Product ordered by COMPANY but not delivered, provided that such Product is promptly
 delivered to COMPANY; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) any
 destruction costs for unused Materials.

14.3. In
 the event of termination of this Agreement by COMPANY for breach of the Agreement by
 ORION, ORION shall, at COMPANY's request and at ORION's expense, reasonably
 cooperate to effectuate the royalty-free transfer of manufacturing know-how from ORION
 to COMPANY or a New Manufacturer to enable COMPANY or the New Manufacturer to manufacture
 and package Products. Such cooperation shall include translation and transfer of documentation
 related to manufacturing of Products as well as assistance with the transfer of COMPANY
 Equipment.

14.4. In
 the event of termination of this Agreement: (a) ORION shall return to COMPANY all API
 in ORION's possession; and (b) each Party shall promptly return to the other, unless
 otherwise agreed, all of such other Party's Confidential Information received hereunder.
 Such returns shall be completed as soon as practicable after completing and delivering
 all outstanding orders of Product.

14.5. Termination
of this Agreement, for whatever reason, shall not affect this Section 14 and other Sections which by their nature should survive
the termination or expiration of this Agreement, including without limitation Sections 1 (to the extent necessary to enforce
other surviving rights and obligations of the Parties), 4.10, 6.1, 6.3, 8, 9, 10, 11, 12 (for the period set forth in Section
12.5), 13 through 28, all of which shall continue in full force and effect in accordance with their terms after such termination.

15. ASSIGNMENT

15.1. Neither
 this Agreement nor any right, obligation, commitment or liability hereunder may be assigned
 by either Party without the other Party's express written consent, such consent not to
 be unreasonably withheld, provided, however, that each Party may assign this Agreement
 to (a) an Affiliate of such Party or (b) a third party to whom its business assets relevant
 to this Agreement are transferred or assigned by means of sale, merger, divestiture,
 license or any bona fide restructuring of operations.

15.2. ORION
 may subcontract the Manufacture of the Product to a third party only with COMPANY's
 prior written consent in each instance.

15.3. Subcontracting
 pursuant to Section 15.2 shall not relieve ORION of any of its obligations under this
 Agreement and ORION shall be responsible and liable for any activities of such subcontractors.
 No assignment under Section 15.1 shall relieve ORION of its obligations accrued until
 the date of such assignment, unless specifically otherwise agreed in writing by COMPANY.

15.4. Any
 attempted assignment or subcontracting in violation of this Section 15 shall be null
 and void.

16. FORCE
MAJEURE

Neither of the Parties to this Agreement shall have any liability whatsoever or be in default for any delays or failures in performance under this Agreement resulting from any occurrence of an event of Force Majeure. For purposes hereof, "**Force Majeure**" shall be deemed to be any future event or condition, which (i) is beyond the reasonable control, and without the fault of the Party affected thereby, (ii) was not foreseeable by such Party at the time this Agreement was entered into, and (iii) the effect(s) of which the Party affected thereby could not have prevented, mitigated or overcome by reasonable measures. The occurrence or existence of any event of Force Majeure shall be promptly notified by the affected Party to the other. The affected Party shall use all reasonable endeavours to remove, as quickly as possible, the effect of said event of Force Majeure.

17. PRODUCT
RECALL; RECORDS

17.1. Each
 Party shall promptly notify the other Party in writing of any facts relating to the advisability
 of the recall, destruction or withholding from the market of the Product(s) (hereinafter
 "**Recall** "). COMPANY shall control all decisions regarding whether to
 initiate any Recall as well as the implementation of any Recall.

17.2. ORION
 shall bear the direct out-of-pocket costs and expenses, including replacement of any
 product determined unsalable, of any Recall if and only to the extent such Recall is
 the result of any fault attributable to ORION or a breach by ORION of its obligations
 under this Agreement. COMPANY shall bear all costs and expenses of any Recall in all
 other circumstances.

17.3. Any
 and all complaints of which ORION becomes aware relating to the Product shall promptly
 be forwarded to COMPANY. Without limiting the foregoing, ORION shall forward any such
 complaint that might be associated with an Adverse Event (as defined below) no later
 than twenty-four (24) hours following its receipt. COMPANY shall promptly inform ORION
 of any and all complaints that COMPANY receives which implicate ORION's manufacturing
 or other processes at the Approved Facility. Notification under this Section 17.3 shall
 be given by telephone or email, with a facsimile confirmation promptly following.

17.4. For
 the purposes of this Agreement, "**Adverse Event**" shall mean any adverse
 event associated with the use of the Product in humans, including but not limited to
 "adverse event" as defined in International Conference on Harmonisation of
 Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) guidelines
 or applicable law. Adverse Events shall include an adverse event occurring in the course
 of the use of a Product in professional practice, in studies, in investigations or in
 tests. Adverse Events also shall include an adverse event occurring from Product overdose
 (whether accidental or intentional), from Product abuse, or from Product withdrawal,
 as well as any toxicity, sensitivity, failure of expected pharmacological action, or
 laboratory abnormality which is or is thought by the reporter to be serious or associated
 with relevant clinical signs or symptoms. With respect to Product, ORION shall promptly
 notify COMPANY, as soon as possible, but no later than [\*\*\*] following
 its receipt, of information concerning a possible Adverse Event. ORION shall provide
 to COMPANY all the information ORION has available concerning the Adverse Event and shall
 cooperate fully with any investigation conducted or directed by COMPANY. To the extent
 an Adverse Event of which COMPANY becomes aware implicates ORION's manufacturing
 or other processes at the Approved Facility, COMPANY shall inform ORION of such Adverse
 Event and shall disclose to ORION any information COMPANY has regarding that Adverse
 Event which implicates ORION's manufacturing or other processes at the Approved
 Facility. Notification under this Section 17.4 shall be given by telephone or email,
 with a facsimile confirmation promptly following.

17.5. ORION
 shall maintain records detailing the Manufacture of Products (the "**Records** ").
 These Records shall be made available for inspection by COMPANY, or a representative
 employed by COMPANY, at reasonable times during the term of this Agreement and thereafter
 for [\*\*\*]. COMPANY shall have the right to make extracts or copies of Records.

17.6. If
 any governmental or regulatory authority conducts, or gives notice to ORION (or COMPANY)
 of its intent to conduct, an inspection of a portion of ORION's facilities relating
 to the Product or of the Records, or to take any other action with respect to the services
 provided under this Agreement, ORION will promptly give COMPANY notice thereof. ORION
 shall permit COMPANY to participate in any such inspection. ORION shall timely provide
 COMPANY with a copy of any inspection report or regulatory letter issued by a regulatory
 authority. ORION may redact any information from such letters or reports not related
 to a portion of ORION's facilities relating to the Product or the Records, or the
 services provided under this Agreement. ORION shall also provide COMPANY a meaningful
 opportunity to review and comment upon any response of ORION thereto. COMPANY's
 comments in such regard shall be considered in good faith and be given due regard by
 ORION in formulating any response to a regulatory authority.

18. COMPLIANCE
WITH LAW AND GOOD BUSINESS PRACTICE, PROCESSING OF PERSONAL DATA

18.1. At
 all times during the term of this Agreement, each Party agrees to comply with all applicable
 laws, rules and regulations as well as ethical business practices. Without limiting the
 generality of the foregoing, each Party shall comply with the applicable anti-corruption
 laws of the United Kingdom (i.e. the Bribery Act 2010) and the country/ies in which such
 Party is located or is operating. In addition, the COMPANY undertakes to comply with
 ORION's Third Party Code of Conduct appended hereto as Schedule 5.

18.2. In
 the performance of the pharmacovigilance and other activities under this Agreement, both
 Parties shall comply with all laws and regulations relating to protection or processing
 of personal data applicable to each party's respective activities, including without
 limitation European Union Directive 95/46/EC, as amended from time to time, and/or any
 national legislation implementing such directive, Regulation (EU) 2016/679 of the European
 Parliament and of the Council of 27 April 2016 (General Data Protection Regulation),
 as amended from time to time, and/or any subsequent European Union and its Member States'
 legislation in relation to the protection of personal data and the California Consumer
 Privacy Act of 2018, Cal. Civ. Code § 1798.100 et seq. ()"**Data Protection Laws** ").

18.3. For
 the purposes of this Agreement "personal data" shall mean information that
 can be used by itself or in combination with other available information to identify
 a specific individual, as defined in detail under applicable Data Protection Laws.

18.4. Each
 Party shall process, use and disclose personal data obtained in the course of performing
 its activities under this Agreement for the sole purpose of performance of this Agreement
 and in compliance with the applicable regulatory obligations, or as otherwise required
 by law or by a court order. Both Parties shall implement all commercially reasonable
 physical, technical and administrative safeguards appropriate to the nature of the information
 designed to prevent any use or disclosure of personal data other than as provided for
 by this Agreement. Both Parties will also take commercially reasonable precautions to
 protect the personal data from alteration or destruction.

18.5. Each
 Party shall notify the other Party promptly after discovery of any accidental, unauthorized,
 or unlawful destruction, loss, alteration, or disclosure of, or access to, the personal
 data ()"**Personal Data Breach**") that such Party is processing in connection
 with this Agreement, and shall take immediate steps to rectify any Personal Data Breach.

18.6. The
 Parties acknowledge that each of them shall process personal data, as defined in the
 Data Protection Laws, in connection with this Agreement. The Parties anticipate that
 the personal data disclosed to each other in connection with the Agreement will consist
 solely of the names, titles and contact details of their respective personnel who are
 involved in the performance or administration of the Agreement. Each Party processes
 personal data that it receives from the other Party for its own purposes as a data controller,
 as defined in the Data Protection Laws. To the extent ORION transfers any personal data
 outside of the EU/EE, excluding, however, such countries, which are deemed by the European
 Commission to provide adequate protection to data subjects (pursuant to Article 45 of
 the EU GDPR), the Parties agree that the then-current approved EU standard contractual
 clauses for transfers to controllers shall at such time be signed between the Parties,
 and which clauses shall be attached to this Agreement as a Schedule.

19. WAIVER
AND VARIATION

19.1. The
 failure by either Party at any time to enforce any of the terms, provisions or conditions
 of this Agreement or to exercise any right hereunder shall not constitute or be construed
 to constitute a waiver of the same or affect that Party's rights thereafter to
 enforce or exercise the same.

19.2. No
 waiver of any term, provision or condition of this Agreement shall be effective unless
 it is in writing and signed by a duly authorised person on behalf of the waiving Party.

20. SEVERABILITY

In case one or more of the provisions contained in this Agreement shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed by limiting such invalid, illegal or unenforceable provision, or if such is not possible, by deleting such invalid, illegal or unenforceable provision from this Agreement; provided that should this Agreement as a result of any such deleting not any more reasonably correspond to the good faith intent of the Parties, either Party may propose to the other Party amendments also to the other provisions of this Agreement in order to have the Agreement correspond to such good faith intent and negotiate in good faith on such amendment(s).

21. ENTIRE
AGREEMENT

21.1. This
 Agreement, together with the attached Schedules and the Quality Agreement, represents
 the entire agreement between the Parties relating to the subject matter hereof and supersedes
 all prior arrangements, understandings, correspondence, notes, minutes and agreements
 between the Parties whether written or oral, other than that certain Master Contract
 Manufacturing Agreement dated October 15, 2018, by and between ORION and COMPANY (as
 successor-in-interest to Novan, Inc.) (the "**Prior Supply Agreement** "),
 which shall remain in full force and effect; provided, that as of the Date of Agreement,
 all then-ongoing activities related to commercial batches initiated or otherwise conducted
 pursuant to the Prior Supply Agreement shall be subject to the terms and conditions of
 this Agreement and all batches in process as of the Date of Agreement, including those
 ordered under [\*\*\*], shall count towards any minimum purchase
 obligations under this Agreement. COMPANY shall not be required to issue any forecasts
 or Purchase Orders under this Agreement until such time that COMPANY determines is appropriate
 based on such batches in process. In the event of a conflict between the Quality Agreement
 and the body of this Agreement regarding a cGMP related matter, the Quality Agreement
 shall control; in the event of any other conflict, the body of this Agreement shall control.

21.2. No
 supplement, modification or amendment of this Agreement shall be binding unless executed
 by the Parties in writing and signed by the duly authorized representatives of both Parties
 hereto, provided that this Agreement shall be deemed automatically amended by any Change
 Order signed by the Parties without the requirement of additional action by either Party.

22. INDEPENDENT
CONTRACTORS

The status of COMPANY and ORION under the business arrangement established by this Agreement is that of independent contractors. It is expressly agreed that for tax, legal or other purposes (i) this Agreement or any portion of this Agreement shall not be considered to be a partnership agreement, and (ii) the relationship between the two Parties shall not constitute a partnership, joint venture or agency. Neither Party has any authority whatsoever to act as an agent or representative of the other, nor has either any authority or power to contract for, or create or assume any obligation or liability in the other's name or on behalf of the other or otherwise bind the other in any way for any purpose, nor shall either Party hereto represent to any third parties it possesses any such authority to bind the other Party.

23. NOTICES

23.1. Notices
 provided hereunder to be given by either Party to the other shall be in writing and shall
 be delivered by recognized overnight delivery service or sent by government mail service
 (certified or registered air mail) to the following respective addresses or to such other
 addresses as the Parties may hereafter communicate to each other in writing:

If to ORION:

Orion Corporation

Attn: CEO

Orionintie 1

02200 Espoo, Finland

If to COMPANY:

LNHC, Inc.

4020 Stirrup Creek Drive

Suite 110

Durham, North Carolina 27703 U.S.A.

Attn: Chief Executive Officer.

23.2. The
 notices shall be deemed to have been received as follows: (a) registered air-mail, on
 the fifth (5) day after mailing; and (b) for notices delivered in any other form, on
 the day when delivered at the address of the recipient.

23.3. Nothing
 contained herein shall justify or excuse failure to give oral notice for the purpose
 of informing the other Party hereto when prompt notification is required, but, it is
 understood that such oral notice shall in no way satisfy the requirement of a written
 notice.

24. COUNTERPARTS

This Agreement may be executed in any number of counterparts and by the Parties to it on separate counterparts, each of which when so executed and delivered shall be an original, but all the counterparts shall together constitute one and the same instrument. This Agreement may be signed by any party hereto through an electronic signature. A signed copy of this Agreement delivered by facsimile, e-mail, or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

25. GOVERNING
LAW AND JURISDICTION

25.1. This
 Agreement shall be governed by, and construed in accordance with, the laws of England
 and Wales, without reference to the conflict of law provisions thereof. It is specifically
 agreed that the United Nations Convention on Contracts for the International Sale of
 Goods is not applicable to this Agreement.

25.2. Any
 and all disputes arising out of or relating to this Agreement, including the validity
 or breach thereof, shall be finally and exclusively settled by binding arbitration under
 the Rules of Arbitration of the International Chamber of Commerce. IBA Rules on the Taking
 of Evidence in International Arbitration shall apply in the arbitration proceedings.
 The arbitration proceedings shall be held in the English language. The seat of arbitration
 shall be in London, United Kingdom. For the avoidance of doubt, nothing in this Section
 25.2 shall preclude either Party from seeking equitable relief or interim or provisional
 relief from a court of competent jurisdiction, including a temporary restraining order,
 preliminary injunction or other interim equitable relief, concerning a Dispute either
 prior to or during any arbitration if necessary to protect the interest of such Party
 or to preserve the status quo pending the arbitration proceeding.

26. PUBLICITY

Unless agreed upon in writing beforehand by the Parties, neither Party shall discuss with any third party or originate any publicity, news release or other public announcement, written or oral, whether to the public press, stockholders or otherwise, regarding any matters relating to the content or terms of this Agreement, or any amendment hereto, or the performance by either of the Parties hereunder, except for such announcement as in the opinion of legal counsel to the Party making such announcement is required under applicable law or stock exchange regulations, in which event such Party shall give the other Party an opportunity reasonable under the circumstances to review the form and content of the announcement before such legally required disclosure is made.

27. SCHEDULES

The following Schedules are attached to this Agreement:

Schedule 1 Products and Product Specification

Schedule 2 Company Equipment

Schedule 3 Safety Stock

Schedule 4 Prices

Schedule 5 Orion's Third-Party Code of Conduct

The Schedules constitute an integral part of this Agreement. In case of discrepancies between the Agreement and a Schedule, the provisions of the Agreement shall prevail.

28. HEADINGS

The headings in this Agreement are inserted for the convenience of the Parties only and may not be used in the interpretation of any provisions hereof.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorised representatives.

**SIGNATURES**

---

| | | | |
|:---|:---|:---|:---|
| **Orion Corporation** | **Orion Corporation** | **LNHC, INC.** | **LNHC, INC.** |
| By: | /s/ Juhani Kankaanpaa | By: | /s/ Octavio Espinoza |
| Name: | Juhani Kankaanpaa | Name: | Octavio Espinoza |
| Title: | SVP, G-OPS | Title: | CFO |
| By: | /s/ Marko Salo |  |  |
| Name: | Marko Salo |  |  |
| Title: | VP, Marketing and Sales |  |  |

---

SCHEDULE 1 Products and Product Specification

**Berdazimer Gel (Tube A)**

**[\*\*\*]**

[\*\*\*]

**Hydrogel (Tube B)**

**[\*\*\*]**

**Zelsuvmi Admixture**

**[\*\*\*]**

SCHEDULE 2 Company Equipment

---

| | |
|:---|:---|
| **Scope** | Maintenance of equipment and purchasing of dedicated spare parts for Company owned equipment at Orion premises used for both hydrogel and active gel products. Equipment is only used for Company products, and maintenance of equipment is done at Orion and Orion technical support will order the spare parts and participate in maintenance and be present when maintenance personnel by equipment supplier are at site. |

---

The scope of work for Company owned equipment will include:

● Ordering of needed spare parts.

● Ordering of special equipment supplier maintenance and/or repair when needed.

● Orion Inhouse work for

&nbsp;&nbsp;&nbsp;&nbsp;○ writing of CR, reception and checking of parts.

&nbsp;&nbsp;&nbsp;&nbsp;○ maintenance of equipment by Orion technical personnel

&nbsp;&nbsp;&nbsp;&nbsp;○ participating/being present during special equipment supplier maintenance and/or repair done.

&nbsp;&nbsp;&nbsp;&nbsp;○ testing and verification of equipment for use after any repairing done.

---

| | |
|:---|:---|
| **Equipment** | **[\*\*\*]** |

---

**Responsibilities**

Orion to order maintenance and needed spare parts, and to do technical maintenance, when capable or order maintenance and/or repair from equipment manufacturer, when needed. Orion to inform needed maintenance and/or repair of equipment to Company, and estimated costs.

---

| | |
|:---|:---|
| **Cost** | Total cost depending of scope of work. Spare parts and maintenance and repair done by equipment manufacturer are charged as pass-through-costs. Orion personnel work to be invoiced based on hourly rate of [\*\*\*] |

---

---

| | |
|:---|:---|
| **Invoicing** | Invoicing after maintenance/repair work done, and any spare parts ordered, received and checked. In case any prepayments are required by equipment manufacturer, Orion will pass such costs immediately to Company. |

---

SCHEDULE 3 Safety Stock

[\*\*\*]

SCHEDULE 4 Prices

[\*\*\*]

SCHEDULE 5

**Third Party Code of Conduct**

Orion Corporation ('Orion) is a Finnish pharmaceutical company — a globally operating builder of well-being. We develop, manufacture and market human and veterinary pharmaceuticals and active pharmaceutical ingredients.

Orion is committed to sustainability in all its operations. Through the Orion's internal Code of Conduct and Our Management Approaches of Corporate Responsibility (www.orion.fi/en/sustainability) Orion has established company standards that include ethical business practices, labour, health and safety, environment and related management systems. These standards apply to all Orion personnel. We are committed to high standards ourselves thus we regard ourselves entitled to expect the same from our Third Parties that supply goods and services for us. 'Third Parties' typically refers to suppliers of products and services, but can also include agents, distributors, wholesalers, licensors, licensees and sales entities. All of Orion's Third Parties are obligated to implement the principles of the Third Party Code of Conduct across their whole business involved in the manufacturing of goods and services for Orion. Third Party shall show continued effort to improve their performance with the expectations of this Third Party Code of Conduct.

To demonstrate conformance with these expectations and compliance with applicable regulations, Orion is reserved the right to conduct, or have conducted on our behalf, on-site audits to check compliance upon the giving of reasonable notice. Third Party shall maintain documentation necessary to demonstrate conformance with these expectations and compliance with applicable regulations.

If you have any questions, please do not hesitate to contact us at Orion.

**Regulatory compliance**

Orion's general rule is that our Third Party must, at a minimum, operate in full compliance with all applicable laws, rules and regulations in the countries in which they operate. Orion's requirements may exceed the requirements set out in national law.

**Ethical business practices**

Third Party shall conduct their business ethically and act with integrity. Third Party shall commit to and respect the principles and values of the United Nations Universal Declaration of Human Rights.

**Business integrity and Fair Competition**

The highest standards of integrity are to be expected in all business interactions. All forms of bribery, corruption, extortion and embezzlement are prohibited. Third Party shall not pay or accept bribes or participate in other illegal inducements in business or government relationships. Third Party shall conduct business in full compliance with the applicable competition laws that govern the jurisdictions in which they conduct business.

**Identification of Concerns**

All workers should be encouraged to report concerns or illegal activities in the workplace without threat of reprisal, intimidation or harassment. Third Party shall investigate and take corrective action if needed.

**Animal Welfare**

Animals shall be treated respectfully with pain and stress minimized. Animal testing should be performed after consideration to replace animals, to reduce the numbers of animals used, or to refine procedures to minimize distress. Alternatives should be used wherever these are scientifically valid and acceptable to regulatory authorities.

**Privacy**

Third Party shall ensure that company, worker, and patient privacy rights are protected as provided by the applicable laws.

**Labour**

Third Party shall be committed to uphold the human rights of workers and to treat them with dignity and respect. Third Party shall commit to and respect the principles of International Labor Organization (ILO) Conventions.

**Freely Chosen Employment**

Third Party shall not use forced, bonded or indentured labour, trafficked or non voluntary labour.

**Child Labour and Young Workers**

Third Party shall not, under any condition, employ children who are below the minimum legal age for employment. The employment of young workers below the age of 18 shall only occur in non hazardous work and when young workers are above a country's legal age for employment or the age established for completing compulsory education.

**Non-Discrimination**

Third Party shall provide a workplace free of harassment and discrimination. Discrimination on the basis of race, colour, age, gender, sexual orientation, ethnicity, disability, religion, political affiliation, union membership, marital status or any other discriminating factor is not condoned.

**Fair Treatment**

Third Party shall provide a workplace free of harsh and inhumane treatment, including any sexual harassment, sexual abuse, corporal punishment, mental or physical coercion or verbal abuse of workers and no threat of any such treatment.

**Wages, Benefits and Working Hours**

Third Party shall pay workers at least the applicable minimum wages, overtime hours and mandated benefits required by local laws. Local legislation and collective bargaining agreements regulating hours of work shall be followed.

**Freedom of Association**

Open communication and direct engagement with workers to resolve workplace and compensation issues is encouraged. Third Party shall respect the rights of workers, as set forth in local laws, to associate freely, join or not join labour unions, seek representation, join workers' councils and bargain collectively.

**Health and Safety**

Third Party shall provide a safe and healthy working environment, including for any company provided living quarters, for workers at all levels. Appropriate health and safety information, training and equipment shall be provided to workers.

Third Party shall fully comply with all safety and health laws and regulations including those applicable to the areas of occupational safety, emergency preparedness, occupational illness, industrial hygiene, physically demanding work, machine safeguarding, sanitation, food and housing.

**Worker Protection**

Third Party shall protect workers from over exposure to chemical, biological, physical hazards and physically demanding tasks in the work place and in any company provided living quarters.

**Environment**

Third Party should support a precautionary approach to environmental challenges. Third Party shall operate in an environmentally responsible and efficient manner to minimize adverse impacts on the environment. Third Party shall undertake initiatives to promote greater environmental responsibility and are encouraged for the development and diffusion of environmentally friendly technologies.

**Environmental Authorizations**

Third Party shall comply with all applicable environmental laws and regulations. All required environmental permits, licenses, information registrations and restrictions shall be obtained and their operational and reporting requirements followed.

**Waste and Emissions**

Third Party shall have systems in place to ensure the safe handling, movement, storage, recycling, reuse, or management of waste, air emissions and wastewater discharges. Any waste, wastewater or emissions with the potential to adversely impact human or environmental health shall be appropriately managed, controlled and treated prior to release into the environment.

**Spills and Releases**

Third Party shall have systems in place to prevent and mitigate accidental spills and releases to the environment.

## Exhibit 10.22

**Exhibit 10.22**

**EXECUTION VERSION**

**ASSIGNMENT AGREEMENT**

**THIS ASSIGNMENT AGREEMENT** (this "***Agreement***") is made as of March 24, 2025 (the "***Effective Date***"), by and between Ligand Pharmaceuticals Incorporated, a Delaware corporation ("***Assignee***"), and LNHC, Inc., a Delaware corporation ("***Assignor***"). Assignee and Assignor may be referred to herein, individually, as a "***Party***," and, collectively, as the "***Parties***." Capitalized terms used and not elsewhere defined herein have the meanings set forth in <u>Article VI</u>.

**<u>RECITALS</u>**

**WHEREAS**, the Parties are undertaking a restructuring involving Assignee and certain of its Affiliates on terms mutually agreed to by the Parties (the "***Restructuring***"); and

**WHEREAS**, to give partial effect to the Restructuring, Assignor wishes to assign to Assignee, and Assignee wishes to accept from Assignor, the Assigned Assets (as defined below), and, as consideration therefor, Assignor shall assign to Assignee, and Assignee shall accept from Assignor, the Assumed Liabilities (as defined below).

**<u>AGREEMENT</u>**

**NOW, THEREFORE**, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

**<u>Article I</u>**<br> **ASSIGNMENT**

<u>Section 1.1.</u> <u>Assignment & Acceptance of the Assigned Assets</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Upon the terms and conditions set forth in this Agreement, (i) Assignor hereby irrevocably transfers, assigns, contributes, conveys and delivers to Assignee, and Assignee hereby accepts from Assignor, all of Assignor's right, title and interest in and to the rights, properties and assets, either tangible or intangible, owned, used or held for use by Assignor and described or set forth on **<u>Exhibit A</u>** (the "***Assigned Assets***"); and (ii) Assignee hereby assumes, and agrees to pay, perform and discharge when due, any and all Liabilities arising from the Assigned Assets, whether or not arising from Assignor's ownership and/or use thereof prior to the Effective Date (the "***Assumed Liabilities***", and the transactions contemplated by the foregoing (i) and (ii), collectively, the "***Assignment***").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Notwithstanding anything in <u>Section 1.1(a)</u> to the contrary, (i) all other assets and properties of Assignor that are not Assigned Assets as specifically set forth in <u>Section 1.1(a)</u> shall be excluded from and shall not constitute Assigned Assets; and (ii) all Liabilities other than those Liabilities that are specifically Assumed Liabilities are excluded Liabilities, and Assignee shall not assume and shall not be responsible to pay, perform or discharge when due any Liabilities of Assignor or any of its Affiliates of any kind or nature whatsoever other than the Assumed Liabilities.

<u>Section 1.2.</u> <u>Procedures for Assigned Assets Not Transferable; Post-Closing Transfers</u>. If any Assigned Asset is not assignable or transferable to, or any Assumed Liability is not assumable by, Assignee without the consent of a Governmental Authority or a third party, and such consent has not been obtained on or prior to the Closing (as defined below), this Agreement will not constitute an assignment, sublease, transfer or assumption thereof unless and until such consent is obtained. In such case, Assignor will (a) cooperate in good faith with Assignee and use commercially reasonable best efforts to obtain such consent as soon as practicable after the Closing, (b) use commercially reasonable best efforts to provide Assignee the benefit of the Assigned Assets and (c) cooperate in good faith in any reasonable and lawful arrangement designed to provide such benefits to Assignee.

<u>Section 1.3.</u> <u>Wrong Pockets</u>. If, prior to the date that is twelve (12) months after the Closing, Assignee determines and identifies any rights, properties and assets, either tangible or intangible, owned, used or held for use by Assignor that Assignee reasonably determines was incorrectly omitted from the Assigned Assets, and Assignor, acting reasonably, agrees with such determination, then such right, property or asset, as applicable, will be hereby irrevocably transferred, assigned and delivered by Assignor to Assignee, and **<u>Exhibit A</u>** will be deemed amended to include such right, property or asset, as applicable.

<u>Section 1.4.</u> <u>Pass-through of Payments Received Under the Sato License Agreement</u>. Beginning on the Effective Date, Assignee shall pay Assignor any amounts received by Assignee from Sato Pharmaceutical Co., Ltd ("***Sato***") under the Sato License Agreement (as defined in Schedule 2 to **<u>Exhibit A</u>**) solely in respect of the "Licensed Product" (and, for the avoidance of doubt, no other product covered by the Sato License Agreement) in the "Licensed Field" (in each case, as defined in that certain Exclusive License and Sublicense Agreement between the Parties as of even date herewith), less any out-of-pocket costs incurred by Assignee to effectuate its rights, obligations and responsibilities under the Sato License Agreement. In consideration for this payment, Assignor agrees to satisfy all of its obligations under that certain (a) Quality Agreement – Nitric oxide-based investigational medicinal products, dated as of September 26<sup>th</sup>, 2019, by and between Sato and Assignor (as successor-in-interest to Novan, Inc.); (b) Pharmacovigilance Agreement, dated as of May 31<sup>st</sup>, 2018, by and between Sato and Assignor (as successor-in-interest to Novan, Inc.); (c) Data Transfer Agreement, dated as of February 23<sup>rd</sup>, 2023, by and between Sato and Assignor (as successor-in-interest to Novan, Inc.); (d) Quality Agreement – SB204 for clinical trial, dated as of July 20<sup>th</sup>, 2018, by and between Sato and Assignor (as successor-in-interest to Novan, Inc.); (e) Clinical Supply Agreement – SKN15B01, dated as of March 14<sup>th</sup>, 2023, by and between Sato and Assignor (as successor-in-interest to Novan, Inc.); (f) Clinical Supply Agreement – SKN15C01, dated as of October 17<sup>th</sup>, 2024, by and between Sato and Assignor (as successor-in-interest to Novan, Inc.); and (g) any other agreement entered into by Sato and Assignor relating to the Sato License Agreement.

**<u>Article II</u>**<br> **CLOSING**

<u>Section 2.1.</u> <u>Closing</u>. Subject to the terms and conditions of this Agreement, the closing of the Assignment (the "***Closing***") will occur on the Effective Date.

<u>Section 2.2.</u> <u>Closing Deliverables</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) At the Closing, Assignor will deliver, or cause to be delivered (as applicable), to Assignee the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) A Bill of Sale in the form set forth on **<u>Exhibit B</u>** (the "***Bill of Sale***"), duly executed by Assignor;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) An IP Assignment Agreement in the form set forth on **<u>Exhibit C</u>** (the "***IP Assignment Agreement***", and together with the Bill of Sale, collectively, the "***Ancillary Agreements***"), duly executed by Assignor; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Such other customary instruments of transfer, assumption, filings or documents in form and substance reasonably satisfactory to Assignee as may be required to give effect to this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) At the Closing, Assignee will deliver, or cause to be delivered (as applicable), to Assignor the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The Bill of Sale, duly executed by Assignee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The IP Assignment Agreement, duly executed by Assignee; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Such other customary instruments of transfer, assumption, filings or documents in form and substance reasonably satisfactory to Assignor as may be required to give effect to this Agreement.

**<u>Article III</u>**<br> **REPRESENTATIONS AND WARRANTIES OF ASSIGNOR**

Assignor hereby represents and warrants to Assignee that the statements contained in this <u>Article III</u> are true and correct as of the Effective Date.

<u>Section 3.1.</u> <u>Organization</u>. Assignor is a corporation duly organized and incorporated, validly existing and in good standing under the laws of the State of Delaware.

<u>Section 3.2.</u> <u>Authorization</u>. All corporate action required to be taken by Assignor to enter into this Agreement, has been taken. All actions on the part of the officers of Assignor necessary for the execution and delivery of this Agreement and the performance of all obligations of Assignor under this Agreement to be performed as of the execution of this Agreement have been taken. This Agreement, when executed and delivered by Assignor, shall constitute valid and legally binding obligations of Assignor (assuming due authorization, execution and delivery by Assignee), enforceable against Assignor in accordance with its terms except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors' rights generally or (b) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

<u>Section 3.3.</u> <u>Assigned Assets</u>. Assignor has good, valid and marketable title to, and owns or otherwise possesses valid and legally enforceable rights to use, the Assigned Assets, free and clear of encumbrances.

<u>Section 3.4.</u> EXCEPT AS EXPRESSLY SET FORTH IN THIS <u>Article III</u>, ASSIGNOR MAKES NO WARRANTIES WITH RESPECT TO THE ASSIGNED ASSETS, AND HEREBY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.

**<u>Article IV</u>**<br> **REPRESENTATIONS AND WARRANTIES OF ASSIGNEE**

Assignee hereby represents and warrants to Assignor that the statements contained in this <u>Article IV</u> are true and correct as of the Effective Date.

<u>Section 4.1.</u> <u>Organization</u>. Assignee is a corporation duly organized and incorporated, validly existing, and in good standing under the laws of the State of Delaware.

<u>Section 4.2.</u> <u>Authorization</u>. All corporate action on the part of Assignee, its officers, directors and stockholders necessary for the authorization, execution and delivery by Assignee of this Agreement, and the performance of all obligations of Assignee hereunder, has been taken, and this Agreement constitutes (assuming due authorization, execution and delivery by Assignor) a valid and legally binding obligation of Assignee, enforceable against Assignee in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors' rights generally, or (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

**<u>Article V</u>**<br> **LIMITATION OF LIABILITY**

<u>Section 5.1.</u> EXCEPT AS PROHIBITED BY APPLICABLE LAW, IN NO EVENT SHALL A PARTY BE LIABLE TO ANY OTHER PARTY OR ANY ENTITY CLAIMING THROUGH SUCH PARTY FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL, INDIRECT, PUNITIVE OR EXEMPLARY DAMAGES (INCLUDING, CLAIMS FOR LOST BUSINESS PROFITS OR REVENUE, OR INTERRUPTION IN USE OF THE PRODUCTS), WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY, TORT, STRICT LIABILITY, STATUTE OR OTHERWISE AND EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

**<u>Article VI</u>**

**DEFINITIONS**

<u>Section 6.1.</u> <u>Definitions</u>.

"***Affiliate***" means any entity that, directly or indirectly, controls, is controlled by, or is under common control with, the specified entity. For purposes of this definition, "control" and, with correlative meanings, the terms "controlled by" and "under common control with" means: (i) the possession, directly or indirectly, of the power to direct the management and policies of a business entity, whether through the ownership of voting securities, by contract relating to voting rights or corporate governance or otherwise; (ii) the ownership, directly or indirectly, of more than fifty percent (50%) of the voting securities or other ownership interests of a business entity (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity); or (iii) any other arrangement whereby an entity controls or has the right to control the board of directors or equivalent governing body or management of a corporation or other entity.

"***Liability***" means any liability, debt, obligation, deficiency, tax, penalty, assessment, fine, claim, action or other loss, fee, cost or expense of any kind or nature whatsoever, whether asserted or unasserted, absolute or contingent, known or unknown, accrued or unaccrued, liquidated or unliquidated, and whether due or to become due and regardless of when asserted.

**<u>Article VII</u>**<br> **MISCELLANEOUS**

<u>Section 7.1.</u> <u>Amendments and Waivers</u>. No modification, amendment or waiver of any provision hereof shall be effective against the Parties unless such modification, amendment or waiver is approved in writing by each Party. The failure of any Party to enforce any provision of this Agreement or under any agreement contemplated hereby shall in no way be construed as a waiver of such provisions and shall not affect the right of such Party thereafter to enforce each and every provision of this Agreement and any agreement referred to herein in accordance with their terms.

<u>Section 7.2.</u> <u>Survival of Representations and Warranties</u>. All representations and warranties contained herein or made in writing by any Party in connection herewith will survive the execution and delivery of this Agreement and the Closing, regardless of any investigation made by any of the Parties or on their behalf.

<u>Section 7.3.</u> <u>Further Assurances</u>. In case at any time after the execution of this Agreement any further action is necessary or desirable to carry out the purposes of this Agreement or to consummate the transactions contemplated herein, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as the other Party may reasonably request, all at the sole cost and expense of the requesting Party. In the event any filings or notices are required to be made with, or any consents or similar approvals are required to be obtained from, the U.S. Food and Drug Administration or any other regulatory or governmental authorities (each, a "***Governmental Authority***") after the Effective Date to carry out the purposes of this Agreement or to consummate the transactions contemplated herein ("***Required Government Actions***"), the Parties shall cooperate, at their respective cost and expense, to take any and all such Required Government Actions.

<u>Section 7.4.</u> <u>Assignment</u>. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Except as (a) to Affiliates or (b) to a successor to all or substantially all of the Party's rights, interests or obligations to which this Agreement relates, whether by a merger, sale of stock, sale of assets, reorganization or other transaction, neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned or delegated by any Party without the prior consent of the other Party. Any assignment or delegation of any rights, interests or obligations of a Party under this Agreement that is inconsistent with this <u>Section 7.4</u> shall be null and void.

<u>Section 7.5.</u> <u>Severability</u>. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable under any applicable law or rule in any jurisdiction, such provision will be ineffective only to the extent of such invalidity, illegality or unenforceability in such jurisdiction, without invalidating the remainder of this Agreement in such jurisdiction or any provision hereof in any other jurisdiction.

<u>Section 7.6.</u> <u>Governing Law</u>. All questions concerning the construction, validity and interpretation of this Agreement shall be governed and construed in accordance with the domestic laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

<u>Section 7.7.</u> <u>Relationship of the Parties</u>. It is expressly agreed that the relationship of the Parties shall not constitute a partnership, joint venture or agency, and the Parties shall be considered independent contractors. None of the Parties shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on any other Party without the prior consent of such Party.

<u>Section 7.8.</u> <u>Notices</u>. Any notice, approval, authorization, consent, or other communication required or permitted to be delivered to either Party under this Agreement must be in writing and will be deemed properly delivered, given, and received (i) when delivered by hand or by messenger, (ii) when sent by facsimile, with written confirmation of receipt, (iii) three (3) business days after being mailed by first class mail (return receipt requested) or delivery to an international courier or express delivery service, or (iv) when received at the applicable e-mail address set forth below when sent by e-mail. All notices, approvals, authorizations, consents, or other communications shall be sent to the address or e-mail address set forth below (or to such other address or e-mail address as may be designated by a Party by giving written notice to the other Party pursuant to this <u>Section 7.8</u>):

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| | |
|:---|:---|
| &nbsp;&nbsp;If to Assignor, to:<br>LNHC, Inc. <br> 4020 Stirrup Creek Drive <br> Suite 110 <br> Durham, NC 27703 <br> Attention: Chief Executive Officer  | &nbsp;&nbsp;If to Assignee, to:<br>Ligand Pharmaceuticals Incorporated <br> 555 Heritage Drive <br> Suite 200 <br> Jupiter, FL 33458 <br> Attention: Chief Financial Officer<br>in each case, with copies also sent to:<br>Ligand Pharmaceuticals Incorporated <br> 555 Heritage Drive <br> Suite 200 <br> Jupiter, FL 33458 <br> Attention: Chief Legal Officer<br>Latham & Watkins, LLP <br> 200 Clarendon Street <br> Boston, MA 02116 <br> Attn: Peter Handrinos, Esq. <br> Email: <u>peter.handrinos@lw.com</u> |

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<u>Section 7.9.</u> <u>Counterparts</u>. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

<u>Section 7.10.</u> <u>Construction</u>. Any rule of construction to the effect that ambiguities are to be resolved against the drafting Party will not be applied in the construction or interpretation of this Agreement. Except where the context otherwise requires, wherever used, the use of any gender shall be applicable to all genders, and the word "or" is used in the inclusive sense. As used in this Agreement, the words "include" and "including," and variations thereof, will not be deemed to be terms of limitation, but rather will be deemed to be followed by the words "without limitation."

<u>Section 7.11.</u> <u>Entire Agreement</u>. This Agreement (including **<u>Exhibit A</u>** hereto), together with the Ancillary Agreements, collectively constitute the full and entire understanding and agreement between the Parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the Parties are expressly canceled.

<u>Section 7.12.</u> <u>Descriptive Headings</u>. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

[SIGNATURE PAGES FOLLOW]

**IN WITNESS WHEREOF**, the Parties have caused this Assignment Agreement to be executed as of the Effective Date.

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| | | |
|:---|:---|:---|
| **ASSIGNEE:** | **LIGAND PHARMACEUTICALS INCORPORATED** | **LIGAND PHARMACEUTICALS INCORPORATED** |
|  | By: | /s/ Richard Baxter |
|  | Name: | Richard Baxter |
|  | Title: | Senior Vice President, Investment Operations |

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*Signature Page to Assignment Agreement*

**IN WITNESS WHEREOF**, the Parties have caused this Assignment Agreement to be executed as of the Effective Date.

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| | | |
|:---|:---|:---|
| **ASSIGNOR:** | **LNHC, INC.** | **LNHC, INC.** |
|  | By: | /s/ Octavio Espinoza |
|  | Name: | Octavio Espinoza |
|  | Title: | Officer & Board Member |

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*Signature Page to Assignment Agreement*

**<u>EXHIBIT A</u>**

**Assigned Assets**

v All Intellectual Property Rights (as defined below) owned, controlled by or licensed to Assignor as of the Effective Date and all upgrades, enhancements, modifications, alterations, improvements, developments, or other changes to such Intellectual Property Rights made by Assignor after the Effective Date, including those Intellectual Property Rights set forth on <u>Schedule 1</u> to this **<u>Exhibit A</u>** but excluding the trademarks for "LNHC" or "PELTHOS THERAPEUTICS" (the "***Assigned IP***").

v All Regulatory Materials owned or controlled by Assignor as of the Effective Date.

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| | |
|:---|:---|
| ❖ | The contracts, agreements or documents, as applicable, of Assignor set forth on <u>Schedule 2</u> to this **<u>Exhibit A</u>** that are related to the Assigned IP (the "***Assigned Contracts***"). |

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|:---|:---|
| ❖ | The domain names set forth on <u>Schedule 3</u> to this **<u>Exhibit A</u>** (the "***Assigned Domains***"). |

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For the purposes of this **<u>Exhibit A</u>**, the following terms have the following respective meanings:

"***Intellectual Property Rights***" means and includes all rights of any of the following types anywhere in the world: (i) Patent Rights; (ii) copyrights, moral rights, and rights in works of authorship; (iii) Know-How; (iv) all other intellectual property and proprietary rights of any kind or nature, including trademark and servicemark rights (whether registered or not) and the entire goodwill of the business of Assignor connected with and symbolized by such trademarks, but excluding domain names; and (v) all registrations and applications (and like protections) for any of the foregoing.

"***Know-How***" means data, trade secrets, inventions (whether patentable or otherwise), discoveries, specifications, instructions, processes, compositions, formulae, materials, compounds, methods, protocols, expertise, technical information, and any other information of any kind whatsoever (including any pharmacological, biological, chemical, biochemical, manufacturing, business, and financial information), and other technology applicable to formulations, compositions or products or to their manufacture, development, registration, use or marketing or to methods of assaying or testing them, and all biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical and analytical, safety, quality control, manufacturing, preclinical, and clinical data relevant to any of the foregoing.

"***Patent Rights***" means in any country, any and all: (i) patents (including any inventor's certificate, utility model, petty patent and design patent), including any reissue, re-examination, renewal or extension (including any supplementary protection certificate) of any patent, and any confirmation patent or patent of addition based on any patent, in such country, and (ii) patent applications, including any continuations, continuations-in-part, divisionals, provisionals, continued prosecution application, substitute applications, and any other patent application that claims priority from any patent.

"***Regulatory Materials***" means regulatory applications (including the NDA and all investigational drug applications), submissions, notifications, communications, correspondence, registrations, Regulatory Approvals or other filings made to, received from or otherwise conducted with a Regulatory Authority in connection with the research, manufacturing, development, or commercialization of a drug product in a particular country or jurisdiction. For clarity, Regulatory Materials includes any drug or device master files owned or controlled by Assignor.

"***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. Regulatory Approvals include any approved New Drug Applications held by or on behalf of Assignor, including that certain New Drug Application #217424 filed for marketing approval of Zelsuvmi and that certain New Drug Application #203791 filed for marketing approval of Sitavig.

"***Regulatory Authority***" means an agency of any government having the authority to regulate the sale, manufacture, marketing, testing, pricing or payment reimbursement of drugs.

<u>Schedule 1</u>

Registered Intellectual Property

<u>Schedule 2</u>

Assigned Contracts

&nbsp;&nbsp;&nbsp;&nbsp;1. Amended,
 Restated and Consolidated License Agreement, dated as of June 27<sup>th</sup>, 2012,
 by and between The University of North Carolina at Chapel Hill ("  ***UNC*** ")
 and Assignor (as successor-in-interest to Novan, Inc.), as amended by that certain First
 Amendment to Amended, Restated and Consolidated License Agreement, dated as of November
 30<sup>th</sup>, 2012, that certain Second Amendment to Amended, Restated and Consolidated
 License Agreement, dated as of April 12<sup>th</sup>, 2016, that certain Third Amendment
 to Amended, Restated Consolidated License Agreement, dated as of November 1<sup>st</sup>,
 2018, that certain Fourth Amendment to Amended, Restated and Consolidated License Agreement,
 dated as of November 26<sup>th</sup>, 2018, that certain Fifth Amendment to Amended,
 Restated and Consolidated License Agreement, dated as of November 9<sup>th</sup>, 2021,
 that certain Sixth Amendment to Amended, Restated and Consolidated License Agreement,
 dated as of July 26, 2024, and that certain Seventh Amendment to Amended, Restated and
 Consolidated License Agreement, dated as of March 12, 2025, in each case, by and between
 UNC and Assignor (as successor-in-interest to Novan, Inc.).

&nbsp;&nbsp;&nbsp;&nbsp;2. License
 Agreement, dated as of January 12<sup>th</sup>, 2017, by and between Sato and Assignor
 (as successor-in-interest to Novan, Inc.), as amended by that certain First Amendment
 to License Agreement, dated as of January 12<sup>th</sup>, 2017, and that certain Second
 Amendment to License Agreement, dated as of October 5<sup>th</sup>, 2018, in each case,
 by and between Sato and Assignor (as successor-in-interest to Novan, Inc.) (the "  ***Sato License Agreement*** ").

&nbsp;&nbsp;&nbsp;&nbsp;3. UNC
 Sublicense Agreement, dated as of December 29, 2015, by and between KNOW Bio, LLC ("  ***KNOW Bio***") and Assignor (as successor-in-interest to Novan, Inc.), as amended
 by that certain First Amendment to UNC Sublicense Agreement, dated as of October 13<sup>th</sup>,
 2017, and that certain Second Amendment to UNC Sublicense Agreement, dated as of November
 2<sup>nd</sup>, 2018, in each case, by and between KNOW Bio and Assignor (as successor-in-interest
 to Novan, Inc.).

&nbsp;&nbsp;&nbsp;&nbsp;4. Novan
 Patent and Know-How License Agreement, dated as of December 29<sup>th</sup>, 2015, by
 and between KNOW Bio and Assignor (as successor-in-interest to Novan, Inc.), as amended
 by that certain First Amendment to Novan Patent and Know-How License Agreement, dated
 as of October 13<sup>th</sup>, 2017, and that certain Second Amendment to Novan Patent
 and Know-How License Agreement, dated as of November 2<sup>nd</sup>, 2018, in each case,
 by and between KNOW Bio and Assignor (as successor-in-interest to Novan, Inc.).

&nbsp;&nbsp;&nbsp;&nbsp;5. License
 Agreement, dated as of May 23<sup>rd</sup>, 2012, by and between The University of Akron
 Research Foundation and Assignor (as successor-in-interest to Novan, Inc.).

&nbsp;&nbsp;&nbsp;&nbsp;6. License
 and Data Purchase Agreement, dated August 15<sup>th</sup>, 2014, by and between Strakan
 International S.à r.l. and Assignor (as successor-in-interest to Novan, Inc.).

&nbsp;&nbsp;&nbsp;&nbsp;7. OTC
 Switch License Agreement, dated February 21<sup>st</sup>, 2020, by and between Bayer
 Healthcare LLC and Assignor (as successor-in-interest to EPI Health LLC).

&nbsp;&nbsp;&nbsp;&nbsp;8. Transfer
 and License Agreement, dated February 21<sup>st</sup>, 2020, by and between Vectans Pharma
 and Assignor (as successor-in-interest to EPI Health LLC).

&nbsp;&nbsp;&nbsp;&nbsp;9. Quality
 Agreement, dated August 30<sup>th</sup>, 2018, by and between Vectans Pharma and Assignor
 (as successor-in-interest to EPI Health LLC).

<u>Schedule 3</u>

Assigned Domains

berdazimer.com

berdazimersodium.com

nitricil.com

nitric-oxide.com

sitavig.com

**<u>EXHIBIT B</u>**

**Form of Bill of Sale**

**BILL OF SALE**

**This Bill of Sale** (this "**Bill of Sale**") is dated as of [ ● ], 2025 (the ***"Effective Date***"), by and between Ligand Pharmaceuticals Incorporated, a Delaware corporation ("***Assignee***"), and LNHC, Inc., a Delaware corporation ("***Assignor***"). Assignee and Assignor may be referred to herein, individually, as a "***Party***," and, collectively, as the "***Parties***." Capitalized terms used and not elsewhere defined herein have the meanings set forth in the Assignment Agreement (as defined below).

**<u>RECITALS</u>**

**WHEREAS**, the Parties are undertaking a restructuring involving Assignee and certain of its Affiliates on terms mutually agreed to by the Parties (the "***Restructuring***");

**WHEREAS**, in connection with the Restructuring, Assignor and Assignee have entered into that certain Assignment Agreement, dated as of [ ● ] (the "***Assignment Agreement***"), pursuant to which Assignor and Assignee have agreed that Assignor shall assign to Assignee, and Assignee shall accept and assume from Assignor, the Assigned Assets, and as consideration therefor, Assignor shall assign to Assignee, and Assignee shall accept and assume from Assignor, the Assumed Liabilities; and

**WHEREAS**, Assignor and Assignee now desire to evidence the assignment of the Assigned Assets and the Assumed Liabilities from Assignor to Assignee by the execution and delivery of this Bill of Sale.

**<u>AGREEMENT</u>**

**NOW, THEREFORE**, in furtherance of the Assignment Agreement and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the Parties, the Parties, intending to be legally bound, do hereby agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Pursuant to the Assignment Agreement, (a) Assignor does hereby irrevocably assign, transfer and deliver to Assignee, and Assignee does hereby accept and assume from Assignor, all of Assignor's right, title and interest in and to the Assigned Assets; and (b) Assignee hereby assumes, and agrees to pay, perform and discharge when due, the Assumed Liabilities. Assignor hereby authorizes Assignee at any time to file one or more financing statements or any amendments or assignments to financing statements previously filed by Assignee (and continuation statements with respect to such financing statements when applicable) naming Assignor as the seller and Assignee as the buyer in respect of the Assigned Assets and Assumed Liabilities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. This Bill of Sale: (a) is made pursuant to, and is subject to the terms of, the Assignment Agreement and (b) shall be binding upon and inure to the benefit of Assignor and Assignee and their respective successors and permitted assigns, for the uses and purposes set forth and referred to above, effective immediately upon its delivery to Assignee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. THIS BILL OF SALE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. This Bill of Sale may be executed in any number of counterparts and by facsimile or other electronic transmission, each of which counterpart shall constitute an original and all of which counterparts together shall constitute one and the same instrument.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. ARTICLE VII (Miscellaneous) of the Assignment Agreement is hereby incorporated by reference in its entirety as if fully set forth herein. The Parties hereto acknowledge and agree that the representations, warranties and agreements contained in the Assignment Agreement shall not be superseded hereby but shall remain in full force and effect to the full extent provided therein. In the event of any conflict or inconsistency between the terms of the Assignment Agreement and the terms of this Bill of Sale, the terms of the Assignment Agreement shall govern. Nothing in this Bill of Sale shall amend, modify, limit or waive any rights or obligations of Assignor or Assignee under the Assignment Agreement.

[SIGNATURE PAGE FOLLOWS]

**In Witness Whereof**, the Parties have executed this Bill of Sale as of the Effective Date.

 

Name:
 [ ● ] 

Title:
 [ ● ] 

 

Address: 

555
 Heritage Drive 

Suite
 200 

Jupiter,
 FL 33458 

Attention:
 CFO 

Email:
 [ ● ] 

 

Name:
 [ ● ] 

Title:
 [ ● ] 

 

Address: 

4020
 Stirrup Creek Drive 

Suite
 110 

Durham,
 NC 27703 

Attention:
 CEO 

Email:
 [ ● ] 

*Signature Page to Bill of Sale*

**<u>EXHIBIT C</u>**

**Form of IP Assignment Agreement**

**IP ASSIGNMENT**

**This IP Assignment** (this "**IP Assignment**") is dated as of [ ● ], 2025 (the ***"Effective Date***"), by and between Ligand Pharmaceuticals Incorporated, a Delaware corporation ("***Assignee***"), and LNHC, Inc., a Delaware corporation ("***Assignor***"). Assignee and Assignor may be referred to herein, individually, as a "***Party***," and, collectively, as the "***Parties***." Capitalized terms used and not elsewhere defined herein shall have the meanings set forth in the Assignment Agreement (as defined below).

**<u>RECITALS</u>**

**WHEREAS**, Assignor is the owner of the Assigned Assets, including the Intellectual Property Rights owned and registered to Assignor as set forth in **<u>Exhibit A</u>** attached hereto (the "***Assigned IP***");

**WHEREAS**, the Parties are undertaking a restructuring involving Assignee and certain of its Affiliates on terms mutually agreed to by the Parties (the "***Restructuring***");

**WHEREAS**, in connection with the Restructuring, Assignor and Assignee have entered into that certain Assignment Agreement, dated as of [ ● ] (the "***Assignment Agreement***"), pursuant to which Assignor and Assignee have agreed that Assignor shall assign to Assignee, and Assignee shall accept and assume from Assignor, the Assigned IP, among other things, and as consideration therefor, Assignor shall assign to Assignee, and Assignee shall accept and assume from Assignor, the Assumed Liabilities; and

**WHEREAS**, the Parties now desire to assign from Assignor to Assignee the Assigned IP by the execution and delivery of this IP Assignment.

**<u>AGREEMENT</u>**

**NOW, THEREFORE**, in furtherance of the Assignment Agreement and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the Parties, the Parties, intending to be legally bound, do hereby agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Pursuant to the Assignment Agreement, (a) Assignor does hereby irrevocably assign, transfer and convey to Assignee, and Assignee does hereby accept and assume from Assignor, all of Assignor's right, title and interest in and to the Assigned IP, including without limitation: (a) all statutory rights, common law rights and other intellectual property or proprietary rights in the Assigned IP, and all registrations or applications therefor, and all renewals or extensions thereof, under any applicable law now or hereafter in effect; (b) all rights to royalties, fees, income, payments, and other proceeds now or hereafter due or payable and deriving from the Assigned IP; (c) all goodwill associated with the Assigned IP or symbolized thereby and (d) the right to bring claims and/or actions for, and to obtain relief (and to retain any damages recovered) in respect of such claims and/or actions for, any infringement, misappropriation or any other violation of the Assigned IP, whether occurring before, on or after the date of this IP Assignment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. If Assignor has any Assigned IP that cannot be assigned as a matter of law (the "***Unassignable IP Rights***"), Assignor hereby grants to Assignee an exclusive (without reservation), irrevocable, perpetual, worldwide, transferable, fully-paid and royalty-free license, with the right to sublicense through multiple tiers, under the Unassignable IP Rights, to fully utilize the Assigned IP in any manner without any restriction. Assignor further waives any "moral" rights, or other rights with respect to attribution of authorship or integrity relating to the Assigned IP as Assignor may have under any applicable law under any legal theory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Assignor agrees to perform, without charge or cost to Assignee, all acts reasonably necessary to permit and assist Assignee in perfecting the full benefits, enjoyment, rights, title and interest throughout the world in the Assigned IP assigned to Assignee hereunder, including without limitation the execution of documents, including any and all powers of attorney, applications, assignments, declarations, affidavits, and any other papers in connection therewith reasonably necessary to perfect such benefits, enjoyment, rights, title and interest in Assignee, assistance and cooperation in the registration of applicable Intellectual Property Rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. This IP Assignment: (a) is made pursuant to, and is subject to the terms of, the Assignment Agreement and (b) shall be binding upon and inure to the benefit of Assignor and Assignee and their respective successors and permitted assigns, for the uses and purposes set forth and referred to above, effective immediately upon its delivery to Assignee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. THIS IP ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION OTHER THAN THE STATE OF DELAWARE.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Nothing in this IP Assignment, express or implied, is intended or shall be construed to confer upon, or to give to, any individual or entity other than the Assignee and its successors and assigns any remedy or claim under or by reason of this IP Assignment or any terms, covenants or conditions hereof, and this IP Assignment shall be for the sole and exclusive benefit of the Assignee and its successors and assigns.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. ARTICLE VII (Miscellaneous) of the Assignment Agreement is hereby incorporated by reference in its entirety as if fully set forth herein. The Parties hereto acknowledge and agree that the representations, warranties and agreements contained in the Assignment Agreement shall not be superseded hereby but shall remain in full force and effect to the full extent provided therein. In the event of any conflict or inconsistency between the terms of the Assignment Agreement and the terms of this IP Assignment, the terms of the Assignment Agreement shall govern. Nothing in this IP Assignment shall amend, modify, limit or waive any rights or obligations of Assignor or Assignee under the Assignment Agreement.

[SIGNATURE PAGE FOLLOWS]

**In Witness Whereof**, the Parties have executed this IP Assignment as of the Effective Date.

 

Name:
 [ ● ] 

Title:
 [ ● ] 

 

Address: 

555
 Heritage Drive 

Suite
 200 

Jupiter,
 FL 33458 

Attention:
 CFO 

Email:
 [ ● ] 

 

Name:
 [ ● ] 

Title:
 [ ● ] 

 

Address: 

4020
 Stirrup Creek Drive 

Suite
 110 

Durham,
 NC 27703 

Attention:
 CEO 

Email:
 [ ● ] 

*Signature Page to IP Assignment*

## Exhibit 10.23

**Exhibit 10.23**

**EXECUTION VERSION**

**MASTER SERVICES AGREEMENT FOR PRODUCT SUPPLY**

**This Master Services Agreement for Product Supply** ("**Agreement**") is made and entered into as of March 24, 2025 (the "**Effective Date**") by and between **Ligand Pharmaceuticals Incorporated**, a Delaware corporation (hereinafter referred to as "**Ligand**") and **LNHC, Inc.**, a Delaware corporation (hereinafter referred to as "**Supplier**"). Ligand and Supplier may be referred to individually as a "**Party**" and collectively, as "**Parties**".

**RECITALS**

**WHEREAS**, Ligand and Supplier undertook a restructuring involving Supplier and its Affiliates (the "**Restructuring**"), pursuant to which Ligand provided Supplier with the requisite assets and processes to provide certain Services (as defined below) to the Applicable Ligand Parties (as defined below) in accordance with this Agreement.

**NOW, THEREFORE**, in consideration of the premises and the mutual covenants and agreements contained herein, the Parties hereto agree as follows:

1. DEFINITIONS

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 "**Affiliate**" shall mean, with respect to a Person, any Person that, directly or indirectly, through one (1) or more intermediaries, controls, is controlled by or is under common control with, such first Person for so long as such Person controls, is controlled by or is under common control with, such first Person. For purposes of this definition, "control" and, with correlative meanings, the terms "controlled by" and "under common control with" shall mean: (a) the possession, directly or indirectly, of the power to direct the management or policies of a business entity, whether through the ownership of voting securities, by contract relating to voting rights or corporate governance or otherwise; or (b) the ownership, directly or indirectly, of more than fifty percent (50%) of the voting securities or other ownership interests of a business entity (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity). For the avoidance of doubt, the Applicable Ligand Parties (as defined below) and Supplier shall not be deemed to be Affiliates of each other.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 "**Anticorruption Law**" shall mean all Applicable Law relating to anti-bribery or anticorruption, including which prohibit the corrupt payment, offer, promise, or authorization of the payment or transfer of anything of value (including gifts or entertainment), directly or indirectly, to any government official to obtain a business advantage; such as, the U.S. Foreign Corrupt Practices Act of 1977, as amended from time to time and all national and international laws enacted to implement the OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 "**API**" shall mean active pharmaceutical ingredient.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 "**Applicable Law**" shall mean all applicable federal, state, local or foreign laws, statutes or ordinance, common law, or any rules, regulations, standards, judgments, orders, writs, injunctions, decrees, arbitration awards and agency requirements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 "**Bankruptcy Code**" shall mean the United States Bankruptcy Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 "**Batch**" shall mean a specific quantity of Product that is intended to be of defined character and quality, within specified limits, and is produced during one cycle of Product manufacture as defined by the applicable Batch record.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 "**Business Day**" shall mean any day on which commercial banks in New York, New York are generally open for business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.8 "**Certificate of Analysis**" shall mean the certificate provided by Supplier to the Applicable Ligand Parties confirming that each Batch of Product that has been tested meets the Specifications and, to the extent specified as a Product Requirement in the applicable Work Order, the requirements of GMP.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.9 "**Change of Control**" shall mean (a) the acquisition, directly or indirectly (through beneficial ownership or otherwise), of a majority of the voting securities of a party, (b) a merger, reorganization or other business combination in which the stockholders of a party beneficially own less than a majority of the voting stock of the surviving entity, or (c) the sale, conveyance, transfer, lease or other disposition of all or substantially all assets of a party to a non-Affiliate party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.10 "**Claim**" shall mean any claim, demand, proceeding, action.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.11 "**Deliverables**" means all documents, materials and Products developed or made by Supplier, its Affiliates, or their Representatives as part of or in relation to the Services in any form (including those items stated to be deliverables as set forth on a Work Order and all reports, data and information arising in the course of the Services (including drafts thereof)).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.12 "**Failure to Supply**" means either (a) Supplier discontinues the manufacture of a Product being supplied to the Applicable Ligand Parties in accordance with this Agreement and the Work Order(s) applicable thereto, or (b) Supplier fails to deliver at least a minimum percentage (as set forth in the applicable Work Order(s)) of the quantity of a Product ordered by the Applicable Ligand Parties on or before the Delivery Date set forth in the applicable Work Order(s).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.13 "**Force Majeure Event**" means, in relation to a Party, any event beyond that Party's reasonable control, including any act of God or the elements, fire, flood, pandemic, epidemic, quarantine restriction, war, terrorism, acts of civil or military authority, any civil commotion, riots, strikes, lock outs or other industrial dispute.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.14 "**GMP**" shall mean the good manufacturing practices in effect from time to time applicable to the manufacture of the Products and promulgated by Regulatory Authorities in each jurisdiction in which Products are manufactured, packaged, marketed, distributed, used or sold, including the requirements set forth in U.S. C.F.R. (Title 21, Parts 210-211) and as further defined by FDA guidance documents, and in European Commission Directive 91/356/EEC, as amended by Directives 2003/94/EC and 91/412/EEC respectively (as supplemented by Volume 4 of EUR-Lex published by the European Commission).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.15 "**Intellectual Property Rights**" shall mean, in any and all jurisdictions throughout the world, all: (a) Patents, (b) Know-how, (c) trademarks and service marks, including all applications and registrations thereof and the goodwill connected with the use of and symbolized by the foregoing, (d) copyrights, including all applications and registrations related to the foregoing, and (e) other intellectual property rights, and the term "**Intellectual Property Right**" shall be construed accordingly.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.16 "**Know-how**" shall mean data, trade secrets, inventions (whether patentable or otherwise), discoveries, specifications, instructions, processes, compositions, formulae, materials, compounds, methods, protocols, expertise, technical information, and any other information of any kind whatsoever (including any pharmacological, biological, chemical, biochemical, manufacturing, business, and financial information), and other technology applicable to formulations, compositions or products or to their manufacture, development, registration, use or marketing or to methods of assaying or testing them, and all biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical and analytical, safety, quality control, manufacturing, preclinical, and clinical data relevant to any of the foregoing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.17 "**Ligand Materials**" shall mean the materials, if any, which are provided by or on behalf of the Applicable Ligand Parties to Supplier for use in the performance of Services.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.18 "**Ligand Product**" shall mean any drug product developed by the Applicable Ligand Parties incorporating Products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.19 "**Loss**" means any liabilities, expenses, and losses, including reasonable (and reasonably documented) legal expenses and attorneys' fees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.20 "**OFAC**" shall mean the U.S. Treasury Department's Office of Foreign Assets Control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.21 "**Patents**" shall mean in any country, any and all: (i) patents (including any inventor's certificate, utility model, petty patent and design patent), including any reissue, re-examination, renewal or extension (including any supplementary protection certificate) of any patent, and any confirmation patent or patent of addition based on any patent, in such country, and (ii) patent applications, including any continuations, continuations-in-part, divisionals, provisionals, continued prosecution application, substitute applications, and any other patent application that claims priority from any patent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.22 "**Person**" shall mean any individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or other similar entity or organization, including a government or political subdivision, department or agency of a government.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.23 "**Product**" shall mean certain starting material, raw material, intermediate, reference standard, bulk form pharmaceutical product, finished form pharmaceutical product or API to be supplied by Supplier to the Applicable Ligand Parties, as set out in Work Orders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.24 "**Product Requirements**" shall mean, with respect to a Batch of Product, (a) this Agreement, (b) all applicable Specifications, (c), to the extent applicable, the requirements of the Quality Agreement, (d) the requirements of Applicable Law, (e) the requirements of GMP (unless otherwise stated in the applicable Work Order) and (f) any other requirements expressly stated in the applicable Work Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.25 "**Regulatory Approval**" shall mean, 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.26 "**Regulatory Authority**" shall mean the applicable national (e.g., the FDA, ICH), supra-national (e.g., the European Commission), regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity that, in each case, has the authority to regulate the sale, manufacture, marketing, testing, pricing or payment reimbursement of drugs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.27 "**Regulatory Materials**" shall mean regulatory applications, submissions, notifications, communications, correspondence, registrations, Regulatory Approvals or other filings made to, received from or otherwise conducted with a Regulatory Authority in connection with the research, manufacturing, development, or commercialization of a drug product in a particular country or jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.28 "**Representatives**" shall mean the respective employees, officers, directors, consultants, Affiliates and agents of, as applicable, an Applicable Ligand Party or Supplier (or, to the extent applicable, each of its respective Affiliates).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.29 "**Service Charges**" shall mean the agreed charges for the performance of the Services for a Work Order, as set forth in the applicable Work Order; <u>provided</u> that all Service Charges shall be based upon Supplier's actual cost to perform the applicable Services plus no more than a ten percent (10%) mark-up on such actual cost.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.30 "**Service Requirements**" shall mean: (a) this Agreement, (b) the requirements of Applicable Law, and (c) any requirements expressly stated in the applicable Work Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.31 "**Services**" shall mean certain development and manufacturing services to be provided by Supplier or Permitted Subcontractors in compliance with this Agreement and as set forth in the Work Orders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.32 "**Specifications**" shall mean those specifications for a Product set out in the applicable Work Order, as may be modified or amended from time to time by mutual written agreement of the Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.33 "**Supplier Manufacturing Assets**" means all assets, tangible and intangible (including Intellectual Property Rights and Regulatory Materials), of Supplier and its Affiliates that are identified by Ligand and its Representatives as being reasonably necessary for the development and manufacture of Specified Products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.34 "**Tax**" shall mean any form of tax or taxation, levy, duty, charge, social security charge, contribution or withholding of whatever nature (including any related fine, penalty, surcharge or interest).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.35 "**Third Party**" shall mean a party other than a Party or its Affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.36 "**U.S. Trade Controls**" shall mean any laws and regulations administered and maintained by the United States Government and any agency thereof pertaining to economic sanctions and export controls, including the U.S. Department of Commerce's Export Administration Regulations and the various economic sanctions programs promulgated by OFAC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.37 "**Work Order(s)**" shall mean a written document, substantially in the form of <u>Schedule 1</u>, specifying the Services to be conducted by Supplier, the applicable Product(s) that are the subject of the relevant Services, and the Deliverables to be supplied in connection therewith, as mutually agreed to by the parties thereto, which document shall be incorporated by reference into this Agreement.

2. SCOPE OF AGREEMENT

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 **Structure**. This Agreement sets out the master terms and conditions under which the Applicable Ligand Parties may request to contract with Supplier for the provision of various Services from time to time by entering into Work Orders with Supplier.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 **Work Orders**. Supplier shall manufacture and supply to Ligand and/or any of its Affiliates (each, an "**Applicable Ligand Party**", and, collectively, the "**Applicable Ligand Parties**") pre-clinical, clinical or commercial, as applicable per each Work Order, quantities of Products based on the NITRICIL™ technology on terms set forth in a Work Order to be submitted by the Applicable Ligand Parties to Supplier; <u>provided</u> that such Work Order requires that the Applicable Ligand Party submit purchase orders for the manufacture and supply of the Products with at least a six (6) month lead time with respect to orders for commercial supply. If the Applicable Ligand Parties request in writing that Supplier shall provide certain other Services that are not related to the manufacture and supply of clinical or commercial quantities of Products that are based on the NITRICIL™ technology, the Applicable Ligand Parties, on the one hand, and Supplier, on the other hand, shall negotiate in good faith a Work Order with respect to such Services, which the parties to such Work Order shall execute no later than thirty (30) Business Days after the initial written request. Each Work Order incorporates the terms of this Agreement by reference and will be governed by the terms and conditions of this Agreement. In the event of a conflict between the terms of this Agreement and the terms of a Work Order, the terms of this Agreement will govern, unless the Work Order expressly identifies the provision intended by the parties to such Work Order to be modified.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 **Ligand Licensees**. Notwithstanding anything in this Agreement to the contrary, the "Applicable Ligand Parties" as defined in <u>Section 2.2</u> above shall include certain Persons that have received from Ligand licenses or sublicenses (as applicable) to Intellectual Property Rights of Ligand relating to Services to be provided by Supplier hereunder, whether or not such Services are being provided by Supplier pursuant to existing Work Orders (such Persons, each, a "**Ligand Licensee**", and, collectively, the "**Ligand Licensees**"). Upon Supplier's receipt of written notice from Ligand setting forth any such Ligand Licensees, the Ligand Licensees shall be entitled to exercise any and all rights of the Applicable Ligand Parties hereunder. For the avoidance of doubt, (i) Ligand Licensees shall not be considered Affiliates of Ligand for any purposes of this Agreement unless otherwise satisfying the provisions of the term Affiliate as defined herein, and (ii) Supplier shall in no event be considered a Ligand Licensee.

3. SERVICES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 **Provision of Services**. Supplier shall provide the Services to the Applicable Ligand Parties in conformance with the Service Requirements and within the timeframe and target dates set forth in the applicable Work Order. Supplier shall cooperate and comply with all instructions of the Applicable Ligand Parties (and their respective Representatives) in all matters relating to the Services.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 **Permitted Subcontractors**. Supplier shall not subcontract or sublicense its rights or obligations under this Agreement without the prior written consent of Ligand; <u>provided</u>, <u>however</u>, that Supplier may subcontract its rights or obligations under this Agreement to Supplier's Affiliates without Ligand's prior written consent (any Third Party to whom Ligand grants consent pursuant to this <u>Section 3.2</u> being a "**Permitted Subcontractor**"). Supplier shall remain fully and unconditionally liable, obligated and responsible for the full and complete performance of all of its obligations under the terms and conditions of this Agreement whether or not such performance is carried out by Supplier or any of its Permitted Subcontractors.

4. SUPPLY OF PRODUCT

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 **Supply of Product**. If the Services involve the supply of Product, Supplier shall supply such Product to the Applicable Ligand Parties in conformance with the Product Requirements and shall manufacture such Product at the Supplier facility specified for manufacture in the Work Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 **Shipping**. Supplier shall ship only Products which have been manufactured in accordance with the Product Requirements therefor. Supplier shall ship such conforming Products for delivery on the delivery date set forth in the applicable Work Order (the "**Delivery Date**") together with such accompanying documentation (including any applicable Certificate of Analysis) as set forth in the applicable Work Order. Supplier shall ship the Products DDP (Incoterms 2010) (or as otherwise specified in the applicable Work Order) using such freight carrier as is notified by the Applicable Ligand Parties to Supplier in the applicable Work Order. All Product supplied hereunder will be delivered free and clear of all encumbrances and liens.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 **Safety Stock**. Throughout the term of a Work Order that includes Services involving the supply of Product, Supplier shall secure, maintain and store no less than a nine (9) month inventory of such Product based on projected anticipated order quantities from the Applicable Ligand Parties; <u>provided</u> that upon Supplier's request, the Applicable Ligand Parties shall reasonably and promptly provide forecasts or projections to Supplier to assist Supplier with stockpiling appropriate quantities of such Product. All inventories of Product shall be maintained on a first-product-in, first-product-out basis such that Supplier replaces any consumed inventory on a timely basis.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 **Failure to Deliver**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4.1 In the event a Failure to Supply occurs with respect to a Product being supplied in accordance with this Agreement and the Work Order(s) applicable thereto (such Product, the "**Specified Product**"), the Parties shall meet as soon as reasonably practicable following the first occurrence of such Failure to Supply to discuss the source of the Failure to Supply and the suggested remedies therefor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4.2 In the event of a Failure to Supply in which Supplier fails to deliver for any reason (except due a Force Majeure Event) at least a minimum percentage (as set forth in a Work Order) of the quantity of Product ordered by the Applicable Ligand Parties between fifteen (15) days and thirty (30) days after the Delivery Date set forth in such Work Order for such Product, the price that the Applicable Ligand Parties shall pay to Supplier for such Product pursuant to such Work Order will be discounted by ten percent (10%). In the event of a Failure to Supply in which Supplier fails to deliver for any reason (except due a Force Majeure Event) at least a minimum percentage (as set forth in a Work Order) of the quantity of Product ordered by the Applicable Ligand Parties between thirty-one (31) days and sixty (60) days after the Delivery Date set forth in such Work Order for such Product, the price that the Applicable Ligand Parties shall pay to Supplier for such Product pursuant to such Work Order will be discounted by twenty-five percent (25%). In the event of a Failure to Supply in which Supplier fails to deliver for any reason (including due to a Force Majeure Event) at least a minimum percentage (as set forth in a Work Order) of the quantity of Product ordered by the Applicable Ligand Parties more than sixty (60) days after the Delivery Date set forth in such Work Order, the Applicable Ligand Parties, in their sole discretion, shall have the right to either (a) pay Supplier for such Product at a discount of thirty-five percent (35%) or (b) terminate all or a portion of such Work Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4.3 If a Failure to Supply is not cured by Supplier within ninety (90) days after the first occurrence of such Failure to Supply, then at Ligand's option upon written notice to Supplier, and notwithstanding anything in this Agreement to the contrary, Ligand shall have the right to require that Supplier promptly, and in no event more than the greater of (i) thirty (30) days after Supplier's receipt of the foregoing written notice from Ligand and (ii) (x) in the event a Product defect is giving rise to the Failure to Supply and (y) the applicable Product is submitted to an independent testing laboratory for determination in accordance with <u>Section 4.5.4</u> below, thirty (30) days after the Parties' receipt of such determination results, cooperate with Ligand and/or its designee to effect a smooth and orderly transition of the manufacture and supply of the Specified Product to a Third Party manufacturer of Ligand's choice so that the Applicable Ligand Parties' supply of the Specified Product is not disrupted, including by providing access to relevant data and information and granting a non-exclusive license to Ligand and/or its designee to the Supplier Manufacturing Assets. Supplier shall, at the reasonable request of Ligand, permit Ligand and its Representatives to conduct such inspections of the assets and books and records of Supplier as Ligand deems reasonably necessary for Ligand and its Representatives to identify the Supplier Manufacturing Assets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5 **Inspection; Defects; Testing**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.1 The Applicable Ligand Parties shall visually inspect Product promptly following delivery, and if the Applicable Ligand Parties determine that the Product is not in accordance with the Product Requirements, the Certificate of Analysis or contains obvious defects ("**Defective Product**"), the Applicable Ligand Parties shall promptly notify Supplier in writing of the same within thirty (30) days following the Applicable Ligand Parties' receipt of such Product. Upon receipt of notification that a Product is a Defective Product, other than as a result of the failure of the Applicable Ligand Parties to store or handle such Defective Product in accordance with the Specifications therefor, at the Applicable Ligand Parties' sole option, Supplier shall either (a) rework and/or reprocess such Defective Products in accordance with the Product Requirements as soon as reasonably possible or (b) deliver replacement Products, in each case (a) or (b), within ninety (90) days of the Applicable Ligand Parties' notice pursuant to this <u>Section 4.5</u> or such other time frame as may be agreed between the applicable parties at no additional charge unless otherwise set forth on the applicable Work Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.2 Notwithstanding <u>Section 4.5.1</u>, Supplier shall remain liable to the Applicable Ligand Parties as appropriate, for any Product that is determined to be Defective Product subsequently and which Product could not reasonably have been determined to be Defective Product earlier pursuant to <u>Section 4.5</u>. Upon discovery of such defect, the Applicable Ligand Parties shall notify Supplier in writing specifying the relevant defect and rejecting the relevant shipment not later than thirty (30) days following the detection of the relevant defect. Upon receipt of such notice, the Parties shall discuss in good faith a rework or reprocess of the impacted lots together with a timeline for delivery.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.3 Notwithstanding anything in this <u>Section 4.5</u> to the contrary, in the event any Product defect hereunder gives rise to a Failure to Supply, in the good faith judgment of Ligand, Ligand shall have the right to exercise the rights set forth in <u>Section 4.4</u> as to the applicable Product, and nothing in this <u>Section 4.5</u> shall be read or interpreted to preclude or otherwise restrict Ligand's exercise thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.4 If Supplier disputes that the relevant Product is a Defective Product, whether pursuant to <u>Section 4.5.1</u> or <u>Section 4.5.2</u>, the Applicable Ligand Parties, on the one hand, and Supplier, on the other hand, may each propose to submit the Product to an agreed reputable independent testing laboratory for determination, in which case the Applicable Ligand Parties and the Supplier shall cooperate to provide such Product to such laboratory. If the independent testing laboratory agrees with the Applicable Ligand Parties' determination, Supplier shall bear all costs for such testing; otherwise, the Applicable Ligand Parties shall bear all such testing costs. The results of such testing shall be binding on the Parties, absent manifest error.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6 **Quality Agreement, Quality Control**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6.1 At any time during the Term, Ligand may request in writing that Supplier execute and deliver to Ligand a Quality Agreement, (x) in form reasonably satisfactory to Ligand and (y) within twenty (20) Business Days of Supplier's receipt of such written request, specifying the roles, responsibilities, procedures and standards by which the Applicable Ligand Parties and Supplier (and their respective Affiliates and Permitted Subcontractors) will coordinate and implement the operational and quality assurance activities needed to efficiently achieve regulatory compliance objectives in connection with the Services and activities conducted pursuant to this Agreement (the "**Quality Agreement**"). For clarity, upon execution and delivery thereof, Supplier and the Applicable Ligand Parties shall each, and shall each cause their Permitted Subcontractors and Affiliates, as applicable, to, comply with their respective obligations as set forth in the Quality Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6.2 Regardless of whether a Quality Agreement has been executed and delivered by the Parties pursuant to <u>Section 4.6.1</u> above, Supplier shall perform quality control testing and quality assurance review, approval, and Batch release prior to its shipping of each Batch of Product to the Applicable Ligand Parties to ensure that the Product and/or Services comply with the Product Requirements. Supplier shall promptly notify the Applicable Ligand Parties if Supplier becomes aware that any Products or Services do not meet the Product Requirements or Service Requirements, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7 **Manufacturing Technology Transfer**. If Ligand notifies Supplier that Ligand wishes to manufacture any product that uses the NITRICIL™ technology platform (excluding ZELSUVMI™ (berdazimer) topical gel for the treatment of treatment of molluscum contagiosum in humans): (i) Supplier shall transfer from Supplier or its Affiliates or its or their Third Party contractors to Ligand or its designee (in writing or in an electronic format) all data, information, and other Know-How owned or controlled by Supplier and its Affiliates and its or their Third Party contractors that is necessary or is actually used by Supplier or its Affiliates or its or their Third Party contractors for the manufacture of such product to enable Ligand or its designee to manufacture such product ("**Manufacturing Technology Transfer**"); and (ii) at the reasonable request of Ligand from time to time, Supplier shall make its employees and consultants (including personnel of its Affiliates or its or their Third Party contractors) available to Ligand or its designee to provide reasonable consultation and technical assistance in order to ensure an orderly Manufacturing Technology Transfer for such product to Ligand or its designee and to assist Ligand and its designee in the manufacture of such product.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8 **Supply of Product to Third Party Licensees**. Upon written request of an Applicable Ligand Party, Supplier will negotiate in good faith reasonable terms and conditions for an agreement between Supplier and a Third Party licensee of such Applicable Ligand Party for Supplier to supply to such Third Party any Products that are based on the NITRICIL™ technology.

5. PERSONNEL AND REPORTING

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 Supplier shall: (a) only use personnel with sufficient qualifications and experience in order to supply the Services; (b) provide its personnel with adequate training; and (c) assume full responsibility for its personnel's compliance with this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 The Parties hereby agree that the performance of the Services shall be under the day-to-day supervision of a duly qualified employee of Supplier ("**Responsible Person**") who shall fully inform, update and cooperate with the designated contact person of the Applicable Ligand Parties on a timely, reasonable and regular basis, including at any reasonable time requested by such contact person. The Responsible Person shall be available to attend regular scheduled meetings (as agreed between the Parties) and ad hoc meetings as needed with the Applicable Ligand Parties to discuss matters relating to the Services.

6. REGULATORY COOPERATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 **General Assistance**. Supplier shall provide the Applicable Ligand Parties with assistance, as the Applicable Ligand Parties reasonably require, in connection with supply of Products or Ligand Products under the Services, and preparation and filing of all Regulatory Materials and any other documents required in connection with seeking and obtaining Regulatory Approval of Ligand Products, including providing the Applicable Ligand Parties with Supplier's drug master file for Product and a right to reference the same. The Applicable Ligand Parties will own all Regulatory Materials submitted by the Applicable Ligand Parties to the Regulatory Authorities and all Regulatory Approvals resulting from such submissions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 **Regulatory Data and Right of Reference**. Supplier grants to the Applicable Ligand Parties a right to reference, file, or incorporate by reference any of Supplier's Regulatory Materials that are reasonably necessary or desirable for the Applicable Ligand Parties to exercise their respective rights under this Agreement. The Applicable Ligand Parties may use and disclose all Regulatory Materials of Supplier and underlying data, information, documents, results, and analyses: (a) in any filing or correspondence that the Applicable Ligand Parties make with a Regulatory Authority; (b) in the preparation, filing, prosecution, defense, and enforcement of any Patents; and (c) in connection with preparing, publishing, and otherwise presenting research articles, scientific articles, scientific presentations, and the like, subject to the provisions of the confidentiality provisions in this Agreement. In addition, Supplier will provide the Applicable Ligand Parties with copies of all pre-clinical data, clinical data, and any other data used, relied on, or incorporated into any such Regulatory Materials (all such data being subject to the license granted under <u>Section 8.1.1</u> hereof). The Applicable Ligand Parties may use and exploit all such data for use in connection with Ligand Products, including in any filing or correspondence that the Applicable Ligand Parties make with a Regulatory Authority with respect to any Ligand Products.

7. PAYMENTS AND RELATED OBLIGATIONS

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 **Service Charges, Invoices**. In consideration of the provision of the Services, the Applicable Ligand Parties shall pay to Supplier the applicable Service Charges therefor. Supplier shall invoice the Applicable Ligand Parties for Services as set out in the applicable Work Order on the terms set out therein. Where payment intervals or invoicing arrangements are not specified in the applicable Work Order, Supplier will submit monthly invoices in arrears for Services performed during such period. Supplier shall provide to the Applicable Ligand Parties, on request, all documents, data and information reasonably required to support such invoice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2 **Payment Method, Currency**. The Applicable Ligand Parties shall pay all amounts properly due and undisputed within thirty (30) days of receipt of an invoice therefor in accordance with <u>Section 7.1</u>, unless otherwise agreed in the applicable Work Order. All payments made by the Applicable Ligand Parties under this Agreement shall be made in United States dollars.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3 **Taxes**. All Service Charges stated and any other payments made by the Applicable Ligand Parties to Supplier under this Agreement (a) are inclusive of any Taxes, including any excise, sales, use, or value added (VAT), if any and (b) shall be made free and clear and without deduction or withholding for any Taxes, except as required by Applicable Law. The Applicable Ligand Parties shall have no obligation to pay, and Supplier shall be solely responsible for, any Taxes or fees that are based upon Supplier's income or receipts or otherwise with respect to the performance of the Services hereunder.

**8. INTELLECTUAL PROPERTY**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 **Licenses**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1.1 **By Supplier**. Supplier, together with its applicable Affiliate(s), hereby grants to the Applicable Ligand Parties a non-exclusive, perpetual, irrevocable, fully-paid up, royalty-free license (with the right to sublicense) under Supplier's Intellectual Property Rights to the extent necessary for the Applicable Ligand Parties to use, make, have made, sell, offer for sale, import and otherwise exploit any Deliverable created pursuant to a Work Order and all Ligand Products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1.2 **By the Applicable Ligand Parties**. The Parties acknowledge that, in connection with the Restructuring, the Parties entered into that certain Exclusive License and Sublicense Agreement, of even date herewith (the "**License Agreement**"), pursuant to which Ligand granted to Supplier licenses and sublicenses to certain Specified IP (as defined therein) (the "**Specified Licenses**"). Except for the Specified IP covered by the Specified Licenses, which Ligand has granted a license and sublicense to Supplier on the terms and conditions of the License Agreement, the Applicable Ligand Parties, together with their respective Affiliate(s), hereby grant to Supplier until termination or expiry of the applicable Work Order, a non-exclusive, fully paid-up, royalty-free, non-transferable, non-sublicensable (other than to Permitted Subcontractors and solely to the extent necessary for the provision of the Services hereunder) license to, as applicable, their respective Intellectual Property Rights made available to Supplier pursuant to a Work Order solely to the extent required for Supplier to provide the Services under such Work Order on the terms and conditions of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 **No Other Rights**. No license or other right is or shall be created or granted hereunder by implication, estoppel or otherwise. Except for the Specified IP covered by the Specified Licenses, which Ligand has granted to Supplier on the terms and conditions of the License Agreement, (i) all licenses and rights are or shall be granted only as expressly provided in this Agreement, (ii) the Applicable Ligand Parties, Supplier and their respective Affiliates retain exclusive ownership of their respective Intellectual Property Rights, and (iii) all rights not expressly granted by the Applicable Ligand Parties, Supplier or their respective Affiliates under this Agreement are reserved by such parties.

9. WARRANTIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1 **Mutual Representations and Warranties**. Each Party represents and warrants the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.1 **Corporate Power**. Such Party is duly organized and validly existing under the laws of the jurisdiction of its organization and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof and its obligations hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.2 **Due Authorization**. Such Party is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder. The person executing this Agreement on such Party's behalf has been duly authorized to do so by all requisite corporate action.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.3 **Binding Agreement**. This Agreement is a legal and valid obligation binding upon such Party and enforceable in accordance with its terms. The execution, delivery and performance of this Agreement by such Party does not conflict with any agreement, instrument or understanding, oral or written, to which it is a Party or by which it may be bound, nor, to such Party's knowledge, does it violate any Applicable Law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2 **Ligand Representations and Warranties**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2.1 **License**. Ligand represents and warrants to Supplier that the Applicable Ligand Parties, together with their respective Affiliate(s), have the full and legal rights and authority to grant the license granted to Supplier under <u>Section 8.1.2</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2.2 **Intellectual Property**. Ligand represents and warrants to Supplier that, to Ligand's knowledge, the use of the Ligand Materials or the manufacture of a Product under a Work Order as specifically directed by Ligand shall not infringe or misappropriate any Intellectual Property Rights of any Third Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3 **Supplier Representations and Warranties**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3.1 **Product**. Supplier represents and warrants to the Applicable Ligand Parties that any Product delivered pursuant to a given Work Order shall conform to the Product Requirements. Supplier further represents and warrants that Product, at the time of delivery, shall not be adulterated or misbranded within the meaning of the United States Food, Drug and Cosmetic Act, if applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3.2 **Intellectual Property**. Supplier represents and warrants to the Applicable Ligand Parties that, to Supplier's knowledge, the provision of the Services and the Applicable Ligand Parties' receipt and use of those Services (including any Deliverable) shall not infringe or misappropriate any Intellectual Property Rights of any Third Party. The representation and warranty in this <u>Section 9.3.2</u> shall exclude any activities under the Services that are performed by Supplier specifically at Ligand's direction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3.3 **No Breach**. Supplier represents and warrants to the Applicable Ligand Parties that in providing the Services, it and its Permitted Subcontractors will not breach any contract or infringe any rights of any person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3.4 **Permits**. Supplier represents and warrants to the Applicable Ligand Parties that it has, and its Permitted Subcontractors have, and will maintain during the term of this Agreement all licenses, permits and similar authorizations of governmental and regulatory authorities necessary for Supplier to comply with all of its obligations pursuant to this Agreement, including under U.S. Trade Controls, including health, safety and environmental permits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3.5 **Non-debarment**. Supplier represents and warrants that: (a) it has not been debarred or suspended by the FDA or similar actions by any other Regulatory Authority having jurisdiction, from providing services to a company that has a pending or approved drug product application; and (b) it shall not engage anyone (as a Permitted Subcontractor, Representative or otherwise) who has been debarred by the FDA or similar actions by other Regulatory Authority having jurisdiction, for performing Services under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3.6 **Professional Standards**. Supplier represents and warrants that (a) it, and its Permitted Subcontractors, as applicable possess the necessary expertise to perform the Services hereunder consistent with professional standards of the industry, and (b) the Services will be performed in a professional and workmanlike manner consistent with professional standards of the industry.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3.7 **Use of Ligand Materials**. To the extent Ligand Materials are provided in connection with the provision of the Services, if any, Supplier represents and warrants that Supplier and its Permitted Subcontractors will use the Ligand Materials only for the manufacture of Product and the performance of Services and not for any other purposes without the express written permission of the Applicable Ligand Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3.8 **Anticorruption Law**. Supplier represents and warrants to the Applicable Ligand Parties that it will perform all Services hereunder in compliance with all Applicable Law (including Anticorruption Law).

10. INDEMNIFICATION, LIABILITY AND INSURANCE

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1 **Indemnification by Supplier**. Supplier shall indemnify, defend and hold harmless the Applicable Ligand Parties and their respective Representatives from and against all Losses to which the Applicable Ligand Parties or their respective Representatives may become subject to as a result of any Third Party Claims resulting from or arising out of any: (a) breach by Supplier of any of Supplier's representations, warranties, covenants or obligations under this Agreement; (b) gross negligence or willful misconduct of Supplier or any of its Representatives; or (c) violation by Supplier and its Representatives of any Applicable Law with respect to the Services which are the subject matter of this Agreement, in each case except to the extent that any such Loss arises out of any negligence, gross negligence or willful misconduct of, or breach of this Agreement by the Applicable Ligand Party and/or its Representatives or is subject to Ligand's obligations under <u>Section 10.2</u> hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2 **Indemnification by Ligand**. Ligand shall indemnify, defend and hold harmless Supplier and its Representatives from and against all Losses to which the Supplier and its Representatives may become subject to as a result of any Third Party Claims resulting from or arising out of any: (a) breach by Ligand of any of Ligand's representations, warranties, covenants or obligations under this Agreement; (b) gross negligence or willful misconduct of Ligand or any Ligand Representative; or (c) any acts or omissions of Supplier or its Representatives taken at Ligand's direction, in each case, except to the extent that any such Loss arises out of any negligence, gross negligence or willful misconduct of, or breach of this Agreement by Supplier and/or its Representatives or is subject to Supplier's obligations under <u>Section 10.1</u> hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3 **Indemnification Procedure**. A Party (the "**Indemnitee**") which intends to claim indemnification under this <u>Section 10</u> shall promptly notify the other Party (the "**Indemnitor**") in writing of any action, claim or liability in respect of which the Indemnitee or any of its directors, officers, employees or agents intend to claim such indemnification, <u>provided</u> that the failure to provide timely notice to the Indemnitor shall release the Indemnitor from any liability to the Indemnitee but only to the extent the Indemnitor is actually prejudiced thereby. Within fifteen (15) days after such notification is delivered by the Indemnitee to the Indemnitor, the Indemnitee shall permit and shall cause its employees and agents to permit, the Indemnitor to assume the defense of any such action or claim with qualified counsel at the Indemnitor's sole cost and expense, <u>provided</u>, <u>however</u>, that if there exists or is reasonably likely to exist a conflict of interest that would make it inappropriate in the judgment of the Indemnitee in its reasonable discretion for the same counsel to represent both the Indemnitee and the Indemnitor, the Indemnitee shall be able to obtain its own counsel at the expense of the Indemnitor. If the Indemnitor does not deliver written notice to the Indemnitee of its intent to assume control of such defense within such fifteen (15) day period, the Indemnitee may assume such defense with qualified counsel if its choice at the sole cost of the Indemnitor. If the Indemnitor assumes such defense hereunder, the Indemnitee may participate in such defense through counsel of its own selection at the Indemnitee's sole cost and expense. Neither Party shall settle or consent to entry of judgment of any such claim or dispute without the other Party's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; <u>provided</u> that the Indemnitee shall be deemed to have granted such consent if either (a) such settlement does not adversely affect the Indemnitee and does not impose any obligation or liability on the Indemnitee which cannot be assumed and performed in full by the Indemnitor, or (b) such settlement involves only the payment of money by the Indemnitor or its insurer. The Indemnitor shall not be responsible for any attorneys' fees or other costs incurred other than as provided in this Agreement. The Indemnitee, its employees and agents, shall provide reasonable and good faith assistance (including documents and testimony) to the Indemnitor and its legal representatives, at the Indemnitor's expense, in the investigation and defense of any action, claim or liability covered by this indemnification.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.4 **Limitation of Liability**. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW AND EXCEPT WITH RESPECT TO: (A) A CLAIM ARISING OUT OF FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, (B) ANY AMOUNTS PAYABLE PURSUANT TO <u>SECTION 10.1</u> OR <u>SECTION 10.2</u>, OR (C) ANY BREACH OF <u>SECTION 11</u>, IN NO EVENT SHALL EITHER PARTY, ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR AFFILIATES BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, MULTIPLE, SPECIAL, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHATSOEVER THAT IN ANY WAY ARISE OUT OF, RELATE TO, OR ARE A CONSEQUENCE OF, ITS PERFORMANCE OR NON-PERFORMANCE HEREUNDER, WHETHER BASED UPON A CLAIM OR ACTION OF CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHER TORT, OR OTHERWISE, EVEN IF SUCH PARTY HAS BEEN PUT ON NOTICE OF THE POSSIBILITY OF SUCH DAMAGES, ARISING OUT OF THE AGREEMENT. SUPPLIER'S AGGREGATE LIABILITY FOR ANY CLAIM ARISING UNDER THIS AGREEMENT SHALL NOT EXCEED THREE (3) TIMES THE AMOUNTS PAID OR PAYABLE BY ALL APPLICABLE LIGAND PARTIES TO SUPPLIER OVER THE TWELVE (12) MONTHS PRECEDING THE DATE ON WHICH SUCH CLAIM ARISES.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.5 **Insurance**. Supplier shall, beginning not later than the Effective Date and, thereafter, during the Term and for a period of five (5) years after expiration or termination of this Agreement, maintain sufficient levels of comprehensive commercial general liability and products liability insurance with a reputable insurance company, at its own cost and expense, to cover Supplier's potential liabilities under this Agreement. Supplier shall provide, within thirty (30) days of an Applicable Ligand Party's request, certificates of insurance verifying insurance coverage in accordance with this <u>Section 10.5</u>.

11. CONFIDENTIALITY

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1 **Confidential Information**. The Applicable Ligand Parties and Supplier (and, to the extent applicable, their respective Affiliates) have given to each other prior to the Effective Date, and in connection with this Agreement may in the future provide to each other, Confidential Information, including each such party's and its respective Affiliates' Know-how, disclosures, proprietary materials and/or technologies, economic information, business or research strategies, trade secrets and material embodiments thereof. As used herein, "**Confidential Information**" shall mean any and all information of a confidential and proprietary nature disclosed prior to the Effective Date or during the Term by or on behalf of the Applicable Ligand Parties, Supplier and/or their respective Affiliates to any other such Party and/or its respective Affiliates, either directly or indirectly, whether in graphic, written, electronic or oral form, identified at the time of disclosure as confidential, or which would reasonably be understood or otherwise deemed to be confidential. It is agreed and understood that the terms of this Agreement shall be deemed the Confidential Information of each of the Applicable Ligand Parties, Supplier and their respective Affiliates, and that all reports and other information provided by or on behalf of any such Party and/or its respective Affiliates shall be deemed the Confidential Information of such Party and its respective Affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2 **Confidentiality and Non-Use**. Subject to <u>Section 11.3</u> and <u>Section 11.4</u>, the recipient of a disclosing Party's Confidential Information shall maintain such Confidential Information in strict trust and confidence, and shall disclose such Confidential Information only to its employees, agents, consultants, Affiliates, attorneys, accountants and advisors who have a reasonable need to know such Confidential Information and who are bound by obligations of confidentiality and non-use no less restrictive than those set forth herein. Subject to <u>Section 11.3</u> and <u>Section 11.4</u>, the recipient of the disclosing Party's Confidential Information shall use such Confidential Information solely to exercise its rights and perform its obligations under this Agreement (including the right to use and disclose such Confidential Information in regulatory applications and filings), unless otherwise mutually agreed in writing. The recipient of the other Party's Confidential Information shall protect and keep secret such Confidential Information using the same degree of care that it uses to protect its own confidential and proprietary information of a similar nature and importance (but in any event no less than reasonable care).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.3 **Exclusions**. Confidential Information shall not include information that: (a) is in the recipient Party's possession prior to receipt from the disclosing Party, as evidenced by the recipient Party's contemporaneous records; (b) is or becomes, through no fault of the recipient Party, publicly known; (c) is furnished to the recipient by a Third Party without breach of a duty to the disclosing Party; or (d) is independently developed by the recipient without use of, application of or access to the disclosing Party's Confidential Information, as evidenced by the recipient Party's contemporaneous records.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.4 **Authorized Disclosure**. A Party that has received the Confidential Information of the other Party may disclose such Confidential Information without the prior written consent of the disclosing Party to the extent such disclosure is reasonably necessary in the following instances; <u>provided</u> that the recipient Party, to the extent possible, shall give the disclosing Party prior written notice (or, to the extent prior notice is not possible, written notice as soon as possible) of the proposed disclosure and shall cooperate fully with the disclosing Party to minimize the scope of any such required disclosure, to the extent possible and in accordance with Applicable Law: (a) prosecuting or defending litigation; (b) complying with applicable governmental laws and regulations or rules of a securities exchange; and (c) if otherwise legally compelled to disclose such Confidential Information. In addition, the recipient Party may disclose the disclosing Party's Confidential Information to the recipient Party's employees, investors, acquirers, consultants and agents who have a reasonable need to know such Confidential Information and are bound by obligations of confidentiality and non-use no less restrictive than those set forth in this <u>Section 11</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.5 **Termination**. All obligations of confidentiality and non-use imposed under this <u>Section 11</u> shall expire five (5) years after the date of expiration or termination of this Agreement.

12. TERM AND TERMINATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1 **Term**. The term of this Agreement shall commence on the Effective Date and continue in full force and effect for a period of fifteen (15) years ("**Initial Term**"). Ligand may renew this Agreement for additional periods of five (5) years each by providing notice in writing to Supplier not less than ninety (90) days prior to the expiry of, as applicable, the Initial Term or any subsequent renewal period (the Initial Term together with all renewal periods, the "**Term**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2 **Work Orders**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2.1 Each Work Order shall commence on the effective date thereof and shall terminate upon the completion of the Services specified thereunder unless earlier terminated in accordance with this <u>Section 12</u>. If the term of a Work Order extends past the expiry of this Agreement, the applicable terms and conditions of this Agreement shall continue in full force and effect until completion of the specified Services. The expiry or termination of a Work Order will not terminate or otherwise affect any other Work Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2.2 For clarity, termination or expiration of any one Work Order pursuant to <u>Section 12.3</u> or <u>12.4</u> shall not affect the effectiveness of any other Work Order and each effective Work Order shall continue in full force and effect unless specifically terminated or expired under the terms of such Work Order and/or this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3 **Ligand Termination Rights**. Ligand may terminate this Agreement and the Applicable Ligand Parties may terminate any Work Order upon thirty (30) days prior written notice to Supplier:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3.1 upon the occurrence of a Change of Control in Supplier; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3.2 for convenience.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.4 **General Termination Rights**. Either Party may terminate this Agreement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.4.1 upon written notice to the other Party in the event of the entry of a decree or order for relief by a court of competent jurisdiction in respect of the other Party in an involuntary case under the Bankruptcy Code, as now constituted or hereafter amended, or any other applicable federal, state or foreign insolvency or other similar law and the continuance of any such decree or order that is unstayed and in effect for a period of sixty (60) consecutive days;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.4.2 upon written notice to the other Party in the event of the filing by the other Party of a petition for relief under the Bankruptcy Code, as now constituted or hereafter amended, or any other applicable federal, state or foreign insolvency or similar law; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.4.3 immediately in the event of a material breach of any provision of this Agreement by the other Party and/or any of its Affiliates if the breach is not remedied within thirty (30) days following written notice of such breach to the other Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.5 **Effect of Termination**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.5.1 Upon termination or expiry of this Agreement or a Work Order for any reason:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. each
 Party hereto shall promptly return, or at the request of another Party hereto destroy,
 any Confidential Information of the other Party hereto or its respective Affiliates in
 the possession or control of such Party or its Affiliates at such time within thirty
 (30) days following the termination (<u>provided</u> that each such party may retain
 one (1) copy solely to the extent required by Applicable Law) and Supplier shall
 promptly return to the Applicable Ligand Parties any unused Ligand Materials that are
 in Supplier's or its Affiliates' possession or control, if any;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. The
 Applicable Ligand Parties shall pay any undisputed outstanding amounts due for Services
 completed up to and including the effective date of termination or expiry of this Agreement
 ()"**Effective Termination Date** "). Any payment due under this <u>Section 12.5.1b</u> shall be paid by the Applicable Ligand Parties within thirty (30) days after the
 Effective Termination Date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. each
 of the Applicable Ligand Parties and Supplier (and, to the extent applicable, their respective
 Affiliates) shall retain any and all rights or remedies such Party (and, to the extent
 applicable, its Affiliates) may have in law or in equity; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Supplier
 shall provide all reasonable assistance for further reasonable cost to the Applicable
 Ligand Parties to facilitate the orderly transfer of the provision of Services to the
 Applicable Ligand Parties or to enable a Third Party to commence the provision of all
 or part of the Services.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.6 **Survival**. Termination or expiration of this Agreement through any means and for any reason shall not relieve the Applicable Ligand Parties or Supplier (and, to the extent applicable, their respective Affiliates) of any obligation accruing prior thereto, including the obligation to pay money, and shall be without prejudice to the rights and remedies of either such party (and, to the extent applicable, its Affiliates) with respect to the antecedent breach of any of the provisions of this Agreement. <u>Sections 1</u>, <u>4.5</u>, <u>6</u> through <u>11</u>, <u>12.5</u> and <u>13</u> through <u>16</u> shall survive the termination or expiration of this Agreement.

13. RIGHTS IN BANKRUPTCY

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.1 **Applicability of 11 U.S.C. § 365(n)**. All rights and licenses, except for the Specified Licenses, which Ligand has granted to Supplier on the terms and conditions of the License Agreement, granted under or pursuant to this Agreement (collectively, the "**Agreement Intellectual Property**") are intended to be, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code (the "**Bankruptcy Code**") or any analogous provisions in any other country or jurisdiction, licenses of rights to "intellectual property" as defined under Section 101(35A) of the Bankruptcy Code. The Parties agree that the licensee of such Agreement Intellectual Property under this Agreement shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code, including Section 365(n) of the Bankruptcy Code, or any analogous provisions in any other country or jurisdiction. All of the rights granted to the Applicable Ligand Parties or Supplier (and, to the extent applicable, their respective Affiliates) under this Agreement shall be deemed to exist immediately before the occurrence of any bankruptcy case in which a Party is the debtor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.2 **Rights of non-Debtor Party in Bankruptcy**. If a bankruptcy proceeding is commenced by or against Supplier under the Bankruptcy Code or any analogous provisions in any other country or jurisdiction, the Applicable Ligand Parties shall be entitled to a complete duplicate of (or complete access to, as appropriate) any Agreement Intellectual Property and all embodiments of such Agreement Intellectual Property, which, if not already in the Applicable Ligand Parties' possession, shall be delivered to the Applicable Ligand Parties within five (5) Business Days of such request.

14. RECORDS AND INSPECTIONS.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.1 **Records**. Supplier shall, and shall cause its Permitted Subcontractors to, keep during the Term and for six (6) years following the Term, clear, complete, accurate, and up to date records ("**Records**") of all Services provided in connection with this Agreement, all time, costs and expenses incurred in the provision of the Services, and all personnel, materials, products, parts and equipment used in connection with the provision of the Services. No less than thirty (30) days prior to the later of: (a) the date on which Supplier intends to destroy the Records in accordance with this <u>Section 14.1</u>, and (b) the sixth (6<sup>th</sup>) anniversary of the termination or expiration of the Term, Supplier shall notify Ligand in writing of such impending destruction and offer Ligand the opportunity to take ownership of the Records, at Ligand's expense.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.2 **Audits**. Upon reasonable prior written notice from the Applicable Ligand Parties, Supplier shall make available or cause its Permitted Subcontractors to make available, to the Applicable Ligand Parties and their respective nominated Representatives, or any Regulatory Authority or other competent government authority, and their representatives and agents, (a) the Records, (b) Supplier's facilities, or (c) the facilities of its Permitted Subcontractors, each to the extent required to monitor and audit Supplier's compliance with this Agreement and all Applicable Laws (an "**Audit**"). Supplier shall cooperate fully with such Audit. Such audits may be conducted during normal business hours upon reasonable prior written notice to Supplier, and not more than once per calendar year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.3 **Regulatory Authority Inspections**. If Supplier receives any notice or request from an applicable Regulatory Authority or other competent government authority relating to an inspection of its Records or facilities, Supplier shall notify Ligand in writing within three (3) Business Days of receipt thereof, to the extent such inspection relates to the provision of the Services. Supplier shall permit (and shall cause its Permitted Subcontractors to permit) Ligand and/or its designated Representatives to attend any such inspection and shall provide Ligand with a copy of all correspondence and reports or such other materials that it or its Permitted Subcontractor(s) receives from such Regulatory Authority or government authority in connection therewith within three (3) Business Days of receipt.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.4 **Notice of Regulatory Actions**. Supplier shall inform Ligand of any regulatory or government actions (including warning letters) or change in the regulatory status (including the GMP compliance status) of any part of its (or its Permitted Subcontractor's) facilities within three (3) Business Days of becoming aware thereof. To the extent Supplier sends any comments or responses to any Regulatory Authority or other competent government authority in relation thereto, Supplier shall allow Ligand to review and comment on any such comments or responses reasonably in advance of submission.

15. DISPUTE RESOLUTION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.1 **Exclusive Dispute Resolution Mechanism**. The Parties agree the procedures set forth in this <u>Section 15</u> shall be the exclusive mechanism for resolving any disputes, controversies or claims (collectively, "**Disputes**") between the Applicable Ligand Parties and Supplier (and/or their respective Affiliates) that arise from time to time pursuant to this Agreement relating to the rights and/or obligations of such parties and their respective Affiliates hereunder that cannot be resolved through good faith negotiation between such parties. In the event an Affiliate of a Party not constituting an Applicable Ligand Party hereunder is party to or otherwise involved in any Dispute, the applicable Party shall ensure that such Affiliate abides by the terms of this <u>Section 15</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2 **Executive Resolution**. Any Dispute must first be submitted to the officers designated below, or their appointed representatives, for attempted resolution by good faith negotiations for a period of at least thirty (30) days.

For Ligand Chief Financial Officer (or the Chief Financial Officer's designee)

For Supplier CEO (or the CEO's designee)

If the representatives of the Parties designated in accordance with the above are not able to resolve any Dispute within such thirty (30) day period, the Applicable Ligand Parties, Supplier and/or their respective Affiliates (as applicable) may invoke the provisions set forth in <u>Section 15.3</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.3 **Dispute Resolution**. Any and all unresolved Disputes, and any and all unresolved issues remaining after consideration of a Dispute in accordance with <u>Section 15.2</u>, except as set forth in <u>Section 15.4</u>, shall be exclusively and finally resolved by and in the state or federal courts located in the State of Delaware, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement delivered in connection herewith or the transactions contemplated hereby or for recognition or enforcement of any judgment relating thereto, and each Party hereto hereby irrevocably and unconditionally: (a) agrees not to commence any such action or proceeding except in such courts; (b) agrees that any claim in respect of any such action or proceeding may be heard and determined in such state or federal court located in the State of Delaware, to the extent permitted by Applicable Law; (c) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such state or federal court; and (d) waives, to the fullest extent permitted by Applicable Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such state or federal court. Each Party hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Applicable Law. Each Party hereto irrevocably consents to service of process in the manner provided for notices in <u>Section 16.9</u>. Nothing in this Agreement will affect the right of any Party hereto to serve process in any other manner permitted by Applicable Law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.4 **Preliminary Injunctions**. Notwithstanding anything herein to the contrary, the Parties hereto may seek equitable relief, including a temporary restraining order or a preliminary injunction from any court of competent jurisdiction in order to prevent immediate and irreparable injury, loss, or damage on a provisional basis, pending the decision of the court(s) on the ultimate merits of any Dispute.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.5 **Confidentiality**. All proceedings and decisions of the court(s) shall be deemed Confidential Information and shall be subject to <u>Section 11</u> hereof.

16. MISCELLANEOUS

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.1 **Entire Agreement**. The Parties hereto acknowledge that this Agreement, together with all Work Orders, and, to the extent applicable, the Quality Agreement set forth the entire agreement and understanding of the parties and except as set out herein, supersedes all prior written or oral agreements or understandings with respect to the subject matter hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.2 **Public Announcements**. Except as permitted under <u>Section 11</u>, no Party hereto shall, nor shall it permit its respective Affiliates to, issue, publish, or disseminate or cause to be issued, published or disseminated any press release or public communication relating to this Agreement, its terms or any of the transactions contemplated herein without the prior written consent of the other Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.3 **Governing Law**. This Agreement shall be governed by, and construed and interpreted, in accordance with the internal laws of the State of Delaware, without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Delaware to the rights and duties of the parties hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.4 **Further Assurances**. From time to time on and after the Effective Date, each Party hereto shall, and, to the extent applicable, shall cause its respective Affiliates to, at the reasonable request of another Party hereto: (a) deliver to such other party hereto such records, data or other documents consistent with the provisions of this Agreement; (b) execute, and deliver or cause to be delivered, all such assignments, consents, documents or further instruments of transfer or license; and (c) take or cause to be taken all such other actions, as such other Party hereto may reasonably deem necessary or desirable in order for such party hereto to obtain the full benefits of this Agreement and the transactions contemplated hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.5 **Independent Contractors**. The relationship of the Applicable Ligand Parties and Supplier established by this Agreement is that of independent contractors. Nothing in this Agreement shall be constructed to create any other relationship between the Applicable Ligand Parties and Supplier. Neither Party shall have any right, power or authority to bind the other or assume, create or incur any expense, liability or obligation, express or implied, on behalf of the other.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.6 **Assignment**. Neither Party hereto may assign or transfer this Agreement, in whole or in part or by operation of law or otherwise, without the prior written consent of the other Party, which shall not be unreasonably withheld; <u>provided</u> that either Party hereto may make an assignment of this Agreement, without the other Party's consent to an Affiliate or to a Third Party successor to all or substantially all of the business or product to which this Agreement relates, whether in a merger, sale of stock, sale of assets or other transaction; <u>provided</u> that any such permitted successor or assignee is obligated pursuant to a written agreement to assume performance of this Agreement or such rights and obligations. Any permitted assignment shall be binding on the successors of the assigning party hereto. Any assignment or attempted assignment by any Party hereto in violation of the terms of this <u>Section 16.6</u> shall be null and void.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.7 **Third Party Beneficiaries**. This Agreement is neither expressly nor impliedly made for the benefit of any party other than the parties hereto and the parties indemnified pursuant to <u>Section 10</u> and there are no intended Third Party beneficiaries except for the parties indemnified pursuant to <u>Section 10</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.8 **No Use of Names**. Except as otherwise required under Applicable Law, or as otherwise permitted under <u>Section 11</u>, no party hereto shall, nor shall it permit its Affiliates to, use the name of the other in its advertising, press releases or promotional materials without the prior written consent of the Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.9 **Notices**. Any notice, approval, authorization, consent, or other communication required or permitted to be delivered to either Party under this Agreement must be in writing and will be deemed properly delivered, given, and received (i) when delivered by hand or by messenger, (ii) when sent by facsimile, with written confirmation of receipt, (iii) three (3) Business Days after being mailed by first class mail (return receipt requested) or delivery to an international courier or express delivery service, or (iv) when received at the applicable e-mail address set forth below when sent by e-mail. All notices, approvals, authorizations, consents, or other communications shall be sent to the address or e-mail address set forth below (or to such other address or e-mail address as may be designated by a Party by giving written notice to the other Party pursuant to this <u>Section 16.9</u>):

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| | |
|:---|:---|
| If to Ligand, to:<br>Ligand Pharmaceuticals Incorporated<br> 555 Heritage Drive<br> Suite 200<br> Jupiter, FL 33458<br> Attention: Chief Financial Officer<br>in each case, with copies also sent to:<br>Ligand Pharmaceuticals Incorporated<br> 555 Heritage Drive<br> Suite 200<br> Jupiter, FL 33458<br> Attention: Chief Legal Officer<br>Latham & Watkins, LLP<br> 200 Clarendon Street<br> Boston, MA 02116<br> Attn: Peter Handrinos, Esq.<br> Email: <u>peter.handrinos@lw.com</u><br>| If to Supplier, to:<br>LNHC, Inc.<br> 4020 Stirrup Creek Drive<br> Suite 110<br> Durham, NC 27703<br> Attention: Chief Executive Officer<br>|

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.10 **Costs and Expenses**. Except as otherwise provided in this Agreement, each Party hereto shall bear the costs and expenses (including legal and accounting fees) arising out of or in connection with (i) its preparation, negotiation and implementation of this Agreement and (ii) its and its respective Affiliates' preparation, negotiation and implementation of any Work Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.11 **Amendment**. No modification of any of the terms of this Agreement, or any amendments thereto, shall be deemed to be valid unless in writing and signed by the Parties. No course of dealing or usage of trade shall be used to modify the terms and conditions herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.12 **No Waiver**. Any delay or failure by a party hereto to enforce its rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such party's rights to the future enforcement of its rights under this Agreement, except only in the event of an express written and signed waiver as to a particular matter for a particular period of time. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.13 **Severability**. If any provision of this Agreement or any other document delivered under this Agreement is prohibited or unenforceable in any jurisdiction, it shall be ineffective in such jurisdiction only to the extent of such prohibition or unenforceability and such prohibition or unenforceability shall not invalidate the balance of such provision to the extent it is not prohibited or enforceable nor the remaining provisions hereof, nor render unenforceable such provision in any other jurisdiction, unless the effect of rendering such provision ineffective would be to substantially deviate from the expectations and intent of the respective parties to, as applicable, this Agreement or such other document. In the event any provision of this Agreement or any other document delivered under this Agreement shall be held to be invalid, illegal or unenforceable, the same shall be amended and interpreted so as best to accomplish the original intent (within the limits of Applicable Law) of the applicable parties and so as not to affect the validity or enforceability thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.14 **Construction of this Agreement**. Except where the context otherwise requires, wherever used, the use of any gender shall be applicable to all genders, and the word "or" is used in the inclusive sense. When used in this Agreement, "including" shall mean "including without limitation". References to either Party include the successors and permitted assigns of that Party. The headings of this Agreement are for convenience of reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement. The Parties have each consulted counsel of their choice regarding this Agreement, and, accordingly, no provisions of this Agreement shall be construed against either Party on the basis that the Party drafted this Agreement or any provision thereof. If the terms of this Agreement conflict with the terms of any schedule, then the terms of this Agreement shall govern. The official text of this Agreement and any schedules hereto, any notice given or accounts or statements required by this Agreement and any dispute proceeding related to or arising hereunder, shall be in English. In the event of any dispute concerning the construction or meaning of this Agreement, reference shall be made only to this Agreement as written in English and not to any other translation into any other language. Unless the context requires otherwise, references herein to "this Agreement" shall include this Agreement and the Work Orders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.15 **Counterparts**. This Agreement and any amendment or supplement hereto may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall constitute one and the same instrument. This Agreement may be executed and delivered by facsimile or any other electronic means, including ".pdf" or ".tiff" files and any facsimile or electronic signature shall constitute an original for all purposes.

[Signature Page Follows]

**IN WITNESS WHEREOF**, the Parties hereto have each caused this Agreement to be executed by their duly authorized officers as of the Effective Date.

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| | |
|:---|:---|
| **LIGAND PHARMACEUTICALS INCORPORATED** | **LNHC, INC.** |

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| | | | |
|:---|:---|:---|:---|
| By: | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Richard Baxter | By: | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Octavio Espinoza |

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Name: Richard Baxter Name: Octavio Espinoza <br> Title: Senior Vice President, Investment Operations Title: Officer & Board Member

*Signature Page to Master Services Agreement for Product Supply*

**SCHEDULE 1<br>FORM OF WORK ORDER<br>WORK ORDER#**

**This Work Order** (the "**Work Order**") is made and entered into as of this _____ day of _______, ______ (the "**Effective Date**") by and [between]/[among] [APPLICABLE LIGAND PARTIES] (hereinafter referred to[, collectively,] as "**Ligand**") and **LNHC, Inc.**, a Delaware corporation (hereinafter referred to as "**Supplier**"). Ligand and Supplier may be referred to individually, as a "**Party**", and collectively, as "**Parties**".

**RECITALS**

**WHEREAS**, [Ligand Pharmaceuticals Incorporated, a Delaware corporation] and Supplier entered into that certain Master Services Agreement for Product Supply dated [●] (the "**Master Services Agreement**"), which allows Ligand to request services from Supplier from time to time.

**WHEREAS**, in accordance with <u>Section 2.2</u> of the Master Services Agreement, this Work Order sets out the Services to be supplied by Supplier to Ligand.

**NOW, THEREFORE**, in consideration of the premises and the mutual covenants and agreements contained herein, the Parties hereto agree as follows:

1. INTERPRETATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 This Work Order incorporates the terms of the Master Services Agreement by reference. All defined terms in the Master Services Agreement shall have the same meaning in this Work Order unless otherwise stated.

2. TERM AND TERMINATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 This Work Order shall commence on the Effective Date set out above and shall expire upon the completion of the supply of the Services unless terminated earlier in accordance with the Master Services Agreement.

3. SERVICES AND SERVICE CHARGES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 Supplier shall provide the Services as set out in Appendix A to this Work Order to Ligand.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 Service Charges for the provision of the Services under this Work Order shall be [***for a total sum anticipated not to exceed [●]***] as set out in Appendix B to this Work Order.

4. PAYMENT TERMS

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 All invoices for payment under this Work Order shall be submitted to:

[APPLICABLE LIGAND PARTIES]<br> Department: [●]<br> Address: [●]

Supplier invoices under this Work Order shall be made payable to:

Bank Account no: [●]

Name and Address of Bank [●]

US Routing [●]

Swift Code [●]

Name and Address of a/c holder [●]

5. ADDITIONAL TERMS AND CONDITIONS

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 Any terms and conditions additional to those set out above and in the Master Services Agreement are set out in Appendix C to this Work Order.

[Signature Page Follows]

**IN WITNESS WHEREOF**, the Parties hereto have caused their duly authorized representatives to sign this Work Order upon the date first set forth above.

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| | |
|:---|:---|
| **[APPLICABLE LIGAND PARTIES]** | **LNHC, INC.** |

---

By:

Name: Name: <br> Title: Title:

**APPENDIX A TO WORK ORDER#<br>(SERVICES)**

**[INSERT DESCRIPTION OF THE SERVICES TO BE PROVIDED UNDER THE WORK ORDER INCLUDING ANY DELIVERABLES OR PRODUCTS AND ANY TIMELINE/ PROJECT MILESTONES AGREED.]**

**[ATTACH/ INSERT ANY AGREED DESCRIPTION OF SERVICES REQUIREMENTS, PRODUCT REQUIREMENTS, SPECIFICATIONS, ANY DELIVERABLES OR ANY EXCEPTION TO GMP REQUIREMENT.]**

**APPENDIX B TO WORK ORDER#<br>(SERVICE CHARGES)**

**PART A: SERVICE CHARGES**

**[ADD DETAILS OF SERVICE CHARGES (SPECIFY CURRENCY) OR INSERT DOCUMENT THAT SPECIFIES THE SERVICE CHARGES/ BUDGET.]**

**PART B: PAYMENT INTERVALS**

**[INSERT THE DATES OR EVENTS ON WHICH INSTALMENTS ARE TO BE INVOICED AND THE AMOUNT OF EACH INSTALLMENT.]**

**APPENDIX C TO WORK ORDER#<br>(ADDITIONAL TERMS AND CONDITIONS)**

[INSERT ANY ADDITIONAL TERMS AND CONDITIONS.]

## Exhibit 10.24

**Exhibit 10.24**

**EXECUTION VERSION**

**EXCLUSIVE License and SUBLICENSE Agreement**

This **Exclusive License and Sublicense Agreement** (this "**Agreement**") is entered into as of March 21, 2025 (the "**Effective Date**"), by and between **Ligand Pharmaceuticals Incorporated**, a Delaware corporation ("**Licensor**") and **LNHC, Inc.**, a Delaware corporation ("**Licensee**"). Licensor and Licensee are sometimes referred to herein individually as a "**Party**" and together as the "**Parties**."

**Recitals**

**Whereas**, the U.S. Food and Drug Administration (the "**FDA**") has approved that certain New Drug Application #217424 filed for marketing approval of the Licensed Product (as defined below) (the "**NDA**");

**Whereas**, Licensor owns or controls the Specified IP (as defined below) relating to the Licensed Product; and

**Whereas**, Licensee desires to receive, as applicable, exclusive licenses and sublicenses to the Specified IP, and Licensor is willing to grant such licenses and sublicenses to Licensee under the terms and conditions provided herein.

**Now, therefore**, in consideration of the mutual covenants set forth herein and for other consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:

**Agreement**

**1.** **Definitions.** As
 used in this Agreement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.1** "**Affiliate**" means, with respect to a Person, any Person that, directly or indirectly, through one (1) or more intermediaries, controls, is controlled by or is under common control with such first Person at any time for so long as such Person controls, is controlled by or is under common control with such first Person. For purposes of this definition, "control" and, with correlative meanings, the terms "controlled by" and "under common control with" means: (i) the possession, directly or indirectly, of the power to direct the management and policies of a business entity, whether through the ownership of voting securities, by contract relating to voting rights or corporate governance or otherwise; (ii) the ownership, directly or indirectly, of more than fifty percent (50%) of the voting securities or other ownership interests of a business entity (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity); or (iii) any other arrangement whereby a Person controls or has the right to control the board of directors or equivalent governing body or management of a corporation or other entity. For the avoidance of doubt, Licensor and Licensee shall not be deemed to be Affiliates of each other hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.2** "**Applicable Law**" shall mean all applicable federal, state, local or foreign laws, statutes or ordinance, common law, or any rules, regulations, standards, judgments, orders, writs, injunctions, decrees, arbitration awards and agency requirements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.3** "**Applicable Royalty Rate**" means (i) prior to the expiration of the Initial Royalty Term, thirteen percent (13%) and (ii) after the expiration of the Initial Royalty Term, ten and four tenths percent (10.4%).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.4** "**Change of Control**" means the occurrence of one of the following events: (i) any Third Party becoming the owner, directly or indirectly, of securities of the pertinent Party representing more than fifty percent (50%) of the combined voting power of such Party's then outstanding securities, other than by virtue of a merger, consolidation or similar transaction; (ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the pertinent Party and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of such Party immediately prior thereto do not own, directly or indirectly, either (x) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving entity in such merger, consolidation or similar transaction or (y) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving entity in such merger, consolidation or similar transaction; or (iii) there is a sale of all or substantially all of the pertinent Party's assets and/or business in one transaction or in a series of related transactions. In addition to the foregoing, the transfer or sale to a Third Party of all or substantially all of the business of the pertinent Party to which this Agreement relates, whether by merger, sale of stock, sale or transfer of assets or otherwise, shall, to the extent not otherwise covered by the foregoing clauses (i)-(iii), also constitute a Change of Control of such Party for purposes of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.5** "**Commercially Reasonable Efforts**" means with respect to Licensee in relation to an obligation under this Agreement applicable to a Licensed Product, the use of reasonable, good faith efforts that would be used by a reputable biopharmaceutical company that is marketing a pharmaceutical product at a similar stage in its development or commercial life as the Licensed Product, and that has commercial, profit and market potential, or strategic value, similar to the Licensed Product, taking into account, in each case, any of the following, without limitation: the intellectual property protection and competitive landscape relevant to such product, safety and efficacy, product profile, competitiveness of the marketplace, proprietary position, commercial success or lack thereof of such product, regulatory exclusivity (or lack thereof), reasonably anticipated or approved labeling, the likelihood of receipt of Regulatory Approval given the regulatory structure involved, the likely timing of entry into the market, profitability (including pricing and reimbursement status achieved or likely to be achieved), in relation to pricing determinations, Applicable Laws and market practices, including those relating to pricing, discounting and reimbursement, and any other relevant, actual or anticipated scientific, technical, commercial and other factors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.6** "**Confidential Information**" means all information disclosed (whether in writing, electronically, orally or by observation) by one Party (the "**Disclosing Party**") to the other Party (the "**Receiving Party**") unless, in each case, such information, as shown by competent evidence:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** was known to the Receiving Party or to the general public prior to the Disclosing Party's disclosure, as demonstrated by the Receiving Party's contemporaneous written records;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** became known to the general public, after the Disclosing Party's disclosure hereunder, other than through a breach of the confidentiality provisions of this Agreement by the Receiving Party or any Person to whom such Receiving Party disclosed such information;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)** was subsequently disclosed to the Receiving Party by a Person having a legal right to disclose, without any restrictions, such information; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)** was developed by the Receiving Party independent of the Disclosing Party's Confidential Information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.7** "**Distributor**" means, with respect to a country, any Third Party that is used by Licensee in such country on a non-exclusive basis, and without any license grant or other right from Licensee or any of its Sublicensees under any Intellectual Property Rights, to distribute finished, packaged pharmaceutical products to pharmacies, managed care organizations, governmental agencies, and other group purchasing organizations (e.g., pharmaceutical benefits managers) and the like in such country. For clarity, a Distributor of a Licensed Product in a country shall not include any person or entity that has been granted a right, whether by license or otherwise and whether express or implied (including by subcontract or agency), by Licensee or its Affiliates to manufacture any such Licensed Product.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.8** "**First Commercial Sale**" means, on a country-by-country basis, the first sale by or on behalf of Licensee, its Affiliate, or any Sublicensee (excluding Distributors) to a Third Party of a Licensed Product for use by the end user in a given country in the Territory after Regulatory Approval has been granted to such Licensed Product in such country. Any sale of Licensed Product by Licensee to its Affiliate or a Sublicensee shall not constitute a First Commercial Sale unless there is no subsequent resale of such Licensed Product by such Affiliate or Sublicensee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.9** "**Hatch-Waxman Time Period**" means the applicable period of time during which a patent holder or licensee has the right to file an infringement suit to maintain certain rights and privileges upon receipt of a Paragraph IV Patent Certification by a Third Party filing an abbreviated new drug application or new drug application, or any other similar patent certification by a Third Party, or any foreign equivalent thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.10** "**Improvements**" means any upgrade, enhancement, modification, alteration, improvement, development, or other change made by either Party, whether solely or jointly, to the Specified IP (or the products or inventions disclosed therein) during the Term.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.11** "**Initial Royalty Term**" means, on a country-by-country basis, the period of time commencing on the Effective Date and continuing until the expiration or termination of the last to expire Valid Claim of the Patent Rights that are included in the Specified IP and that cover the Licensed Product.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.12** "**Intellectual Property Rights**" means and includes all rights of any of the following types anywhere in the world: (i) Patent Rights, (ii) copyrights, moral rights, and rights in works of authorship, (iii) Know-How, (iv) all other intellectual property and proprietary rights of any kind or nature, and (v) all registrations and applications for any of the foregoing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.13** "**Know-How**" means data, trade secrets, inventions (whether patentable or otherwise), discoveries, specifications, instructions, processes, compositions, formulae, materials, compounds, methods, protocols, expertise, technical information, and any other information of any kind whatsoever (including any pharmacological, biological, chemical, biochemical, manufacturing, business, and financial information), and other technology applicable to formulations, compositions or products or to their manufacture, development, registration, use or marketing or to methods of assaying or testing them, and all biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical and analytical, safety, quality control, manufacturing, preclinical, and clinical data relevant to any of the foregoing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.14** "**Launch**" means the commencement of commercialization activities designed to achieve the First Commercial Sale of the Licensed Product in the Field in the Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.15** "**Licensed Field**" means the treatment of molluscum contagiosum in humans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.16** "**Licensed Product**" means ZELSUVMI™ (berdazimer) topical gel.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.17** "**Net Sales**" means, with respect to any Licensed Product, the gross amounts invoiced for sales or other disposition of such Licensed Product by or on behalf of Licensee, its Affiliates, and their Sublicensees to Third Parties (other than Licensee's Affiliates, Sublicensees and Distributors) for use by the end user in a bona fide arm's length transaction less (a) sales taxes or other taxes, (b) shipping and insurance charges, (c) actual allowances, rebates, credits, or refunds for returned or defective Licensed Products, (d) trade discounts and quantity discounts, retroactive price reductions, or other allowances actually allowed or granted from the billed amount and taken, (e) rebates, credits, and chargeback payments (or the equivalent thereof) granted to managed health care organizations, wholesalers, or to federal, state/provincial, local and other governments, including their agencies, purchasers, and/or reimbursers, or to trade customers, and (f) any import or export duties, tariffs, or similar charges incurred with respect to the import or export of the Licensed Product into or out of any country in the Territory. The Licensed Product will be considered sold when paid for. Notwithstanding the foregoing, Net Sales shall not include, and shall be deemed zero with respect to, (1) the distribution of reasonable quantities of promotional samples of the Licensed Product, (2) Licensed Products provided for clinical trials or research purposes, or charitable or compassionate use purposes, or (3) Licensed Products provided to any of Licensee's Affiliates, Sublicensees or other strategic partners under an agreement in which Net Sales by such Affiliate, Sublicensee or other strategic partner shall be subject to royalties hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.18** "**Net Sales Milestone Event**" means the sale(s) of commercial quantities of the Licensed Product for human therapeutic use under any Regulatory Approval for the Licensed Product (including the NDA) by Licensee, an Affiliate or any Sublicensee of the foregoing for which the aggregate proceeds of such sale(s) constitute thirty-five million U.S. Dollars ($35,000,000) in aggregate Net Sales during four (4) consecutive calendar quarters.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.19** "**Non-Royalty Sublicense Income**" means payments received by Licensee or its Affiliates from a Sublicensee in consideration for the grant by Licensee or its Affiliates of a sublicense under the Specified IP to make, use, sell, offer to sell, or otherwise develop, commercialize or exploit the Licensed Product in the Licensed Field in the Territory, including the portion of upfront payments, license fees and milestone payments allocable to such rights to Specified IP, but excluding: (a) payments made in consideration of equity or debt securities of Licensee or its Affiliates to the extent at or below the fair market value of such securities, (b) payments made to Licensee or its Affiliates as a prepayment or reimbursement for the performance of research, development or commercialization services at cost, and (c) royalty or profit share payments received based on the sales of any Licensed Product, <u>provided</u> that such quanta of sales is included as Net Sales under this Agreement. In the event that Licensee receives non-cash consideration from a Sublicensee for rights to the Specified IP, Non-Royalty Sublicense Income will be determined based on the fair market value of such consideration received by Licensee or its Affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.20** "**Patent Challenge**" means, with respect to any Patent Right included in the Specified IP, to contest the validity, enforceability, or scope of claims of any such Patent Right, in whole or in part, in any court, arbitration proceeding or other tribunal, including the United States Patent and Trademark Office and the United States International Trade Commission. As used in this definition the term "contest" includes (a) filing an action under 28 U.S.C. §§ 2201-2202 seeking a declaration of invalidity, unenforceability, or non-infringement of any such Patent Rights; (b) filing, or joining in, a petition under 35 U.S.C. § 311 to institute inter partes review of any such Patent Right or any portion thereof; (c) filing, or joining in, a petition under 35 U.S.C. § 321 to institute post-grant review of any such Patent Right or any portion thereof; (d) any foreign equivalent of clauses (a), (b), or (c) in the Territory outside of the United States; or (e) filing or commencing any opposition, nullity, or similar proceedings challenging the validity of any such Patent Right in any country outside the United States.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.21** "**Patent Rights**" means in any country, any and all: (i) patents (including any inventor's certificate, utility model, petty patent and design patent), including any reissue, re-examination, renewal or extension (including any supplementary protection certificate) of any patent, and any confirmation patent or patent of addition based on any patent, in such country, and (ii) patent applications, including any continuations, continuations-in-part, divisionals, provisionals, continued prosecution application, substitute applications, and any other patent application that claims priority from any patent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.22** "**Person**" means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, incorporated association, joint venture or similar entity or organization, including a government or political subdivision or department or agency of a government.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.23** "**Prosecute**" and "**Prosecution**" means the preparation, filing, prosecution and maintenance of Patent Rights, including seeking patent extensions and supplementary protection certificate applications pursuant to 35 U.S.C. § 156 or similar statutes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.24** "**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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.25** "**Regulatory Authority**" means an agency of any government having the authority to regulate the sale, manufacture, marketing, testing, pricing or payment reimbursement of drugs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.26** "**Regulatory Materials**" means regulatory applications, submissions, notifications, communications, correspondence, registrations, Regulatory Approvals (including the NDA) or other filings made to, received from or otherwise conducted with a Regulatory Authority in connection with the research, manufacturing, development, or commercialization of a drug product in a particular country or jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.27** "**Sato License Agreement**" means that License Agreement, dated as of January 12<sup>th</sup>, 2017, by and between Sato Pharmaceutical Co., Ltd ("**Sato**") and Licensee (as successor-in-interest to Novan, Inc.), as amended by that certain First Amendment to License Agreement, dated as of January 12<sup>th</sup>, 2017 and that certain Second Amendment to License Agreement, dated as of October 5<sup>th</sup>, 2018, in each case, by and between Sato and Licensee (as successor-in-interest to Novan, Inc.), and as assigned to Licensor pursuant to that certain Assignment Agreement, dated as of March 24, 2025, by and between the Parties (the "**Assignment Agreement**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.28** "**Specified IP**" means the Intellectual Property Rights set forth on Exhibit A of the Assignment Agreement that are necessary to (a) make, use, sell or offer to sell the Licensed Product in the Licensed Field in the Territory or (b) make or have made Compound and/or Licensed Products (each as defined in the Sato License Agreement) for Sato solely pursuant to the Sato License Agreement and related ancillary agreements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.29** "**Sublicensee**" means a Third Party or an Affiliate of Licensee to which Licensee grants a sublicense under <u>Section 2.2</u>, under the Specified IP, to make, use, sell or offer to sell the Licensed Product in the Licensed Field in the Territory, as the case may be, other than a Distributor. In no event will Licensor or any of its Affiliates be deemed a Sublicensee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.30** "**Subsequent Equity Financing**" means a bona fide equity financing for the principal purpose of raising capital pursuant to which Licensee issues and sells shares of its capital stock (including, for the avoidance of doubt, any securities convertible or exchangeable for shares of its capital stock) ("**Financing Shares**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.31** "**Territory**" means worldwide except for Japan (it being understood and agreed to by the Parties that Sato has obtained exclusive rights with respect to the Licensed Product in Japan pursuant to the Sato License Agreement).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.32** "**Third Party**" means any entity other than Licensee or Licensor or an Affiliate of Licensee or Licensor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.33** "**Third Party Analyst**" means a reputable Third Party auditor or vendor with experience with fields and products substantially similar to the Licensed Field and the Licensed Product, respectively, selected by Licensor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.34** "**UNC Agreement**" means that certain Amended, Restated and Consolidated License Agreement, dated June 27, 2012, with The University of North Carolina at Chapel Hill ("**UNC**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.35** "**Valid Claim**" means, on a country-by-country basis, (a) a claim of an unexpired issued or granted Patent Right as long as the claim has not been admitted to being invalid by the owner of such Patent Right or otherwise caused to be invalid or unenforceable through reissue, disclaimer or otherwise, or held invalid or unenforceable by a tribunal or governmental agency of competent jurisdiction from whose judgment no appeal is allowed or timely taken; or (b) a claim within a patent application in a Patent Right that has not been pending for more than seven (7) years from the date of its first priority patent application anywhere in the Territory and which claim has not been revoked, cancelled, withdrawn, held invalid or abandoned.

**2.** **Licenses and Sublicenses; Development Rights** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.1 Exclusive Licenses and Sublicenses**. Subject to the terms and conditions of this Agreement, including payment of all amounts owing under <u>Section 6</u>, Licensor hereby grants to Licensee an exclusive (even as to Licensor), sublicensable (through multiple tiers, solely in accordance with and as described below in <u>Section 2.2</u>) and non-transferrable (except as described in <u>Section 12.3</u>) license and sublicense (as applicable to the pertinent Specified IP owned by upstream licensors of Licensor) during the Term under the Specified IP to (a) make, use, sell or offer to sell the Licensed Product in the Licensed Field in the Territory and (b) make or have made "Compound" and/or "Licensed Products" (each as defined in the Sato License Agreement) for Sato solely pursuant to the Sato License Agreement and related ancillary agreements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.2 Sublicense**. Licensee may, with the prior written consent of Licensor, such consent not to be unreasonably withheld, conditioned or delayed, grant sublicenses to its Affiliates and Third Parties, through multiple tiers, under the licenses and sublicenses granted by Licensor to Licensee in <u>Section 2.1</u>. All sublicenses granted in accordance with this <u>Section 2.2</u> will be pursuant to written agreements that are in accordance with and no broader than the terms of this Agreement and that include indemnification provisions no less protective of Licensor than those contained herein and a disclaimer of warranties on behalf of Licensor. Licensee shall provide Licensor with a copy of any such sublicense agreement and each amendment thereto no later than ten (10) days following the execution of such sublicense or amendment, which may be redacted as necessary to protect confidential information and other commercially sensitive information but solely to the extent not necessary for Licensor to determine whether the sublicense is consistent with the terms of this Agreement. Licensee shall ensure that such Sublicensee is bound by and subject to all terms and conditions of this Agreement applicable to such Sublicensee, in the same manner and to the same extent as Licensee is bound thereby, and Licensee shall remain directly and primarily responsible and liable for any acts or omissions of its Sublicensees in relation to any subject matter of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.3 Implied Licenses; Retained Rights**.

**(a).** There are no implied rights or licenses granted under this Agreement, and all rights and licenses not expressly granted hereunder are reserved by the Parties hereof.

**(b).** Without limiting the foregoing, Licensor reserves all rights to the Specified IP outside of the Licensed Field.

**(c).** Licensee acknowledges and agrees that the sublicenses granted to Licensee under <u>Section 2.1</u> are subject to the retained rights of UNC under the UNC Agreement, including Section 2.3 and Section 2.4 thereof.

**(d).** With respect to any Specified IP that was developed in whole or in part using funding from the federal government of the United States (the "**United States Government**"), and to the extent applicable due to any such funding, the United States Government is entitled, as a right, under the provisions of 35 U.S.C. §§ 200-212 and applicable regulations of Title 37 of the Code of Federal Regulations, to a non-exclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on the behalf of the United States Government any of the Specified IP throughout the world and Licensee agrees to comply and require compliance therewith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.4 Additional UNC Specified IP**. In the event that UNC notifies Licensor of an Improvement (for the purposes of this <u>Section 2.4</u>, as defined in the UNC Agreement) that becomes available for the license to Licensor under the UNC Agreement, Licensor will notify Licensee of such Improvement. If Licensor includes such Improvement in the license granted to Licensor in the UNC Agreement, then the Intellectual Property Rights of UNC claiming such Improvement shall be included in the Specified IP under this Agreement (thereafter, "**Additional Sublicensed Specified IP**"). In the event that Licensor does not desire to include such Improvement in the license granted to Licensor in the UNC Agreement, Licensor shall inform Licensee of such fact together with notification of the existence of such Improvement, and Licensee may, by providing written notice to Licensor within thirty (30) days of receiving notice from Licensor of such Improvement, require that such Improvement be included in the license granted to Licensor in the UNC Agreement and the sublicense granted to Licensee under the Specified IP, in which case, Licensee will be responsible for any and all costs arising from the addition of such Additional Sublicensed Specified IP and from the Prosecution of such Additional Sublicensed Specified IP.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.5 UNC Agreement**.

**(a).** Licensee acknowledges and agrees that Licensor obtained the rights to certain of the Specified IP (the "**Sublicensed Specified IP**") through the UNC Agreement and that Licensee has received a copy thereof. Licensee's rights and obligations under this Agreement as they relate to the sublicense of the Sublicensed Specified IP shall be subject to terms and conditions of the UNC Agreement. Licensee acknowledges that if UNC renders the license granted under the UNC Agreement non-exclusive in accordance with the UNC Agreement with respect to any or all Sublicensed Specified IP, the statement that the sublicense granted by Licensor under <u>Section 2.1</u> is "exclusive" shall not include exclusivity as to any non-exclusive rights of UNC under such Sublicensed Specified IP.

**(b).** To give further effect to <u>Section 2.5(a)</u> above, Licensee shall, on behalf of Licensor, comply in all respects with any and all of the due diligence, reporting, information, inspection and recordation obligations of Licensor under the UNC Agreement, including those set forth in Articles 4 and 5 of the UNC Agreement. Any and all expenses and costs arising from the foregoing shall be the responsibility of Licensee unless expressly made the responsibility of UNC under the UNC Agreement. Licensee shall concurrently provide to Licensor a copy of all such reports, records or other information provided to UNC in accordance herewith; <u>provided</u> that the Parties agree and acknowledge that such copies of such reports, records or other information provided to UNC shall not be deemed to satisfy Licensee's obligations under <u>Section 6.1(b)</u> unless Licensor agrees in writing that such obligations have been satisfied in full.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.6 Development Rights**. In addition to the rights granted to Licensee hereto, the Parties hereby agree, for a period of one (1) year commencing on the Effective Date, to negotiate in good faith a development and funding agreement (a "**Development and Funding Agreement**") for Licensee to obtain rights to develop and commercialize the product program designated by Licensor as SB207 (the "**SB207 Program**"). If the Parties are unable to enter into a mutually agreeable Development and Funding Agreement within one (1) year of the Effective Date, Licensee will have no further rights to the SB207 Program, and Licensor will have no further obligation to Licensee with respect to the SB207 Program.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.7 Importance of Know-How**. Licensor represents and Licensee acknowledges that the Know-How in the Specified IP is a valuable and essential component of the Specified IP, and constituting proprietary and confidential information that is critical to the successful manufacture, use, sale or other commercialization or exploitation of the Licensed Product in the Licensed Field in the Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.8 Disclosure of Know-How**. Upon written request from Licensor during the Term, Licensee shall promptly provide Licensor or Licensor's designee any then-existing Know-How that Licensee or its Affiliates or Sublicensees have discovered, invented, conceived, generated, developed, created, reduced to practice or obtained with respect to the manufacture, use or commercialization of the Licensed Product, Licensee shall promptly notify Licensor in writing of details of such Know-How.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.9 No Diversion**. Licensee shall use Commercially Reasonable Efforts not to, and shall use Commercially Reasonable Efforts to cause its Affiliates, Sublicensees, Distributors and wholesalers not to, (a) manufacture, export, distribute, market, promote, offer for sale or sell the Licensed Products for use outside of the Licensed Field or (b) distribute, market, promote, offer for sale or sell the Licensed Product to any Third Party that is reasonably likely to directly or indirectly distribute, market, promote, offer for sale or sell the Licensed Product outside of the Licensed Field, or distribute, market, promote, offer for sale or sell the Licensed Product to another Person that, in turn, will be reasonably likely to do so. In the event either Party becomes aware of any Third Party diverting any Licensed Product for use outside of the Licensed Field, such Party shall promptly notify in writing the other Party, and Licensee shall reasonably investigate such diversion and keep Licensor fully and timely informed regarding the investigation to eliminate such diversion. In the event that any Licensed Product sold or distributed by Licensee or any of its Affiliates, Sublicensees, Distributors or wholesalers is discovered for sale or is sold outside of the Licensed Field in contravention of this <u>Section 2.9</u>, Licensee shall, and shall cause its Affiliates, Sublicensees, Distributors and wholesalers to, use Commercially Reasonable Efforts and take prompt action to eliminate such diversion, including, in the event that Licensee makes a good faith determination that a particular Distributor, wholesaler or retailer is knowingly responsible for such diversion, by exercising all rights and remedies available to Licensee with respect to such Distributor, wholesaler or retailer, up to and including terminating, or causing to be terminated, the relationship with such Distributor, wholesaler or retailer.

**3. Improvements**. All Improvements shall be exclusively owned by Licensor, and Licensee hereby irrevocably and unconditionally assigns all right, title, and interest in and to such Improvements, including all Intellectual Property Rights therein, to Licensor. Licensee shall automatically receive a license or sublicense, as applicable to all Improvements pursuant to <u>Section 2.1</u>. The Parties agree and acknowledge that, with respect to the Sublicensed Specified IP, this <u>Section 3</u> is subject to any rights of UNC to Improvements involving the Sublicensed Specified IP pursuant to the UNC Agreement.

**4.** **Prosecution and Enforcement; Regulatory Matters**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.1 Prosecution**. Licensor will have the sole right to handle all Prosecution of the Specified IP, including any patents and applications based on Improvements, at Licensor's expense. Licensee shall have the right to participate, at its cost and expense, in the filing and Prosecution activities of Licensor to the extent solely related to the Licensed Field. Licensor will notify Licensee periodically of the status of any pending Patents Rights contained in the Specified IP, including any office actions, notice of allowance, and required filings or payments concerning the Specified IP. Licensee will have the opportunity to comment on any response to office actions or amendments to claims prior to their filing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.2 Enforcement**. Each Party will promptly notify the other Party upon becoming aware of any known or suspected infringement of any Specified IP. Such notice will include the identity of the party or parties known or suspected to have infringed the Specified IP and any available information that is relevant to such infringement. Licensor will retain sole control over enforcement and defense of the Specified IP against such Third Party infringers. If Licensor elects to file or defends any claim, suit, or action (a "**Claim**") against any Third Party based on any Specified IP, Licensee will cooperate with Licensor, at Licensor's request, in enforcing or defending such Claim, including joining Licensor as a party to such suit or action at any time at Licensor's request. Licensor will be responsible for all costs, expenses, and legal fees incurred by Licensee in connection with any Claim. Licensor will be entitled to all damages awarded as a result of or agreed to in a monetary settlement of any Claim. If Licensor fails to bring an action or proceeding with respect to infringement of any Specified IP in the Licensed Field in the Territory within (X) ninety (90) days following the notice of alleged infringement or declaratory judgment, (Y) thirty (30) days prior to the end of the applicable Hatch-Waxman Time Period, or (Z) thirty (30) days prior to the deadline that is necessary to avoid an irrevocable loss of rights, whichever comes first, Licensee shall have the right, but not the obligation, to bring and control any such action at its own expense and by counsel of its own choice, and Licensor shall have the right, at its own expense, to be represented in any such action by counsel of its own choice. Nothing contained in this <u>Section 4.2</u> will obligate Licensor to enforce or defend any Specified IP.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.3 Regulatory Matters**. Commencing on the Effective Date, Licensor hereby transfers to Licensee the NDA, and Licensee shall be the holder of the NDA during the Term. Licensee shall be the holder of all Regulatory Approvals (i.e., the NDA) for the Licensed Product in the Licensed Field in the Territory. Licensee shall use Commercially Reasonable Efforts to (a) maintain the validity and effectiveness of the Regulatory Approvals for the Licensed Product in the Licensed Field in the Territory in compliance with Applicable Law and all applicable requirements of the FDA or other applicable Regulatory Authority (which shall include providing the FDA or other applicable Regulatory Authority with all necessary updates and notifications in connection with the Regulatory Approvals for the Licensed Product in the Licensed Field in the Territory, and timely reporting all relevant adverse events, complaints and safety data to the FDA or other applicable Regulatory Authority), (b) promptly and diligently fulfill all of its obligations in its capacity as holder of the Regulatory Approvals for the Licensed Product pursuant to Applicable Law in the Licensed Field in the Territory and (c) secure and maintain any additional Regulatory Approvals that are necessary for the manufacturing, distributing, marketing, sale, pricing and reimbursement of the Licensed Product in the Licensed Field in the Territory. Licensee shall promptly notify Licensor after becoming aware of any audit or inspection being conducted by a Regulatory Authority with respect to the Licensed Product, or of any recall or similar action with respect to the Licensed Product.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.4 Review of Regulatory Materials**. Licensee will provide Licensor for its review and comment drafts of any proposed Regulatory Materials to be submitted to Regulatory Authorities in the Territory for the Licensed Products reasonably prior to submission, but not less than thirty (30) days prior to the planned submission date, unless such time period is not practicable to comply with regulatory requirement, in which case the maximum amount of time practicable, to allow Licensor to review and comment thereon. Unless otherwise agreed by the Parties, Licensor shall provide its comments within thirty (30) days of receipt. Licensee will reasonably consider Licensor's comments and incorporate any comments unless unreasonable. In the event of a dispute over the content of such Regulatory Materials to be submitted to a Regulatory Authority, Licensor shall have the right to make the final decision with respect to the content of any Regulatory Materials for Licensed Products to the extent such content could reasonably impact the Regulatory Approval of any product containing the NITRICIL™ technology platform. Licensee will notify Licensor of any material comments or other material correspondence received from any Regulatory Authority with respect to all Regulatory Materials (including all material correspondence with any Regulatory Authority) in the Territory for the Licensed Product within five (5) business days of such receipt and will provide Licensor with copies thereof promptly after its receipt.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.5 Right of Reference**. Licensee hereby grants to the Licensor and its Affiliates a right to reference, file, or incorporate by reference any of Licensee's Regulatory Approvals (e.g., the NDA) and other Regulatory Materials to the extent reasonably necessary or desirable for Licensor to exercise its rights under this Agreement, including exploitation of any product containing the NITRICIL™ technology platform other than the Licensed Product (or, after termination of this Agreement pursuant to the terms hereof, to pursue the development, commercialization and/or sale of the Licensed Product). Notwithstanding anything to the contrary herein, Licensor and its Affiliates may use and disclose all Regulatory Materials of Licensee and all underlying data, information, documents, results and analyses: (a) in any filing or correspondence that the Licensor or its Affiliates, as applicable, make with a Regulatory Authority; (b) in the preparation, filing, prosecution, defense, and enforcement of any Patent Rights; and (c) in connection with preparing, publishing, and otherwise presenting research articles, scientific articles, scientific presentations, and the like.

**5.** **Commercialization**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.1 General**. Licensee shall be solely responsible, at its own expense, for all aspects of commercialization of the Licensed Product in the Field in the Territory.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.2 Commercial Diligence**. Licensee shall (either by itself or with or through its Affiliates or Sublicensees) use Commercially Reasonable Efforts to commercialize (including obtaining Regulatory Approvals necessary for commercialization of) the Licensed Product in the Licensed Field in the Territory.

**6.** **Royalty, Milestones and Reporting** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.1 Royalty and Reporting.**

**(a).** As consideration for the rights granted to Licensee under this Agreement, during the Term, on a Licensed Product-by-Licensed Product and country-by-country basis, Licensee will pay Licensor a running royalty equal to (i) the Applicable Royalty Rate multiplied by (ii) all Net Sales of the Licensed Product sold by Licensee or any of its Affiliates and Sublicensees. For clarity, the obligation to pay royalties under this <u>Section 6.1</u> shall be imposed only once with respect to the sale of the Licensed Product, regardless of whether the Licensed Product, or the use or sale thereof, is covered by more than one claim contained in the Specified IP. All amounts payable under this <u>Section 6.1(a)</u> are payable on a quarterly basis, with such amounts due by Licensee and received by Licensor on or before the thirtieth (30<sup>th</sup>) day following the end of the calendar quarter in which such amounts were earned.

**(b).** Licensee shall deliver to Licensor for each calendar month during the Term written reports (x) for each such month and (y) for the three (3) month period ending on each such month (i) stating (A) the number, description and aggregate selling prices of Licensed Products sold or otherwise disposed of, and deductions taken, during such applicable periods (and, to the extent applicable, adjustments and corrections from prior periods), including, for such purposes, statements of unit volume shipped and gross and net unit price(s) paid by purchasers of the Licensed Product and (B) the Net Sales derived therefrom, and (ii) including a report from a Third Party Analyst of (A) total prescriptions, new prescriptions and estimated end user sales resulting from sales of the Licensed Product during such applicable periods and (B) such other additional reporting requirements and information as are reasonably requested by Licensor (the foregoing (i) and (ii), collectively, the "**Progress Reports**"). Progress Reports shall be delivered by Licensee to Licensor (i), if the pertinent calendar month is the last calendar month of a calendar quarter, on the date that is the earliest to occur of (x) the date that is fifteen (15) days after the end of such calendar month and (y) the date that the royalty payment due for such calendar quarter is made by Licensee, and (ii) if the pertinent calendar month is not the last calendar month of a calendar quarter, the date that is fifteen (15) days after the end of such calendar month. The costs and expenses incurred by Licensee in connection with the preparation and delivery of the Progress Reports shall be the sole responsibility of Licensee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.2 Milestone Payments.**

**(a).** Upon the First Commercial Sale of the Licensed Product, Licensee shall pay to Licensor a one-time, non-refundable cash payment equaling the sum of (A) five million U.S. Dollars ($5,000,000) plus (B) such amounts payable to UNC in connection with any extensions of the first commercial sale milestone in Appendix D of the UNC Agreement pursuant to (x) that certain Sixth Amendment to Amended, Restated and Consolidated License Agreement, dated as of July 26, 2024, by and between Licensor and UNC and (y) such other amendments to the UNC Agreement as are entered into for the purposes of extending the aforementioned milestone.

**(b).** Upon the occurrence of the Net Sales Milestone Event, Licensee shall pay to Licensor a one-time, non-refundable cash payment equaling five million U.S. Dollars ($5,000,000).

**(c).** All amounts payable under <u>Section 6.2</u> shall be due and payable on the thirtieth (30<sup>th</sup>) day following the achievement of the event giving rise to the payment obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.3 Non-Royalty Sublicense Income**. Licensee shall pay Licensor thirty percent (30%) of all Non-Royalty Sublicense Income received by Licensee or its Affiliates from any Sublicensee within thirty (30) days of Licensee or its Affiliate's receipt of Non-Royalty Sublicense Income from a Sublicensee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.4 Payment Terms; Exchange Rate.** All amounts payable hereunder, including, for the avoidance of doubt, the payments under <u>Section 6.1</u>, <u>Section 6.2</u> and <u>Section 6.3</u>, shall be paid in U.S. dollars. Any late payments of any such amounts shall be subject to interest at an annual percentage rate equal to the lesser of twelve percent (12%) or the maximum rate permitted by law (the "**Applicable Rate**") from the original due date until paid in full. When conversion of payments from any currency other than U.S. dollars is required, such conversion shall be at an exchange rate equal to the weighted average of the rates of exchange for the currency of the country from which such payments are payable as published by The Wall Street Journal, Eastern U.S. Edition, during the calendar quarter in which the applicable sales were made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.5 Audit.** In addition to the Progress Reports, Licensee will and will cause its Affiliates and Sublicensees to maintain books and records pertaining to its regulatory and commercialization activities and the royalties and related payments under this Agreement. Such records shall be kept for three (3) years following the end of the calendar quarter to which they pertain, or such longer period as may be required under Applicable Law. Licensor will be entitled to audit the books and records of Licensee and its Affiliates, and require Licensee or its Affiliate to audit the books and records of Sublicensees, relevant to calculating amounts to be paid under this <u>Section 6</u>. Such audits may be conducted during normal business hours upon reasonable prior written notice to Licensee, and not more than once per calendar year. Any amounts shown to be owed but unpaid shall be paid within thirty (30) days after the audit report. Any overpayment by Licensee revealed by an audit shall be credited against future payments owed by Licensee to Licensor (and if no further payments are due, shall be refunded by Licensor to Licensee within thirty (30) days after the audit report). Licensor shall bear the full cost of such audit unless such audit discloses an underpayment by Licensee of the greater of (a) five percent (5%) of the amount of royalties or other payments due under this Agreement for the audited period and (b) fifty thousand dollars ($50,000), in which case, Licensee shall bear the reasonable cost of such audit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.6 Consequences of a Patent Challenge**. If: (i) Licensee or any of its Affiliates brings a Patent Challenge against Licensor or UNC, (ii) Licensee or any of its Affiliates assists a Third Party in bringing a Patent Challenge against Licensor or UNC (except as required under a court order or subpoena), or (iii) a Sublicensee or any of its Affiliates brings a Patent Challenge or assists another in bringing a Patent Challenge against Licensor or UNC and Licensee does not terminate such Sublicensee's sublicense upon notice by Licensor, and in the case of any of (i), (ii), or (iii), Licensor does not choose to exercise its rights to terminate this Agreement pursuant to <u>Section 11.3</u>, then Licensee shall pay to Licensor royalties at two times (2x) the applicable rate set forth under <u>Section 6.1</u> for the remainder of the Term. If such a Patent Challenge is successful, then Licensee shall have no right to recoup any royalties paid during the period of such Patent Challenge. If a Patent Challenge is unsuccessful, then Licensee shall reimburse each of Licensor and UNC for all legal fees and expenses incurred in its defense against the Patent Challenge. Royalties due during the pendency of any Patent Challenge shall be paid directly to Licensor and not placed in escrow or other account. If any of the provisions of this <u>Section 6.6</u> are held invalid or unenforceable for any reason, then such invalidity or unenforceability shall not affect any of the other provisions of this <u>Section 6.6</u> or other provisions of this Agreement.

**7.** **Representations and Warranties; Liability** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.1 Mutual Representations and Warranties**. Each Party represents and warrants that it has full right, power, and authority to enter into this Agreement and to perform its obligations and duties under this Agreement, and that the performance of such obligations and duties does not and will not conflict with or result in a breach of any other agreements of such Party or any judgment, order, or decree by which such Party is bound.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.2 Additional Licensor Representations, Warranties and Covenants**. Licensor represents, warrants, and covenants, as applicable, to Licensee that, as of the Effective Date, (a) Licensor is the sole owner, or exclusive licensee (with the right to grant sublicenses) of the entire right, title and interest in and to all Intellectual Property Rights within the Specified IP, free and clear from any mortgages, pledges, liens, security interests, conditional and installment sale agreements, encumbrances, charges or claims of any kind; (b) Licensor has the full and legal rights and authority to grant the licenses granted by it to Licensee under this Agreement; (c) Licensor has not granted as of the Effective Date, and will not grant during the Term, any right to any Third Party under the Specified IP that would conflict with the rights granted to Licensee hereunder; and (d) during the Term, Licensor will use commercially reasonable efforts to Prosecute the Patent Rights in the Specified IP in the respective patent offices in the Territory in accordance with Applicable Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.3 Disclaimer of Warranties**. **OTHER THAN THE REPRESENTATIONS AND WARRANTIES SET FORTH IN <u>SECTIONS 7.1</u> AND <u>7.2</u>, LICENSOR DOES NOT MAKE ANY WARRANTY OR REPRESENTATION AND DISCLAIMS ALL WARRANTIES AND REPRESENTATIONS, INCLUDING ALL WARRANTIES, REPRESENTATIONS, AND CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, WORKMANSHIP, TITLE, OWNERSHIP, AND NON-INFRINGEMENT.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.4 Limitation of Liability. EXCEPT FOR LICENSEE'S BREACH OF <u>SECTION 2.5</u> (AND ANY OTHER SIMILAR OBLIGATIONS TO COMPLY WITH THE UNC AGREEMENT), <u>SECTION</u> 4, <u>SECTION 6</u>, <u>SECTION 10</u>, AND ITS INDEMNIFICATION OBLIGATIONS HEREUNDER, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR ANY CONSEQUENTIAL, INDIRECT, PUNITIVE, EXEMPLARY, SPECIAL OR INCIDENTAL DAMAGES, INCLUDING ANY LOST DATA AND LOST PROFITS, ARISING FROM OR RELATING TO THIS AGREEMENT OR THE SPECIFIED IP. LICENSOR'S TOTAL CUMULATIVE LIABILITY ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE SPECIFIED IP, WHETHER IN CONTRACT OR TORT OR OTHERWISE, WILL NOT EXCEED ONE HUNDRED THOUSAND DOLLARS ($100,000).**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.5 Mutual Representations and Warranties**. Licensee hereby expressly acknowledges, for the benefit of Licensor and UNC, the disclaimers and limitations of liability of UNC set forth in Article 10 of the UNC Agreement.

**8. Indemnification**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.1 By Licensor**. Licensor will defend, indemnify, and hold Licensee and its Affiliates, directors, officers, employees, and agents (each a "**Licensee Representative**") harmless from and against any and all any and all liabilities, expenses, and losses, including reasonable (and reasonably documented) legal expenses and attorneys' fees (collectively, "**Losses**"), to which any Licensee Representative may become subject to as a result of any claim, demand, action, or other proceeding by any Third Party (a "**Claim**") to the extent such Losses are directly or indirectly arising from or relating to: (i) any gross negligence, misconduct, or violation of law by any Licensor Representative in the performance of this Agreement; or (ii) any breach by any Licensor Representative of any of Licensor's representations, warranties, covenants or obligations under this Agreement, except, in each of subsection (i) and (ii), to the extent such Losses are subject to Licensee's obligations pursuant to <u>Section 8.2</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.2 By Licensee**. Licensee will defend, indemnify, and hold Licensor and UNC, and each of their respective Affiliates, directors, officers, employees, and agents, harmless (each, a "**Licensor Representative**") from and against any and all Losses to which any Licensor Representative may become subject to as a result of any Claim to the extent such Losses are directly or indirectly arising from or relating to the exercise of any rights, licenses or sublicenses granted to Licensee hereunder, including: (i) any claims (including any product liability claims) based on the design, manufacture, marketing, promotion, sale, distribution, or use of the Licensed Product by any Licensee Representative; (ii) any gross negligence, misconduct, or violation of law by any Licensee Representative in the performance of this Agreement or in connection with the design, manufacture, marketing, promotion, sale, distribution, or use of the Licensed Product or (iii) any breach by any Licensee Representative of any of Licensee's representations, warranties, covenants or obligations under this Agreement, except, in each of subsection (i), (ii) and (iii), to the extent such Losses are subject to Licensor's obligations pursuant to <u>Section 8.1</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.3 Procedure**. A party that intends to claim indemnification under this <u>Section 8</u> (the "**Indemnitee**") shall promptly notify the indemnifying Party (the "**Indemnitor**") in writing of any Claim in respect of which the Indemnitee intends to claim such indemnification, and the Indemnitor shall have sole control of the defense or settlement thereof. The Indemnitee may participate at its expense in the Indemnitor's defense of and settlement negotiations for any Claim with counsel of the Indemnitee's own selection. The indemnity arrangement in this <u>Section 8</u> shall not apply to amounts paid in settlement of any action with respect to a Claim, if such settlement is effected without the consent of the Indemnitor, which consent shall not be unreasonably withheld or delayed. The failure to deliver written notice to the Indemnitor within a reasonable time after the commencement of any action with respect to a Claim shall only relieve the Indemnitor of its indemnification obligations under this <u>Section 8</u> if and to the extent the Indemnitor is actually prejudiced thereby. The Indemnitee shall cooperate fully with the Indemnitor and its legal representatives in the investigation of any action with respect to a Claim covered by this indemnification.

**9. Insurance**. Licensee is required to maintain in force at its sole cost and expense, with reputable insurance companies, insurance coverage in amounts and of types reasonably sufficient to protect against liability under <u>Section 8</u> above. Licensor and UNC shall have the right to ascertain from time to time that such coverage exists, with such right to be exercised in a reasonable manner.

**10.** **Confidentiality.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.1 Confidential Information.** The Parties agree that, unless the Receiving Party obtains the prior written consent of the Disclosing Party, at all times during the term of this Agreement and for a ten (10) year period following its expiration or earlier termination, the Receiving Party will keep completely confidential, will not publish or otherwise disclose and will not use directly or indirectly for any purpose other than as contemplated by this Agreement any Confidential Information of the Disclosing Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.2 Limited Disclosure Permitted.** Each Party may disclose Confidential Information of the Disclosing Party to the extent that such disclosure is:

**(a).** required by Applicable Law, in the opinion of legal counsel to the Receiving Party; <u>provided</u>, <u>however</u>, that the Receiving Party will first have given reasonable notice to the Disclosing Party (if practicable) and given the Disclosing Party a reasonable opportunity to obtain a protective order or confidential treatment requiring that the Confidential Information and documents that are the subject thereof be held in confidence by the recipient or, if disclosed, be used only for purposes required by such law; <u>provided further</u> that if a protective order is not obtained, the Confidential Information so disclosed will be limited to that information that is legally required to be disclosed by Applicable Law;

**(b).** made by Receiving Party to a governmental entity or Regulatory Authority as required to conduct clinical trials or obtain or maintain Regulatory Approval for products or services that are the subject of licenses granted to the Receiving Party under this Agreement, or otherwise as set forth in <u>Section 4.4</u>;

**(c).** made by Receiving Party to a Third Party as may be necessary or useful in connection with the manufacture, development and commercialization of any products or services that are the subject of licenses or sublicenses granted to the Receiving Party under this Agreement, in connection with financing activities of the Receiving Party, or in connection with the transfer or sale of all or substantially all of the business of the Receiving Party to which this Agreement relates to a Third Party, whether by merger, sale of stock, sale or transfer of assets or otherwise; <u>provided</u>, <u>however</u>, that: (i) each such Third Party has, in the reasonable determination of the Receiving Party, a need to know such Confidential Information and is bound by an agreement containing confidentiality and non-use obligations no less protective than those set forth in this Agreement in any material respect; (ii) the Receiving Party informs each Third Party receiving Confidential Information of its confidential nature; and (iii) the Receiving Party will be responsible for any breach of this <u>Section 10</u> by any such third parties to the same extent as if the breach were by the Receiving Party;

**(d).** made by a Receiving Party in order to comply with applicable securities laws disclosure requirement or any disclosure requirements of any applicable stock market or securities exchange; or

**(e).** made by Licensor pursuant to the UNC Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.3 Terms of Agreement**. The Parties agree that the material terms of this Agreement shall be considered Confidential Information of both Parties, subject to the special authorized disclosure provisions set forth below in this <u>Section 10.3</u> (in lieu of the authorized disclosure provisions set forth in <u>Section 10.2</u>, to the extent of any conflict) and without limiting the generality of the definition of Confidential Information set forth herein. If either Party desires to make a public announcement concerning the terms of this Agreement, such Party shall give reasonable prior advance notice of the proposed text of such announcement to the other Party for its prior review and approval, such approval not to be unreasonably withheld. A Party shall not be required to seek the permission of the other Party to repeat or disclose any information as to the terms of this Agreement that has already been publicly disclosed by such Party in accordance with the foregoing or by the other Party, or any similar or comparable information. Either Party may disclose the terms of this Agreement to such Party's existing investors, lenders, directors and professional advisors and to potential investors, lenders, acquirors or merger partners and their professional advisors who are bound by written or professional obligations of non-disclosure and non-use that are at least as stringent as those contained in this <u>Section 10</u> or are customary for such purpose. Each Party also may disclose the relevant terms of this Agreement to potential sublicensees who agree to be bound by obligations of non-disclosure and non-use at least as stringent as those contained in this <u>Section 10</u> in all material respects. Licensor may disclose this Agreement to UNC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.4 Publications**. Licensor shall have the right to review and comment on any material proposed for disclosure or publication by Licensee, such as by oral presentation, manuscript or abstract, which includes data generated from the use of the Specified IP or any Confidential Information of Licensor. Before any such material is submitted for publication, Licensee shall deliver a complete copy to Licensor at least forty-five (45) days prior to submitting the material to a publisher or initiating any other disclosure. Licensor shall review any such material and give its comments to Licensee within forty-five (45) days of the delivery of such material to Licensor. Licensee shall comply with Licensor's request to delete references to Licensor's Confidential Information in any such material and agrees to delay any submission for publication or other public disclosure for a period of up to an additional sixty (60) days for the purpose of preparing and filing appropriate applications in respect of any patentable information that should, as determined by Licensor, be protected by the filing of a patent application before publication or disclosure.

**11.** **Term and Termination**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.1 Term.** This Agreement will take effect on the Effective Date, and remain in full force and effect until such time as Licensee ceases to actively exploit the Licensed Product, subject to termination as provided in this <u>Section 11</u> (the "**Term**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.2 Termination for Material Breach**. Either Party may terminate this Agreement by giving a written notice of termination to the other Party in the event of a material breach by such other Party of any term or condition of this Agreement and such other Party fails to cure such breach within ninety (90) days after a written notice is given to such other Party requesting that such breach be cured.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.3 Termination as a Consequence of Patent Challenge by Licensee**. If Licensee or any of its Affiliates (a) directly or indirectly through assistance granted to a Third Party brings a Patent Challenge against Licensor or UNC, or (except as required under a court order or subpoena) assists others in bringing a Patent Challenge against Licensor or UNC, or (b) does not terminate a sublicense hereunder in accordance with <u>Section 2.2</u> where such Sublicensee directly or indirectly brings a Patent Challenge against Licensor or UNC, then, in each case ((a) or (b)), Licensor may, by written notice to Licensee, terminate this Agreement which termination shall be effective upon receipt of such notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.4 Termination for Insolvency**. Licensor may, but is not required to, terminate this Agreement if, at any time, Licensee shall file in any court or agency pursuant to any statute or regulation of any state, country or jurisdiction, a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee of Licensee or of its assets, or if Licensee proposes a written agreement of composition or extension of its debts, or if Licensee shall be served with an involuntary petition against it, filed in any insolvency proceeding, and such petition shall not be dismissed within sixty (60) days after the filing thereof, or if Licensee shall propose or be a party to any dissolution or liquidation, or if Licensee shall make an assignment for the benefit of its creditors. All rights and licenses granted under or pursuant to this Agreement by either Party are, for all purposes of Section 365(n) of Title 11 of the United States Code ("**Title 11**"), licenses of rights to "intellectual property" as defined in Title 11, and in the event that a case under Title 11 is commence by or against either Party, the other Party shall have all rights set forth in Section 365(n) of Title 11 to the maximum extent permitted thereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.5 Termination by Licensor**. Licensor shall have the right to terminate this Agreement on thirty (30) days' prior notice to Licensee if:

**(a).** Licensee fails to Launch the Licensed Product in the U.S. by December 31, 2025;

**(b).** Licensee fails to use Commercially Reasonable Efforts to enter into an agreement with a Third Party to commercialize the Licensed Product in France, Germany, Italy, Spain and the United Kingdom by September 30, 2026; or

**(c).** Licensee or its Affiliate or Sublicensee fails to receive Regulatory Approval for the Licensed Product in France, Germany, Italy, Spain and the United Kingdom by March 31, 2027.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.6 Effect of Termination.** Upon any termination of this Agreement:

**(a).** the licenses and sublicenses granted by Licensor to Licensee under this Agreement will immediately terminate and be revoked and all other rights and obligations of the Parties under this Agreement will terminate (except for those rights that survive pursuant to <u>Sections 11.7</u> through <u>11.9</u>);

**(b).** Licensee shall (subject to <u>Section 11.7</u>) immediately cease all further commercialization of the Licensed Product;

**(c).** each Party shall promptly return to the other Party, or at the request of the other Party delete or destroy, any Confidential Information of the other Party in such Party's possession or control; <u>provided</u> that such Party may keep one (1) copy of such materials for archival purposes only, subject to continuing confidentiality obligations; and

**(d).** to the extent permitted under Applicable Law, Licensee shall assign to Licensor (or its designated Affiliate), at Licensee's cost, all Regulatory Approvals (including the NDA pursuant to the dossier transfer letter attached hereto as <u>Exhibit A</u> held in escrow, which letter shall automatically become effective as of the effective date of such termination of this Agreement and shall thereafter be submitted by Licensor to the FDA), all Regulatory Materials and all domain names for the Licensed Product in the Territory, as well as any Third Party contracts necessary for the manufacture, use or sale of the Licensed Product in the Territory as of the effective date of termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.7 Sell-Off Period**. On termination of this Agreement by Licensee pursuant to <u>Section 11.2</u>, Licensee and its Affiliates and Sublicensees shall have the right to dispose of all stocks of Licensed Products in their possession and all Licensed Products in the course of manufacture at the date of termination for a period of one hundred twenty (120) days after the date of termination (the "**Sell-off Period**"), in each case, in accordance with the terms and conditions of this Agreement. Any royalty payable under the provisions of <u>Section 6.1</u> shall be paid to Licensor within forty-five (45) days after (a) termination, with respect to royalties accrued prior to the effective date of termination, and (b) the expiration of the Sell-off Period, with respect to royalties accrued during the Sell-off Period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.8 Effect on Sublicensees**. All sublicenses and rights of Affiliates and Sublicensees will terminate as of the effective date of termination of this Agreement; <u>provided</u>, <u>however</u>, that if, at the effective date of termination, any Sublicensee (a) is in good standing with respect to its obligations under its sublicense, (b) is not in material breach of the terms of this Agreement in regard to such sublicense, (c) was in compliance with all Applicable Law the effective date of termination, and (d) agrees to assume the applicable obligations of Licensee hereunder (with respect to any obligations that arise after the effective date of termination), then, at the request of the Sublicensee and with the written consent of Licensor (in Licensor's sole discretion), such sublicense shall survive such termination of this Agreement and shall be assigned to Licensor, <u>provided</u> that, in such case, the obligations of Licensor to Sublicensee shall not exceed the obligations of Licensor to Licensee under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.9 Survival.** Upon termination or expiration of this Agreement, <u>Sections 1</u> (Definitions), <u>3</u> (Improvements), <u>4</u> (Prosecution and Enforcement; Regulatory Matters), <u>6</u> (Royalty, Milestones and Reporting), <u>7</u> (Representations and Warranties; Liability), <u>8</u> (Indemnification), <u>10</u> (Confidentiality), <u>11.6</u> (Effect of Termination), <u>11.7</u> (Sell-Off Period), <u>11.8</u> (Effect on Sublicensees), <u>11.9</u> (Survival), and <u>12</u> (General) will survive.

**12.** **General** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.1 Notice**. Any notice, approval, authorization, consent, or other communication required or permitted to be delivered to either Party under this Agreement must be in writing and will be deemed properly delivered, given, and received (i) when delivered by hand or by messenger, (ii) when sent by facsimile, with written confirmation of receipt, (iii) three (3) business days after being mailed by first class mail (return receipt requested) or delivery to an international courier or express delivery service, or (iv) when received at the applicable e-mail address set forth below when sent by e-mail. All notices, approvals, authorizations, consents, or other communications shall be sent to the address or e-mail address set forth below (or to such other address or e-mail address as may be designated by a Party by giving written notice to the other Party pursuant to this <u>Section 12.1</u>):

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| | |
|:---|:---|
| If to Licensor, to:<br>Ligand Pharmaceuticals Incorporated<br> 555 Heritage Drive<br> Suite 200<br> Jupiter, FL 33458<br> Attention: Chief Financial Officer<br>in each case, with copies also sent to:<br>Ligand Pharmaceuticals Incorporated<br> 555 Heritage Drive<br> Suite 200<br> Jupiter, FL 33458<br> Attention: Chief Legal Officer<br>Latham & Watkins, LLP<br> 200 Clarendon Street<br> Boston, MA 02116<br> Attn: Peter Handrinos, Esq.<br> Email: <u>peter.handrinos@lw.com</u><br>| If to Licensee, to:<br>LNHC, Inc.<br> 4020 Stirrup Creek Drive<br> Suite 110<br> Durham, NC 27703<br> Attention: Chief Executive Officer<br>|

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.2 Governing Law; Venue**. This Agreement will be construed in accordance with and governed in all respects by the laws of the State of Delaware, USA. Any legal action or other legal proceeding relating to this Agreement or the enforcement of any provision of this Agreement may be brought or otherwise commenced in the state and federal courts located in Delaware, USA. Each Party expressly and irrevocably consents and submits to the jurisdiction of such state courts (and each appellate courts thereof) in connection with any such legal proceeding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.3 Assignment**. Neither Party may assign, delegate or otherwise transfer, in whole or in part, any rights or obligations under this Agreement, by operation of law or otherwise, without the other Party's express prior written consent, which shall not be unreasonably withheld; <u>provided</u>, <u>however</u>, that (i) Licensor may assign or transfer its rights and delegate its obligations under this Agreement without such consent to an Affiliate, <u>provided</u> that Licensor shall remain liable and responsible to Licensee for the performance and observance of all such duties and obligations by such Affiliate; and (ii) Licensor may assign or transfer its rights and delegate its obligations under this Agreement without such consent to a transferee or successor entity upon a Change of Control of Licensor. For the avoidance of doubt, Licensee shall not have the right to assign or transfer its rights or delegate its obligations under this Agreement to (x) an Affiliate of Licensee or (y) an acquirer, transferee or successor entity of Licensee in connection with a Change of Control of Licensee, in each case, without the prior written consent of Licensor, such consent not to be unreasonably withheld, conditioned or delayed. In the case of any permitted assignment or transfer of or under this Agreement, this Agreement shall be binding upon, and inure to the benefit of, the transferees, successors and assigns of the Parties hereto. Any assignment in violation of the foregoing shall be null and void.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.4 Remedies**. The rights and remedies of the Parties will be cumulative (and not alternative). If any legal action is brought to enforce this Agreement, the prevailing Party will be entitled to receive its attorneys' fees, court costs, and other collection expenses, in addition to any other relief it may receive.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.5 Waiver**. All waivers must be in writing and signed by an authorized representative of the Party to be charged. Any waiver or failure to enforce any provision of this Agreement on one occasion will not be deemed a waiver of any other provision or of such provision on any other occasion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.6 Severability**. If any provision of this Agreement is unenforceable, such provision will be changed and interpreted to accomplish the objectives of such provision to the greatest extent possible under Applicable Law and the remaining provisions will continue in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.7 Independent Contractors**. This Agreement is not intended to establish any partnership, joint venture, employment, or other relationship between the Parties except that of independent contractors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.8 Construction**. The section headings in this Agreement are for convenience of reference only, will not be deemed to be a part of this Agreement, and will not be referred to in connection with the construction or interpretation of this Agreement. Any rule of construction to the effect that ambiguities are to be resolved against the drafting Party will not be applied in the construction or interpretation of this Agreement. Except where the context otherwise requires, wherever used, the use of any gender shall be applicable to all genders, and the word "or" is used in the inclusive sense. As used in this Agreement, the words "include" and "including," and variations thereof, will not be deemed to be terms of limitation, but rather will be deemed to be followed by the words "without limitation."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.9 Counterparts**. This Agreement may be executed in several counterparts, each of which will constitute an original and all of which, when taken together, will constitute one agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.10 English Language**. This Agreement has been prepared in the English language and the English language shall control its interpretation. In addition, all notices required or permitted to be given hereunder, an all written, electronic, or other communications between the Parties regarding this Agreement shall be in the English language.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.11 Entire Agreement**. This Agreement, along with the Exhibit(s) hereto, set forth the entire understanding of the Parties relating to the subject matter hereof and supersedes all prior agreements and understandings between the Parties relating to the subject matter hereof. This Agreement may not be amended, modified, altered, or supplemented other than by means of a written instrument duly executed and delivered on behalf of both Parties.

*[Signature Page Follows.]*

**IN WITNESS WHEREOF**, the Parties have executed this Agreement as of the Effective Date.

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| | |
|:---|:---|
| **LIGAND PHARMACEUTICALS INCORPORATED** | **LNHC, INC.** |

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| | | | |
|:---|:---|:---|:---|
| By: | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Richard Baxter | By: | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Octavio Espinoza |

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Name: Richard Baxter Name: Octavio Espinoza <br> Title: Senior Vice President, Investment Operations Title: Officer & Board Member

*Signature Page to Exclusive License and Sublicense Agreement*

**<u>Exhibit A</u>**

**<u>Dossier Transfer Letter from Licensee to Licensor</u>**

**[ ● ], 20[ ● ]**

[ ● ], Director

Food and Drug Administration

Division of Dermatology and Dentistry

Center for Drug Evaluation and Research

Attention: Central Document Room

5901-B Ammendale Road

Beltsville, MD 20705-1266

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| | |
|:---|:---|
| **Re:** | **NDA 217424 (ZELSUVMI<sup>TM</sup> ((berdazimer) topical gel))** |

---

---

| | |
|:---|:---|
| **Subject:** | **General Correspondence: Change in Ownership of NDA Change in contact** |

---

Dear [ ● ]:

Reference is made to NDA 217424 for ZELSUVMI<sup>TM</sup> (berdazimer) topical gel approved by the FDA on January 5, 2024.

LNHC, Inc. ("<u>LNHC</u>") is hereby notifying the Division that it has transferred all rights and ownership of NDA 217424 from LNHC to Ligand Pharmaceuticals Incorporated ("<u>Ligand</u>") a Delaware corporation. Also enclosed is a letter from [ ● ] of Ligand, who will be the official correspondent for NDA 217424 going forward from [ ● ].

Accordingly, LNHC is no longer the owner and sponsor of NDA 217424 effective [ ● ]. Ligand has a complete copy of the NDA, including amendments and records. The address and contact information for correspondence after [ ● ] is below.

**Corresponding Address of the New Sponsor:**

Ligand Pharmaceuticals Incorporated

[ ● ]

**Change in Contact:**

Effective [ ● ] the new Sponsor's contact information for NDA 217424 is as follows:

Ligand Pharmaceuticals Incorporated

[ ● ]

This submission contains trade secrets and confidential commercial information exempt from public disclosure pursuant to exemption 4 of the Freedom of Information Act and FDA regulations (5 U.S.C. § 552(b)(4); 21 C.F.R. § 20.61), and the disclosure of which is prohibited by other applicable laws. LNHC and Ligand respectfully request that the data and information submitted not be publicly disclosed, consistent with 21 C.F.R. § 314.430. Pursuant to FDA regulations, Ligand is entitled to notice, an opportunity to object, and an opportunity to seek pre-release judicial review in the event that FDA determines that all or any part of this submission may be disclosed. *See* 21 C.F.R. § 20.61.

If you have any questions regarding this correspondence, please feel free to contact me at the number provided below.

Sincerely,

**LNHC, INC.**

By:

Name: <br> Title:

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| | |
|:---|:---|
| **LIGAND PHARMACEUTICALS INCORPORATED** | . |

---

By:

Name: <br> Title:

## Exhibit 99.1

**Exhibit 99.1**

**LNHC, Inc.**

**Condensed Balance Sheets**

**(in thousands)**

---

| | | |
|:---|:---|:---|
|  | **(Unaudited)<br> June 30, 2025** | **December 31, 2024** |
| **ASSETS** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | $2817 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net | 48 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventory | 7091 | 4526 |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 1189 | 798 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 11145 | 5324 |
| Intangible assets, net |  | 9802 |
| Goodwill | 6604 | 6604 |
| Property and equipment, net | 10633 | 11483 |
| Operating lease right-of-use assets, net | 3452 | 3646 |
| Other assets | 529 | 501 |
| Total assets | $32363 | $37360 |
| **LIABILITIES AND PARENT COMPANY NET INVESTMENT** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | $993 | $1712 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses | 10432 | 2041 |
| &nbsp;&nbsp;&nbsp;&nbsp;Short-term Bridge loan | 6053 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities, current portion | 626 | 617 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue, current portion | 1072 | 1178 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 19176 | 5548 |
| Deferred revenue, net of current portion | 1763 | 2246 |
| Deferred income tax liability |  | 85 |
| Operating lease liabilities, net of current portion | 2940 | 3117 |
| Other long-term liabilities | 17441 | 15939 |
| Total liabilities | 41320 | 26935 |
| Commitments and contingencies (Note 11) |  |  |
| Parent company net investment: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Parent company net investment | (8957) | 10425 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total parent company net investment | (8957) | 10425 |
| Total liabilities and parent company net investment | $32363 | $37360 |

---

*The accompanying notes are an integral part of these condensed financial statements.*

**LNHC, Inc.**

**Condensed Statements of Operations**

**(Unaudited)**

**(in thousands)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended** | **Three months ended** | **Six months ended** | **Six months ended** |
|  | **June 30,** | **June 30,** | **June 30,** | **June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Revenues | $317 | $219 | $611 | $437 |
| Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and development | 3938 | 2288 | 6670 | 5617 |
| &nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative | 12384 | 3174 | 16646 | 7087 |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of intangibles |  | 178 | 162 | 357 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 16322 | 5640 | 23478 | 13061 |
| Operating loss | (16005) | (5421) | (22867) | (12624) |
| Other income (expense), net: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense | (930) | (380) | (1556) | (750) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other income (expense) | (26) | 2 | (49) | (4) |
| Total other income (expense), net | (956) | (378) | (1605) | (754) |
| Loss before income tax | (16961) | (5799) | (24472) | (13378) |
| Income tax benefit (expense) |  | 59 |  | 136 |
| Net loss | $(16961) | $(5740) | $(24472) | $(13242) |

---

*The accompanying notes are an integral part of these condensed financial statements.*

**LNHC, Inc.**

**Condensed Statements of Changes in Parent Company Net Investment**

**(Unaudited)**

**(in thousands)**

---

| | |
|:---|:---|
|  | **Parent** <br> **company net**<br> **investment** |
| **Balance as of January 1, 2025** | $10425 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss | (7511) |
| &nbsp;&nbsp;&nbsp;&nbsp;Parent allocation of share-based compensation | 1348 |
| &nbsp;&nbsp;&nbsp;&nbsp;Transfer of intangible asset to parent company | (9640) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net transfers from parent company | 7778 |
| **Balance as of March 31, 2025** | 2400 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss | (16961) |
| &nbsp;&nbsp;&nbsp;&nbsp;Parent allocation of share-based compensation | 1744 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net transfers from parent company | 3860 |
| **Balance as of June 30, 2025** | $(8957) |
| **Balance as of January 1, 2024** | $9294 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss | (7502) |
| &nbsp;&nbsp;&nbsp;&nbsp;Parent allocation of share-based compensation | 981 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net transfers from parent company | 6921 |
| **Balance as of March 31, 2024** | 9694 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss | (5740) |
| &nbsp;&nbsp;&nbsp;&nbsp;Parent allocation of share-based compensation | 883 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net transfers from parent company | 5786 |
| **Balance as of June 30, 2024** | $10623 |

---

*The accompanying notes are an integral part of these condensed financial statements.*

**LNHC, Inc.**

**Condensed Statements of Cash Flows**

**(Unaudited)**

**(in thousands)**

---

| | | |
|:---|:---|:---|
|  | **Six months ended** | **Six months ended** |
|  | **June 30,** | **June 30,** |
|  | **2025** | **2024** |
| **Cash flow from operating activities:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss | $(24472) | $(13242) |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Parent allocation of share-based compensation | 3092 | 1864 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accretion of interest for Reedy Creek obligation | 1556 | 750 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation of property and equipment | 919 | 939 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of intangibles | 162 | 357 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lease amortization expense | 347 | 347 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory write-off | 264 | 248 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other | 51 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | (48) | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory | (2829) | (2722) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses | (391) | (59) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease right-of-use assets | (153) | (166) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | (719) | (466) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses | 7481 | 175 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities | (168) | (146) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | (589) | (437) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income tax | (85) | (136) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets and liabilities | (82) | 13 |
| Net cash used in operating activities | (15664) | (12678) |
| **Cash flow from investing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchases of property and equipment | (67) | (29) |
| Net cash used in investing activities | (67) | (29) |
| **Cash flow from financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from Pelthos investors | 6910 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net transfer from parent | 11638 | 12707 |
| Net cash provided by financing activities | 18548 | 12707 |
| Net increase in cash and cash equivalents | 2817 |  |
| Cash and cash equivalents as of beginning of period |  |  |
| Cash and cash equivalents as of end of period | $2817 | $— |
| **Supplemental disclosure of cash flow information:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash paid for interest | $— | $— |
| **Supplemental disclosure of non-cash investing and financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchases of property and equipment with accounts payable and accrued expenses as of end of period | $— | $3 |

---

*The accompanying notes are an integral part of these condensed financial statements.*

**LNHC, Inc.**

**Notes to Condensed Financial Statements**

**(dollar values in thousands, except for per share amounts)**

**Note 1: Organization and Nature of Operations**

LNHC, Inc. is a wholly-owned subsidiary of Ligand Pharmaceuticals Incorporated ("Ligand") initially incorporated for the purpose to hold the assets and liabilities acquired from Novan, Inc. ("Novan"). On September 27, 2023, Ligand, through LNHC, Inc., acquired certain assets and liabilities of Novan. This transaction (the "Novan Acquisition") was accounted for by Ligand as a business combination. Novan was a medical dermatology company focused on developing and commercializing innovative therapeutic products for skin diseases. Through its NITRICIL technology platform, Novan had concentrated on developing SB206 (berdazimer gel, 10.3%) as a topical prescription gel for the treatment of viral skin infections, with a focus on molluscum contagiosum.

In January 2023, Novan submitted a New Drug Application to the U.S. Food and Drug Administration (the "FDA") for berdazimer gel, 10.3% as a topical treatment for molluscum contagiosum which was subsequently approved by the FDA on January 5, 2024, and is commercially known as ZELSUVMI™.

ZELSUVMI is a topical medication for the treatment of molluscum contagiosum in adults and pediatric patients one year of age or older. The FDA approved ZELSUVMI as a novel drug for the treatment of molluscum infections. ZELSUVMI is the first and only topical prescription medication that can be applied by patients, parents, or caregivers at home, outside of a physician's office, or other medical setting to treat this highly contagious viral skin infection.

From the date of the Novan Acquisition through March 24, 2025, LNHC held an IP portfolio that consisted of over 45 U.S. patents, 120 non-U.S. patents, and 25 pending patent applications worldwide along with substantial know-how and trade secrets. In addition to ZELSUVMI, this IP portfolio provides material coverage for the NITRICIL platform technologies, licensed products and product candidates. There are 14 issued U.S. patents covering ZELSUVMI which are expected to be listed in the Orange Book and which are expected to expire beginning in 2026 and ending in 2035 (or potentially 2037 with patent extension).

On March 24, 2025, LNHC assigned its rights to its IP portfolio to Ligand, and entered into an exclusive license and sublicense agreement with Ligand, pursuant to which Ligand licensed to LNHC the intellectual property rights necessary to make, use, sell or offer to sell ZELSUVMI for the treatment of molluscum contagiosum in humans worldwide except for Japan. In addition, on March 24, 2025, LNHC and Ligand also entered into a Master Services Agreement under which Ligand, or related parties, may contract with LNHC for LNHC to provide Ligand active pharmaceutical ingredients for clinical or commercial use related to NITRICIL technology. In addition, the agreement also allows Ligand to require LNHC to provide manufacturing technology transfer services, if requested by Ligand, for products utilizing NITRICIL technology other than ZELSUVMI for the treatment of molluscum contagiosum in humans, to a potential third-party manufacturer.

**Note 2: Basis of Presentation and Significant Accounting Policies**

***Basis of Presentation***

Unless the context otherwise requires, "LNHC" or the "Company", refers to LNHC, Inc. The Company's condensed financial statements have been prepared on a stand-alone basis, in conformity with United States generally accepted accounting principles ("U.S. GAAP").

***Parent Company Net Investment***

The Company is under the control of Ligand (commonly referred to as "Parent" or "Parent Company"). Accordingly, the Parent Company net investment in the Company is shown in lieu of stockholder's equity in the condensed financial statements. All significant intercompany transactions with the Parent Company are deemed to have been paid in the period the costs were incurred. Expenses related to corporate allocations are considered to be effectively settled for cash in the condensed financial statements at the time the transaction was recorded.

***Corporate Allocations***

The condensed financial statements include all revenues, expenses, assets and liabilities directly associated with the Company's business activity, as well as an allocation of certain general and administrative expenses related to facilities, functions and services provided by the Parent.

Corporate expenses have been allocated to the Company based on a relative usage of (benefit from) certain corporate divisions, or specific corporate employees, in the Company's business. Management believes that methodology applied to the Company corporate expenses allocations are reasonable and consistent across the Company's reporting periods.

All of the allocations and estimates in the condensed financial statements are based on assumptions that management believes are reasonable. However, the condensed financial statements included herein may not be indicative of the financial position, results of operations and cash flows of the Company in the future or if the Company had been a separate, stand-alone publicly traded entity during the periods presented.

***Liquidity and Going Concern***

Since the Novan Acquisition, LNHC was dependent upon Ligand for all of its working capital and financing requirements, as Ligand uses a centralized approach for cash management and financing its operations. There were no cash amounts specifically attributable to LNHC for the historical periods presented; therefore, there is no cash reflected in the condensed financial statements. Accordingly, cash and cash equivalents have not been allocated to LNHC in the condensed financial statements. Financing transactions related to LNHC are accounted for as a component of net Parent investment in the condensed balance sheets and as a financing activity including an interest expense component allocation on the accompanying condensed statements of cash flows.

The accompanying condensed financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

LNHC expects to continue to incur losses for the foreseeable future, as it continues to invest in commercialization activities for ZELSUVMI, add operational, financial and management information systems and personnel to support Company operations and incur additional costs associated with operating as a public company. LNHC's ability to continue its operations is dependent upon its ability to obtain additional capital in the future and generate cash flows from operations.

Based on LNHC's current projections, management believes there is substantial doubt about its ability to continue to operate as a going concern and fund its operations through at least the next twelve months following the issuance of these condensed financial statements. While the Company completed an equity offering of $50.1 million subsequent to the end of the reporting period, see Note (13), Subsequent Events, the Company expects that costs associated with the commercial launch of ZELSUVMI (acquired pursuant to the Merger), in addition to other activities, will require the Company to raise additional funds. However, there is no assurance that the Company will be able to raise such additional funds on acceptable terms, if at all. If the Company raises additional funds by issuing securities, existing stockholders may be diluted.

The accompanying condensed financial statements included in this report do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the matters discussed herein. While the Company believes in the viability of the Company's strategy to generate sufficient revenue, control costs, and raise additional funds, when necessary, there can be no assurances to that effect. The Company's ability to continue as a going concern is dependent upon the ability to implement the business plan, generate sufficient revenues, raise capital, and to control operating expenses.

***Use of Estimates***

The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates.

***Inventory***

The Company measures inventory using the first-in, first-out method and values inventory at the lower of cost or net realizable value. Inventory value includes amounts related to materials, manufacturing labor and overheads. The Company adjusts its inventory for potentially obsolete inventory. The adjustment for obsolescence is generally an estimate of the value of inventory that is expected to expire in the future based on projected sales volume and product expiration or expected sell-by dates. These assumptions require the Company to analyze the aging of and forecasted demand for its inventory and make estimates regarding future product sales.

Prior to obtaining initial regulatory approval for ZELSUVMI in January 2024, the Company expensed costs relating to production of pre-launch inventory as research and development expense in its condensed statements of operations in the period incurred. Inventory acquired and the related costs after January 5, 2024, the date of the FDA's approval of ZELSUVMI, are capitalized.

Additionally, the Company's product is subject to strict quality control and monitoring that is performed throughout the manufacturing process, including release of work-in-process to finished goods. In the event that certain batches or units of product do not meet quality specifications, the Company records a write-down of any potential unmarketable inventory to its estimated net realizable value. The amount of expense related to inventory write down as a result of excess, obsolescence, scrap, or other reasons is recorded as research and development expense in the condensed statement of operations. The Company-recorded inventory write-down amounted to $264 during the three and six months ended June 30, 2025, and $248 during the three and six months ended June 30, 2024. Any of such expenses incurred subsequent to the ZELSUVMI commercial launch date will be recorded as cost of sales.

***Property and Equipment***

Property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives as follows:

---

| | |
|:---|:---|
| Computer equipment | 3 years |
| Software | 3-5 years |
| Furniture and fixtures | 5-7 years |
| Manufacturing and laboratory equipment | 7 years |

---

Leasehold improvements are amortized over the shorter of the life of the lease or the useful life of the improvements. Expenditures for maintenance and repairs are expensed as incurred. Improvements and betterments that add new functionality or extend the useful life of an asset are capitalized. Leases for real estate often include tenant improvement allowances, which the Company assesses according to applicable accounting guidance to determine the appropriate owner, and capitalizes such tenant improvement assets accordingly.

***Leases***

The Company leases office space under non-cancelable lease agreements. The Company applies the accounting guidance in ASC 842, *Leases.* As such, the Company assesses all arrangements, that convey the right to control the use of property, plant and equipment, at inception, to determine if it is, or contains, a lease based on the unique facts and circumstances present in that arrangement. For those leases identified, the Company determines the lease classification, recognition, and measurement at the lease commencement date. For arrangements that contain a lease, the Company: (i) identifies lease and non-lease components; (ii) determines the consideration in the contract; (iii) determines whether the lease is an operating or financing lease; and (iv) recognizes lease Right of Use ("ROU") assets and corresponding lease liabilities. Lease liabilities are recorded based on the present value of lease payments over the expected lease term. The corresponding ROU asset is measured from the initial lease liability, adjusted by (i) accrued or prepaid rents; (ii) remaining unamortized initial direct costs and lease incentives; and (iii) any impairments of the ROU asset.

The Company elected the practical expedient to not separate non-lease components from the lease components. Fixed lease payments on operating leases are recognized over the expected term of the lease on a straight-line basis. Variable lease expenses that are not considered fixed are expensed as incurred. Fixed and variable lease expense on operating leases is recognized within operating expenses within the condensed statements of operations. The Company has elected the short-term lease exemption and, therefore, does not recognize an ROU asset or corresponding liability for lease arrangements with an original term of 12 months or less.

The interest rate implicit in the Company's lease contracts is typically not readily determinable and as such, the Company uses its incremental borrowing rate based on the information available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment.

***Impairment of Goodwill and Long-Lived Assets***

Goodwill, which has an indefinite useful life, represents the excess of cost over fair value of net assets acquired. Goodwill is reviewed for impairment at the reporting unit level at least annually during the fourth quarter, or more frequently if an event occurs indicating the potential for impairment. During the goodwill impairment review, management performs an assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and the overall financial performance. If, after assessing the totality of these qualitative factors, management determines that it is not more likely than not that the fair value of reporting unit is less than the carrying amount, then no additional assessment is deemed necessary. The Company did not identify indicators of impairment for goodwill during the three and six months ended June 30, 2025 and 2024.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for an amount by which the carrying amount of the asset exceeds the fair value of the asset. The Company did not identify indicators of impairment for the finite-lived intangibles during the three and six months ended June 30, 2025 and 2024.

***Fair Value of Financial Instruments***

Accounts receivable, other current assets, accounts payable, accrued expenses, operating lease liabilities and other long-term liabilities (Reedy Creek liability) are financial instruments and are recorded at cost in the condensed balance sheets.

The estimated fair value of Reedy Creek liability as of June 30, 2025, was $20,614 compared to a carrying value of $17,441. The estimated fair value of Reedy Creek liability as of December 31, 2024, was $19,100 compared to a carrying value of $15,939. The fair value of Reedy Creek liability is classified as Level 3 within the fair value hierarchy (Unobservable inputs in which there is little or no market data, which require the Company to develop its own assumptions) since it is determined based upon inputs that are both significant and unobservable. This liability was fair valued based on the discounted cash flow method that estimated the present value of the potential royalties, milestones, and collaboration revenue streams derived from the related programs mentioned above, by applying a discount rate of 20% (revenue risk-adjusted discount rate).

The estimated fair value of the remaining financial instruments approximates their carrying value as of June 30, 2025 and December 31, 2024.

***Revenue Recognition***

To determine revenue recognition for arrangements with customers, the Company performs the following five steps: (i) identify the contracts with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, the Company assesses the goods or services promised to a customer within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Upon the occurrence of a contract modification, the Company conducts an evaluation pursuant to the modification framework in Topic 606 to determine the appropriate revenue recognition. The framework centers around key questions, including (i) whether the modification adds additional goods and services, (ii) whether those goods and services are distinct, and (iii) whether the contract price increases by an amount that reflects the standalone selling price for the new goods or services. The resulting conclusions will determine whether the modification is treated as a separate, standalone contract or if it is combined with the original contract and accounted for in that manner. In addition, some modifications are accounted for on a prospective basis and others on a cumulative catch-up basis.

***Research and Development Expenses***

Research and development expenses include all direct and indirect development costs incurred for the development of the Company's drug product SB206. These expenses include salaries and related costs, including stock-based compensation and travel costs for research and development personnel, allocated facility costs, laboratory and manufacturing materials and supplies, consulting fees, product development, preclinical studies, clinical trial costs, licensing fees and milestone payments under license agreements and other fees and costs related to the development of drug candidates. The cost of tangible and intangible assets that are acquired for use on a particular research and development project, have no alternative future uses, and are not required to be capitalized in accordance with the Company's capitalization policy, are expensed as research and development costs as incurred.

***Income Taxes***

Provision for income taxes, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management's best assessment of estimated future taxes to be paid. Significant judgments and estimates based on interpretations of existing tax laws or regulations in the United States are required in determining the Company provision for income taxes. Changes in tax laws, statutory tax rates, and estimates of our future taxable income could impact the deferred tax assets and liabilities provided for in the condensed financial statements and would require an adjustment to the provision for income taxes.

Deferred tax assets are regularly assessed to determine the likelihood they will be recovered from future taxable income. A valuation allowance is established when management believes it is more likely than not the future realization of all or some of a deferred tax asset will not be achieved. In evaluating our ability to recover deferred tax assets within the jurisdiction which they arise, management considers all available positive and negative evidence. Factors reviewed include the cumulative pre-tax book income for the past three years, scheduled reversals of deferred tax liabilities, Company history of earnings and reliability of management forecasts, projections of pre-tax book income over the foreseeable future, and the impact of any feasible and prudent tax planning strategies.

The Company recognizes the impact of a tax position in its condensed financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Tax authorities regularly examine our returns in the jurisdictions in which the Company does business and management performs a regular assessment of tax risk of Company's return filing positions. Due to the complexity of some of the uncertainties, the ultimate resolution may result in payments that are materially different from current estimate of the tax liability. These differences, as well as any interest and penalties, will be reflected in the provision for income taxes in the period in which they are determined.

***Recently Issued Accounting Standards Not Yet Adopted***

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity's effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU will be effective for the annual periods beginning after December 15, 2024. The Company is currently evaluating the impact ASU No. 2023-09 will have on its condensed financial statements.

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2024-03, "Disaggregation of Income Statement Expenses," which requires disclosures of certain disaggregated income statement expense captions into specified categories within the footnotes to the financial statements. The requirements of the ASU are effective for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The requirements will be applied prospectively with the option for retrospective application. The Company is currently evaluating the impact ASU No. 2024-03 will have on its condensed financial statements.

The Company does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the condensed financial statements or disclosures.

**Note 3: Sato Agreement**

On January 12, 2017, the Company entered into a license agreement, and related first amendment, with Sato Pharmaceutical Co., Ltd. ("Sato"), relating to SB204, its drug candidate for the treatment of acne vulgaris in Japan (the "Sato Agreement"). Pursuant to the Sato Agreement, the Company granted to Sato an exclusive, royalty-bearing, non-transferable right and license under certain of the Company's intellectual property rights, with the right to sublicense with the Company's prior written consent, to develop, use and sell products in Japan that incorporate SB204 in certain topical dosage forms for the treatment of acne vulgaris, and to make the finished form of such products.

On October 5, 2018, the Company and Sato entered into the second amendment (the "Sato Amendment") to the Sato Agreement (collectively, the "Amended Sato Agreement"). The Sato Amendment expanded the Sato Agreement to include SB206, the Company's drug candidate for the treatment of viral skin infections. Pursuant to the Amended Sato Agreement, the Company granted to Sato an exclusive, royalty-bearing, non-transferable license under certain of its intellectual property rights, with the right to sublicense with the Company's prior written consent, to develop, use and sell products in Japan that incorporate SB204 or SB206 in certain topical dosage forms for the treatment of acne vulgaris or viral skin infections, respectively, and to make the finished form of such products.

The Company or its designated contract manufacturer will supply study materials to Sato for use in the development of SB204 and SB206 in the licensed territory. The rights granted to Sato do not include the right to manufacture the active pharmaceutical ingredient ("API") of SB204 or SB206; rather, the parties agreed to negotiate a commercial supply agreement pursuant to which the Company or its designated contract manufacturer would be the exclusive supplier to Sato of the API for the commercial manufacture of licensed products in the licensed territory. Under the terms of the Amended Sato Agreement, the Company also has exclusive rights to certain intellectual property that may be developed by Sato in the future, which the Company could choose to use for its own development and commercialization of SB204 or SB206 outside of Japan.

The term of the Amended Sato Agreement (and the period during which Sato must pay royalties under the amended license agreement) expires on the twentieth anniversary of the first commercial sale of a licensed product in the licensed field in the licensed territory (adjusted from the tenth anniversary of the first commercial sale in the Sato Agreement). The term of the Amended Sato Agreement may be renewed with respect to a licensed product by mutual written agreement of the parties for additional two-year periods following expiration of the initial term. All other material terms of the Sato Agreement remain unchanged by the Sato Amendment.

Sato is responsible for funding the development and commercial costs for the program that are specific to Japan. The Company is obligated to perform certain oversight, review and supporting activities for Sato, including: using commercially reasonable efforts to obtain marketing approval of SB204 and SB206 in the United States and sharing all future scientific information the Company may obtain during the term of the Amended Sato Agreement pertaining to SB204 and SB206; and participating in a joint committee that oversees, reviews and approves Sato's development and commercialization activities under the Amended Sato Agreement. Additionally, the Company has granted Sato the option to use the Company's trademarks in connection with the commercialization of licensed products in the licensed territory for no additional consideration, subject to the Company's approval of such use.

The Company concluded that Sato is a customer with respect to all promises in the Amended Sato Agreement, and as such, revenue is recognized in accordance with ASC 606. The Company allocated the transaction price (including the upfront payments received and the unconstrained variable consideration), between the individual performance obligations based on their relative standalone-selling prices. In future periods, the Company would lift the variable consideration constraint from each contingent payment if there were no longer a probable likelihood of significant revenue reversal.

A portion of transaction price allocated to license performance obligation was recognized in revenues on the date of license delivery. For all other performance obligations, the Company concluded that a cost-based input method for revenue recognition is most appropriate. The Company monitors and reassesses actual and estimated costs over the expected development period to calculate a percentage of completeness for purposes of revenue recognition during each reporting period.

The Company currently estimates the end of development period in the first quarter of 2028, based upon a Sato-prepared Japanese development program timeline. The estimated percentage of completeness remains subject to prospective reassessment and adjustment based upon Sato's interaction with the Japanese regulatory authorities and other developmental and timing considerations.

All contract liabilities (deferred revenue) recognized on the condensed balance sheets as of June 30, 2025 and December 31, 2024, were related to the Sato Agreement. All revenue recognized for the three and six months ended June 30, 2025 and 2024 was related to the Sato Agreement, and was recognized out of the deferred revenue balance as of the beginning of respective period. The net amount of existing performance obligations under long-term contracts unsatisfied as of June 30, 2025 was $2,835, out of which the Company expects to recognize approximately $1,072 in revenue over the next 12 months, and the remaining balance thereafter.

The Sato Agreement may be terminated by (i) Sato without cause upon 120 days' advance written notice to the Company; (ii) either party in the event of the other party's uncured material breach upon 60 days' advance written notice; (iii) force majeure; (iv) either party in the event of the other party's dissolution, liquidation, bankruptcy or insolvency; and (v) the Company immediately upon written notice if Sato challenges the validity, patentability, or enforceability of any of the Company's patents or patent applications licensed to Sato under the Amended Sato Agreement. In the event of a termination, no portion of the upfront fees received from Sato are refundable. The payment terms contained within the Sato Agreement related to upfront, developmental milestone and sales milestone payments are of a short-term nature and, therefore, do not represent a financing component requiring additional consideration.

On March 24, 2025, LNHC assigned the Sato Agreement to Ligand, however, LNHC agreed to assume all contractual liabilities under the Sato Agreement and certain agreements related to the Sato Agreement, and Ligand is obligated to pass-through all future payments received from Sato to LNHC, starting from March 24, 2025. As such, the amount of Sato deferred revenue in the carve-out financials has not changed as a result of the assignment of the Sato Agreement to Ligand.

**Note 4: License Agreements**

The Company has entered into various licensing agreements with universities, research institutions, and others under which the Company receives the rights, and in some cases substantially all of the rights, of the inventors, assignees or co-assignees to produce and market technology protected by certain patents and patent applications.

On March 24, 2025, LNHC assigned its rights to its IP portfolio to Ligand, and entered into an exclusive license and sublicense agreement with Ligand, pursuant to which Ligand licensed to LNHC the intellectual property rights necessary to make, use, sell or offer to sell ZELSUVMI for the treatment of molluscum contagiosum in humans worldwide except for Japan. In addition, on March 24, 2025, LNHC and Ligand also entered into a Master Services Agreement under which Ligand, or related parties, may contract with LNHC for LNHC to provide Ligand active pharmaceutical ingredients for clinical or commercial use related to NITRICIL technology. In addition, the agreement also allows Ligand to require LNHC to provide manufacturing technology transfer services, if requested by Ligand, for products utilizing NITRICIL technology other than ZELSUVMI for the treatment of molluscum contagiosum in humans, to a potential third-party manufacturer.

Under the terms of the license agreement with LNHC, Ligand is entitled to a 13% royalty on worldwide sales of ZELSUVMI, and $10 million in commercialization and sales-based milestones. A $5 million obligation for the milestone related to commercialization activities was incurred at the end of June 2025 and is reflected within both accrued expenses and selling, general and administrative expenses for the three and six months ended June 30, 2025.

Prior to the March 24, 2025, LNHC assignment of its rights to its IP portfolio to Ligand, the Company's primary license agreement was with the University of North Carolina at Chapel Hill ("UNC") and is described in further detail within the subsection below.

The Company is generally required to make milestone payments based on development milestones and will be required to make royalty payments based on a percentage of future sales of covered products or a percentage of sublicensing revenue. Costs to acquire rights under license agreements and pre-commercialization milestone payments are classified as research and development expenses in the condensed statements of operations. Research and development expense recognized in connection with the incurrence of such costs totaled zero during both the three months ended June 30, 2025 and 2024, and $115 and $130 during the six months ended June 30, 2025 and 2024, respectively.

The Company is generally required by the various licensing agreements to reimburse the licensor for certain legal and other patent related costs. These costs are expensed as incurred and are classified as general and administrative expenses in the condensed statements of operations. The Company's general and administrative expense recognized in connection with the incurrence of such costs totaled to $46 and $40 for the three months ended June 30, 2025 and 2024, and $48 and $59 for the six months ended June 30, 2025 and 2024, respectively.

These license arrangements could require the Company to make payments upon achievement of certain milestones by the Company. As future royalty payments are directly related to future revenues (either sales or sublicensing), future commitments cannot be determined. No accrual for future payments under these agreements has been recorded, as the Company cannot estimate if, when or in what amount payments may become due.

***UNC License Agreement***

The Company acquired exclusive rights to intellectual property, including those that were ultimately developed by the Company into the specific library of NITRICIL compounds, pursuant to license agreements with the University of North Carolina at Chapel Hill ("UNC"), entered into in July 2007 and October 2009, which were subsequently amended, restated and consolidated in June 2012 (the "UNC License Agreement"). Under the UNC License Agreement, the Company was granted an exclusive, worldwide license, with the ability to sublicense, to develop and commercialize products utilizing the licensed intellectual property. The Company has amended the UNC License Agreement multiple times since June 2012 to both expand the scope of licensed patents to cover additional nitric oxide technologies and to modify certain regulatory and/or commercial milestones under the UNC License Agreement.

The UNC License Agreement currently requires the Company to pay UNC up to $250 in regulatory and commercial milestones on a licensed product by licensed product basis and a running royalty percentage in the low single digits on net sales of licensed products. Licensed products include any products being developed by the Company or by its sublicensees. In addition, under the UNC License Agreement, the Company is obligated to reimburse UNC for reasonable prosecution and maintenance costs related to intellectual property. Pursuant to the UNC License Agreement, the Company has the first right to defend against third-party claims of patent infringement with respect to the licensed products and to enforce the licensed patents against third-party infringers.

Unless earlier terminated by the Company at its election, or if the Company were to materially breach the agreement or become bankrupt, the UNC License Agreement remains in effect on a country by country and licensed product by licensed product basis until the expiration of the last to expire issued patent covering such licensed product in the applicable country, and upon such expiration, the Company will receive a perpetual, unrestricted, fully-paid and royalty free right to develop and commercialize such licensed product in such country.

UNC may terminate the agreement or render the license granted thereunder non-exclusive for the Company's material breach of the agreement that remains uncured after 90 days of receipt of written notice thereof from UNC and may also terminate the agreement or render the license granted thereunder non-exclusive upon providing written notice for our bankruptcy or insolvency-related events within 30 days of the occurrence of such events. The Company may terminate the agreement at any time for convenience upon providing written notice of not less than 30 days to UNC. On March 24, 2025, LNHC assigned the UNC License Agreement to Ligand.

***NITRICIL Platform and Other Nitric Oxide Releasing Compounds***

The UNC License Agreement provided the Company with a library of compounds, patents and related intellectual property associated with nitric oxide releasing materials ("UNC IP"). Certain portions of the UNC IP relate to what has been developed by the Company into the NITRICIL technology platform, including NVN1000 (also known as berdazimer sodium), the new chemical entity ("NCE") which is the active pharmaceutical ingredient for ZELSUVMI, the Company's first U.S. Food and Drug Administration ("FDA") approved commercial product. Other nitric oxide releasing materials, unrelated to berdazimer sodium, were a part of the UNC IP but have not been developed subsequent to the execution of the UNC License Agreement by the Company or have been sublicensed to other parties. On March 24, 2025, LNHC assigned its rights to these patents to Ligand.

***NITRICIL Platform***

As of June 30, 2025 the last to expire patent related to ZELSUVMI originating from the UNC License Agreement is May 2026. The Company has progressed the development of that in-licensed intellectual property portfolio from the UNC License Agreement and has since obtained 12 U.S. patents, in addition to two U.S. patents obtained with the original UNC License Agreement, resulting in a total of 14 issued U.S. patents covering ZELSUVMI. These 14 U.S. patents are expected to expire during the time period beginning in 2026 and ending in 2035. Upon the initial FDA approval of ZELSUVMI, the Company applied for 1,280 days of patent term extension ("PTE"), for the U.S. patent covering ZELSUVMI compositions. Assuming grant of the PTE application, the term of this patent may be extended from February 27, 2034, to August 30, 2037. On March 24, 2025, LNHC assigned its rights to these patents to Ligand.

**Note 5: Reedy Creek Liability** 

On April 29, 2019, the Company entered into a royalty and milestone payments purchase agreement (the "Reedy Creek Purchase Agreement") with Reedy Creek Investments LLC ("Reedy Creek"), pursuant to which Reedy Creek provided funding to the Company in an amount of $25,000 for the Company to pursue the development, regulatory approval and commercialization activities (including through out-license agreements and other third-party arrangements) for SB206, a topical gel with anti-viral properties being developed as a treatment for molluscum, and advancing programmatically such activities with respect to SB204, a once-daily, topical monotherapy being developed for the treatment of acne vulgaris, and SB414, a topical cream-based product candidate being developed for the treatment of atopic dermatitis.

If the Company successfully commercializes any such product, following regulatory approval, the Company will be obligated to pay Reedy Creek a low single digit royalty on net sales of such products in the United States, Mexico or Canada.

Pursuant to the Purchase Agreement, the Company will pay Reedy Creek ongoing quarterly payments, calculated based on an applicable percentage per product of any upfront fees, milestone payments, royalty payments or equivalent payments received by the Company pursuant to any out-license agreement for SB204, SB206 or SB414 in the United States, Mexico or Canada, net of any upfront fees, milestone payments, royalty payments or equivalent payments paid by the Company to third parties pursuant to any agreements under which the Company has in-licensed intellectual property with respect to such products in the United States, Mexico or Canada. The applicable percentage used for determining the ongoing quarterly payments, applied to amounts received directly by the Company pursuant to any out-license agreement for each product, ranges from 10% for SB206 to 20% for SB204 and SB414.

However, the agreement provides that the applicable percentage for each product will be 25% for fees or milestone payments received by the Company (but not royalty payments received by the Company) until Reedy Creek has received payments under the Purchase Agreement equal to the total funding amount provided by Reedy Creek under the Purchase Agreement. If the Company decides to commercialize any product on its own following regulatory approval, as opposed to commercializing through an out-license agreement or other third-party arrangement, the Company will only be obligated to pay Reedy Creek a low single digits royalty on net sales of such products.

The Company determined that the Reedy Creek Purchase Agreement is within the scope of ASC 730-20, *Research and Development Arrangements* ("ASC 730-20"), and that there has not been a substantive and genuine transfer of risk related to the Reedy Creek Purchase Agreement. As such, the Company determined that the appropriate accounting treatment under ASC 730-20 was to record the proceeds of $25,000 as cash and cash equivalents, as the Company had the ability to direct the usage of funds, and a long-term liability ("Reedy Creek Liability") within the condensed balance sheets. The Reedy Creek liability would remain until the Company receives future milestones from other potential third parties, as defined within the Purchase Agreement, of which 25% will be contractually owed to Reedy Creek. If potential future milestones or other payments are received by the Company, and become partly due to Reedy Creek, the corresponding partial repayment to Reedy Creek will result in a ratable reduction of the total long-term obligation to repay the initial purchase price.

As of the Novan Acquisition date, the Reedy Creek liability was measured at fair value in the amount of $13,700. This long-term liability is subsequently measured at amortized cost using the prospective effective interest method described in ASC 835-30, *Imputation of Interest*. The effective interest rate is calculated by forecasting the expected cash flows to be paid over the life of the liability relative to its fair value as of the Novan Acquisition date. The effective interest rate is recalculated in each reporting period as the difference between expected cash flows and actual cash flows are realized and as there are changes to expected future cash flows. The carrying value of the Reedy Creek liability is made up of the opening balance, which is increased by accrued interest expense, and decreased by any cash payments made to Reedy Creek during the period to arrive at the ending balance.

**Note 6: Balance Sheet Account Details**

***Prepaid expenses and other current assets consisted of the following:***

---

| | | |
|:---|:---|:---|
|  | **June 30, 2025** | **December 31, 2024** |
| Prepaid Prescription Drug User Fee Act (PDUFA) fees | $202 | $404 |
| Study materials under Sato Agreement |  | 162 |
| Deposits for meetings and conferences | 488 |  |
| Other | 499 | 232 |
| Total prepaid expenses and other current assets | $1189 | $798 |

---

***Inventory consisted of the following:***

---

| | | |
|:---|:---|:---|
|  | **June 30, 2025** | **December 31, 2024** |
| Raw materials | $385 | $603 |
| Work-in-process | 5504 | 3923 |
| Finished goods | 1202 |  |
| Total inventory | $7091 | $4526 |

---

***Property and equipment consisted of the following:***

---

| | | |
|:---|:---|:---|
|  | **June 30, 2025** | **December 31, 2024** |
| Manufacturing and laboratory equipment | $2810 | $2810 |
| Software | 1225 | 1225 |
| Furniture and fixtures | 100 | 100 |
| Computer equipment | 21 | 21 |
| Leasehold improvements | 7957 | 7957 |
| Construction-in-progress | 1734 | 1668 |
| Property and equipment, cost | 13847 | 13781 |
| Less: Accumulated depreciation and amortization | (3214) | (2298) |
| Total property and equipment, net | $10633 | $11483 |

---

The Company's depreciation and amortization expense was $461 and $469 for the three months ended June 30, 2025 and 2024, and $919 and $939 for the six months ended June 30, 2025 and 2024, respectively.

***Goodwill and other identifiable intangible assets consisted of the following:***

---

| | | |
|:---|:---|:---|
|  | **June 30, 2025** | **December 31, 2024** |
| Indefinite-lived intangible assets |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Goodwill | $6604 | $6604 |
| Definite-lived intangible assets |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Complete technology |  | 10700 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: accumulated amortization |  | (898) |
| Total definite-lived intangible assets |  | 9802 |
| Total goodwill and other identifiable intangible assets, net | $6604 | $16406 |

---

Amortization of finite-lived intangible assets is computed using the straight-line method over the estimated useful life of the asset of 15 years. The Company's amortization expense was nil and $178 for the three months ended June 30, 2025 and 2024, and $162 and $357 for the six months ended June 30, 2025 and 2024, respectively. The Company had no impairment of goodwill or intangible assets during the three and six months ended June 30, 2025 and 2024.

***Other long-term assets consisted of the following:***

Other long-term assets as of June 30, 2025 and December 31, 2024 were comprised of finished products (berdazimer gel, 10.3%). These finished products, while not currently available for commercial sale due to the different labeling utilized, the Company expects to use these units in the future as part of a patient assistance program. These items will be expensed when distributed.

***Accrued expenses consisted of the following:***

---

| | | |
|:---|:---|:---|
|  | **June 30, 2025** | **December 31, 2024** |
| Compensation | $1601 | $1095 |
| Drug product manufacturing subcontractor | 1134 | 353 |
| Commercialization milestone payable | 5000 |  |
| Deferred proceeds from Pelthos investors | 910 |  |
| Other | 1787 | 593 |
| Total accrued expenses | $10432 | $2041 |

---

**Note 7: Leases**

On January 18, 2021, the Company entered into a lease with an initial term expiring in 2032, as amended for 19,265 rentable square feet, located in Durham, North Carolina. This lease dated as of January 18, 2021, as amended (the "TBC Lease"), is by and between the Company and Copper II 2020, LLC (the "TBC Landlord"), pursuant to which the Company is leasing space serving as its corporate headquarters and primary API manufacturing site (the "Premises") located within the Triangle Business Center. The lease executed on January 18, 2021, as amended, was further amended on November 23, 2021 to expand the Premises by approximately 3,642 additional rentable square feet from 15,623 rentable square feet.

The TBC Lease commenced on January 18, 2021 (the "Lease Commencement Date"). Rent under the TBC Lease commenced in October 2021 (the "Rent Commencement Date"). The term of the TBC Lease expires on the last day of the 123 calendar month after the Rent Commencement Date. The TBC Lease provides the Company with one option to extend the term of the TBC Lease for a period of 5 years, which would commence upon the expiration of the original term of the TBC Lease, with base rent of a market rate determined according to the TBC Lease; however, the renewal period was not included in the calculation of the lease obligation as the Company determined it was not reasonably certain to exercise the renewal option.

The monthly base rent for the Premises is approximately $39 for months 1-10 and approximately $49 for months 11-12, per the second amendment to the primary lease. Beginning with month 13 and annually thereafter, the monthly base rent will be increased by 3%. Subject to certain terms, the TBC Lease provided that base rent was abated for three months following the Rent Commencement Date. The Company is obligated to pay its pro-rata portion of taxes and operating expenses for the building as well as maintenance and insurance for the Premises, all as provided for in the TBC Lease.

The TBC Landlord has agreed to provide the Company with a tenant improvement allowance in an amount not to exceed $130 per rentable square foot, totaling approximately $2,450, per the primary lease, inclusive of the first amendment, and $115 per rentable square foot, totaling $419, per the second amendment to the TBC Lease. Pursuant to the terms of the TBC Lease, the Company delivered to the TBC Landlord a letter of credit in the amount of $583, as amended, as collateral for the full performance by the Company of all of its obligations under the TBC Lease and for all losses and damages the TBC Landlord may suffer as a result of any default by the Company under the TBC Lease.

The Company's rent cost was $174 for both the three months ended June 30, 2025 and 2024, and $347 for both the six months ended June 30, 2025 and 2024, respectively. Cash paid for amounts included in the measurement of operating lease liabilities was $161 and $156 for the three months ended June 30, 2025 and 2024, and $321 and $312 for the six months ended June 30, 2025 and 2024, respectively.

The weighted average remaining lease term for the TBC Lease and weighted average discount rate for the TBC Lease are 6.6 years and 8.4%, respectively, as of June 30, 2025.

Future minimum lease payments as of June 30, 2025, were as follows:

---

| | |
|:---|:---|
| **Maturity of Lease Liabilities** | **Operating Leases** |
| 2025 | $324 |
| 2026 | 665 |
| 2027 | 685 |
| 2028 | 705 |
| 2029 | 726 |
| 2030 and beyond | 1583 |
| &nbsp;&nbsp;&nbsp;Total future undiscounted lease payments | 4688 |
| &nbsp;&nbsp;&nbsp;Less: imputed interest | (1122) |
| &nbsp;&nbsp;&nbsp;Total reported lease liability | $3566 |

---

**Note 8: Income Taxes**

Our effective tax rate may vary from the U.S. federal statutory tax rate due to the change in the valuation allowance. The effective tax rate was zero and 1% for the three months ended June 30, 2025 and 2024, and zero and 1% for the six months ended June 30, 2025 and 2024, respectively. The variance from the U.S. federal statutory tax rate of 21% for the three and six months ended June 30, 2025 and 2024 was primarily due to the change in valuation allowance, state income taxes, and other permanent differences.

**Note 9: Relationship with Parent and Related Entities**

Historically, the Company's business has been managed and operated in the normal course of business consistent with other affiliates of the Parent. Accordingly, certain shared costs have been allocated to the Company and reflected as expenses in its condensed financial statements. Management considers the allocation methodologies used to be reasonable and appropriate reflections of the historical Parent expenses attributable to the Company for purposes of its stand-alone condensed financial statements. However, the expenses reflected in the condensed financial statements may not be indicative of the actual expenses that would have been incurred during the periods presented if the Company historically operated as a separate, stand-alone entity. In addition, the expenses reflected in the condensed financial statements may not be indicative of related expenses that will be incurred in the future by the Company.

The condensed statements of operations include expenses for certain centralized functions (such as accounting, treasury, audit, purchasing, human resources, legal and facilities), executive compensation and other programs provided and/or administered by Parent that are charged directly to the Company. A portion of these costs benefits the Company and is allocated using a pro-rata method based on measures that management believes are consistent and reasonable.

The amounts of corporate expenses allocated to the Company are summarized in a table below:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended** | **Three months ended** | **Six months ended** | **Six months ended** |
|  | **June 30,** | **June 30,** | **June 30,** | **June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Payroll and related expenses | $782 | $351 | $1645 | $880 |
| Share-based compensation | 1744 | 883 | 3092 | 1864 |
| Other non-employee related corporate expenses | 242 | 205 | 455 | 371 |
| Total corporate expenses allocated to the Company | $2768 | $1439 | $5192 | $3115 |

---

LNHC participates in Ligand's centralized cash management and financing programs and will continue to participate in Ligand's centralized cash management until it becomes an independent company.

While most of vendors disbursements are made directly by LNHC, all Company's obligations are financed by Ligand and financing decisions are determined by central Ligand treasury operations. Certain Company's expenses are settled directly by Ligand, including personnel-related expenses.

On March 24, 2025, LNHC entered into a Bridge loan agreement with Ligand based on which any amounts of cash transfers from Ligand to LNHC, or settlement of LNHC expenses directly by Ligand, starting from January 1, 2025, would be considered a loan in the amount up to $18,000. This loan will accumulate interest on a risk-free rate, and will be either payable back to Ligand, or reduce Ligand's funding commitment with respect to an anticipated merger transaction.

As mentioned in Note 1, on March 24, 2025, LNHC assigned its rights to its IP portfolio to Ligand, and entered into an exclusive license and sublicense agreement with Ligand, pursuant to which Ligand licensed to LNHC the intellectual property rights necessary to make, use, sell or offer to sell ZELSUVMI for the treatment of molluscum contagiosum in humans worldwide except for Japan. An IP transfer transaction was accounted as a non-cash distribution from LNHC to the Parent, resulting in a reduction of Parent Company Net Investments (PCNI) balance by the amount of IP's net book value as of the date of the transfer. The IP was licensed back to LNHC on the same date, and based on the license agreement, in the future LNHC will pay an aggregate amount of $10,000 upon the achievement of certain sales and commercial milestones, a low double-digit percentage royalty (reduced to lower double-digit percentage royalty after expiration date for the licensed patents covering ZELSUVMI), and a low-mid percentage of non-royalty payments received from LNHC's sublicensees.

Also, as mentioned in Note 1, on March 24, 2025, LNHC and Ligand also entered into a Master Services Agreement under which Ligand, or related parties, may contract with LNHC to provide active pharmaceutical ingredients for clinical or commercial use related to NITRICIL technology. The agreement also allows Ligand to require LNHC to provide manufacturing technology transfer services, if requested, for products other than ZELSUVMI for the treatment of molluscum contagiosum in humans, to a potential third-party manufacturer.

**Note 10: Stock Based Compensation**

LNHC does not have its own equity-based incentive plans, and employees of LNHC do not participate in Parent's equity-based incentive plans. However, a portion of certain Parent corporate employees' share-based compensation expenses was allocated to LNHC based on their involvement in LNHC operations. Under the Ligand 2002 Stock Incentive Plan ("2002 Plan"), Parent employees were awarded share-based incentive awards in a number of forms, including non-statutory stock options, incentive stock options, restricted stock units ("RSUs"), performance stock units ("PSUs") and other cash-based or share-based awards. Awards granted to Parent employees under the incentive plans typically vest 1/8 on the six month anniversary of the date of grant, and 1/48 each month thereafter for forty-two months. The Company's share-based compensation expense is recognized based on the fair value on a straight-line basis over the requisite service periods of the awards, taking into consideration of forfeitures as they occur.

The Company measures share-based compensation for all share-based incentive awards at fair value on the grant date. The Black-Scholes option-pricing model is used to estimate the fair value of stock options granted. The model assumptions include expected volatility, term, dividends, and the risk-free interest rate. Management looks to historical and implied volatility of the underlying stock to determine the expected volatility. The expected term of an award is based on historical forfeiture experience, exercise activity, and on the terms and conditions of the stock awards. The expected dividend yield is determined to be 0% given that the Parent Company currently does not expect to pay cash dividends or make any other distributions on common stock in the future. The risk-free interest rate is based upon U.S. Treasury securities with remaining terms similar to the expected term of the share-based awards. The fair value of RSUs is determined by the closing market price of the underlying stock on the date of grant.

Total stock-based compensation expense included in the condensed statements of operations is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended** | **Three months ended** | **Six months ended** | **Six months ended** |
|  | **June 30,** | **June 30,** | **June 30,** | **June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Research and development | $— | $27 | $51 | $27 |
| Selling, general and administrative | 1744 | 856 | 3041 | 1837 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $1744 | $883 | $3092 | $1864 |

---

**Note 11: Commitments and Contingencies**

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

The Company is not currently a party to any material legal proceedings and is not aware of any claims or actions pending against the Company that the Company believes could have a material adverse effect on the Company's business, operating results, cash flows or condensed financial statements. In the future, the Company might from time to time become involved in litigation relating to claims arising from its ordinary course of business.

The Company has entered into, and expects to continue to enter into, contracts in the normal course of business with various third parties who support its development work, commercialization activities, including drug product manufacturing, technical transfers, finished commercial product production and supportive costs. The scope of the services under these agreements can generally be modified at any time, and these agreements can generally be terminated by either party after a period of notice and receipt of written notice. There have been no material contract terminations as of June 30, 2025.

**Note 12: Retirement Plan**

The Company maintains a defined contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers all employees who meet minimum age requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company had made discretionary matching contributions of 50% of the employee's contributions, up to a maximum of $6 per year, and contributed $6 and $107 for three and six months ended June 30, 2024, respectively. Since January 1, 2025, the Company has made discretionary matching contributions of 100% of the first 4% of employee's contribution, with no cap, and contributed $47 and $127 for three and six months ended June 30, 2025, respectively.

**Note 13: Subsequent Events**

On July 1, 2025, the Company was disposed by Parent and became a wholly owned subsidiary of Channel Therapeutics Corporation ("Channel"). The combined company now operates under the name Pelthos Therapeutics Inc. ("Pelthos"). Concurrent with the Pelthos Merger, Ligand invested $18.0 million into Pelthos out of total $50.1 million of equity capital investment made by Ligand and a group of strategic investors led by Murchinson (including a cancellation of bridge capital that has been advanced to Pelthos by certain of the private placement Investors since the beginning of 2025).

On July 4, 2025, the President signed into law the One Big Beautiful Bill Act, a budget reconciliation package that changes many key provisions of the U.S. federal income tax code, including extensions of various expiring provisions from the Tax Cuts and Jobs Act of 2017. The Company is evaluating the impact on our financial statements from this legislation and the anticipated forthcoming administrative guidance. We expect the most significant impact to the Company of the new legislation will be to allow for more taxpayer-favorable treatment of research and development expenditures for US income tax purposes.

## Exhibit 99.2

**Exhibit 99.2**

**UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**

*Certain terms used below, but not otherwise defined, in this section shall have the meanings ascribed to them elsewhere in the Original Report or the Form 8-K/A.*

On July 1, 2025 (the "Closing Date"), Pelthos Therapeutics Inc., a Nevada corporation (formerly known as "Channel Therapeutics Corporation" (the "Company")), consummated the previously announced merger transaction contemplated by that certain Agreement and Plan of Merger, dated as of April 16, 2025 (the "Merger Agreement"), by and among the Company, CHRO Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company ("Merger Sub"), LNHC, Inc., a Delaware corporation ("LNHC"), and solely for the purposes of Article III thereof, Ligand Pharmaceuticals Incorporated, a Delaware corporation and the parent of LNHC ("Ligand"). Pursuant to the Merger Agreement, (i) Merger Sub merged with and into LNHC, with LNHC as the surviving company in the merger and, after giving effect to such merger, continuing as a wholly-owned subsidiary of the Company (the "Merger") and (ii) the Company's name was changed from Channel Therapeutics Corporation to Pelthos Therapeutics Inc. At the effective time of the Merger (the "Effective Time"), the Company issued an aggregate of approximately 31,278 shares of the Company's Series A Convertible Preferred Stock to Ligand, based on the exchange ratio set forth in the Merger Agreement

Additionally, on the Closing Date, the Company closed on a securities purchase agreement (the "Securities Purchase Agreement") with LNHC and certain investors, which includes Ligand (collectively, the "PIPE Investors"), pursuant to which, among other things, the PIPE Investors purchased (either for cash or in exchange for the conversion of principal and interest payable under an outstanding convertible note issued by the Company), and the Company issued and sold to the PIPE Investors, an aggregate of 50,100 shares of the Company's Series A Convertible Preferred Stock, par value $0.0001 per share (the "Series A Preferred Stock") at a price per share equal to $1,000 (such transaction, the "PIPE Financing"). As an inducement to enter into the Securities Purchase Agreement, the Company, LNHC and certain PIPE Investors, also entered into the ZELSUVMI Royalty Agreement and the Channel Products Royalty Agreement (the "Royalty Agreements"), pursuant to which certain PIPE Investors will receive royalty payments based on percentages of net sales of ZELSUVMI and the Channel Covered Products (each as further defined in the Original Report or the Form 8-K/A).

The following unaudited pro forma condensed combined financial information presents the financial information of the Company, adjusted to give effect to the Merger, PIPE Financing and certain other transactions consummated on the Closing Date, including the Reverse Stock Split and Conversions of Series A Preferred Stock (collectively, the "Transactions"). The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.

The unaudited pro forma condensed combined balance sheet as of June 30, 2025 combines the historical balance sheets of the Company and LNHC on a pro forma basis as if the Transactions had been consummated on June 30, 2025. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2025 and year ended December 31, 2024 combine the historical statements of operations of Channel and LNHC for such periods on a pro forma basis as if the Transactions had been consummated on January 1, 2024, the beginning of the earliest period presented.

Assumptions and estimates underlying the unaudited pro forma adjustments included in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The unaudited pro forma adjustments are based on available preliminary information and certain assumptions that the Company believes are reasonable under the circumstances. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results and financial position that would have been achieved had the Transactions occurred on the dates indicated. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

The Merger was accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification ("ASC") 805, *Business Combinations* ("ASC 805"). The Company and LNHC each meet the definition of a business as defined by ASC 805 by virtue of having inputs, processes and outputs. In addition, LNHC met the definition of a VIE given the entity does not have sufficient equity to finance its activities without additional financial support, as assessed immediately prior to the Merger. Finally, the Company owns 100% of the shares of LNHC following the close of the Merger and is therefore the primary beneficiary of the LNHC business. As a result, the Company is deemed to be the accounting acquirer in the Merger, and the Merger is accounted for as a business combination in which the Company acquired the LNHC business. The LNHC assets acquired, and liabilities assumed in connection with the Merger are recorded at their acquisition date fair values. The preliminary allocation of the estimated purchase price is based upon management's estimates utilizing information currently available and is subject to revision as additional information on the fair value of the assets and liabilities become available and final appraisals and detailed analyses are completed. The Company is still evaluating the fair value of intangible assets, inventory and other long-term liabilities, in addition to ensuring all other assets and liabilities and contingencies have been identified and recorded. Differences between these preliminary estimates and the final purchase price allocation could occur, and these differences may be material. A change in the fair value of the net assets of LNHC may change the amount of the purchase price allocable to goodwill, and could have a material impact on the accompanying unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined financial information was derived from, and should be read together with, the accompanying notes to the unaudited pro forma condensed combined financial information, the Company's historical consolidated financial statements, accompanying notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations included in its annual report on Form 10-K for the fiscal year ended December 31, 2024 as filed with the SEC on March 27, 2025 and interim report on Form 10-Q as of and for the three and six months ended June 30, 2025 as filed with the SEC on August 13, 2025. The unaudited pro forma condensed combined financial information should also be read together with LNHC's historical audited combined financial statements, and accompanying notes, as of and for the fiscal year ended December 31, 2024, included in the definitive information statement filed with the SEC on May 27, 2025 (the "Information Statement"), the unaudited financial statement for the three months ended March 31, 2025, included in the Information Statement and the unaudited combined financial statements, and accompanying notes, as of and for the three and six months ended June 30, 2025, included in this Form 8-K/A.

**UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET**

**AS OF JUNE 30, 2025**

**(in thousands)**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Pelthos**<br> **Therapeutics**<br> **Inc.**<br> **(Historical)** | <br>**LNHC Inc.**<br> **(Historical)** | **Transaction**<br> **Accounting**<br> **Adjustments**<br> **(Note 4)** | **Note** | **Pro Forma**<br> **Combined** |
| **ASSETS** | | | |  | |
| Current assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $59 | $2817 | 29976 | **4(e)** | $27642 |
|  |  |  | (3774) | **4(c)** |  |
|  |  |  | (1436) | **4(k)** |  |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net |  | 48 |  |  | 48 |
| &nbsp;&nbsp;&nbsp;Inventory |  | 7091 | 18594 | **4(h)** | 25685 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 764 | 1189 |  |  | 1953 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 823 | 11145 | 43360 |  | 55328 |
| Intangible assets, net |  |  | 33200 | **4(b)** | 33200 |
| Goodwill |  | 6604 | 12084 | **4(d)** | 18688 |
| Property and equipment, net |  | 10633 |  |  | 10633 |
| Operating lease right-of-use assets, net |  | 3452 | 114 | **4(i)** | 3566 |
| Other assets |  | 529 |  |  | 529 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $823 | $32363 | $88758 |  | $121944 |
| **LIABILITIES AND STOCKHOLDERS' DEFICIT** |  |  |  |  |  |
| Current liabilities: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | $5013 | $11425 |  |  | $16438 |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities, current portion |  | 626 |  |  | 626 |
| &nbsp;&nbsp;&nbsp;Deferred revenue, current portion |  | 1072 |  |  | 1072 |
| &nbsp;&nbsp;&nbsp;Loan payable, net of debt discount | 2173 | 6053 | (6053) | **4(e)** |  |
|  |  |  | (2173) | **4(k)** |  |
| &nbsp;&nbsp;&nbsp;Loan payable - related party, net of debt discount | 132 |  | (100) | **4(e)** | 32 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 7318 | 19176 | (8326) |  | 18168 |
| Deferred revenue, net of current portion |  | 1763 |  |  | 1763 |
| Operating lease liabilities, net of current portion |  | 2940 |  |  | 2940 |
| Deferred tax liability |  |  | 13466 | **4(j)** | 13466 |
| Other long-term liabilities |  | 17441 | 2159 | **4(g)** | 32409 |
|  |  |  | 12809 | **4(e)** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 7318 | 41320 | 20108 |  | 68746 |
| Commitments and contingencies |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Parent company net investment |  | (8957) | 8957 | **4(f)** |  |
| &nbsp;&nbsp;&nbsp;Series A convertible preferred stock |  |  |  | **4(a)** |  |
|  |  |  |  | **4(e)** |  |
|  |  |  |  | **4(m)** |  |
| &nbsp;&nbsp;&nbsp;Series C preferred stock |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Common stock |  |  |  | **4(k)** |  |
|  |  |  |  | **4(m)** |  |
| &nbsp;&nbsp;&nbsp;Additional paid in capital | 20397 |  | 39410 | **4(a)** | 84211 |
|  |  |  | 23320 | **4(e)** |  |
|  |  |  | 737 | **4(k)** |  |
|  |  |  | 347 | **4(l)** |  |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (26892) |  | (3774) | **4(c)** | (31013) |
|  |  |  | (347) | **4(l)** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' deficit | (6495) | (8957) | 68650 |  | 53198 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' deficit | $823 | $32363 | $88758 |  | $121944 |

---

**UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS**

**FOR THE SIX MONTHS ENDED JUNE 30, 2025**

**(in thousands, except share and per share amounts)**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Pelthos** <br> **Therapeutics** <br> **Inc.** <br> **(Historical)** | <br> **LNHC Inc.** <br> **(Historical)** | **Transaction** <br> **Accounting** <br> **Adjustments** <br> **(Note 4)** | **Note** | **Pro Forma** <br> **Combined** |
| Revenues | $— | $611 | $— |  | $611 |
| Operating expenses: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Selling, general and administrative expenses | 4355 | 16646 |  |  | 21001 |
| &nbsp;&nbsp;&nbsp;Research and development | 709 | 6670 |  |  | 7379 |
| &nbsp;&nbsp;&nbsp;Amortization of intangible assets |  | 162 | 1115 | **4(n)** | 1277 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 5064 | 23478 | 1115 |  | 29657 |
| Operating loss | (5064) | (22867) | (1115) |  | (29046 |
| Other income (expense), net: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense | (352) | (1556) | 352 | **4(p)** | (2607) |
|  |  |  | (1051) | **4(s)** |  |
| &nbsp;&nbsp;&nbsp;Other income |  | (49) |  |  | (49 |
| Total other (expense) income | (352) | (1605) | (699) |  | (2656 |
| Net loss before provision for income taxes | (5416) | (24472) | (1814) |  | (31702) |
| Provision for income taxes |  |  |  | **4(q)** |  |
| Net loss | $(5416) | $(24472) | $(1814) |  | $(31702 |
| Net loss per common share - basic and diluted | $(8.64) |  |  |  | $(10.54 |
| Weighted average number of common shares outstanding during the year - basic and diluted | 626736 |  | 2381000 | **4(t)** | 3007736 |

---

**UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS**

**FOR THE YEAR ENDED DECEMBER 31, 2024**

**(in thousands, except share and per share amounts)**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Pelthos**<br> **Therapeutics Inc.**<br> **(Historical)** | <br> **LNHC Inc.**<br> **(Historical)** | **Transaction**<br> **Accounting**<br> **Adjustments**<br> **(Note 4)** | **Note** | **Pro Forma**<br> **Combined** |
| Revenues | $— | $876 | $— |  | $876 |
| Operating expenses: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Selling, general and administrative expenses | 6392 | 15528 | 3774 | **4(o)** | 26041 |
|  |  |  | 347 | **4(r)** |  |
| &nbsp;&nbsp;&nbsp;Research and development | 1179 | 11278 |  |  | 12457 |
| &nbsp;&nbsp;&nbsp;Amortization of intangible assets |  | 714 | 1840 | **4(n)** | 2554 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 7571 | 27520 | 5961 |  | 41052 |
| Operating loss | (7571) | (26644) | (5961) |  | (40176 |
| Other income (expense), net: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense | (786) | (1878) | 786 | **4(p)** | (3979) |
|  |  |  | (2101) | **4(s)** |  |
| &nbsp;&nbsp;&nbsp;Other income | 39 | 2 |  |  | 41 |
| &nbsp;&nbsp;&nbsp;Gain on default judgement | 363 |  |  |  | 363 |
| Total other (expense) income | (384) | (1876) | (1315) |  | (3575 |
| Net loss before provision for income taxes | (7955) | (28520) | (7276) |  | (43751) |
| Provision for income taxes |  | 290 |  | **4(q)** | 290 |
| Net loss | $(7955) | $(28230) | $(7276) |  | $(43461 |
| Net loss per common share - basic and diluted | $(14.27) |  |  |  | $(14.79 |
| Weighted average number of common shares outstanding during the year - basic and diluted | 557447 |  | 2381000 | **4(t)** | 2938447 |

---

**NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION** 

**Note 1 – Basis of Pro Forma Presentation** 

The unaudited pro forma condensed combined financial information presents the financial information of the Company, adjusted to give effect to the Transactions. The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.

The Merger was accounted for as a business combination using the acquisition method of accounting under the provisions of ASC 805. The Company and LNHC each meet the definition of a business as defined by ASC 805 by virtue of having inputs, processes and outputs. In addition, LNHC met the definition of a VIE given the entity does not have sufficient equity to finance its activities without additional financial support, as assessed immediately prior to the Merger. Finally, the Company owns 100% of the shares of LNHC following the close of the Merger and is therefore the primary beneficiary of the LNHC business. As a result, the Company is deemed to be the accounting acquirer in the Merger, and the Merger is accounted for as a business combination in which the Company acquired the LNHC business. The LNHC assets acquired, and liabilities assumed in connection with the Merger are recorded at their acquisition date fair values. The preliminary allocation of the estimated purchase price is based upon management's estimates utilizing information currently available and is subject to revision as additional information on the fair value of the assets and liabilities become available and final appraisals and detailed analyses are completed. The Company is still evaluating the fair value of intangible assets, inventory and other long-term liabilities, in addition to ensuring all other assets and liabilities and contingencies have been identified and recorded. Differences between these preliminary estimates and the final purchase price allocation could occur, and these differences may be material. A change in the fair value of the net assets of LNHC may change the amount of the purchase price allocable to goodwill, and could have a material impact on the accompanying unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined balance sheet as of June 30, 2025 combines the historical balance sheets of the Company and LNHC on a pro forma basis as if the Transactions had been consummated on June 30, 2025. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2025 and year ended December 31, 2024 combine the historical statements of operations of the Company and LNHC for such periods on a pro forma basis as if the Transactions had been consummated on January 1, 2024, the beginning of the earliest period presented.

The unaudited pro forma condensed combined balance sheet as of June 30, 2025 has been prepared using, and should be read in conjunction with:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The
 Company's unaudited consolidated balance sheet as of June 30, 2025 and the related notes thereto included in the Company's
 Form 10-Q filed with the SEC on August 13, 2025; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• LNHC's
 unaudited combined balance sheet as of June 30, 2025 and the related notes thereto included in this Form
 8-K/A.

The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2025 and year ended December 31, 2024 have been prepared using, and should be read in conjunction with:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The
 Company's unaudited consolidated statement of operations for the six months ended June 30, 2025 and the related notes
 thereto included in the Company's Form 10-Q filed with the SEC on August 13, 2025;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The Company's audited consolidated statement of operations
for the year ended December 31, 2024 and the related notes thereto included in the Company's Form 10-K filed with the SEC on March
27, 2025;

• LNHC's unaudited condensed statement of operations for the six months ended June 30, 2025 and the
related notes thereto included in LNHC's historical results included elsewhere in this Form 8-K/A; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• LNHC's
 audited statement of operations for the year ended December 31, 2024 and the related notes thereto included
 in LNHC's historical results included in the Information Statement.

Assumptions and estimates underlying the unaudited pro forma adjustments included in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The unaudited pro forma adjustments are based on available preliminary information and certain assumptions that management believes are reasonable under the circumstances. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results and financial position that would have been achieved had the Transactions occurred on the dates indicated. The actual financial position and results of operations may differ materially from the information presented in these unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined financial statements, including the notes thereto, should be read in conjunction with the separate Company and LNHC historical financial statements included elsewhere or incorporated by reference in the Original Report or the Form 8-K/A.

**Note 2 – Accounting Policies and Reclassifications** 

During the preparation of the unaudited pro forma condensed combined financial statements, the Company performed a preliminary analysis to identify differences in LNHC's and the Company's historical financial statement presentation and significant accounting policies. Based on its initial analysis, the Company did not identify any differences in accounting policies that would have a material impact on the unaudited pro forma condensed combined financial information. No reclassification adjustments have been made to conform LNHC's historical financial statement captions to the Company's financial statement captions in the unaudited pro forma condensed combined financial statements.

Following the completion of the Merger, or as more information becomes available, the Company will finalize its comprehensive review of financial statement presentation and accounting policies. Therefore, the pro forma financial information may not reflect all reclassifications necessary to conform LNHC's presentation to that of the Company due to limitations on the availability of information as of the date of this Form 8-K/A. Accounting policy differences and reclassification adjustments may be identified as more information becomes available.

**Note 3 – Estimated Merger Consideration and Preliminary Purchase Price Allocation**

*Estimated Merger Consideration* 

The fair value of the merger consideration transferred upon completion of the Merger included the fair value of the Company's Series A Preferred Stock issued to the holder of LNHC common stock pursuant to the Merger Agreement.

The following table summarizes the components of the estimated preliminary merger consideration (in thousands, except share and per share amounts):

---

| | |
|:---|:---|
| Shares of Series A Preferred Stock issued in the Merger<sup>(a)</sup> | 31278 |
| Pelthos Series A Preferred Stock per share price<sup>(b)</sup> | $1260 |
| &nbsp;&nbsp;&nbsp;**Estimated total merger consideration** | $39410 |

---

&nbsp;&nbsp;&nbsp;&nbsp;(a) Represents the number
 of shares of the Company's Series A Preferred Stock issued to LNHC's shareholders based on the exchange ratio
 as set forth in the Merger Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;(b) As the Company's
 Series A Preferred Stock is immediately convertible into the Company's common stock at a ratio of 1 to 100, the
 fair value estimate of the Company's Series A Preferred Stock is calculated as the closing Channel common stock
 price on June 30, 2025 multiplied by 100.

The estimated total merger consideration is preliminary and subject to additional adjustments.

*Preliminary Purchase Price Allocation* 

Under the acquisition method of accounting in accordance with ASC 805, LNHC's identifiable assets acquired and liabilities assumed by the Company are recorded at their acquisition-date fair value and combined with the assets and liabilities of the Company. The pro forma purchase price allocation is preliminary and the estimated fair value of the assets acquired and liabilities assumed are based upon available information and certain assumptions, which the Company believes are reasonable to illustrate the estimated effects of the Merger. The fair value of certain assets and liabilities are estimated to approximate their book values, thus no adjustments are reflected. The final determination of the purchase price allocation will be completed as soon as practicable and will be based on the fair value of the assets acquired and liabilities assumed as of the Closing Date. Accordingly, the pro forma purchase price allocation is subject to further adjustment as additional information becomes available and as additional analyses and final valuations are completed. There can be no assurances that these additional analyses and final valuations will not result in material changes to the estimates of fair value set forth below.

The following table sets forth a preliminary allocation of the estimated merger consideration to LNHC's identifiable tangible and intangible assets expected to be acquired and liabilities expected to be assumed by the Company, as if the Merger had been completed on June 30, 2025 (in thousands):

---

| | |
|:---|:---|
| **Estimated total consideration transferred** | $39410 |
| **Estimated fair value of assets acquired and liabilities assumed:** |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | 2817 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net | 48 |
| &nbsp;&nbsp;&nbsp;Inventory | 25685 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 1189 |
| &nbsp;&nbsp;&nbsp;Intangible assets | 33200 |
| &nbsp;&nbsp;&nbsp;Property and equipment | 10633 |
| &nbsp;&nbsp;&nbsp;Operating lease right-of-use assets | 3566 |
| &nbsp;&nbsp;&nbsp;Other assets | 529 |
| &nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | (11425) |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities, current portion | (626) |
| &nbsp;&nbsp;&nbsp;Deferred revenue, current portion | (1072) |
| &nbsp;&nbsp;&nbsp;Loan Payable | (6053) |
| &nbsp;&nbsp;&nbsp;Deferred revenue, net of current portion | (1763) |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities, net of current portion | (2940) |
| &nbsp;&nbsp;&nbsp;Deferred tax liability | (13466) |
| &nbsp;&nbsp;&nbsp;Other long-term liabilities | (19600) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total estimated fair value of net assets acquired | **20722** |
| **Estimated goodwill** | **$18688** |

---

Preliminary goodwill is calculated as the excess of the estimated merger consideration over the estimated fair value of the underlying net assets to be acquired. The goodwill arising from the transaction is primarily attributable to expected synergies. The final calculation of goodwill could differ materially from the preliminary amounts presented in these unaudited pro forma condensed combined financial statements due to several factors. Each of these potential adjustments would have a corresponding impact to the preliminary calculation of goodwill.

**Note 4 – Pro Forma Transaction Accounting Adjustments** 

The following pro forma adjustments are included in the unaudited pro forma condensed combined balance sheet as of June 30, 2025 to reflect the effects of the Transactions:

**4(a)** Reflects the total estimated merger consideration as outlined in Note 3, consisting of the estimated fair value of the Company's Series A Preferred Stock issued of $39.4 million. See Note 3 for significant estimates and assumptions used to estimate the total merger consideration for the purpose of preparing the pro forma condensed combined financial information.

**4(b)** Reflects a net adjustment to recognize the estimated fair value of LNHC's identifiable intangible assets. The estimated net fair value and the useful life of the intangible assets expected to be acquired is as follows (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Estimated** <br> **fair value** | **Average**<br> **estimated**<br> **useful life** | **Annual**<br> **amortization**<br> **expense**  | **Six-month amortization expense** |
| Developed technology | $32200 | 13 | $2477 | $1238 |
| Sato licensing agreement | 1000 | 13 | 77 | 38 |
| &nbsp;&nbsp;&nbsp;**Total estimated fair value of intangible assets acquired** | 33200 |  | 2554 | 1277 |

---

The preliminary fair value of developed technology was estimated using the "multi-period excess earnings" method, an income approach that considers the net cash flows expected to be generated by the intangible asset by excluding any cash flows related to contributory assets. Significant assumptions include the expected useful life of the patent, contributory asset charges and the concluded discount rate.

The preliminary fair value of the Sato licensing agreement was estimated using the "relief from royalty" method, an income approach that considers the market-based royalty a company would pay to enjoy the benefits of the trade name or technology in lieu of actual ownership of the technology. Significant assumptions include the royalty rate, forecasted cash flows of the license agreement and concluded discount rate.

The identified intangible assets and related amortization are preliminary and based on preliminary valuations prepared by third-party advisors and reviewed by management. As discussed above, the amount that will ultimately be allocated to identified intangible assets and the subsequent amortization expense may differ materially from this preliminary allocation. In addition, the amortization impacts will ultimately be based upon the periods in which the associated economic benefits are expected to be derived. Therefore, the amount of amortization following the Merger may differ significantly between periods based upon the final value assigned and amortization methodology used for each identified intangible asset.

Amortization related to the identified intangible assets is reflected as a pro forma adjustment in the unaudited pro forma condensed combined statements of operations based on the estimated useful lives above, as further described in Note 4(n). The useful life assigned to the intangibles is derived based on the expected timeline of cumulative cash flows from the intangible asset.

**4(c)** Reflects total estimated merger-related transaction costs paid on the Closing Date of $3.8 million, which are reflected as an adjustment to accumulated deficit.

**4(d)** Reflects a net adjustment to recognize the preliminary estimated goodwill expected to arise from the merger, partially offset by the elimination of LNHC's historical goodwill balance. See Note 3 for significant estimates and assumptions used to determine the preliminary estimate of goodwill for the purpose of preparing the pro forma condensed combined financial information. Goodwill arising from the Merger may change materially from the amount presented due to a number of factors.

**4(e)** Represents the net proceeds received from the PIPE Financing and Royalty Agreements, which was initially allocated to the PIPE Financing and the Royalty Agreements on a relative fair value basis. The gross proceeds received under the PIPE Financing of $50.1 million was reduced by amounts previously funded under bridge loan and/ or convertible note agreements which were exchanged in the PIPE Financing for the conversion of principal and interest payable, and approximately $1.2 million transactions costs.

The Royalty Agreements are initially recognized and accounted for in accordance with ASC 470, *Debt* ("ASC 470"). The preliminary fair value of the Royalty Agreements was estimated using a discounted cash flow model, an income approach that discounts the estimated future royalty payments based on the contractual royalty rates and expected revenues to be generated during the life of the intellectual property. Significant assumptions include the projected revenues, expected useful life of the patent, and the concluded discount rate. The fair value of the Royalty Agreements are preliminary and based on preliminary valuations prepared by third-party advisors and reviewed by management. The final amount that will ultimately be allocated to the Royalty Agreements may differ materially from this preliminary amount.

**4(f)** Reflects the elimination of LNHC's historical net parent investment.

**4(g)** Represents the purchase accounting adjustment to increase LNHC's liability associated with Reedy Creek to its estimated fair value.

**4(h)** Represents the purchase accounting adjustment to step-up inventory balances to their estimated fair value.

**4(i)** Represents the purchase accounting adjustment to increase the Right-of-use asset balance for lease agreements to their estimated fair value.

**4(j)** Represents an adjustment to the deferred tax liability to record the estimated deferred tax impact of acquisition accounting adjustments primarily related to amounts allocated to intangible assets and inventory.

**4(k)** Represents the repayment of the Company's loan payable upon the closing of the Transactions, of which approximately $0.7 million was converted into 48,939 shares of the Company's Common Stock and the remainder settled in cash.

**4(l)** Represents the expected impact of equity-based compensation granted in April 2025 in contemplation of the Merger and the expected impact of the accelerated vesting of certain equity-based compensation awards upon closing of the Merger.

**4(m)** Represents the conversion of 23,810 shares of Series A Preferred Stock into 2,381,000 shares of the Company's Common Stock in connection with the Merger.

The following pro forma adjustments are included in the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2025 and year ended December 31, 2024 to reflect the effects of the Transactions:

**4(n)** Reflects the estimated amortization expense related to the acquired intangible assets, which is calculated assuming a straight-line method of amortization based on the preliminary estimated fair values and useful lives presented Note 4(b) above. The amount of amortization are be based on the periods in which the associated economic benefits are expected to be derived and the pattern of benefit for each intangible asset, and therefore, the amount following the Merger may differ significantly between periods based upon the final values assigned and amortization methodology used for each intangible asset.

A 10% increase or decrease in the estimated fair value of the intangible assets would cause an increase or decrease of $0.1 million to the quarterly amortization amount as presented in the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2025, assuming a weighted average estimated useful life of 13 years.

A 10% increase or decrease in the estimated fair value of the intangible assets would cause an increase or decrease of $0.2 million to the annual amortization amount as presented in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2024, assuming a weighted average estimated useful life of 13 years.

**4(o)** Reflects a non-recurring adjustment to record the total estimated merger-related transaction costs of approximately $3.8 million incurred by the Company. Direct transaction costs are expensed as incurred and these additional transaction costs are reflected as if incurred on January 1, 2024, the date the Merger is assumed to have been completed for the purposes of the unaudited pro forma condensed combined statement of operations.

**4(p)** Reflects the removal of interest expense associated with the Company's loan payable converted into common shares or repaid at the closing of the Transactions as discussed in Note 4(k).

**4(q)** No income tax adjustment is reflected for the six months ended June 30, 2025 and year ended December 31, 2024 based on combined estimated annual effective tax rate and having a full valuation allowance on the combined net deferred tax asset.

**4(r)** Represents the expected impact of equity-based compensation granted in April 2025 in contemplation of the Merger and the expected impact of the accelerated vesting of certain equity-based compensation awards upon closing of the Merger. The accelerated compensation cost is incurred on January 1, 2024, the date the Merger is assumed to have been completed for the purposes of the unaudited pro forma condensed combined statement of operations.

**4(s)** Represents the estimated interest expense to be incurred in connection with the Royalty Agreements. As the Royalty Agreements are classified as long-term liabilities under ASC 470, these amounts represent the accretion of the liability's initial carrying value to the expected future payout owed under the terms of the arrangement

**4(t)** Represents additional shares of the Company's Common Stock issued in the conversion of Series A Preferred Stock to Common Stock in connection with the Merger.

**4(u)** Pro forma basic and diluted net income (loss) per share has been adjusted to reflect the pro forma adjustments herein for the six months ended June 30, 2025 and year ended December 31, 2024.