Document:

exhibit_4-3.htm

Exhibit 4.3

 

DEVELOPMENT AND COMMERCIALISATION AGREEMENT

 

THIS DEVELOPMENT AND COMMERCIALISATION AGREEMENT (this "Agreement") is made and entered into as of February 28, 2011 (the "Effective Date"), by and between IntelGenx Corp., a Canadian corporation  ("lntelGenx"),  and Pacific Therapeutics  Ltd., a Canadian company ("Pacific"). IntelGenx and Pacific each may be referred to herein individually  as a "Party," or collectively  as the "Parties".

 

WHEREAS, each party is the sole and exclusive  owner or Licensee of certain intellectual  property and other patent rights relating to the development of a certain Product (as such term is defined herein);

 

WHEREAS, Pacific wishes IntelGenx to undertake  the formulation development of the Product, all as more fully set forth herein;

 

WHEREAS, Pacific desires to secure a license from IntelGenx to use IntelGenx' Patent Rights and Technology  and knowhow to further the Product;

 

WHEREAS, IntelGenx  and Pacific wish to set forth in the Agreement  the terms upon which IntelGenx  may enter into an agreement  with the  Commercial  Partner for the purpose of permitting  the Commercial  Partner to commercialize, distribute or otherwise exploit the Product, Patents Rights and/or Licensed  Know How; and

 

WHEREAS,  the license to be granted shall be granted on a worldwide  basis all as more fully set out below.

 

NOW THEREFORE, THIS AGREEMENT WITNESSETH THAT, in consideration of the mutual promises and covenants  hereinafter  contained,  the Parties hereto agree as follows:

 

DEFINITIONS

 

"Affiliate" of a Party means any other entity that, directly or indirectly,  through one or more intermediaries, controls, is controlled  by, or is under common control with such Party.  For purposes of this definition  only, "control" and, with correlative meanings, the terms "controlled by" and "under  common control with" will mean the possession, directly or indirectly, of the power to direct the management or policies of an entity, whether through the ownership  of fifty percent or more of the voting securities  of the other organization or entity or by contract relating to voting rights or corporate governance.

 

"Confidential Information" shall mean any confidential  or proprietary  information  of either Party, without regard to form, including  without limitation  any and all product technology, manufacturing processes, product design, product development, product cost and pricing information, business plans or proposals, manufacturing procedures,  formulas, Technology, Know-How, processes, customer lists, marketing information and strategies, financial information, drawings, specifications, prototypes, pictures, parts, discoveries, inventions, concepts, ideas, materials,  goods, equipment  or apparatus,  techniques,  vendors, distributors, improvements, chemical structures, formulas, amino acid or nucleic acid sequences or about development plans, intellectual  property strategies,  regulatory  strategies, unpublished  patents, information about speculations regarding compound functionality or suitability,  any information of either Party without regard to form that constitutes a trade secret under applicable law, and any other information  which the disclosing  Party maintains  as confidential  or proprietary.

 

"Commercialisation" shall mean the commercial  distribution and/or commercial  promotion  of the Product for sale.

 

"Commercial Capabilities" shall mean possessing  the means, financial and otherwise, to ensure the timely completion  of all activities, necessary for the Commercialisation of the Product. "Commercial Partner" shall mean Pacific and/or any party or parties responsible  for the Commercialisation of Products.

 

"Commercial Revenue" shall mean all revenue derived by Pacific, within one calendar year, from Net Sales and/or Sublicense  Sales Royalties.

 

"External Costs" shall mean all costs, excluding Internal Costs, incurred or accrued during the Project.

 

"Field of Use" shall mean oral delivery of the Product.

 

"Infringement" shall mean any infringement, imitation,  dilution, distortion,  misappropriation or other unauthorized  use or conduct in violation or derogation of the rights in question. "Infringement Allegation" shall mean any allegation  of Infringement by a third party or that the activities contemplated  herein, or the use, or otherwise,  of  the IntelGenx  Intellectual  Property, Project Intellectual Property, Pacific Intellectual Property as related to the Project, Project related intellectual property, Patent Rights and the Licensed Patents, violate a third party's intellectual property rights.

 

 

  

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"lntelGenx Intellectual Property" shall mean, all intellectual property owned, licensed, invented, created, or developed by IntelGenx whether existing immediately prior to the Effective Date or developed, discovered or otherwise obtained or acquired thereafter, owned or controlled by IntelGenx (or otherwise to the extent IntelGenx has rights therein, thereto or there under), and shall include all rights in such independently developed, discovered or otherwise obtained, owned, licensed or controlled: (i) invention disclosures, patents, patent applications, continuation applications, continuation-in-part applications, divisional applications, provisional applications, supplementary protection certificates, inventors' certificates, any corresponding foreign patent applications to any of the foregoing, and all patents that may be granted or that may have been granted on any of the foregoing, including reissues, re-examination and extensions; (ii) Know­ How, trade secrets, discoveries, inventions, data, processes, techniques, procedures, compositions, devices, methods, formulas, and protocols and information; (iii) copyrightable works, copyrights and application, registrations and renewals; (v) all other proprietary rights; and (vi) all copies and tangible embodiments of any or more of the foregoing.

 

"lntelGenx  Revenue" shall mean all revenue derived by IntelGenx, within one calendar year, from Net Sales and/or Sublicense Sales Royalties.

 

"Internal Costs" shall mean the costs listed in the R&D costs portion of the R&D Budget, up to a maximum of CAD $181,500 (CAD one hundred and eighty one thousand five hundred dollars) plus a ten percent contingency.

 

"Licensed Application" shall mean the use of Patent Rights solely for purpose of selling, offering for sale and importing a combination product containing pentoxifylline and n­ acetylcysteine in the Field of Use.

 

"Licensed Know-How" means all information (other than that contained in the Patents) whether patentable or not and physical objects related to the Product, including but not limited to Product data, Product-related results and information, including, but not limited to, clinical data, analytical test results, non-clinical pharmacology and safety data, other R&D data, Regulatory Documentation, manufacturing and formulation information of a like nature, all provided that the Licensed Know-How is known to, generated by, vested in (or licensed to) and/or controlled by IntelGenx, including, without limitation, the Licensed Know-How.

 

"Licensed  Patents" shall mean IntelGenx Intellectual Property solely relating to the Product and US Patent Application 2007/0190144 and all corresponding know-how, patents, patent applications, continuation applications, continuation-in-part applications, divisional applications, provisional applications, supplementary protection certificates, inventors' certificates, any corresponding foreign patent applications to any of the foregoing, and all patents that may be granted or that may have been granted on any of the foregoing, including reissues, re­ examination and extensions worldwide.

 

"Licensed  Patents  Disputes" shall mean any and all controversies, disputes or claims arising out of, in connection with, or in relation to the interpretation, performance, non-performance, validity or breach of any agreement related to the Project or otherwise arising out of, or in any way related to the Product and/or Licensed Patents, including, without limitation, any and all claims based on contract, tort, statute or constitution.

 

"Licensed  Processes" shall mean the processes claimed in Patent Rights.

 

"Marketing Approval" shall mean the obtaining of all necessary regulatory approvals (excluding the obtainment of pricing reimbursement approval) required from the applicable regulatory authority in the territory in order to commercially sell or market the Product for human consumption in such territory, and satisfaction of any related regulatory registration and notification requirements.

 

"Net Sales" means amounts actually received by the Commercial Partner or its Affiliates in respect of all revenue received, less, and following recovery of, the following items (collectively, the "Recognized Deductions") as considered under International Accounting Standards (IFRS):

	 	
(i) 

	
allowances or credits granted to and taken by customers (including wholesalers) for rejections, returns (including as a result of recalls), and prompt payment and trade, cash and volume discounts or resulting from inventory management

	 	
(ii) 

	
amounts incurred resulting from government mandated rebate programmes (or any agency thereof);

	 	
(iii) 

	
freight, transport, packing and insurance charges;

	 	
(iv) 

	
taxes, including value added tax, tariffs or import/export or customs, duties; rebates, charge backs and discounts paid or credited;

 

 

  

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"Pacific Intellectual  Property" shall mean, all intellectual property owned, licensed, invented, created, or developed by Pacific independently of IntelGenx, and whether existing immediately prior to the Effective Date or developed, discovered or otherwise obtained or acquired thereafter, owned or controlled by Pacific (or otherwise to the extent Pacific has rights therein, thereto or there under), and shall include all rights in such independently developed, discovered or otherwise obtained, owned, licensed or controlled: (i) invention disclosures, patents, patent applications, continuation applications, continuation-in-part applications, divisional applications, provisional applications, supplementary protection certificates, inventors' certificates, any corresponding foreign patent applications to any of the foregoing, and all patents that may be granted or that may have been granted on any of the foregoing, including reissues, re­ examination and extensions; (ii) Licensed Know-How, trade secrets, discoveries, inventions, data, processes, techniques, procedures, compositions, devices, methods, formulas, and protocols and information; (iii) copyrightable works, copyrights and application, registrations and renewals; (v) all other proprietary rights; and (vi) all copies and tangible embodiments of any or more of the foregoing.

 

"Patent Rights" shall mean inventions described in the Licensed Patents, the inventions described and claimed therein, and any divisions, continuations, continuations-in-part, or reissues thereof.

 

"Proceeding" shall mean any action, suit, arbitration, or other alternate dispute resolution mechanism, or investigation, inquiry, administrative hearing or any other actual, threatened or completed  proceeding, whether civil, administrative, investigative or criminal including, without limitation, any appeal there from.

 

"Product" shall mean products claimed in Patent Rights or products made in accordance with or by means of Licensed Processes, Licensed Application or any product containing or embodying any invention claimed in Patent Rights.

 

"Project" shall mean the project contemplated by this Agreement whereby the Parties will develop Product.

"Regulatory Authority" means any applicable government entity regulating or otherwise exercising authority with respect to the development and Commercialisation of a Product.

 

"Regulatory Documentation" means all applications, registrations, licenses, authorizations  and approvals (including all Marketing Approvals), all correspondence submitted to or received from Regulatory Authorities (including  minutes and official contact reports relating to any communications with any Regulatory  Authority), all supporting documents and all clinical studies and tests, including the manufacturing  batch records for Product to be assigned, relating to a Product, and all data contained in any of the foregoing,  including all regulatory drug lists, advertising and promotion documents, adverse event files and complaint files.

 

"Sublicense" means a sublicense from Pacific to a third party under the License granted pursuant to this Agreement and the term "Sublicensee" shall be construed accordingly. "Sublicense Sales Royalties" means all sales royalties, milestones,  income and all cash or equivalents to which value can be assigned directly and/or indirectly actually received by Pacific from third party marketing Sublicensees (and/or any further Sublicensees thereof) in respect of the Product.

 

"Technology" shall mean any and all information or Patent Rights supplied by IntelGenx to Pacific.

 

2. DEVELOPMENT RESPONSIBILITIES AND DECISION-MAKING

 

2.1           Development. The Parties shall, following the Effective Date, undertake the co- development of the Product as more fully set forth herein below.

 

2.1.1    IntelGenx  Development Costs and Responsibilities. IntelGenx shall perform the development of the Product in accordance with the provisions of the development programme, and budget attached hereto as Annex 1.1 (the "R&D Programme"). The budget set forth in the R&D Programme  shall be referred to herein as the "R&D Budget". IntelGenx will be responsible, solely, for all Internal Costs.

 

IntelGenx shall at all times retain all manufacturing  rights related to the Licensed Application  and/or Product and shall, in furtherance to Sections 3.4 and 5.1, be responsible, at Pacific's cost, for carrying out all manufacturing  activities related to the Product, either itself or, subject to approval by Pacific, such approval not to be unreasonably withheld, delayed or conditioned, through a qualified third party manufacturer. Notwithstanding the provisions in section 2.1.2,

 

 

  

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Notwithstanding the foregoing and/or all text or content to the contrary set forth herein, IntelGenx shall, other than Internal Costs and/or in the event that Inte1Genx exercises it Transfer Option as provided in Section 2.4, have no financial obligation in relation to the Product.

 

2.1.2        Pacific's Costs and Responsibilities. Pacific shall be responsible for all External Costs. For the avoidance of doubt, Pacific shall, subject to Sections 2.1, 2.4, 3.4 and 5.1, be responsible financially and/otherwise for all activities not listed in the R&D Programme, necessary for the successful Commercialisation of the Product.

 

2.2           Third Party  Obligations. All royalty and other payment obligations existing under any agreement entered into by either Party or any other obligation undertaken by either Party required to be paid to third parties in respect of the Commercialisation of the Product shall be the burden of the Commercial Partner. In addition, if additional license(s) to intellectual property are necessary to enable the Parties to exercise the License, and the receipt of or license to use such additional intellectual property requires payment of royalties, settlement payments, awards or any other payments made to and taken by any third party on account of the use of such third party's intellectual property shall be the burden of the Commercial Partner.

 

2.3           Further Development.  Within ninety (90) days of the completion of a pilot biostudy and delivery of the final report on the results of the pilot biostudy("Further Development Option Deadline"), Pacific shall have, upon verification of Pacific's  Commercial Capabilities and written notification to IntelGenx, the option to continue, at its expense, any further development of the Product deemed necessary for commercialisation of the Product whilst being, subject to Sections 3.4 and 5.1 solely responsible financially and/or otherwise for the timely completion of all activities, necessary for the commercialisation of the Product, and, for the avoidance of doubt, with all royalty obligations as per Section 8, responsibilities as per Section 2 and license grants as per Section 5, described herein remaining in effect ("Further Development Option").  In the event that Pacific elects to exercise its Further Development Option, and the Parties will enter into good faith negotiations to finalize a development and supply agreement.  Notwithstanding the foregoing IntelGenx  shall at all times retain all manufacturing rights related to the Licensed Application  and/or Product and shall, in furtherance to Sections 3.4 and 5.1, be responsible, at Pacific's cost, upon receipt by IntelGenx of a Purchase order for product from the Commercial  Partner, for carrying out all manufacturing  activities related to the Product, either itself or, subject to approval by Pacific, such approval not to be unreasonably  withheld, delayed or conditioned, through a qualified third party manufacturer.

 

In the event that Pacific elects not to exercise its Further Development Option, or in the event that Pacific is unable to provide reasonable evidence by the Further Development Option Deadline of Pacific's Commercial  Capabilities, Pacific shall immediately send IntelGenx written notification of such. This notice is deemed as an offer by Pacific to IntelGenx, to fully transfer title, interest, ownership  and/or control of the Project and all intellectual  property and intellectual property rights related thereto. IntelGenx  shall the have the right, at its sole discretion  to accept full title, interest, ownership  and/or control thereto and complete, at its own expense, all activities necessary to successfully  commercialize the Product, without liability to Pacific as to the result of any actions taken by IntelGenx, its Affiliates, licensee(s) and/or any sublicensee ("Transfer Option"). Notwithstanding any text to the contrary set forth herein, in the event that IntelGenx exercises its Transfer Option Pacific shall, other than costs incurred  before IntelGenx exercises its Transfer Option, have no further financial  responsibility or involvement  in further development  of the Project.

 

In the event that IntelGenx elects not to exercise its Transfer Option, this Agreement shall terminate, and Pacific shall, within forty five (45) days of Pacific receiving written notification oflntelGenx' decision not to exercise its Transfer Option, pay IntelGenx an amount equal to the Internal Costs. Notwithstanding termination  of the Agreement,  all royalty obligations  shall continue.

 

2.4           Ownership of Regulatory Application. In the event that Pacific exercises its Further Development  Option, Pacific will pay the relevant fees to the Regulatory  Authority and will file the application and act as the applicant during the regulatory  review process.

 

3.            LICENSE GRANT

 

3.1           Scope of License. Subject to all the terms and conditions of this  Agreement, IntelGenx hereby grants to Pacific, an exclusive worldwide, perpetual (subject to termination in accordance with the terms hereof) license under the Patents and the Licensed Know-How, with such exclusivity being limited to the right to and for the sole purpose the Licensed Application ("License").

 

 

  

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3.2           Sublicenses. The License granted to Pacific under this Agreement is, subject to IntelGenx' approval, sublicensable in whole or in part, to third parties in arm’s length transactions. Pacific shall give IntelGenx written notice of any intended Sublicense, including the name of the Sublicensee and the material terms thereof. IntelGenx agrees that it cannot unreasonably withhold, delay or condition approval to any proposed Sublicense hereunder. Any sublicense by the Parties of the rights granted to such Party under this Agreement shall be consistent with the terms of this Agreement, shall contain provisions necessary to effectuate the terms of this Agreement and shall include an obligation for the Sublicensee to comply with obligations similar to those of this Agreement.

 

3.3           Limitations on Other  Licenses. During the term of this Agreement, IntelGenx shall not grant any rights or licenses to any Patents or Licensed Know-How, or transfer any data or know-how to any third party that conflict with lntelGenx' obligations under this Agreement and the rights granted to Pacific under this Agreement.

 

3.4           Manufacturing. For the avoidance of doubt, IntelGenx reserves the right to grant manufacturing privileges for the Product such a grant being subject to, in the event that Pacific exercises its Further Development Option, Pacific's approval, such approval not to be unreasonably withheld.

 

4.            DATA TRANSFER

 

4.1           Data Transfer. Upon and following the successful and valid execution of this Agreement, IntelGenx shall reasonably provide to Pacific, at no cost to Pacific, all the pertinent information it has about the Product including, but not limited to, all Patents, know-how, and R&D data as relevant for the development, marketing approval, marketing and other Commercialisation of the Product.

 

4.2           Assistance. IntelGenx undertakes to reasonably assist, at Pacific's cost, in a technical transfer of Licensed Know-How to a contract manufacturing organization chosen by IntelGenx and approved by Pacific, such approval not to be unreasonably withheld.

 

5.            DECISION MAKING

 

5.1           The Parties hereto shall jointly take all key decisions regarding the development and Commercialisation of the Product, subject to the following:

 

5.1.1           IntelGenx shall bear primary responsibility for the development of the Product in accordance of the R&D programme and shall have a deciding vote in respect of development and manufacturing decisions regarding the Product development during the R&D Programme

 

5.1.2           Pacific shall bear primary responsibility for the licensing, clinical testing of the Product, Commercialisation and partnering of the Product and shall have a deciding vote in respect to regulatory and partnering/licensing/Commercialisation decisions relating to the Product.

 

5.1.3           IntelGenx shall have the deciding vote on matters pertaining to R&D Programme and manufacturing decisions and Pacific shall have the deciding vote on matters pertaining to regulatory [see 5.1.2] and partnering/licensing/Commercialisation decisions, all as described in Section 5.1 above.

 

6.           DILIGENCE

 

IntelGenx will make a good faith, continuous and diligent effort to allocate all appropriate resources to prepare, initiate and complete its development responsibilities within the R&D Budget and the timeframe agreed for the R&D Programme.

 

7.           REPORTS

 

7.1           IntelGenx shall keep Pacific reasonably informed with respect to activities and progress regarding the development of the Product. Specifically IntelGenx will report to Pacific at the completion of the following activities as defined in the R&D Programme Pre-development Activities Analytical Characterization Pre-formulation trials Formulation development Pilot BioStudy.

 

7.2           Upon Exercise of the Further Development Option Pacific agrees as follows:

 

7.2.1         Commercialisation Reports. Within thirty (30) days following the close of each calendar quarter following  the completion  of the R&D Programme  and exercise of the Further Development  Option, Pacific will provide IntelGenx  with a quarterly report with respect to activities and progress regarding its responsibilities, the commercialisation, sublicensing, and government  approvals of Product.

 

 

  

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7.2.2         First Commercial Sale Report.  To report to IntelGenx  the date of the first commercial  sale of the Product, together with the name of the country in which such first commercial sale occurred.

 

7.2.3         Revenue Reports. To deliver to IntelGenx a revenue report with respect to each calendar quarter within thirty (30) days of the expiration of such calendar quarter, detailing in a manner to be mutually agreed the following: the amount of Net Sales and Sublicense  Sales Royalties  received from Product, including  the Recognized  Deductions applicable in computing  Net Sales and the deductions  applicable  in computing Sublicense Sales Royalties, and the total Royalties due based on Net Sales and Sublicense  Sales Royalties.

 

7.3           Any and all information, data or reports supplied by Pacific pursuant to the provisions of this Section 7 shall be treated as Pacific's Confidential  Information.

 

7.4           If this Agreement is terminated  for any reason, Pacific shall deliver a final report and associated revenue sharing payment to IntelGenx within sixty (60) days after such termination.  Following termination,  Pacific shall have no further reporting obligations.

 

8           FINANCIAL PROVISIONS

 

8.1           Revenue Sharing. The Commercial  Partner will pay IntelGenx an amount equal to seven percent (7%) on the first $5,000,000 of Net Sales received  annually and 5% of Net Sales above the first $5,000,000" Notwithstanding the foregoing,  IntelGenx shall, in the event it exercises its Transfer Option, pay Pacific an amount equal to seven percent (7%) on the first $5,000,000 oflntelGenx Revenue and five percent (5%) of lntelGenx Revenue above the first $5,000,000.

 

8.2           Due Dates for Payment. All payments due pursuant to the provisions of Section 8.1 above shall be due and payable to IntelGenx on a calendar quarterly basis within fifteen (15) days following the submission of the relevant quarterly revenue report but no earlier than ten (10) business days following receipt of a relevant invoice from IntelGenx.

 

8.3           Any amounts due to IntelGenx under this Agreement will be paid in Canadian dollars, by wire transfer in immediately available funds to an account designated in writing at least fifteen (15) days in advance by IntelGenx.

 

8.4           Currency; Foreign Payments. If any currency conversion will be required in connection with the calculation of any payment hereunder, such conversion will be made by using the exchange rate for the purchase of U.S. dollars as published in The Wall Street Journal, Eastern Edition, on the date of the payment.

 

8.5           No Warranty.

 

8.5.1         For the avoidance of doubt, nothing contained in this Agreement shall be construed as a warranty by the Commercial Partner that any Commercialisation to be carried out by it in connection with this Agreement will actually achieve its aims or any other results and the Commercial Partner makes no warranties whatsoever as to any results to be achieved in consequence of the carrying out of any such Commercialisation. Furthermore, The Commercial Partner makes no representation to the effect that the Commercialisation of the Product, or any part thereof, will succeed, or that it shall be able to sell the Product in any quantity.

 

8.5.2        For the avoidance of doubt, nothing contained in this Agreement shall be construed as a warranty by IntelGenx that any activities carried out by IntelGenx in connection with this Agreement will actually achieve its aims or any other results and IntelGenx makes no warranties whatsoever as to any results to be achieved in consequence of the carrying out of any such activities. Furthermore, IntelGenx makes no representation to the effect that any clinical trials and/or any other activities required for an approval from any Regulatory Authority to market and/or sell the Product, or any part thereof, will succeed, or that the Commercial Partner shall be able to sell the Product in any quantity.

 

9           RECORD RETENTION  AND AUDIT

 

9.1           Record Retention. Pacific will maintain (and will ensure that its Affiliates maintain) complete and accurate books, records and accounts that fairly reflect Net Sales and/or Sublicense  Sales Royalties, in sufficient detail to confirm the accuracy of any payments required hereunder,  which books, records and accounts will be retained for two (2) years after the end of the period to which such books, records and accounts pertain.

 

 

 

  

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9.2           Audit. IntelGenx will have the right, at its own cost, to have an independent  certified public accounting  firm of nationally recognized standing, reasonably acceptable  to Pacific and who agrees to be bound by a customary  undertaking  of confidentiality (including  an undertaking  not to disclose to IntelGenx  any information other than the results of its audit), have access during normal business hours, and upon reasonable prior written notice, to the Commercial Partner's records together with any disclosure  necessary to explain the same as may be reasonably  necessary to verify the accuracy of Net Sales, Royalties and/or Sublicense Sales Royalties, as applicable, for any fiscal year ending not more than twenty-four  (24) months prior to the date of such request provided, however, that IntelGenx  will not have the right to conduct more than one  such audit in any calendar year or more than one such audit covering any given time period. Any such audit shall not unreasonably interfere with the business of the Commercial Partner and shall be completed within a reasonable time. Any amounts determined pursuant to any such audit to have been overpaid or underpaid shall promptly be refunded or paid as applicable.   In the event that any such audit reveals an underpayment to lntelGenx of more than five percent (5%), the Commercial Partner shall reimburse IntelGenx  for the expense of such audit.  As a condition to such audit, the independent public accountant  selected shall execute a written agreement, reasonably satisfactory  in form and substance to both Parties, to maintain in confidence all information  obtained during the course of any such audit except for disclosure as necessary for the above purpose and all reasonable documents will be delivered to the auditor under these confidential  terms.  Additionally no auditor may be employed on a contingency basis.

 

9.3           Confidentiality.  Both Parties will treat all information subject to review under this Section 9 in accordance  with the confidentiality provisions  provided herein.

 

10.           REPRESENTATIONS AND WARRANTIES

 

10.1          By Both Parties. Each Party hereby represents, warrants and covenants to the other Party as of the Effective Date as follows:

 

10.1.1       Corporate  Authority.  Such Party (a) has the power and authority and the legal right to enter into this Agreement and perform its obligations hereunder, and (b) has taken all necessary action on its part required to authorize the execution and delivery of this Agreement and the performance  of its obligations hereunder.  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 laws of general application  affecting the enforcement of creditor rights and judicial principles affecting the availability of specific performance and general principles of equity, whether enforceability  is considered a proceeding at law or equity.

 

10.1.2       Consents and Approvals.   Excluding any required regulatory approvals from Regulatory Authorities, and subject to the approvals referenced  in Sections 8.8 and 8.9 above, such Party has obtained all necessary consents, approvals and authorizations from any federal, state provincial, local or foreign government  or subdivision  thereof, or any entity, body or authority exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to any federal, state, provincial, local or foreign government  with jurisdiction  over the subject matter of the transactions  and/or activities contemplated  by this Agreement ("Governmental Authority") and other 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.

 

10.1.3       Conflicts.  The execution and delivery of this Agreement  and the performance of such Party's obligations hereunder, (a) do not conflict with or violate any requirement of applicable law or any provision of the articles of incorporation, bylaws or any similar instrument of such Party, as applicable, in any material way, and (b) do not conflict with, violate, or breach or constitute a default or require any consent not already obtained under, any contractual obligation or court or administrative  order by which such Party is bound.

 

10.2           By IntelGenx.  IntelGenx hereby further represents, warrants, and covenants to Pacific as of the Effective Date as follows:

 

I 0.2.1       IP Ownership.  IntelGenx has the sole legal and/or beneficial title to and ownership of the Patents and to the Licensed Know-How as is necessary to grant the License to Pacific pursuant to this Agreement, and the Patents and the Licensed Know-How are free and clear of any liens, encumbrances or third party rights.

 

10.2.2       No Conflicting Grants. IntelGenx has not and during the term of this Agreement shall not, grant any rights to the Patents or the Licensed Know-How that conflict with the rights granted to Pacific hereunder, and no third party has any rights whatsoever (including the right to receive royalties or any other compensation)  under the Patents or the Licensed Know-How  for the Product.

 

 

  

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10.2.3       Third Party Actions. The exercise of the License in the Field of Use by Pacific will not, to the best of IntelGenx' knowledge,  infringe upon the patent or other intellectual property rights of any third party, and no actions, suits, claims, disputes, or proceedings concerning the Patents, the Licensed Know-How  or the Product are currently pending or have been threatened, that could have an adverse effect on the Product or could impair IntelGenx'  ability to perform its obligations under this Agreement. Furthermore, there are no legal suits or proceedings by a third party (including  without limitation employees or former employees of IntelGenx) contesting the ownership or validity of the Patents, the Licensed Know­ How or the Product or any part thereof, and if IntelGenx shall become aware of any such third party, IntelGenx shall immediately notify Pacific of such, and IntelGenx undertakes to effect any payments required (including the payment of royalties or other compensation) to be made to such third party, and to hold Pacific harmless from, and indemnify and defend Pacific against, any such claims or payments.

 

11           LIMITATION OF LIABILITY.

 

Except in the case of willful or fraudulent misrepresentation under Section 10 and indemnification for payments to third parties under Section 15, in no event shall either Party be liable to the other or any of its Affiliates for any consequential,  incidental, indirect, special, punitive or exemplary damages (including, without limitation, lost profits, business or goodwill) suffered or incurred by such other Party or its Affiliates, whether based upon a claim or action of contract, warranty, negligence or tort, or otherwise, arising out of this Agreement.

 

12           PATENTS

 

12.1           Intellectual Property Ownership. All Product-related intellectual property solely developed by IntelGenx either prior to the Effective Date, or at any time after the Effective Date, shall be owned by IntelGenx, and licensed to Pacific pursuant to the License exclusivity granted herein. All Project-related  intellectual  property invented, created, conceived or developed, as a direct result of the development of the Products shall be owned by the party whose employees make or generate the intellectual  property ("Project Intellectual Property"). If the sole inventor of the Project Intellectual Property is any IntelGenx Parties, it shall be considered IntelGenx Intellectual Property and shall be subject to the licensing terms set forth herein. If the sole inventor of the Project Intellectual  Property is any Pacific Parties, it shall be considered  Pacific Intellectual Property and shall be subject to the licensing terms set forth herein. Intellectual property jointly developed by the Parties in the context of the development of the Product will be jointly owned (the "Joint IP") and IntelGenx' portion of same shall be included in the License granted hereunder. Each Party shall have the right to use such Joint IP in respect to products other than the Product, provided that such other product do not compete with the Product or with any other Product of the other Party; and provided further that neither party shall grant any exclusive rights to, or otherwise dispose of its portion of the Joint IP, without the prior written consent of the other party; other than (i) an assignment  or transfer in connection with a merger of such Party or a sale of all or substantially all of its assets or shares and (ii) Pacific's right to sublicense its portion of the Joint IP in the context of a sublicensing transaction under the License. Employees  of IntelGenx, whether serving as advisors or consultants to Pacific or serving Pacific in any other capacity, shall be considered  employees of IntelGenx for the purpose of determining ownership of intellectual property. Notwithstanding the foregoing, other than as provided in Section 3.1, Pacific shall not be granted any ownership or other rights in or to the IntelGenx Intellectual Property. IntelGenx shall not be granted any ownership or other rights in or to the Pacific Intellectual  Property.

 

12.2           Patent Prosecution  And Maintenance

 

12.2.1       Prosecution.  IntelGenx undertakes to prosecute and maintain the Patents using counsel of its choice in the jurisdictions to the extent such jurisdictions are decided after conferring with Pacific.  IntelGenx will provide Pacific with copies of all relevant documentation so that Pacific will be informed of the continuing prosecution and may comment upon such documentation sufficiently  in advance of any initial deadline for filing a response, provided, however, that if Pacific has not commented  upon such documentation in a reasonable time for IntelGenx to sufficiently  consider Pacific's comments  prior to a deadline with the relevant government patent office, or IntelGenx must act to preserve the Patents, IntelGenx will be free to act without consideration of Pacific's comments, if any.

 

12.2.2       Pacific's Requests.  IntelGenx shall use reasonable efforts to amend any Patent application to include claims or any other changes reasonably requested by Pacific to protect the Product contemplated to be sold under this Agreement. Moreover, IntelGenx will cooperate in the preparation, filing, prosecution, and maintenance of the Patents, including (a) promptly executing all papers and instruments and requiring employees to execute such papers and instruments as reasonable and appropriate so as to enable Pacific to file, prosecute, and maintain the Patents in any country; and (b) promptly informing Pacific of matters that may affect the preparation, filing, prosecution, or maintenance of any Patents.

 

 

  

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12.2.3       Patent Prosecution Costs. lntelGenx shall bear the costs of preparing, filing, prosecuting and maintaining all patent applications contemplated by Section 12.2.1, provided, however that Pacific shall pay all costs and expenses incurred in making amendments or changes required by Pacific, provided such amendments or changes have been expressly and specifically requested from IntelGenx in advance and in writing by Pacific and provided all such costs and expenses have been pre-approved in writing by Pacific. Costs associated with Joint IP patent applications shall be shared equally.

 

12.2.4       Co-operation. The Parties will provide reasonable assistance to each other, including providing access to relevant documents and other evidence, making its employees available at reasonable business hours, and joining the action to the extent necessary to allow the prosecuting and maintaining Party to prosecute and maintain the relevant Patent.

 

12.3  Patent  Enforcement

 

12.3.1       Infringement Notice.  Each party shall promptly notify the other party upon learning of any Infringement Allegation or Licensed Patent Dispute. IflntelGenx  or Pacific determines that any Licensed Patent or Patent Right is being infringed by a third party's activities and that such infringement could affect the exercise of the License under this Agreement, it will promptly notify the other Party in writing. In addition, if IntelGenx or Pacific determines that any Licensed Know-How is being misappropriated by a third party's activities and that such misappropriation could affect the exercise of the License under this Agreement, it will promptly notify the other Party in writing.

 

If Pacific has exercised the Further Development Option, Pacific will have the sole, exclusive and first right but not the obligation to remove such infringement and/or misappropriation and to control all litigation to remove such infringement and/or misappropriation relating to the Product in the Field of Use, all as Pacific shall deem appropriate in its sole discretion. IntelGenx shall provide notice to Pacific of its decision to co-defend (at Pacific's cost) within sixty (60) calendar days from the date the relevant Proceeding (as hereinafter defined) becomes known to IntelGenx. In the event Pacific does, at its discretion, undertake any infringement or misappropriation action and IntelGenx does not co-defend, Pacific will provide IntelGenx with copies of all relevant documentation so that IntelGenx will be informed of the continuing action and may comment upon such documentation. Pacific shall not be permitted to settle any threatened, pending or completed or any claim, issue or matter therein, on behalf oflntelGenx, without the prior written consent oflntelGenx, such consent not to be unreasonably withheld, delayed or conditioned.

 

For the avoidance of doubt, IntelGenx shall have no obligation or be responsible, financially and/or otherwise, for the enforcement of the Patent Rights, as related to any Product, subject to indemnity in 10.2.3

 

12.3.2       Co-operation.  The Parties will provide reasonable assistance to each other, including providing access to relevant documents and other evidence, making its employees available at reasonable business hours.

 

12.3.3       Recovery.  Any amounts recovered in connection with or as a result of any action contemplated by Sections 12.3.2 whether by settlement or judgment, will be used to reimburse the Parties for their reasonable costs and expenses in making such recovery, and any remainder received by IntelGenx or Pacific will be treated as Sublicense Sales Royalties and payments will be due in respect of same pursuant to this Agreement.

 

12.4           Patent Infringement

 

12.4.1       License. In the event that Pacific determines that the manufacturing, use or Commercialisation of the Product or any other action authorized under the License or any part thereof, is such that it is commercially reasonable to seek a license to the intellectual property rights of any third party, Pacific shall, upon IntelGenx' approval, such approval not to be unreasonably withheld,  be entitled to enter into negotiations with such third party in order to reach an agreement according to which Pacific shall obtain a license or other applicable right or a waiver from such party with respect to such intellectual property rights.

 

12.4.2       Claim -Rights and Procedures. In the event that either IntelGenx or Pacific, become aware of any Infringement Allegation, notice of an Infringement Allegation shall promptly be given to the other Party. Notwithstanding the foregoing IntelGenx shall in no way be responsible, financially and/or otherwise for, or be obligated in any way, in the defense of any Infringement Allegations by a third party that the use of the License in the Licensed Application violates a third party's intellectual property rights. All expenses costs, fees, damages, losses, and royalties or other amounts paid in settlement incurred in connection with the defence of such an Infringement Allegation shall in no way be the burden and/or responsibility of IntelGenx  but shall be the sole burden and/or responsibility of the Commercial Partner.

 

 

  

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12.4.3       In the event of an Infringement Allegation wherein IntelGenx is sued independently of Pacific, IntelGenx shall, at its sole discretion, have the first right to defend any such Infringement Allegation(s) using counsel of its choice. Pacific shall be responsible for all cost related thereto, join IntelGenx or replace IntelGenx as the defendant in the suit as may be necessary or advisable by IntelGenx' legal counsel, and Pacific will make available its employees and relevant records to assist in and to provide evidence for such suit. All expenses, fees (including reasonable legal fees and expenses), damages, losses and royalties or other amounts paid in settlement and/or incurred in connection with the defence of any Infringement Allegation shall be the burden of Pacific. In the event that the Commercial Partner is solely financially responsible for any Proceeding other than the defense of any Infringement Allegation, all royalties and/or other amounts paid in settlement, and/or recovered in connection with such shall be the sole benefit and/or responsibility of the Commercial Partner.

 

Neither Party shall, without the consent of the other Party, enter into any settlement or compromise or consent to any judgment in respect of any claim and/or Proceeding related to rights licensed to Pacific under this Agreement, unless such settlement, compromise or consent includes an unconditional release of the other Party from all liability arising out of the claim, if any, and does not otherwise limit or impair the other Party's rights.

 

13           CONFIDENTIALITY

 

13.1           Disclosure and Use Restriction. The Parties agree that during the Term of this Agreement and thereafter, each Party will keep completely confidential and will not publish, submit for publication or otherwise disclose, and will not use for any purpose except for the purposes contemplated by this Agreement, any Confidential Information (as such term is defined below) received from the other Party.

 

13.2           Confidential Information. Information or know-how of a Party shall not be deemed Confidential Information of such Party for purposes of this Agreement if such information or know-how:

(i)  was already known to the receiving Party, other than under an obligation of confidentiality or non-use, at the time of disclosure to such receiving Party;

(ii)  was generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or was otherwise part of the public domain, at the time of its disclosure to such receiving Party;

(iii)  became generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or otherwise became part of the public domain, after its disclosure to such receiving Party through no fault of the receiving Party;

(iv)  was disclosed to such receiving Party, other than under an obligation of confidentiality or non-use, by a third party who had no obligation to the disclosing Party not to disclose such information or know-how to others; or

(v)  was independently discovered or developed by such receiving Party, as evidenced by their written records, without the use of Confidential Information belonging to the disclosing Party and prior to any subsequent disclosure by the receiving Party.

 

All Licensed Know-How shall be deemed to be Confidential Information of lntelGenx;  provided that Pacific shall be entitled to disclose and use any Licensed Know-How in the exercise of its rights under this Agreement.

 

13.3           Authorized Disclosure.  Notwithstanding the provisions of Section 13.1 above, a Party shall be entitled to disclose the Confidential Information of the other Party hereto to the extent that such disclosure is:

 

(i)           made in response to a valid order of a court of competent jurisdiction; provided, however, that such Party will first (to the extent practicably possible) have given notice to such other Party and given such other Party a reasonable opportunity to quash such order and to obtain a protective order requiring that the Confidential Information and documents  that are the subject of such order be held in confidence by such court or agency or, if disclosed, be used only for the purposes for which the order was issued; and provided further that if a disclosure order is not quashed or a protective order is not obtained, the Confidential Information  disclosed in response to such court or governmental order will be limited to that information  which is legally required to be disclosed in response to such court or governmental order;

(ii)           otherwise required by law; provided, however, that the disclosing Party will provide such other Party with notice of such disclosure in advance thereof to the extent practicably possible and to the extent permitted, will redact from such disclosure the other party’s Confidential Information or designate the same as  trade secret;

 

 

  

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(iii)           made by such Party to any Regulatory  Authority or Governmental  Authority as necessary for the development or Commercialisation of a Product, including the Product, in a country, as required in connection  with any filing, application or request for Regulatory  Approval or as required by applicable securities laws and regulations, subject to the limitations in Section 13.3(ii);

 (iv)           made by such Party in connection with the performance of this Agreement, to Sublicensees,  Affiliates, directors, officers, employees, consultants, representatives or agents, each of whom prior to disclosure must be bound by obligations of confidentiality  and non-use at least equivalent in scope to those set forth in this Agreement;

(v)           made by such Party in the course of submitting financial accounts to relevant authorities as per local statutory requirements or to existing or potential acquirers; existing or potential collaborators; investment  bankers; existing or potential investors,  merger candidates,  partners, venture capital firms or other financial institutions or investors for purposes of obtaining financing; or, bona fide strategic potential partners; each of whom prior to disclosure must be bound by obligations  of confidentiality and non-use at least equivalent in scope to those set forth in this Agreement; or

(vi)           a general description of the Product made by a Party to its shareholders and to potential investors with the aim of securing the financing needed to continue the development of the Product.

 

14           PRESS RELEASES

 

Press releases or other similar public communication by either Party relating to the terms of this Agreement (but not, for the avoidance of doubt, unless reference is made to the other Party or the terms of this Agreement, with respect to activities in exercise of its rights under this Agreement) will be approved in advance by the other Party, which approval will not be unreasonably withheld or delayed. Notwithstanding the foregoing,  those communications required by applicable law, regulation or securities exchange  rule (including, but not limited to, a public offering prospectus), disclosures of information for which consent has previously been obtained, and information of a similar nature to that which has been previously  disclosed publicly with respect to this Agreement,  will not require advance approval, but will be provided to the other Party as soon as practicable after the release or communication thereof.  For the avoidance of doubt, the Parties may issue press releases regarding the fact that this Agreement has been signed and the nature of the agreement so long as they do not describe the specific provisions hereof without approval from the other party.

 

15           INDEMNIFICATION

 

15.1           Indemnification of IntelGenx. Pacific will defend and hold IntelGenx and its directors, officers,  Affiliates, employees and agents ("lntelGenx Parties") hannless, from and against any and all liability, Proceedings, suits, investigations, claims or demands by a third party to the extent arising from or occurring as a result of or in connection with (a) the negligence or willful misconduct on the part of Pacific in performing any activity contemplated by this Agreement or (b) a breach by Pacific of any representations,  warranties, or covenants set forth in this Agreement; except to the extent arising from the (i) negligence or willful misconduct on the part of an IntelGenx Party; or (ii) breach by IntelGenx of any representations, warranties or covenants set forth in this Agreement.

 

15.2           lntelGenx  Insurance. During the Term of this Agreement, IntelGenx shall maintain insurance coverage for general liability and property damage, including sufficient insurance covering IntelGenx' indemnification  obligations to Pacific, in an amount no less than $1,000,000 per occurrence, with an aggregate annual limit of$2,000,000, and shall provide evidence of such insurance to Pacific.

 

15.3           Indemnification  of Pacific.  IntelGenx will defend and hold Pacific, its Affiliates, and their respective directors, officers, employees and agents ("Pacific Parties"), harmless, from and against any and all liability, suits, investigations, claims or demands by a third party to the extent arising from or occurring as a result of or in connection with (a) negligence or willful misconduct on the part of IntelGenx or (b) breach by IntelGenx of any representations,  warranties, or covenants set forth in this Agreement, except to the extent the liability or loss arises from or occurs as a result of or in connection  with (i) negligence or willful misconduct on the part of a Pacific Party; or (ii) breach by Pacific of any representations, warranties, or covenants set forth in this Agreement.

 

15.4           Pacific Insurance. During the Term of this Agreement, Pacific shall maintain insurance coverage for general liability and property damage, including sufficient insurance covering Pacific's indemnification  obligations to IntelGenx, in an amount no less than $1,000,000 per occurrence, with an aggregate annual limit of$2,000,000, and shall provide evidence of such insurance to IntelGenx.

 

 

  

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15.5           Conditions to Indemnity.  Each Party's  agreement to indemnify and hold the other harmless is conditioned  upon the indemnified Party (i) providing written notice to the indemnifying Party of any claim, demand or action arising out of the indemnified activities within thirty (30) days after the indemnified  Party has knowledge of such claim, demand or action, (ii) permitting the indemnifying Party to assume full responsibility to investigate, prepare for and defend against any such claim or demand, (iii) assisting the indemnifying  Party, at the indemnifying  Party's expense, in the investigation of, preparation of and defense of any such claim or demand; and (iv) the indemnifying  Party not compromising  or settling such claim or demand without the indemnified  Party's prior written consent, unless such settlement includes as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified Party a complete release from all liability in respect of such claim or litigation; provided that, if the Party entitled to indemnification fails to promptly notify the indemnifying Party pursuant to the foregoing clause (i), the indemnifying  Party shall only be relieved of its indemnification  obligation to the extent it is prejudiced by such failure and provided further that the indemnified  Party is not obligated to notify the indemnifying Party of claims, demands and/or actions made directly against the indemnifying  Party only. Notwithstanding the foregoing, if in the reasonable judgment of the indemnified  Party, such suit or claim involves an issue or matter which could have a materially adverse affect on the business, operations or assets of the indemnified Party, the indemnified  Party may waive its rights to indemnity under this Agreement and control the defense or settlement thereof, but in no event shall any such waiver be construed as a waiver of any indemnification  rights such indemnified  Party may have at law or in equity.

 

16           TERM AND TERMINATION

 

16.1          Term.  Unless earlier terminated in accordance with the provisions of Section 2.4 or Section 16, the term of this Agreement (the "Term") commences upon the Effective Date and will continue until terminated  in accordance with the terms hereof.

 

16.2          Termination.

 

16.2.1       Termination  for Breach. Failure by a Party to comply with any of its material obligations contained herein will entitle the Party not in default to give to the defaulting Party notice specifying the nature of the material breach, requiring the defaulting Party to make good or otherwise cure such material breach, providing specific actions that the defaulting Party could take to cure such material breach, and stating its intention to invoke the provisions of Section 16.2 if such material breach is not cured. If such material breach is not cured within ninety (90) days after the receipt of such notice (or, if such material breach cannot be cured within such ninety (90) day period, if the defaulting Party does not commence actions to cure such material breach within such period and thereafter diligently continue such actions), the Party not in default will be entitled, without limiting any of its other rights conferred on it by this Agreement (except as expressly set forth herein), to terminate this Agreement by providing written notice to the breaching Party.

 

Notwithstanding anything to the contrary herein, in the event of termination of the Agreement by IntelGenx as a result of Pacific's material breach of this Agreement, and without derogating from any oflntelGenx' other rights at law, IntelGenx shall have the right to continue any and/or all activities contemplated in under and/or by this Agreement, terminate all rights granted to Pacific, continue utilizing the Patents and the Know-How for the exploitation of the Products, with the right to set-off, from any sums due to Pacific hereunder, amounts equivalent to any damage caused to IntelGenx as a result of Pacific breach hereunder.

 

Notwithstanding anything to the contrary herein, in the event of termination of the Agreement by Pacific as a result oflntelGenx' material breach of this Agreement, and without derogating from any of Pacific's other rights at law, Pacific shall have the right to continue any and/or all activities contemplated in under and/or by this Agreement, terminate all rights, other than the royalty obligations set forth herein, granted to IntelGenx, continue utilizing the Patents and the Know-How for the exploitation of the Products.

 

16.2.2       Voluntary Termination. Pacific may forthwith terminate this Agreement upon the occurrence of any of the following events:

 

	 	
(a) 

	
IntelGenx fails to perform any of its obligations hereunder or makes any material misrepresentation in this Agreement, which, if capable of being cured, has not been cured within ninety (90) days after written notice by Pacific (in which Pacific specifies the nature of such failure or misrepresentation);

	 	
(b) 

	
IntelGenx enters into any compromise with creditors or a general agreement for referral of payment with its creditor;

	 	
(c) 

	
IntelGenx makes or suffers to be made any transfer to any person, trustee, receiver, liquidator, or referee for the benefit of creditors;

 

 

  

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(d) 

	
IntelGenx files a voluntary petition in bankruptcy; and

	 	
(e) 

	
An involuntary petition in bankruptcy is filed against IntelGenx and not dismissed within 60 days of filing.

 

IntelGenx shall in furtherance of and in addition to the provisions of Sections 16.2.1 and 16.2.3, be entitled, in its sole discretion, to terminate this Agreement upon the occurrence of any of the following events:

 

	 	
(a) 

	
Pacific fails to perform any of its obligations hereunder or makes any material misrepresentation in this Agreement, which has not been cured within ninety (90) days after written notice by IntelGenx (in which IntelGenx specifies the nature of such failure or misrepresentation);

	 	
(b) 

	
Pacific enters into any compromise with creditors or a general agreement for referral of payment with its creditor;

	 	
(c) 

	
Pacific makes or suffers to be made any transfer to any person, trustee, receiver, liquidator, or referee for the benefit of creditors;

	 	
(d) 

	
Pacific files a voluntary petition in bankruptcy; and

	 	
(e) 

	
An involuntary petition in bankruptcy is filed against Pacific and not dismissed within sixty (60) days of filing.

 

16.2.3       Termination for Convenience. IntelGenx shall be entitled, in its sole discretion, to terminate this Agreement at any time on thirty (30) days written notice to Pacific, without the need to pay  Pacific any compensation  in respect of such termination, in which case the License granted under this Agreement shall immediately  terminate. Pacific shall have no right to terminate this Agreement other than for cause in accordance with the provisions of Section 16.2.1 above. Payment obligations by Pacific under this Agreement incurred or accrued prior to the termination would remain in effect until completed. For the avoidance of doubt, in the event that lnteiGenx terminates this Agreement pursuant to this section, 16.2.3, IntelGenx shall not be entitled to reimbursement of Internal Costs.

 

16.3          Consequences of Termination

 

16.3.1       License. Upon early termination  of this Agreement, all rights granted to Pacific under Section 3.1 will terminate; provided that Pacific shall have a period of one hundred eighty (180) days after the date of termination  to sell-off all previously made Product, subject to Royalties and Sublicense Sale Royalties on such sales being duly paid to IntelGenx. Upon termination of this Agreement all sublicenses granted by Pacific shall, at IntelGenx'  sole discretion, either terminate or, unless termination  is due to breach by IntelGenx or pursuant to Section 16.2.2, be automatically transferred to IntelGenx upon written request from IntelGenx.  For the greater certainty, any agreement with a Sublincensee shall be consistent with this Agreement.

 

16.3.2       Return of Information and Materials.  Upon early termination of this Agreement, each Party will return to the other all Confidential  Information of the other Party (except one copy of which may be retained for archival and compliance purposes), Each Party will return to the other Party or its designee all Licensed Know-How  and any other tangible materials received by the Party under this Agreement and the Party will further waive and actively deregister or assign as requested by the other Party, all Patent right registrations made hereunder.16.3.3

 

16.2.3       Accrued Rights. Termination or expiration of this Agreement for any reason will be without prejudice to any rights or financial compensation  that will have accrued to the benefit of a Party prior to such termination or expiration. Such termination or expiration will not relieve a Party from obligations that are expressly indicated to survive the termination or expiration of this Agreement.

 

16.3.4       Survival. Sections 2.3, 3.4, 7.3, 7.4, 9, 11, 12.1, 13, 15, 16.3 and 17.11, and 17.3 of this Agreement will survive expiration or termination of this Agreement for any reason.

 

 

  

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16.3.5       Further Development. In the event that IntelGenx exercises its Transfer Option Pacific shall not, directly or indirectly, work outside of this Project, either alone or with any third party, on the development of a combination  product containing both pentoxifylline and n-acetylcystein, for a period of twenty (20) years from the Effective Date of this Agreement, whether by carrying on or engaging in or being concerned with or interested in or advising, lending money to, guaranteeing the debts or obligations of or permitting its name or any part thereof to be used or employed by, any person engaged in or concerned with or interested in any business that is directly competitive with the a combination  product containing both pentoxifylline and n-acetylcystein.

 

17            MISCELLANEOUS

 

17.1           Assignment. Without the prior written consent of the other Party hereto, neither Party will sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this Agreement or any of its rights or duties hereunder; provided, however, that (i) either Party hereto may assign or transfer this Agreement or any of its rights or obligations hereunder without the consent of the other Party to any Affiliate, or to any third party successor in interest with which it has merged or consolidated, or to which it has transferred all or substantial  part of its assets or stock to which this Agreement relates.  Any purported assignment or transfer in violation of this Section 17.1 will be void ab initio and of no force or effect.

 

17.2           Severability. Should any term or provision of this Agreement be or become invalid or unenforceable or should this Agreement contain an omission, the validity or enforceability of the remaining terms or provisions shall not be affected. In such case, subject to the next following sentence, the Parties shall immediately commence to negotiate in good faith in order to replace the invalid or unenforceable  term or provision by such other valid or enforceable term or provision which comes as close as possible to the original intent and effect of the invalid or unenforceable  term or provision, or respectively, to fill the omission by inserting such term or provision which the Parties would have reasonably agreed to, if they had considered the omission at the date hereof. In the event that any term or provision as aforesaid is invalid, void or unenforceable by reason of its scope, duration or area of applicability or some similar limitation as aforesaid, then the court making such determination shall have the power to reduce the scope, duration, area or applicability  of the term or provision so that they shall be enforceable to the maximum scope, duration, area or applicability permitted  by applicable  law which shall not exceed those specified in this Agreement or to replace such term or provision with a term or provision that comes closest to expressing the intention of the invalid or unenforceable  term or provision.

 

17.3           Governing Law. This Agreement shall be governed by and construed in accordance  with Ontario law, without reference to any rules of conflicts of laws. All disputes arising out of or related to this Agreement, and any remedies relating thereto, shall be construed, governed, interpreted, and applied in accordance  with the laws of the Province of Ontario and the federal laws of Canada applicable in the Province of Ontario, without resort to conflict of law principles, except that questions affecting the construction, validity, and effect of any patent shall be determined  by the law of the country in which the patent shall have been granted.  The Parties agree that the United Nations Convention  on Contracts for the International Sale of Goods is specifically excluded from and shall not govern the rights and obligations of the Parties under this Agreement. Any actions or Proceedings with respect to, arising directly or indirectly in connection with, out of, related to, or from this Agreement or any other document referred to in this Agreement shall be litigated in courts having situs in the Province of Ontario Each Party hereby submits to the exclusive jurisdiction of any provincial or federal court located in the Province of  Ontario, and hereby waives any rights it may have to transfer or change the jurisdiction or venue of any litigation  brought against it by any Party in accordance  with this Section. Furthermore, to the maximum extent permitted by law, each Party hereby waives any and all objections or defenses to the jurisdiction of such courts, including forum non-conveniens.

 

This Section 17.3 shall not prohibit a Party from seeking injunctive relief from a court of competent jurisdiction  in the event of a breach or prospective breach of this Agreement by the other Party, which would cause irreparable  harm to the first Party.

 

17.4           Notices. All notices or other communications that are required or permitted hereunder will be in writing and delivered personally with acknowledgement  of receipt, sent by electronic mail (provided receipt is acknowledged), facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier as provided herein), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

 

If to IntelGenx, to:

 

IntelGenx Corp.

6425 Abrams

Ville St-Laurent (Quebec) H4S 1X9

Canada

Fax: +1 514-331-0436

 

 

  

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If to Pacific, to:

 

Pacific Therapeutics Ltd.

409 Granville Street

Suite #1023

Vancouver, BC V6C1T2 Canada

 

or to such other address as the Party to who notice is to be given may have furnished to the other Party in writing in accordance herewith.  Any such communication will be deemed to have been given (i) when delivered, if personally delivered, (ii) on the business day (on the receiving end) after dispatch, if sent by nationally-recognized overnight courier (third business day if sent internationally),  (iii) on the third business day following the date of mailing, if sent by mail (fifth business day if sent internationally) and (iv) on the first business day (on the receiving end) after being sent by facsimile or by if sent by electronic mail followed  by facsimile.   It is understood and agreed that this Section 17.4 is not intended to govern the day-to-day business communications  necessary between the Parties in performing  their duties, in due course, under the terms of this Agreement.

 

17.5         Entire Agreement; Modifications. This Agreement sets forth and constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof and all prior agreements, understanding, promises and representations, whether written or oral, with respect thereto, including the term sheet executed between the Parties dated April19, 2010, are superseded hereby. Each Party confirms that it is not relying on any representations or warranties of the other Party except as specifically set forth herein. No amendment, modification, release or discharge will be binding upon the Parties unless in writing and duly executed by authorized representatives of both Parties.

 

17.6          Relationship of the Parties. It is expressly agreed that the Parties will be independent contractors of one another and that the relationship between the Parties will not constitute a partnership, joint venture or agency.

 

17.7          Waiver. Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver will be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition.  Any such waiver will not be deemed a waiver of any other right or breach hereunder.

 

17.8          Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

 

17.9          No Third Party Beneficiaries.  The representations, warranties, covenants and agreements set forth in this Agreement are for the sole benefit of the Parties hereto and their successors and permitted assigns, and they will not be construed as conferring any rights on any other parties.

 

17.10        Further Assurances. Each Party will duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including the filing of such assignments, agreements, documents and instruments, as may be necessary to carry out the provisions and purposes of this Agreement.

 

17.11        Restriction on Development.  Subject to Sections 2.4 and 16, neither Party shall, directly or indirectly, work outside of this Project, either alone or with any third party not currently involved with the Project, on the development of a combination product containing both pentoxifylline and n-acetylcystein, for a period of seven (7) years from the Effective Date of this Agreement, whether by carrying on or engaging in or being concerned with or interested in or advising, lending money to, guaranteeing the debts or obligations of or permitting its name or any part thereof to be used or employed by, any person engaged in or concerned with or interested in any business that is directly competitive with the a combination product containing pentoxifylline and n-acetylcystein.

 

17.12        Force Majeure. Neither party shall be responsible to the other for failure or delay in performing any of its obligations under this Agreement or for other non-­ performance hereof but only to the extent that such delay or non-performance is occasioned by a cause beyond the reasonable control and without fault or negligence of such party, including, but not limited to earthquake, fire, flood, explosion, discontinuity in the supply of power, court order or governmental interference, act of God, strike or other labour trouble, act of war or terrorism and provided that such party will inform the other party as soon as is reasonably practicable and that it will entirely perform its obligations immediately after the relevant cause has ceased its effect. If any such force majeure event continues for a continuous period of three (3) months, the Party whose performance is not prevented by such event may terminate this Agreement with immediate effect by providing the other Party with written notice.

 

 

  

15

  

 

17.13        Language. The parties have requested that this Agreement and all communications and documents relating hereto be expressed in the English language. Les parties ont exige que la presente convention ainsi que tous les documents s'y rattachant soient rediges dans Ia langue anglaise.

 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date.

 

IntelGenx Corp.

 

Signature: /s/ Paul A. Simmons 

Name: Paul A. Simmons

Title: CFO

 

Pacific Therapeutics Ltd.

 

Signature: /s/ Doug Unwin

Name: Doug Unwin

Title: CEO

 

 

 

 

 

 

 

16f10q0913ex10i_ctdholdings.htm

Exhibit 10.1

 

 

	Principal	Loan Date	Maturity	 Bank/App	Loan No 	Account	Officer
	
$578,988.00

	07-17-2013	07-17-2023	092	25802246290001473297	 	J2KX7
	
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. 

Any item above containing "***" has been omitted due to text length limitations.

                                                                              

	Borrower:	 CTD HOLDINGS, INC. (TIN: 59-3029743)    	Lender:  	REGIONS BANK
	 	 14120 NW 126TH TER	 	201 MILAN PARKWAY
	 	 ALACHUA, FL 32615	 	BIRMINGHAM, AL 35211
	 	 	 	 

 

THIS BUSINESS LOAN AGREEMENT dated July 17, 2013, is made and executed between CTD HOLDINGS, INC. ("Borrower") and REGIONS BANK ("Lender") on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement. Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying upon Borrower's representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender's sole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions of this Agreement,

 

TERM. This Agreement shall be effective as of July 17, 2013, and shall continue in full force and effect until such time as all of Borrower's Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys' fees, and other tees and charges, or until July 17, 2023.

 

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to Lender's satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.

 

Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting to Lender security interests in the Collateral; (3) financing statements and all other documents perfecting Lender's Security Interests; (4) evidence of insurance as required below; (5) guaranties; (6) together with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactory to Lender and Lender's counsel.

 

Borrower's Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition. Borrower shall have provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require.

 

Payment of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document.

 

Representations and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct.

 

No Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document.

 

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:

 

Organization. Borrower is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Florida. Borrower is duly authorized to transact business in all other states in which Borrower is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. Borrower has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. Borrower maintains an office at 14120 NW 126TH TER, ALACHUA, FL 32615. Unless Borrower has designated otherwise in writing, the principal office is the office at which Borrower keeps its books and records including its records concerning the Collateral. Borrower will notify Lender prior to any change in the location of Borrowers state or organization or any change in Borrower's name. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to Borrower and Borrower's business activities.

  

  

  

  

 

	
BUSINESS LOAN AGREEMENT

	Loan No: 25802246290001473297 	(Continued)	Page 2

 

Assumed Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business: None.

 

Authorization. Borrower's execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower's articles of incorporation or organization, or bylaws, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower's properties.

 

Financial Information. Each of Borrower's financial statements supplied to Lender truly and completely disclosed Borrower's financial condition as of the date of the statement, and there has been no material adverse change in Borrower's financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements.

 

Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.

 

Properties. Except as contemplated by this Agreement or as previously disclosed in Borrower's financial statements or in writing to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower's properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower's properties are titled in Borrower's legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years.

 

Hazardous Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During the period of Borrower's ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation at any Environmental Laws; (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower's expense and for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower's due diligence in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement, including the obligation to indemnify and defend, shall survive the payment of the indebtedness and the termination, expiration or satisfaction of this Agreement and shall not be affected by Lender's acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.

 

Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower's financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing.

 

Taxes. To the best of Borrower's knowledge, all of Borrower's tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.

 

Lien Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower's Loan and Note, that would be prior or that may in any way be superior to Lender's Security Interests and rights in and to such Collateral.

 

Binding Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.

 

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:

 

Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower's financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor.

 

Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrower's books and records at all reasonable times.

 

Financial Statements. Furnish Lender with such financial statements and other related information at such frequencies and in such detail as Lender may reasonably request.

 

Additional Information. Furnish such additional information and statements, as Lender may request from time to time. 

 

  

  

  

 

	
BUSINESS LOAN AGREEMENT

	Loan No: 25802246290001473297 	(Continued)	Page 3

 

Financial Covenants and Ratios. Comply with the following covenants and ratios:

 

Additional Requirements.

 

Debt Service Coverage Ratio (EBITDA). Borrower will not permit its ratio of EBITDA to Interest Expense and prior period Current Maturities of Long Term Debt for such fiscal year to be at any time less than 1.3 times, to be measured annually.

 

Except as provided above, all computations made to determine compliance with the requirements contained in this paragraph shall be made in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct.

 

Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower's properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least thirty (30) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender's loss payable or other endorsements as Lender may require.

 

Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.

 

Guaranties. Prior to disbursement of any Loan proceeds, furnish executed guaranties of the Loans in favor of Lender, executed by the guarantors named below, on Lender's Forms, and in the amounts and under the conditions set forth in those guaranties.

 

	Names of Guarantors	 	
 Amounts

	 	 	 
	CHARLES EDWARD STRATTAN 	 	
 Unlimited

	
NANCY BACON STRATTAN

	 	
 Unlimited

	NANOSONIC PRODUCTS, INC.	 	
 Unlimited

	CYCLODEXTR INTECHNOLOGIES	 	
 Unlimited

	
DEVELOPMENT, INC.

	 	
 Unlimited

	SPHINGO. BIOTECH, INC	 	
 Unlimited

 

Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.

 

Loan Proceeds. Use all Loan proceeds solely for Borrower's business operations, unless specifically consented to the contrary by Lender in writing.

 

Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower's properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings, and (2) Borrower shall have established on Borrower's books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with GAAP.

 

Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents, and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in writing of any default in connection with any agreement.

 

Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner.

 

Environmental Studies. Promptly conduct and complete, at Borrower's expense, all such investigations, studies, samplings and testings as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned, leased or used by Borrower.

 

Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the conduct of Borrower's properties, businesses and operations, and to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as, in Lender's sole opinion, Lender's interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender's interest.

 

  

  

  

 

	
BUSINESS LOAN AGREEMENT

	Loan No: 25802246290001473297 	(Continued)	Page 4

 

Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower's other properties and to examine or audit Borrower's books, accounts, and records and to make copies and memoranda of Borrower's books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower's expense.

 

Environmental Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist, as a result of an intentional or unintentional action or omission on Borrower's part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower's part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources.

 

Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests.

 

LENDER'S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender's interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower's failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note, or the maximum rate permitted by law, whichever is less, from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note's maturity.

 

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower's financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any other loan with Lender; or (E) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred.

 

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided in this paragraph.

 

DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: 

 

Payment Default. Borrower fails to make any payment when due under the Loan.

 

Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.

 

Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's or any Grantor's property or Borrower's or any Grantor's ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents.

 

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.

 

Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.

  

  

  

  

 

	
BUSINESS LOAN AGREEMENT

	Loan No: 25802246290001473297 	(Continued)	Page 5

 

Defective Colateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.

 

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

 

Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness,

 

Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.

 

Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Loan is impaired.

 

Insecurity. Lender in good faith believes itself insecure.

 

EFFECT OF AN EVENT OF DEFAULT. If any, Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender's option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the "Insolvency" subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender's rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender's right to declare a default and to exercise its rights and remedies.

 

ADDITIONAL DEFINITIONS. Certain Defined Terms. For purposes of the foregoing financial covenants, the following terms are defined as follows:

 

Capital Expenditures means any expenditure for fixed assets or that is properly chargeable to capital account in accordance with GAAP.

 

Current Assets means assets that, in accordance with GAAP, are current assets; provided, however, that (a) inventories shall be taken into account on the basis of cost or current market value, whichever is lower, or, to the extent that such inventories are required for delivery under then-existing contracts, the applicable contract price, (b) current assets shall not include any intangible assets or any securities that are not readily marketable, (c) securities included as current assets shall be taken into account at the current market price thereof, and (d) current assets shall not include any amounts due from or owed by [any shareholder/partner/member] or Affiliate of the Borrower or any of its Subsidiaries.

 

Current Liabilities means, as of the date of determination, all Debt maturing on demand or within one year from, and that is not renewable at the option of the obligor to a date later than one year after, the date as of which such determination is made and all other items (including taxes accrued as estimated) that, in accordance with GAAP, would be Included as current liabilities.

 

Debt means (a) all indebtedness, whether or not represented by bonds, debentures, notes or other securities, for the repayment of borrowed money, (b) all deferred indebtedness for the payment of the purchase price at property or assets purchased, (c) all capitalized lease obligations, (d) all indebtedness secured by any Lien on any property of such person, whether or not indebtedness secured thereby has been assumed, (e) all obligations with respect to any conditional sale contract or title retention agreement, (f) all indebtedness and obligations arising under acceptance facilities or in connection with surety or similar bonds, and the outstanding amount of all letters of credit issued for the account of such person, and (g) all obligations with respect to interest rate swap agreements.

 

Guaranteed Obligations means all guaranties, endorsements, assumptions and other contingent obligations in respect of, or to purchase or to otherwise acquire, any indebtedness, obligation or liability of another person.

 

Interest Expense means interest payable on Debt during the period in question.

 

Lien means any mortgage, pledge, assignment, charge, encumbrance, lien, security title, security interest or other preferential arrangement.

 

Net Cash Flow for any period means net income (or the net deficit, if expenses and charges exceed revenues and other proper income credits) for such period, plus amounts that have been deducted for (a) depreciation and (b) amortization in determining net income for such period.

 

Net Income means, for any period and with respect to any person or entity, the net earnings (after income taxes) of such period, determined on a FIFO basis and in accordance with GAAP, but excluding (a) any gain or loss arising from the sale of capital assets, (b) any gain arising from any write-up of assets, (c) earnings from any person or entity, substantially all of the assets of which have been acquired in any manner by the person or entity whose net income is measured, to the extent that such earnings were realized by such other person or entity prior to the date of such acquisition, (d) net earnings of any other person or entity in which the person or entity whose net income is measured has an ownership interest, unless such earnings have actually been received in the form of cash distributions, (e) the earnings of any other person or entity to which assets of the person or entity whose net income is measured shall have been sold, transferred to, disposed of, or into which the person or entity whose net income is measured shall have merged, to the extent that such earnings arise prior to the date of such transaction, (f) any gain arising from the acquisition of any securities of the person or entity whose net income is measured, and (g) any other extraordinary or nonrecurring gains.

 

Net Income Available for Interest Payments for any period means net income (or the net deficit, if expenses and charges exceed revenues and other proper income credits) for such period plus amounts that have been deducted for (a) Interest Expense, (b) income and profit taxes, and (c) amortization of debt discount in determining net income for such period.

 

  

  

  

 

	
BUSINESS LOAN AGREEMENT

	Loan No: 25802246290001473297 	(Continued)	Page  6

 

Permitted Contest means any appropriate proceeding conducted in good faith by the Borrower to contest any tax, assessment, charge, Lien or similar claim, during the pendency of which proceeding the enforcement of such tax, assessment, charge, Lien or claim is stayed; provided that the Borrower has set aside on its books or, if required by the Lender, deposited as cash collateral with the Lender, adequate cash reserves to assure the payment of any such tax, assessment, charge, Lien or claim.

 

Current Maturities means current maturing or coming due on Debt during the period in question. 

 

Current Ratio defined as current assets/current liabilities (as defined by GAAP).

 

EB1DAR for any period means net income (or the net deficit, if expenses and charges exceed revenues and other proper income credits) for such period, plus amounts that have been deducted for (a) Interest Expense, (b) taxes (including, but not limited to, Income Tax Expense), (c) depreciation, (d) amortization and (e) Rent and Lease Expense for such period.

 

Short Term Debt means all Debt which by its terms matures within one year from, and which is not renewable at the option of the obligor to a date later than one year after, the date such Debt was incurred. Any Debt that is extended or renewed (other than pursuant to the option of the obligor) shall be deemed to have been incurred at the date of such extension or renewal.

 

Solvent means, as to any person or entity, such person or entity (i) owns property whose fair salable value is greater than the amount required to pay all of such person's or entity's debts (including contingent, subordinated, unmatured and unliquidated liabilities), (ii) owns property whose present fair salable value is greater than the probable total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of such person or entity, (iii) is able to pay all of its debts as such debts mature, (iv) has capital that is not unreasonably small for its business and is sufficient to carry on its business and transactions and all business and transactions in which it is about to engage, (v) is not "insolvent" within the meaning of Section 101(32) of the United States Bankruptcy Code, and (vi) has not incurred (by way of assumption or otherwise) any obligations or liabilities (contingent or otherwise) under any of the Loan documents, or made any conveyance pursuant to or in connection therewith, with actual intent to hinder, delay or defraud either present or future creditors of such person or entity or any of its Subsidiaries. As used herein, the term 'fair salable value" of a person's or entity's assets means the amount that may be realized within a reasonable time, either through collection or sale of such assets at the regular market value, based upon the amount that could be obtained for such assets within such period by a capable and diligent seller from an interested buyer who is willing (but is under no compulsion) to purchase under ordinary selling conditions.

 

Subsidiary or Subsidiaries means, with respect to any person or entity, (a) any corporation more than fifty percent (50%) of whose outstanding stock having ordinary voting power (and/or instruments convertible into such stock) is at the time directly or indirectly owned by such person or entity (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency); or (b) a partnership or other entity more than fifty percent (50%) of the ownership interest (and/or instruments convertible into such interest) of which is owned directly or indirectly by such person or entity.

 

Tangible Net Worth means the sum of the amounts set forth on the balance sheet as [shareholders' equity][members' capital accounts][partners' capital accounts] (including the par or stated value of all outstanding [capital stock][membership interests][partnership interests], retained earnings, additional paid-in capital, capital surplus and earned surplus), less the sum of (a) any amount of any write-up of assets, (b) goodwill, (c) patents, trademarks, copyrights, leasehold improvements not recoverable at the expiration of a lease, and deferred charges (including unamortized debt, discount and expense, organization expenses, experimental and developmental expenses, but excluding prepaid expenses), (d) any amounts at which shares of [capital stock][membership interests[[partnership interests] of such person appear on the asset side of the balance sheet and (e) any amounts due from or owed by any [shareholder][member][partner] or Affiliate.

 

Total Liabilities means all Debt and all other items (including taxes accrued as estimated) that, in accordance with GAAP would be included in determining total liabilities as shown on the liabilities side of a balance sheet.

 

Quick Ratio means the ratio of Current Assets, excluding inventory, to Current Liabilities.

 

EBIT for any period means net income (or the net deficit, if expenses and charges exceed revenues and other proper income credits) for such period, plus amounts that have been deducted for (a) Interest Expense, and (b) taxes (including, but not limited to, Income Tax Expense) for such period.

 

EBITDA for any period means net income (or the net deficit, if expenses and charges exceed revenues and other proper income credits) for such period, plus amounts that have been deducted for (a) Interest Expense, (b) taxes (including, but not limited to, Income Tax Expense), (c) depreciation, and (d) amortization for such period.

 

EBITDAR for any period means net income (or the net deficit, if expenses and charges exceed revenues and other proper income credits) for such period, plus amounts that have been deducted for (a) Interest Expense, (b) taxes (including, but not limited to, Income Tax Expense), (c) depreciation, (d) amortization and (e) Rent and Lease Expense for such period.

 

Fixed Charges for any period means Interest Expense plus prior period Current Maturities of Long Term Debt plus Income Tax Expense plus Rent and Lease Expense plus Maintenance Capital Expenditures plus Non Discretionary Dividends.

 

  

  

  

 

	
BUSINESS LOAN AGREEMENT

	Loan No: 25802246290001473297 	(Continued)	Page  7

 

Maintenance Capital Expenditures means the minimum amount of capital expenditures, not financed with Debt, needed to keep the company operating at its current level. The amount of Maintenance Capital Expenditures will be provided by the Borrower to the Lender in an acceptable form. If such information is not supplied or is not acceptable, Maintenance Capital Expenditures will be deemed to be 50% of depreciation expense.

 

Capital Leases means all leases that would be characterized as a financed sale or purchase under GAAP or statutory accounting principles, as applicable.

 

Current Maturities of Long-Term Debt or CMLTD means the principal portion of Long-Term Debt maturing by its terms within one year. 

 

Global Liabilities means the sum of all debts of the Borrower and Guarantor.

 

Global Tangible Net Worth means the sum of the tangible net worth of the Borrower and Guarantor. The Guarantor's tangible net worth will be net of personal property and closely held securities, including ownership interests in closely held entities.

 

Net Global Income Available for Global Debt Service means the business net income before interest, depreciation, and amortization expense, plus personal income of the Guarantor adjusted for depreciation, taxes, and living expenses. Interest Expense and Principal Maturities will include the sum of all annual principal and interest due on business and personal debt.

 

Operating Leases means leases that are not Capital Leases; defined as a lease in which the entity does not assume the risks of ownership of the property, plant, and equipment (PP&E). It is an agreement conveying the right to use property for a limited time in exchange for periodic rental payments.

 

Rent and Lease Expense means, all amounts paid under any Operating Leases or other lease or rental agreement (other than obligations under Capital Leases) during the period in question.

 

Income Tax Expense means for any period any and all income taxes accrued, paid, or owed to any governmental body (e.g. local, state, or national) for such period.

 

Non Discretionary Dividends means for any period all dividends or other distributions made by the Borrower or any of its subsidiaries with respect to any of its stock, preferred stock, membership units, or other similar representation of ownership interest to which the Borrower or its subsidiary is required to make for such period, which includes but not limited to income tax liabilities.

 

Gross Income means for any period Net Sales minus cost of goods sold for such period. 

 

Gross Sales means for any period the total sales for such period.

 

Net Operating Income means Gross Income less operating expenses including depreciation and amortization expense (but excluding Interest Expense and Income Tax Expense).

 

Net Sales means for any period Gross Sales, less the net of returns and discounts allowed, for such period.

 

Minority Interests means ownership interests (e.g. stock or membership units) in the Borrower that aggregate to less than fifty percent (50%) or all outstanding ownership interests.

 

Lease Adjusted Funded Debt means Funded Debt plus the Net Present Value of Non-cancelable Leases.

 

Year over Year Change in Sales (Sales Growth) means for any period the ratio of the total Net Sales for such period to prior period Net Sales.

 

Net Income Available for Debt Service for any period means net income (or the net deficit, if expenses and charges exceed revenues and other proper income credits), plus amounts that have been deducted for (A) depreciation, (B) amortization and (C) Interest Expense for such period.

 

  

  

  

 

	
BUSINESS LOAN AGREEMENT

	Loan No: 25802246290001473297 	(Continued)	Page 8

 

Recurring Items means the aggregate of items of income and/or expense not otherwise accounted for that are determined by the Lender to be highly likely to continue in the future as suggested by similar figures in historical financial statements.

 

Subordinated Debt means all Debt owed to a third party individual or lender whereby the applicable third-party subordinates all of its rights pursuant to a written agreement to enforce the Borrower's obligations to the third-party lender to all of the Lender's rights to enforce Borrower obligations to Lender.

 

Trade Accounts Receivable (net) means for any period all accounts receivable from trade net of allowance for debts.

 

Long Term Debt defined as debt instruments with a maturity principal due date of one year or more in length; including revolving lines of credit, non-revolving lines of credit, notes payable, bonds, loans, capital leases obligations and any other contractual debt instruments. Also includes the portion of long term debt maturing within one year (current portion of long term debt).

 

Cash means all cash and cash equivalents where cash equivalents are marketable securities with less than one year maturity and any other marketable liquid securities. Cash includes all currency, petty cash, demand deposits, money market deposits and all time deposits or certificates of deposit with a maturity of less than one (1) year. Cash does not include any restricted deposits such as sinking funds.

 

Liquid Assets means the sum of cash, marketable securities, and the cash value of life insurance.

 

Net Present Value of Non-cancelable Leases means the net present value of Operating Leases as determined by the Lender based upon Lender's review of Borrower's financial statements.

 

Net Worth means Total Assets less Total Liabilities.

 

Funded Debt defined as total funded debt outstanding including lines of credit, over-drafts, short-term notes payable, current portion of long term debt, long-term debt and any other contractual debt instruments.

 

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement:

 

Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

 

Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of Lender's costs and expenses, including Lender's reasonable attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's reasonable attorneys' fees and legal expenses whether or not there is a lawsuit, including reasonable attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as may be directed by the court.

 

Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.

 

Consent to Loan Participation. Borrower agrees and consents to Lender's sale or transfer, whether now or later, of one or more participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower's obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender.

 

Governing Law. With respect to interest (as defined by federal law) this Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Alabama without regard to its conflicts of laws provisions. In all other respects, this Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Florida without regard to its conflicts of law provisions. The loan transaction that is evidenced by the Note and this Agreement has been approved, made, and funded, and all necessary loan documents have been accepted by Lender in the State of Alabama.

 

No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender's rights or of any of Borrower's or any Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

 

  

  

  

 

	
BUSINESS LOAN AGREEMENT

	Loan No: 25802246290001473297 	(Continued)	Page 9

 

Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower's current address. Unless otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers.

 

Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other-provision of this Agreement.

 

Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word "Borrower" as used in this Agreement shall include all of Borrower's subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower's subsidiaries or affiliates.

 

Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bind Borrower's successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the right to assign Borrower's rights under this Agreement or any interest therein, without the prior written consent of Lender.

 

Survival of Representations and Warranties. Borrower understands and agrees that in making the Loan, Lender is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the making of the Loan and delivery to Lender of the Related Documents, shall be continuing in nature, and shall remain in full force and effect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.

 

Time is of the Essence. Time is of the essence in the performance of this Agreement.

 

Waive Jury. All parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party.

 

DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement:

 

Advance. The word "Advance' means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower's behalf on a line of credit or multiple advance basis under the terms and conditions of this Agreement.

 

Agreement. The word "Agreement" means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time.

 

Borrower. The word "Borrower" means CTD HOLDINGS, INC. and includes all co-signers and co-makers signing the Note and all their successors and assigns.

 

Collateral. The word "Collateral" means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise.

 

Environmental Laws. The words "Environmental Laws" mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto.

 

  

  

  

 

	
BUSINESS LOAN AGREEMENT

	Loan No: 25802246290001473297 	(Continued)	Page 10

 

Event of Default. The words 'Event of Default" mean any of the events of default set forth in this Agreement in the default section of this Agreement.

 

GAAP. The word "GAAP" means generally accepted accounting principles.

 

Grantor. The word "Grantor" means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, including without limitation all Borrowers granting such a Security Interest.

 

Guarantor. The word "Guarantor" means any guarantor, surety, or accommodation party of any or all of the Loan.

 

Guaranty. The word "Guaranty" means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.

 

Hazardous Substances. The words "Hazardous Substances" mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words "Hazardous Substances" are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term "Hazardous Substances" also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.

 

Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents.

 

Lender. The word "Lender" means REGIONS BANK, its successors and assigns.

 

Loan. The word "Loan" means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time.

 

Note. The word "Note" means the Note dated July 17, 2013 and executed by CTD HOLDINGS, INC. in the principal amount of $578,988.00, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement.

 

Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan.

 

Security Agreement. The words "Security Agreement' mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest.

 

Security Interest. The words "Security Interest" mean, without limitation, any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise.

 

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED JULY 17, 2013.

 

	
BORROWER:

	 	 	 
	 	 	 	 
	
CTD HOLDINGS IN

	 	 	 
	 	 	 	 	 
	
By:   

	/s/ Charles Edward Strattan	 	
By:   

	
/s/ Jeffrey Lynne Tate

	
 

	CHARLES EDWARD STRATTAN	 	 	
JEFFREY LYNNE TATE

	
 

	
Secretary/Treasurer of CTD HOLDINGS, INC.

	 	 	
President of CTD HOLDINGS, INC.

 

  

  

  

 

	
BUSINESS LOAN AGREEMENT

	Loan No: 25802246290001473297 	(Continued)	Page 11

 

LENDER:

 

REGIONS BANK

 

	By:   	

	 
	 	
Authorized Signer

	 

 

 

LASER PRD Lending, Ver. 13. 1.0.004 Copr Harland Financial Solutions, Inc. 1997, 2013. All Rights Reserved. ● FLAAL KACFLPLE 40 FC TR-566474 PR-8804

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