Document:

efsh_ex103.htm

EXHIBIT 10.3
  
 EXECUTION COPY
  
 STOCK PURCHASE AGREEMENT
  
 dated as of July 17, 2017
  
 among
  
 1847 WOOD, INC.
  
 WOOD AIR CONDITIONING, INC.
  
 AND
  
 TO THE TOP, INC.
  
  	
	1
	 

	

  
 TABLE OF CONTENTS
  
  				 Page
	 

	 ARTICLE I DEFINITIONS
		 
	 3
	 

	 1.1
	 Certain Definitions.
		 
	 3
	 

	 ARTICLE II PURCHASE AND SALE OF THE SHARES
		 
	 7
	 

	 2.1
	 Purchase and Sale of the Shares.
		 
	 7
	 

	 2.2
	 Adjustments to Purchase Price.
		 
	 7
	 

	 2.3
	 Closing.
		 
	 9
	 

	 2.4
	 Transactions to be Effected at the Closing.
		 
	 9
	 

	 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER
		 
	 9
	 

	 3.1
	 Authority and Enforceability.
		 
	 10
	 

	 3.2
	 Noncontravention.
		 
	 10
	 

	 3.3
	 The Shares.
		 
	 10
	 

	 3.4
	 Brokers’ Fees.
		 
	 11
	 

	 ARTICLE IV REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
		 
	 11
	 

	 4.1
	 Organization, Qualification and Corporate Power; Authority and Enforceability.
		 
	 11
	 

	 4.2
	 Subsidiaries.
		 
	 11
	 

	 4.3
	 Capitalization.
		 
	 12
	 

	 4.4
	 Noncontravention.
		 
	 12
	 

	 4.5
	 Financial Statements.
		 
	 13
	 

	 4.6
	 Taxes.
		 
	 13
	 

	 4.7
	 Compliance with Laws and Orders; Permits.
		 
	 13
	 

	 4.9
	 Tangible Personal Assets.
		 
	 14
	 

	 4.10
	 Real Property.
		 
	 14
	 

	 4.11
	 Intellectual Property.
		 
	 14
	 

	 4.12
	 Absence of Certain Changes or Events.
		 
	 16
	 

	 4.13
	 Contracts.
		 
	 17
	 

	 4.14
	 Litigation.
		 
	 17
	 

	 4.15
	 Employee Benefits.
		 
	 17
	 

	 4.16
	 Labor and Employment Matters.
		 
	 18
	 

	 4.17
	 Environmental.
		 
	 18
	 

	 4.18
	 Insurance.
		 
	 18
	 

	 4.19
	 Brokers’ Fees.
		 
	 18
	 

	 4.20
	 Certain Business Relationships with the Company.
		 
	 18
	 

	 4.21
	 Disclosure.
		 
	 18
	 

	 ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYER
		 
	 18
	 

	 5.1
	 Organization.
		 
	 18
	 

	 5.2
	 Authorization.
		 
	 19
	 

	 5.3
	 Noncontravention.
		 
	 19
	

  
  	 
	 
	 
 
	 

  
  	 ARTICLE VI COVENANTS
		 
	 19
	  

	 6.1
	 Consents.
		 
	 19
	 

	 6.2
	 Operation of the Company’s Business.
		 
	 20
	 

	 6.3
	 Access.
		 
	 21
	 

	 6.4
	 Transfer of Cash and Cash Equivalents.
		 
	 21
	 

	 6.5
	 Notice of Developments.
		 
	 21
	 

	 6.6
	 No Solicitation.
		 
	 21
	 

	 6.7
	 Taking of Necessary Action; Further Action.
		 
	 22
	 

	 6.8
	 Covenant not to Compete.
		 
	 22
	 

	 6.9
	 Financial Information.
		 
	 22
	 

	 6.10
	 Management Fee.
		 
	 22
	 

	 6.11
	 Disclosure Schedule.
		 
	 23
	 

	 6.12
	 Confidentiality.
		 
	 24
	 

	 6.13
	 Personal Guarantees.
		 
	 24
	 

	 ARTICLE VII CONDITIONS TO OBLIGATIONS TO CLOSE
		 
	 24
	 

	 7.1
	 Conditions to Obligation of the Buyer.
		 
	 24
	 

	 7.2
	 Conditions to Obligation of the Seller.
		 
	 26
	 

	 ARTICLE VIII TERMINATION; AMENDMENT; WAIVER
		 
	 27
	 

	 8.1
	 Termination of Agreement.
		 
	 27
	 

	 8.2
	 Effect of Termination.
		 
	 28
	 

	 8.3
	 Amendments.
		 
	 28
	 

	 8.4
	 Waiver.
		 
	 28
	 

	 ARTICLE IX INDEMNIFICATION
		 
	 28
	 

	 9.1
	 Survival.
		 
	 28
	 

	 9.2
	 Indemnification by Seller.
		 
	 29
	 

	 9.3
	 Indemnification by Buyer.
		 
	 29
	 

	 9.4
	 Indemnification Procedure.
		 
	 29
	 

	 9.5
	 Failure to Give Timely Notice.
		 
	 30
	 

	 9.6
	 Limited on Indemnification Obligation.
		 
	 30
	 

	 9.7
	 Payments.
		 
	 31
	 

	 9.8
	 Burden and Benefit; Assignment.
		 
	 31
	 

	 9.9
	 Exclusive Remedy.
		 
	 32
	 

	 9.10
	 Non-Reliance on Extra-Contractual Representations.
		 
	 32
	 

	 9.11
	 No Recourse Against Nonparty Affiliates.
		 
	 33
	 

	 ARTICLE X TAX MATTERS
		 
	 33
	 

	 ARTICLE XI
		 
	 37
	 

	 11.1
	 Press Releases and Public Announcement.
		 
	 37
	 

	 11.2
	 No Third-Party Beneficiaries.
		 
	 37
	 

	 11.3
	 Entire Agreement.
		 
	 37
	 

	 11.4
	 Succession and Assignment.
		 
	 37
	 

	 11.5
	 Construction.
		 
	 37
	 

	 11.6
	 Notices.
		 
	 38
	 

	 11.7
	 Governing Law.
		 
	 39
	 

	 11.8
	 Consent to Jurisdiction and Service of Process.
		 
	 39
	 

	 11.9
	 Headings.
		 
	 39
	 

	 11.10
	 Severability.
		 
	 40
	 

	 11.11
	 Expenses.
		 
	 40
	 

	 11.12
	 Incorporation of Exhibits and Schedules.
		 
	 40
	 

	 11.13
	 Limited Recourse.
		 
	 40
	 

	 11.14
	 Specific Performance.
		 
	 40
	 

	 11.15
	 Counterparts.
		 
	 40
	 

	 11.16
	 Director and Officer Liability and Indemnification.
		 
	 40
	 

	 11.17
	 Privilege, Work Product and Conflict Waiver.
		 
	 41
	 

	 11.18
	 Amendment of Tax Returns.
		 
	 41
	

  
  	
	2
	 

	

  
 STOCK PURCHASE AGREEMENT
  
 STOCK PURCHASE AGREEMENT, dated as of July 17, 2017 (the “Agreement”), among 1847 Wood, Inc., a Delaware corporation (the “Buyer”), Wood Air Conditioning, Inc., a Texas corporation (the “Company”), and To The Top, Inc., a Texas corporation (the “Seller”).
  
 RECITALS
  
 The Seller is the record and beneficial owner of 10,000 shares (the “Shares”) of common stock, $1.00 par value per share, of the Company (the “Common Stock”), which shares represent 100% of the issued and outstanding shares of Common Stock. The Seller desires to sell all of the Shares to the Buyer, and the Buyer desires to purchase all of the Shares from the Seller, upon the terms and subject to the conditions set forth in this Agreement (such sale and purchase of the Shares, the “Acquisition”).
  
 AGREEMENT
  
 NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties hereto, intending to be legally bound, hereby agree as follows:
  
 ARTICLE I
 DEFINITIONS
  
 1.1 Certain Definitions.
  
 (a) When used in this Agreement, the following terms will have the meanings assigned to them in this Section 1.1(a):
  
 “Action” means any claim, action, suit, inquiry, hearing, proceeding or other investigation.
  
 “Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, Controls, is Controlled by or is under common Control with, such Person. For purposes of this definition, “Control” (including the terms “Controlled by” and “under common Control with”) means possession of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of stock, as trustee or executor, by Contract or otherwise.
  
 “Benefit Plan” means any “employee benefit plan” as defined in ERISA Section 3(3), including any (a) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan (as defined in ERISA Section 3(2)), (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan (as defined in ERISA Section 3(37)), (d) Employee Welfare Benefit Plan (as defined in ERISA Section 3(1)) or material fringe benefit plan or program, or (e) stock purchase, stock option, severance pay, employment, change-in-control, vacation pay, company award, salary continuation, sick leave, excess benefit, bonus or other incentive compensation, life insurance, or other employee benefit plan, contract, program, policy or other arrangement, whether or not subject to ERISA, under which any present or former employee of the Company has any present or future right to benefits sponsored or maintained by the Company or any ERISA Affiliate.
  
  	 
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 “Business Day” means a day other than a Saturday, Sunday or other day on which banks located in New York, NY are authorized or required by Law to close.
  
 “Closing Working Capital” means the difference, as of the Closing Date, between (a) the sum of cash, the accounts receivable, inventory, work in process and other prepaid expenses and other current assets of the Company, as reflected on the Closing Date Balance Sheet, less (b) the accounts payable, customer deposits, sales taxes payable, and other current liabilities of the Company as reflected on the Closing Date Balance Sheet, in each case, determined in accordance with GAAP.
  
 “Disclosure Schedule” means the disclosure schedule referred to in this Agreement.
  
 “Code” means the Internal Revenue Code of 1986, as amended.
  
 “Contract” means any written agreement, contract, commitment, arrangement or understanding.
  
 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
  
 “ERISA Affiliate” means any Person who is, or at any time was, a member of a “controlled group of corporations” within the meaning of Section 414(b) or (c) of the Code and, for the purpose of Section 302 of ERISA and/or Section 412, 4971, 4977, 4980D, 4980E and/or each “applicable section” under Section 414(f)(2) of the Code, within the meaning of Section 412(n)(6) of the Code that includes, or at any time included, the Company or any Affiliate thereof, or any predecessor of any of the foregoing.
  
 “Exchange Act” means the Securities Exchange Act of 1934, as amended.
  
 “GAAP” means United States generally accepted accounting principles.
  
 “Governmental Entity” means any entity or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to United States federal, state or local government or foreign, international, multinational or other government, including any department, commission, board, agency, bureau, official or other regulatory, administrative or judicial authority thereof.
  
 “Independent Accounting Firm” means any nationally recognized independent registered public accounting firm which has not represented the Company or the Seller or any of their Affiliates for the past five years as will be agreed by the Company and the Buyer in writing.
  
 “IRS” means the Internal Revenue Service.
  
  	 
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 “Knowledge of the Seller” or any similar phrase means the actual knowledge of the Seller, in each case without obligation of inquiry.
  
 “Law” means any statute, law, ordinance, rule, regulation of any Governmental Entity.
  
 “Liability” means all indebtedness, obligations and other liabilities and contingencies of a Person, whether absolute, accrued, contingent, fixed or otherwise, or whether due or to become due.
  
 “Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, hypothecation or other encumbrance in respect of such property or asset.
  
 “Material Adverse Effect” means any material adverse effect on the assets, properties, condition (financial or otherwise), operations of the Company and any of its Subsidiaries, taken as a whole.
  
 “Minimum Working Capital” is equal to $500,000.
  
 “Order” means any award, injunction, judgment, decree, order, ruling, subpoena or verdict or other decision issued, promulgated or entered by or with any Governmental Entity of competent jurisdiction.
  
 “Permit” means any authorization, approval, consent, certificate, license, permit or franchise of or from any Governmental Entity of competent jurisdiction or pursuant to any Law.
  
 “Person” means an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated association, a Governmental Entity or any agency, instrumentality or political subdivision of a Governmental Entity, or any other entity or body.
  
 “Preliminary Working Capital” means the difference, as of the date of the Preliminary Balance Sheet (as defined in Section 2.2(a)(i) below), between (a) the sum of cash, the accounts receivable, inventory, work in process and other prepaid expenses and other current assets of the Company, as reflected on the Preliminary Balance Sheet, less (b) the accounts payable, customer deposits, sales taxes payable, and other current liabilities of the Company as reflected on the Preliminary Balance Sheet, in each case, determined in accordance with GAAP.
  
 “Representatives” means, with respect to any Person, the respective directors, officers, employees, counsel, accountants and other representatives of such Person.
  
 “Subsidiary” means, with respect to any Person, any corporation, partnership, joint venture or other legal entity of which such Person (either alone or through or together with any other Subsidiary), owns, directly or indirectly, more than 50% of the stock or other equity interests, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of a non-corporate Person.
  
  	 
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 “Taxes” means all federal, state, local and foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severance, stamp, payroll, sales, transfer, employment, unemployment, disability, use, property, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever.
  
 “Taxing Authority” means any Governmental Entity having or purporting to exercise jurisdiction with respect to any Tax.
  
 “Tax Returns” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
  
 “Transaction Proposal” means any unsolicited written bona fide proposal made by a third party relating to (i) any direct or indirect acquisition or purchase of all or substantially all assets of the Company, (ii) any direct or indirect acquisition or purchase of a majority of the combined voting power of the Shares, or (iii) any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company in which the other party thereto or its stockholders will own 51% or more of the combined voting power of the parent entity resulting from any such transaction.
  
 “Transfer Taxes” means sales, use, transfer, recording, documentary, stamp, registration and stock transfer Taxes and any similar Taxes.
  
 “$” means United States dollars.
  
 (b) For purposes of this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires: (i) the meaning assigned to each term defined herein will be equally applicable to both the singular and the plural forms of such term and vice versa, and words denoting any gender will include all genders as the context requires; (ii) where a word or phrase is defined herein, each of its other grammatical forms will have a corresponding meaning; (iii) the terms “hereof”, “herein”, “hereunder”, “hereby” and “herewith” and words of similar import will, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement; (iv) when a reference is made in this Agreement to an Article, Section, paragraph, Exhibit or Schedule without reference to a document, such reference is to an Article, Section, paragraph, Exhibit or Schedule to this Agreement; (v) a reference to a subsection without further reference to a Section is a reference to such subsection as contained in the same Section in which the reference appears, and this rule will also apply to paragraphs and other subdivisions; (vi) the word “include”, “includes” or “including” when used in this Agreement will be deemed to include the words “without limitation”, unless otherwise specified; (vii) a reference to any party to this Agreement or any other agreement or document will include such party’s predecessors, successors and permitted assigns; (viii) a reference to any Law means such Law as amended, modified, codified, replaced or reenacted as of the date hereof, and all rules and regulations promulgated thereunder as of the date hereof; and (ix) all accounting terms used and not defined herein have the respective meanings given to them under GAAP. 
  
  	 
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 ARTICLE II
 PURCHASE AND SALE OF THE SHARES
  
 2.1 Purchase and Sale of the Shares. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing the Seller will sell, transfer and deliver, and the Buyer will purchase from the Seller, all of the Shares or an aggregate purchase price of Six Million Five Hundred Thirty Two Thousand One Hundred Forty Dollars ($6,532,140), consisting of the Cash Portion and the Buyer Note (each as defined below) (the “Purchase Price”), payable as described below.
  
 (a) The cash portion of the Purchase Price shall be Five Million Two Hundred Fifty Thousand Dollars ($5,250,000) payable by the Buyer at the Closing via wire transfer through the delivery to the Seller of cash in immediately available funds (the “Cash Portion”).
  
 (b) At the Closing, the Buyer will issue to the Seller an 8% subordinated promissory note in the aggregate principal amount of One Million Two Hundred Eighty Two Thousand One Hundred Forty Dollars ($1,282,140) in the form to be mutually agreed upon by the parties (the “Buyer Note”). Accrued interest will be paid quarterly under the Buyer Note and all outstanding interest and principal shall be due and payable on the third (3rd) anniversary of the Buyer Note. The Buyer Note shall be secured by a subordinated security interest in all of the Company’s assets pursuant to the Security Agreement in the form to be mutually agreed upon by the parties (the “Security Agreement”).
  
 2.2 Adjustments to Purchase Price.
  
 (a) Working Capital Adjustment. 
  
 (i) At the Closing, the Seller shall deliver to the Buyer an unaudited balance sheet of the Company (the “Preliminary Balance Sheet”) as of the Closing Date together with a certificate of the Seller stating that the Preliminary Balance Sheet was prepared in accordance with GAAP so as to present fairly in all material respects the financial condition of Company as of such date.
  
 (ii) As soon as practicable following the Closing Date (but not later than sixty (60) days after the Closing Date), the Buyer shall cause its auditor to prepare and deliver to the Seller an audited balance sheet of the Company (the “Closing Date Balance Sheet”) as of the Closing Date. The Closing Date Balance Sheet shall be prepared in accordance with GAAP in a manner consistent with the Preliminary Balance Sheet so as to present fairly in all material respects the financial condition of the Company.
  
 (iii) If the Closing Working Capital exceeds the Preliminary Working Capital, then the Buyer (or, at the Buyer’s direction, the Company) shall pay promptly (and, in any event, within seven (7) days) to the Seller via wire transfer an amount in cash that is equal to the excess. If the Preliminary Working Capital exceeds the Closing Working Capital, then Buyer shall offset such excess against the Buyer Note. Any such adjustment shall be treated as an adjustment to the Purchase Price.
  
  	 
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 (iv) In the event the Seller does not agree with the Closing Working Capital as reflected on the Closing Date Balance Sheet, the Seller shall so inform the Buyer in writing within fifteen (15) days of the Seller’s receipt thereof, such writing to set forth the objections of the Seller in reasonable detail. If the Seller and the Buyer cannot reach agreement as to any disputed matter relating to the Closing Working Capital within fifteen (15) days after written notification by the Seller to the Buyer of a dispute (the “Dispute Notice”), they shall forthwith refer the dispute to an Independent Accounting Firm, located in Dallas, Texas, mutually agreeable to the Seller and the Buyer for resolution, with the understanding that such firm shall resolve all disputed items within twenty (20) days after such disputed items are referred to it. If the Buyer and the Seller are unable to agree on the choice of an Independent Accounting Firm within thirty (30) days after the date of the Dispute Notice, then each of the Buyer and the Seller shall select an Independent Accounting Firm and such Independent Accounting Firms, together, shall select an Independent Accounting Firm. The Seller, on the one hand, and the Buyer, on the other hand, shall bear one-half of the costs of such accounting firm. The decision of the accounting firm with respect to all disputed matters relating to the Closing Working Capital shall be deemed final and conclusive and shall be binding upon the Seller and the Buyer. In addition, if the Seller does not object to the Closing Working Capital within the 15-day period referred to above, the Closing Working Capital, as reflected on the Closing Date Balance Sheet as so prepared, shall be deemed final and conclusive and binding upon the Seller and the Buyer.
  
 (v) The Seller shall be entitled to have access to the books and records of the Company and the Buyer’s work papers prepared in connection with the Closing Date Balance Sheet and shall be entitled to discuss such books and records and work papers with the Buyer and those persons responsible for the preparation thereof.
  
 (b) Minimum Working Capital Adjustment. If the Minimum Working Capital exceeds the Preliminary Working Capital, then the Buyer Note shall be reduced at the Closing by an amount equal to such difference. If the Preliminary Working Capital exceeds the Minimum Working Capital, then such difference shall be distributed to the Seller pursuant to Section 2.4(c) below.
  
 (c) Adjustment for Outstanding Indebtedness. The Cash Portion shall be decreased by the amount of any outstanding indebtedness for borrowed money (excluding any liabilities in the calculation of Working Capital) of the Company existing as of the Closing Date. 
  
 (d) TTM Adjusted EBITDA. If the Trailing Twelve Months Adjusted EBITDA (as defined below) for the full twelve calendar months immediately prior to the Closing (the “Target EBITDA”) is equal to or greater than $1,224,776.25 (the “Floor”), or equal to or less than $2,041,293.75 (the “Ceiling”), there will be no adjustment to the Purchase Price. If the Target EBITDA is determined to be less than the Floor, then the Buyer may terminate this Agreement by written notice to the Seller within 10 days after such determination. If the Target EBITDA is determined to be greater than the Ceiling, then the Seller may terminate this Agreement by written notice to the Buyer within ten (10) days after such determination. There will be no adjustment to the Purchase Price if neither the Buyer nor the Seller, as the case may be, exercises its right to terminate this Agreement under this Section 2.2 as a result of the EBITDA for the full twelve calendar months immediately prior to the Closing being above or below the Target EBITDA. For purposes of this Section 2.2(d) “Trailing Twelve Months Adjusted EBITDA” means the earnings of the Company before (i) interest expense, (ii) tax expense, (iii) depreciation and amortization expense, and (iv) stock based compensation expense for the applicable 12-month period. EBITDA shall also be adjusted as mutually agreed to by the parties to normalize all related party transactions that are not at arms-length. If the parties do not agree on the Trailing Twelve Months Adjusted EBITDA required by this Section 2.2(d), then the parties shall employ the dispute resolution mechanism described above in Section 2.2(a)(iv) relating to the working capital adjustment with reasonable mutually agreeable modifications such that such mechanism can resolve a dispute about the Trailing Twelve Months Adjusted EBITDA calculation. 
  
  	 
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 2.3 Closing. The consummation of the Acquisition (the “Closing”) will take place by the reciprocal delivery of closing documents by electronic mail, regular mail, fax or any other means mutually agreed upon by the parties hereto on a date that is no later than two (2) Business Days immediately following the day on which the last of the conditions to closing contained in ARTICLE VII (other than any conditions that by their nature are to be satisfied at the Closing) is satisfied or waived in accordance with this Agreement or at such other location or on such other date as the Buyer and the Company may mutually determine (the date on which the Closing actually occurs is referred to as the “Closing Date”).
  
 2.4 Transactions to be Effected at the Closing. 
  
 (a) At the Closing, the Buyer will (i) pay to the Seller the Purchase Price, adjusted in accordance with Section 2.2 above and less the amounts paid pursuant to subsection 2.2(c) above by paying such sum to the Seller by wire transfer of immediately available funds in accordance with instructions provided by the Seller, (ii) issue to the Seller the Buyer Note, (iii) execute and deliver to the Seller the Security Agreement, and (iv) deliver to the Seller all other documents, instruments or certificates required to be delivered by the Buyer at or prior to the Closing pursuant to this Agreement. 
  
 (b) At the Closing, the Seller will deliver to the Buyer (i) a certificate or certificates representing the Shares duly endorsed or accompanied by stock powers duly endorsed in blank and (ii) all other documents, instruments or certificates required to be delivered by the Seller at or prior to the Closing pursuant to this Agreement.
  
 (c) At the Closing, the Company will distribute to the Seller (i) the excluded assets set forth in Section 2.4(c) of the Disclosure Schedule, and (ii) all cash that is not necessary to satisfy the Minimum Working Capital or the minimum cash set forth in Section 6.4.
  
 ARTICLE III 
 REPRESENTATIONS AND WARRANTIES OF THE SELLER
  
 The Seller, represents and warrants to the Buyer that each statement contained in this ARTICLE III is true and correct as of the date hereof, except as set forth in the Disclosure Schedule. The Disclosure Schedule has been arranged for purposes of convenience only, in sections corresponding to the Sections of this ARTICLE III and ARTICLE IV. Each section of the Disclosure Schedule will be deemed to incorporate by reference all information disclosed in any other section of the Disclosure Schedule. 
  
  	 
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 3.1 Authority and Enforceability. The Seller has the requisite legal capacity to execute and deliver this Agreement, to perform the Seller’s obligations hereunder and to consummate the Acquisition and the other transactions contemplated hereby. This Agreement has been duly executed and delivered by the Seller and, assuming the due authorization, execution and delivery by each other party hereto, constitutes a legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors’ rights generally, and (b) general principles of equity, whether such enforceability is considered in a proceeding in equity or at Law. 
  
 3.2 Noncontravention. 
  
 (a) Neither the execution and the delivery of this Agreement nor the consummation of the Acquisition or the other transactions contemplated by this Agreement will, with or without the giving of notice or the lapse of time or both, (i) to the actual knowledge of the Seller and assuming compliance with the filing and notice requirements set forth in Section 3.2(b)(i), violate any Law applicable to the Seller or (ii) violate any Contract to which the Seller is a party, except to the extent that any such violation would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
  
 (b) The execution and delivery of this Agreement by the Seller does not, and the performance of this Agreement by the Seller will not, require any consent, approval, authorization or Permit of, or filing with or notification to, any Governmental Entity, except for (i) the filings set forth in Section 3.2(b) of the Disclosure Schedule or (ii) where the failure to take such action would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
  
 3.3 The Shares. 
  
 (a) The Seller holds of record and owns beneficially all of the issued and outstanding shares of capital stock of the Company, free and clear of all Liens, other than (a) Liens for current real or personal property Taxes that are not yet due and payable or that may hereafter be paid without material penalty or that are being contested in good faith, (b) statutory Liens of landlords and workers’, carriers’ and mechanics’ or other like Liens incurred in the ordinary course of business or that are being contested in good faith, (c) Liens and encroachments which do not materially interfere with the present or proposed use of the properties or assets they affect, (d) Liens that will be released prior to or as of the Closing, (e) Liens arising under this Agreement, (f) Liens created by or through the Buyer, and (g) Liens set forth on Section 3.3(a) of the Disclosure Schedule (the “Permitted Liens”)
  
 (b) The number of Shares correctly sets forth all of the capital stock of the Company, and is owned of record and beneficially by the Seller.
  
  	 
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 (c) Except as set forth in this Agreement, the Seller is not party to any Contract obligating the Seller to vote or dispose of any shares of the capital stock of, or other equity or voting interests in, the Company.
  
 3.4 Brokers’ Fees. Except as set forth in Section 3.4 of the Disclosure Schedule, the Seller does not have any Liability to pay any fees or commissions to any broker, finder or agent with respect to this Agreement, the Acquisition or the transactions contemplated by this Agreement.
  
 ARTICLE IV
 REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
  
 The Seller represents and warrants to the Buyer that each statement contained in this ARTICLE IV is true and correct as of the date hereof, except as set forth in the Disclosure Schedule. 
  
 4.1 Organization, Qualification and Corporate Power; Authority and Enforceability.
  
 (a) The Company is a corporation duly organized, validly existing and in good standing under the Laws of the State of Texas, and has all requisite corporate power and authority, directly or indirectly, to own, lease and operate its properties and assets and to carry on its business as it is now being conducted. The Company is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties or assets owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except where the failure to be so qualified or licensed would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
  
 (b) The Company has the requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company, and no other action is necessary on the part of the Company to authorize this Agreement or to consummate the Acquisition or the other transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by each other party hereto, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors’ rights generally and (b) general principles of equity, whether such enforceability is considered in a proceeding in equity or at Law.
  
 4.2 Subsidiaries. The Company does not have any Subsidiaries. 
  
  	 
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 4.3 Capitalization. 
  
 (a) The authorized capital stock of the Company consists of 100,000 shares of Common Stock, par value $1.00 per share, of which 10,000 shares are issued and outstanding. No other capital stock of the Company is authorized, issued or outstanding. 
  
 (b) There are no outstanding options, warrants or other securities or subscription, preemptive or other rights convertible into or exchangeable or exercisable for any shares of capital stock or other equity or voting interests of the Company and there are no “phantom stock” rights, stock appreciation rights or other similar rights with respect to the Company. There are no Contracts of any kind to which the Company is a party or by which the Company is bound, obligating the Company to issue, deliver, grant or sell, or cause to be issued, delivered, granted or sold, additional shares of capital stock of, or other equity or voting interests in, or options, warrants or other securities or subscription, preemptive or other rights convertible into, or exchangeable or exercisable for, shares of capital stock of, or other equity or voting interests in, the Company, or any “phantom stock” right, stock appreciation right or other similar right with respect to the Company, or obligating the Company to enter into any such Contract. 
  
 (c) There are no securities or other instruments or obligations of the Company, the value of which is in any way based upon or derived from any capital or voting stock of the Company or having the right to vote (or convertible into, or exchangeable or exercisable for, securities having the right to vote) on any matters on which the Company’s stockholders may vote.
  
 (d) There are no Contracts, contingent or otherwise, obligating the Company to repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity or voting interests in, the Company. There are no voting trusts, registration rights agreements or stockholder agreements to which the Company is a party with respect to the voting of the capital stock of the Company or with respect to the granting of registration rights for any of the capital stock of the Company. There are no rights plans affecting the Company.
  
 (e) Except as set forth in Section 4.3(e) of the Disclosure Schedule, there are no bonds, debentures, notes or other indebtedness of the Company.
  
 4.4 Noncontravention.
  
 (a) Neither the execution and delivery of this Agreement nor the consummation of the Acquisition and the other transactions contemplated by this Agreement will, with or without the giving of notice or the lapse of time or both, (i) violate any provision of the certificate of incorporation or bylaws (or comparable organization documents, as applicable) of the Company, (ii) to the Knowledge of the Seller and assuming compliance with the filing and notice requirements set forth in Section 4.4(b)(i), violate any Law applicable to the Company on the date hereof or (iii) except as set forth in Section 4.4(a) of the Disclosure Schedule, violate any Contract to which the Company is a party, except in the case of clauses (ii) and (iii) to the extent that any such violation would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
  
 (b) The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or Permit of, or filing with or notification to, any Governmental Entity, except for (i) the filings set forth in Section 4.4(b) of the Disclosure Schedule or (ii) where the failure to take such action would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
  
  	 
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 4.5 Financial Statements. Section 4.5 of the Disclosure Schedule contains true and complete copies of (i) the unaudited balance sheet of the Company as of December 31, 2016 and the related unaudited statements of income, stockholders’ equity and cash flows for the two years ended December 31, 2016 and December 31, 2015 (the “Annual Financial Statements”) and (ii) the unaudited balance sheet of the Company as of March 31, 2017 and the related statements of income, stockholders’ equity and cash flows for the three-month period ended March 31, 2017 (the “Interim Financial Statements” and, together with the Annual Financial Statements, the “Financial Statements”). The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and, on that basis, fairly present, in all material respects, the financial condition, results of operations and cash flows of the Company as of the indicated dates and for the indicated periods (subject, in the case of the Interim Financial Statements, to normal year-end adjustments and the absence of notes). 
  
 4.6 Taxes. 
  
 (a) All material Tax Returns required to have been filed by the Company have been filed, and each such Tax Return reflects the liability for Taxes in all material respects. All Taxes shown on such Tax Returns as due have been paid or accrued.
  
 (b) To the Knowledge of the Seller, there is no audit pending against the Company in respect of any Taxes. There are no Liens on any of the assets of the Company that arose in connection with any failure (or alleged failure) to pay any Tax, other than Liens for Taxes not yet due and payable.
  
 (c) The Company has withheld and paid or accrued for all material Taxes required to have been withheld and paid or accrued for in connection with amounts paid or owing to any third party.
  
 (d) The Company has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.
  
 (e) The Company is not a party to any Tax allocation or sharing agreement. 
  
 4.7 Compliance with Laws and Orders; Permits.
  
 (a) The Company is in compliance with all Laws and Orders to which the business of the Company is subject, except where such failure to comply would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 
  
 (b) The Company owns, holds, possesses or lawfully uses in the operation of its business all Permits that are necessary for it to conduct its business as now conducted, except where such failure to own, hold, possess or lawfully use such Permit would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 
  
  	 
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 4.8 No Undisclosed Liabilities. To the Knowledge of the Seller, the Company does not have any Liability, except for (i) Liabilities set forth on the Interim Financial Statements (rather than in any notes thereto) and (ii) Liabilities which have arisen since the date of the Interim Financial Statements in the ordinary course of business (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of law).
  
 4.9 Tangible Personal Assets.
  
 (a) The Company has good title to, or a valid interest in, all of its tangible personal assets, free and clear of all Liens, other than (i) Permitted Liens or (ii) Liens that, individually or in the aggregate, do not materially interfere with the ability of the Company thereof to conduct its business as currently conducted and do not adversely affect the value of, or the ability to sell, such personal properties and assets.
  
 (b) The Company’s tangible personal assets are in good operating condition, working order and repair, subject to ordinary wear and tear, free from defects (other than defects that do not interfere with the continued use thereof in the conduct of normal operations) and are suitable for the purposes for which they are currently being used.
  
 4.10 Real Property. 
  
 (a) Owned Real Property. The Company does not own any real property.
  
 (b) Leased Real Property. Section 4.10(b) of the Disclosure Schedule contains a list of all leases and subleases (collectively, the “Real Property Leases”) under which the Company is either lessor or lessee (the “Real Property”). The Seller has heretofore made available to the Buyer true and complete copies of each Real Property Lease. To the Knowledge of the Seller, (i) all Real Property Leases are valid and binding Contracts of the Company and are in full force and effect (except for those that have terminated or will terminate by their own terms), and (ii) neither the Company or any other party thereto, is in violation or breach of or default (or with notice or lapse of time, or both, would be in violation or breach of or default) under the terms of any such Contract, in each case, except where such default would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 
  
 4.11 Intellectual Property. 
  
 (a) “Intellectual Property” means (i) trade secrets, inventions, confidential and proprietary information, know-how, formulae and processes, (ii) patents (including all provisionals, reissues, divisions, continuations and extensions thereof) and patent applications, (iii) trademarks, trade names, trade dress, brand names, domain names, trademark registrations, trademark applications, service marks, service mark registrations and service mark applications (whether registered, unregistered or existing at common law, including all goodwill attaching thereto), (iv) copyrights, including copyright registrations, copyright applications and unregistered common law copyrights, (v) and all licenses for the Intellectual Property listed in items (i) – (iv) above.
  
  	 
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 (b) Section 4.11(b) of the Disclosure Schedule sets forth a list that includes all material Intellectual Property owned by the Company (the “Company-Owned Intellectual Property”) that is registered or subject to an application for registration (including the jurisdictions where such Company-Owned Intellectual Property is registered or where applications have been filed, and all registration or application numbers, as appropriate). 
  
 (c) All necessary registration, maintenance and renewal fees have been paid and all necessary documents have been filed with the United States Patent and Trademark Office or foreign patent and trademark office in the relevant foreign jurisdiction for the purposes of maintaining the registered Company-Owned Intellectual Property.
  
 (d) Except as set forth on Section 4.11(d) of the Disclosure Schedule, (i) to the Knowledge of the Seller, the Company is the exclusive owner of the Company-Owned Intellectual Property free and clear of all Liens (other than Permitted Liens), (ii) to the Knowledge of the Seller no proceedings have been instituted, are pending or are threatened that challenge the rights of the Company in or the validity or enforceability of the Company-Owned Intellectual Property, (iii) to the Knowledge of the Seller, neither the use of the Company-Owned Intellectual Property as currently used by the Company in the conduct of the Company’s business, nor the conduct of the business as presently conducted by the Company infringes, dilutes, misappropriates or otherwise violates in any material respect the Intellectual Property rights of any Person, and (iv) as of the date of this Agreement, the Company has made no claim of a violation, infringement, misuse or misappropriation by any Person, of their rights to, or in connection with, the Company-Owned Intellectual Property.
  
 (e) Except as set forth in Section 4.11(e) of the Disclosure Schedule, the Company has not permitted or licensed any Person to use any Company-Owned Intellectual Property.
  
 (f) Section 4.11(f) of the Disclosure Schedule sets forth a complete and accurate list of all licenses, other than “off the shelf” commercially available software programs, pursuant to which the Company licenses from a Person Intellectual Property that is material to and used in the conduct of the business by the Company.
  
 (g) To the Knowledge of the Seller, the Company is not in default in the performance, observance or fulfillment of any obligation, covenant or condition contained in any Contract pursuant to which any third party is authorized to use any Company-Owned Intellectual Property or pursuant to which the Company is licensed to use Intellectual Property owned by a third party, except where such default would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 
  
  	 
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 4.12 Absence of Certain Changes or Events. Since the date of the Interim Financial Statements, no event has occurred that has had, individually or in the aggregate, a Material Adverse Effect. Without limiting the generality of the foregoing, since that date: 
  
 (a) the Company has not sold, leased, transferred, or assigned any of its assets, tangible or intangible, other than for a fair consideration in the ordinary course of business;
  
 (b) the Company has not entered into any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) either involving more than $100,000, unless in the ordinary course of business; 
  
 (c) no party (including the Company) has accelerated, terminated, modified, or cancelled any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) involving more than $100,000 to which the Company is a party or by which any of them is bound, unless in the ordinary course of business; 
  
 (d) the Company has not imposed any Liens upon any of its assets, tangible or intangible; 
  
 (e) the Company has not made any capital expenditure (or series of related capital expenditures) either involving more than $100,000, unless the ordinary course of business; 
  
 (f) the Company has not made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and acquisitions) either involving more than $100,000 or outside the ordinary course of business; 
  
 (g) the Company has not transferred, assigned, or granted any license or sublicense of any rights under or with respect to any Intellectual Property; 
  
 (h) there has been no change made or authorized in the certificate of incorporation or bylaws of the Company; 
  
 (i) the Company has not issued, sold, or otherwise disposed of any of its capital stock, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock; 
  
 (j) the Company has not made any loan to, or entered into any other transaction with, any of its directors, officers, and employees outside the ordinary course of business; 
  
 (k) the Company has not entered into any employment contract or modified the terms of any existing such contract or agreement; 
  
 (l) the Company has not granted any increase in the base compensation of any of its directors, officers, and employees outside the ordinary course of business; and
  
 (m) the Company has not committed to any of the foregoing.
  
  	 
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 4.13 Contracts.
  
 (a) Except as set forth in Section 4.13(a) of the Disclosure Schedule, as of the date hereof, the Company is not a party to or bound by any: (i) Contract not contemplated by this Agreement that materially limits the ability of the Company to engage or compete in any manner of the business presently conducted by the Company; (ii) Contract that creates a partnership or joint venture or similar arrangement with respect to any material business of the Company; (iii) indenture, credit agreement, loan agreement, security agreement, guarantee, note, mortgage or other evidence of indebtedness or agreement providing for indebtedness in excess of $100,000; (iv) Contract that relates to the acquisition or disposition of any material business (whether by merger, sale of stock, sale of assets or otherwise) other than this Agreement; and (v) Contract that involves performance of services or delivery of goods or materials by or to the Company in an amount or with a value in excess of $100,000 in any 12-month period (which period may extend past the Closing).
  
 (b) The Seller has heretofore made available to the Buyer true and complete copies of each of the Contracts set forth in Section 4.13(a) of the Disclosure Schedule. To the Knowledge of the Seller, (i) all such Contracts are valid and binding, (ii) all such Contracts are in full force and effect (except for those that have terminated or will terminate by their own terms), and (iii) neither the Company nor any other party thereto, is in violation or breach of or default under (or with notice or lapse of time, or both, would be in violation or breach of or default under) the terms of any such Contract, in each case, except where such default would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 
  
 4.14 Litigation. Except as set forth in Section 4.14 of the Disclosure Schedule, there is no Action pending or, to the Knowledge of the Seller, threatened against the Company that (a) challenges or seeks to enjoin, alter or materially delay the Acquisition, or (b) would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 
  
 4.15 Employee Benefits. 
  
 (a) Section 4.15(a) of the Disclosure Schedule includes a list of all Benefit Plans maintained or contributed to by the Company (the “Company Benefit Plans”). The Seller has delivered or made available to the Buyer copies of (i) each Company Benefit Plan, (ii) the most recent summary plan description for each Company Benefit Plan for which such a summary plan description is required and (iii) the most recent favorable determination letters from the IRS with respect to each Company Benefit Plan intended to qualify under Section 401(a) of the Code.
  
 (b) Except as set forth in Section 4.15(b) of the Disclosure Schedule, (i) none of the Company Benefit Plans is subject to Title IV of ERISA; (ii) each Company Benefit Plan that is intended to be qualified under Section 401(a) of the Code is subject to a favorable determination letter from the IRS and, to the Knowledge of the Seller, no event has occurred and no condition exists that is reasonably likely to result in the revocation of any such determination; and (iii) each Company Benefit Plan is in compliance with all applicable provisions of ERISA and the Code, except for instances of noncompliance that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
  
  	 
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 4.16 Labor and Employment Matters. Section 4.16 of the Disclosure Schedule sets forth a list of all written employment agreements that obligate the Company to pay an annual salary of $50,000 or more and to which the Company is a party. To the Knowledge of the Seller, there are no pending labor disputes, work stoppages, requests for representation, pickets, work slow-downs due to labor disagreements or any actions or arbitrations that involve the labor or employment relations of the Company. The Company is not party to any collective bargaining agreement.
  
 4.17 Environmental. Except (i) as set forth in Section 4.17 of the Disclosure Schedule or (ii) for any matter that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, to the Knowledge of the Seller (a) the Company is in compliance with all applicable Laws relating to protection of the environment (“Environmental Laws”), (b) the Company possesses and is in compliance with all Permits required under any Environmental Law for the conduct of its operations and (c) there are no Actions pending against the Company alleging a violation of any Environmental Law.
  
 4.18 Insurance. Section 4.18 of the Disclosure Schedule sets forth a list of each insurance policy that covers the Company or its businesses, properties, assets, directors, officers or employees (the “Policies”). Such Policies are in full force and effect in all material respects and the Company is not in violation or breach of or default under any of its obligations under any such Policy, except where such default would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
  
 4.19 Brokers’ Fees. Except as set forth in Section 4.19 of the Disclosure Schedule, which such fees shall be paid prior to or at Closing with the Company’s cash, the Company has no Liability to pay any fees or commissions to any broker, finder or agent with respect to this Agreement, the Acquisition or the transactions contemplated by this Agreement. 
  
 4.20 Certain Business Relationships with the Company. Except as set forth in Section 4.20 of the Disclosure Schedule, neither the Seller, nor any Affiliate of the Seller, has been involved in any business arrangement or relationship with the Company within the past 12 months, and neither the Seller, nor any Affiliate of the Seller, owns any asset, tangible or intangible, which is used in the Business. 
  
 4.21 Disclosure. To the Knowledge of the Seller, the representations and warranties contained in this ARTICLE IV do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this ARTICLE IV not misleading.
  
 ARTICLE V
 REPRESENTATIONS AND WARRANTIES OF THE BUYER
  
 The Buyer represents and warrants to the Seller that each statement contained in this ARTICLE V is true and correct as of the date hereof. 
  
 5.1 Organization. The Buyer is a corporation, duly organized, validly existing and in good standing under the laws of the state of Delaware.
  
  	 
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 5.2 Authorization. The Buyer has the requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Buyer of this Agreement, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary action, and no other action on the part of the Buyer is necessary to authorize this Agreement or to consummate the transactions contemplated hereby (other than compliance with the filing and notice requirements set forth in Section 5.3(b)(i)). This Agreement has been duly executed and delivered by the Buyer and, assuming the due authorization, execution and delivery by each of the other parties hereto, constitutes a legal, valid and binding obligation of the Buyer enforceable against the Buyer in accordance with its terms, except as limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors’ rights generally, and (b) general principles of equity, whether such enforceability is considered in a proceeding in equity or at Law.
  
 5.3 Noncontravention.
  
 (a) Neither the execution and the delivery of this Agreement, nor the consummation of the Acquisition and the other transactions contemplated by this Agreement, will, with or without the giving of notice or the lapse of time or both, (i) violate any provision of the certificate of incorporation or bylaws (or comparable organization documents, as applicable) of the Buyer, (ii) violate any Law applicable to the Buyer on the date hereof, or (iii) violate any Contract to which the Buyer is a party, except in the case of clauses (ii) and (iii) to the extent that any such violation would not reasonably be expected to prevent or materially delay the consummation of the Acquisition and the other transactions contemplated by this Agreement.
  
 (b) The execution and delivery of this Agreement by the Buyer does not, and the performance of this Agreement by the Buyer will not, require any consent, approval, authorization or Permit of, or filing with or notification to, any Governmental Entity, except for (i) the filings set forth in Section 3.2(b)(i), or (ii) where the failure to take such action would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
  
 (c) Brokers’ Fees. The Buyer has no Liability to pay any fees or commissions to any broker, finder or agent with respect to this Agreement, the Acquisition or the transactions contemplated by this Agreement that could result in any Liability being imposed on the Seller or the Company. 
  
 ARTICLE VI
 COVENANTS
  
 6.1 Consents. Each of the Company, the Buyer and the Seller will use its commercially reasonable efforts to obtain any required third-party consents to the Acquisition and the other transactions contemplated by this Agreement in writing from each Person.
  
  	 
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 6.2 Operation of the Company’s Business. During the period commencing on the date hereof and ending at the earlier of the Closing and the termination of this Agreement in accordance with ARTICLE VIII, the Company, except (i) as otherwise contemplated by this Agreement, (ii) as required by applicable Law, or (iii) with the prior written consent of the Buyer (which consent will not be unreasonably withheld or delayed), will use commercially reasonable efforts to carry on its business in a manner consistent with past practice and not take any action or enter into any transaction that would result in the following:
  
 (a) any change in the certificate of incorporation or bylaws of the Company or any amendment of any material term of any outstanding security of the Company;
  
 (b) any issuance or sale of any additional shares of, or rights of any kind to acquire any shares of, any capital stock of any class of the Company (whether through the issuance or granting of options or otherwise);
  
 (c) any incurrence, guarantee or assumption by the Company of any indebtedness for borrowed money other than in the ordinary course of business in amounts and on terms consistent with past practices;
  
 (d) any change in any method of accounting, accounting principle or accounting practice by the Company which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;
  
 (e) except in the ordinary course of business (i) any adoption or material amendment of any Company Benefit Plan, (ii) any entry into any collective bargaining agreement with any labor organization or union, (iii) any entry into an employment agreement or (iv) any increase in the rate of compensation to any employee in an amount that exceeds 10% of such employee’s current compensation; provided, that the Company may (A) take any such action for employees in the ordinary course of business or pursuant to any existing Contracts or Company Benefit Plans and (B) adopt or amend any Company Benefit Plan if the cost to such Person of providing benefits thereunder is not materially increased;
  
 (f) except in the ordinary course of business, any cancellation, modification, termination or grant of waiver of any material Permits or Contracts to which the Company is a party, which cancellation, modification, termination or grant of waiver would, individually or in the aggregate, have a Material Adverse Effect;
  
 (g) any change in the Tax elections made by the Company or in any accounting method used by the Company for Tax purposes, where such Tax election or change in accounting method may have a material effect upon the Tax Liability of the Company for any period or set of periods, or the settlement or compromise of any material income Tax Liability of the Company;
  
 (h) except in the ordinary course of business, any acquisition or disposition of any business or any material property or asset of any Person (whether by merger, consolidation or otherwise) by the Company; 
  
 (i) any grant of a Lien on any properties and assets of the Company that would have, individually or in the aggregate, a Material Adverse Effect; or
  
 (j) any entry into any agreement or commitment to do any of the foregoing.
  
  	 
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 6.3 Access. The Company will permit the Buyer and its Representatives to have reasonable access at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Company, to the premises, properties, personnel, books, records (including Tax records), Contracts and documents of or pertaining to the Company. Any such access shall be coordinated directly with Tommy James or Tim Robinson or the Company’s legal counsel and neither the Buyer nor its Representatives shall disclose the transactions contemplated by this Agreement to the Company’s employees or consultants without the Company’s written consent.
  
 6.4 Transfer of Cash and Cash Equivalents. On or prior to the Closing, the Company and the Seller will transfer, or cause to be distributed all cash and cash equivalents of the Company to, among other things, pay any fees owed by Company to brokers or advisors (including termination fees under any advisory agreement) and any indebtedness for borrowed money; provided, however, that the Company shall have an amount in cash in its corporate bank account and on hand at the Closing that is equal to a minimum of $250,000 in the aggregate.
  
 6.5 Notice of Developments. The Seller and the Company will give prompt written notice to the Buyer upon becoming aware of any event that would reasonably be expected to give rise to, individually or in the aggregate, a Material Adverse Effect or would reasonably be expected to cause a breach of any of its respective representations, warranties, covenants or other agreements contained herein. The Buyer will give prompt written notice to the Seller and the Company of any event that could reasonably be expected to cause a breach of any of its representations, warranties, covenants or other agreements contained herein or could reasonably be expected to, individually or in the aggregate, prevent or materially delay the consummation of the Acquisition and the other transactions contemplated by this Agreement. The delivery of any notice pursuant to this Section 6.5 will not limit, expand or otherwise affect the remedies available hereunder (if any) to the party receiving such notice.
  
 6.6 No Solicitation. 
  
 (a) The Seller and the Company will, and will cause each of their Representatives to, cease immediately any existing discussions regarding a Transaction Proposal.
  
 (b) From and after the date of this Agreement until the earlier to occur of the termination of this Agreement and the consummation of the Closing, without the prior consent of the Buyer, neither the Seller nor the Company will, nor will they authorize or permit any of their respective Representatives to, directly or indirectly through another Person to, (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action designed to facilitate any inquiries, proposals or offers from any Person that constitute, or would reasonably be expected to constitute, a Transaction Proposal, (ii) participate in any discussions or negotiations (including by way of furnishing information) regarding any Transaction Proposal or (iii) otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other Person to do or seek any of the foregoing. 
  
 (c) In addition, the Seller shall immediately communicate to the Buyer the terms of any Transaction Proposal received by the Seller or the Company, or any of their Representatives. 
  
  	 
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 6.7 Taking of Necessary Action; Further Action. Subject to the terms and conditions of this Agreement, the Seller, the Company and the Buyer will take all such reasonable and lawful action as may be necessary or appropriate in order to effectuate the Acquisition in accordance with this Agreement as promptly as practicable. 
  
 6.8 Covenant not to Compete. For a period beginning on the Closing Date and ending upon the earlier to occur of (i) three (3) years from and after the Closing Date, and (ii) the date of the Buyer’s monetary default under the Buyer Note (after the expiration of any notice and cure period) (the “Noncompetition Period”), the Seller shall not engage directly or indirectly in the sale, installation and servicing of (i) commercial heating, ventilation and air conditioning (“HVAC”) equipment (the “Business”) in the States of Texas, Arkansas, Mississippi, Louisiana, Georgia, Alabama, Tennessee, Missouri and Kansas, and (ii) residential HVAC equipment in Titus County, Texas and each contiguous county thereto (the “Restricted Territory”); provided, however, that no owner of less than 1% of the outstanding stock of any publicly-traded corporation shall be deemed to engage solely by reason thereof in any of its businesses. During the Noncompetition Period, the Seller shall not induce or attempt to induce any customer, or supplier of the Buyer or any affiliate of the Buyer to terminate its relationship with the Buyer or any Affiliate of the Buyer or to enter into any business relationship to provide or purchase the same or substantially the same services as are provided to or purchased from the Business which might harm the Buyer or any Affiliate of the Buyer. During the Noncompetition Period, the Seller shall not, on behalf of any entity other than the Buyer or an Affiliate of the Buyer, hire or retain, or attempt to hire or retain, in any capacity any Person who is, or was at any time during the preceding twelve (12) months, an employee or officer of the Buyer or an Affiliate of the Buyer. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 6.8 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. Notwithstanding the foregoing, the HVAC business activities conducted by Affiliates of the Seller through JD’s AC, LLC in the 60 mile radius of Longview, Texas shall not violate this Section 6.8, so long as such business is operated in the ordinary course of business consistent with past practices.
  
 6.9 Financial Information. The Seller shall cooperate with the Buyer and the Buyer’s independent certified public accounting firm in order to enable the Buyer to create audited financial statements prepared in accordance with the GAAP for the two full fiscal years preceding the Closing Date and for the calendar year 2017, by making available the Seller’s records as they are maintained in the ordinary course of business and answering reasonable questions. 
  
 6.10 Management Fee. The Seller acknowledges and agrees that from and after the Closing Date, 1847 Holdings LLC will charge the Company an annual management fee consistent with the description of such fees made in the reports filed by 1847 Holdings LLC with the Securities and Exchange Commission, which fee shall cover all of the services provided by it, including the cost of the management consultant that will be engaged to work with the Seller on a day-to-day basis on transition matters.
  
  	 
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 6.11 Disclosure Schedule. 
  
 (a) The Parties acknowledge and agree that (i) the Seller and the Company have not yet delivered a definitive Disclosure Schedule to this Agreement to the Buyer, and (ii) Buyer has not been provided with copies of, nor had an opportunity to review, the items to be referred to on the Disclosure Schedule. The Seller shall deliver (and shall cause the Company to deliver) to the Buyer all of the schedules, including a definitive Disclosure Schedule to this Agreement, and documents referred to thereon, in final form within 30 business days of the date hereof. The Buyer shall have 10 business days following delivery of such schedules and such documents in which to terminate this Agreement if the Buyer objects to any information contained in such schedules or the contents of any such document and Buyer and Seller cannot agree on mutually satisfactory modifications thereto. 
  
 (b) The Seller shall have the right from time to time after the date hereof to deliver written updates of the Disclosure Schedule to reflect matters that existed, occurred or arose prior to or after the date hereof up to Closing and were not included on the Disclosure Schedule but should be so included, or to create new exceptions to the Disclosure Schedule where the text of this Agreement does not expressly contemplate an exception requiring disclosure on the Disclosure Schedule to which Seller obtains or becomes aware of between signing and Closing (the “Updated Disclosure Schedule”). Disclosures set forth in the Updated Disclosure Schedule shall be referred to as “Updated Matters.” 
  
 (c) If the Updated Matters set forth a situation that would have a Company Materials Adverse Effect and reflect matters that existed, occurred or arose prior to the date hereof and should have been disclosed upon the signing of this Agreement, then the Buyer shall be entitled to (i) terminate this Agreement upon written notice to the Seller and the Company or (ii) waive its rights to terminate this Agreement and its rights to indemnification under ARTICLE IX relating to such Updated Matters and proceed with the Closing in which case such Updated Disclosure Schedule shall constitute final Disclosure Schedule for the purposes of this Agreement.
  
 (d) If the Updated Matters set forth a situation that would have an Material Adverse Effect and reflect matters that arise after the signing of this Agreement, then the Buyer shall be entitled to (i) terminate this Agreement upon written notice to the Seller and the Company or (ii) waive its rights to terminate this Agreement and its rights to indemnification under ARTICLE IX relating to such Updated Matters and proceed with the Closing in which case such Updated Disclosure Schedule shall constitute final Disclosure Schedule for the purposes of this Agreement.
  
  	 
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 6.12 Confidentiality. The Buyer will, and will cause its Affiliates, officers, directors, employees, accountants, counsel, consultants, advisors and agents (“Representatives”) to, hold in confidence any and all information, whether written or oral, concerning the Business and the Company, except to the extent that the Buyer can show that such information (i) is already publicly known at the time of disclosure, (ii) becomes publicly known after disclosure through no fault of the Buyer or its Affiliates or Representatives, (iii) is already known to the Buyer or its Affiliates or Representatives at the time of disclosure, (iv) is subsequently disclosed to the Buyer or its Affiliates or Representatives by third parties having no obligation of confidentiality to the Company, or (v) is independently developed or learned by the Buyer or its Affiliates or Representatives without reference or use of such confidential information of the Company. If the Buyer or any of its Affiliates or Representatives is compelled to disclose any such information by judicial or administrative process or by other requirements of law, the Buyer shall promptly notify the Company in writing of such fact and the Buyer shall use its reasonable efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information. 
  
 6.13 Personal Guarantees. Tim Robinson and Tommy James have guaranteed various obligations of the Company, including, without limitation, the guarantees set forth in Section 6.13 of the Disclosure Schedule (collectively, the “Personal Guarantees”). Both prior to and after the Closing (i) the Buyer and the Company shall use their best efforts to release Messrs. Robinson and James from the Personal Guarantees, (ii) Messrs. Robinson and James shall notify the beneficiaries of such Personal Guarantees that they are no longer liable for any liability of the Company created after the Closing Date, and (iii) the Buyer and the Company shall offer to replace the Personal Guarantees of Messrs. Robinson and James with other guarantees or collateral satisfactory to such creditors.
  
 ARTICLE VII
 CONDITIONS TO OBLIGATIONS TO CLOSE
  
 7.1 Conditions to Obligation of the Buyer. 
  
 The obligation of the Buyer to consummate the Acquisition is subject to the satisfaction or waiver by the Buyer of the following conditions:
  
 (a) The representations and warranties of the Seller set forth in this Agreement will be true and correct in all respects as of the date of this Agreement and as of the Closing Date (except to the extent such representations and warranties speak as of another date, in which case such representations and warranties will be true and correct as of such other date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Buyer will have received a certificate signed by the Seller to such effect.
  
 (b) The Seller and the Company will have performed all of the covenants required to be performed by it under this Agreement at or prior to the Closing, except where the failure to perform does not have, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or materially adversely affect the ability of the Seller and the Company to consummate the Acquisition or perform its other obligations hereunder. The Buyer will have received a certificate signed by the Seller to such effect.
  
  	 
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 (c) The Buyer shall have completed its business, accounting and legal due diligence review of the Company and the Business, its assets and liabilities, and the results thereof shall be reasonably satisfactory to the Buyer.
  
 (d) The Buyer shall have obtained on terms and conditions satisfactory to it all of the financing it needs in order to consummate the transactions contemplated hereby and fund the working capital requirements of the Company after the Closing.
  
 (e) There shall not have been any occurrence, event, incident, action, failure to act, or transaction since the date of the Interim Financial Statements, which has had or is reasonably likely to cause a Material Adverse Effect.
  
 (f) All applicable waiting periods (and any extensions thereof) will have expired or otherwise been terminated, and the parties hereto will have received all other authorizations, consents and approvals of all Governmental Entities in connection with the execution, delivery and performance of this Agreement and the transactions contemplated hereby.
  
 (g) No temporary, preliminary or permanent restraining Order preventing the consummation of the Acquisition will be in effect.
  
 (h) Each party, as appropriate, shall have obtained any required consents, permits, licenses, approvals or notifications of any governmental or regulatory authorities, lenders, lessors, suppliers, customers or other third parties for which the Buyer will assume responsibility for properly completing and any and all necessary forms required when applying for and securing any necessary transfers.
  
 (i) The Seller shall have obtained releases of any liens, charges or encumbrances against any of the assets of the Company, at the Seller’s expense.
  
 (j) The Buyer shall have received such pay-off letters and releases relating to the indebtedness of the Company as it shall have requested and such pay-off letters shall be in form and substance satisfactory to it.
  
 (k) The Buyer shall have received fully-executed employment and non-competition agreements with the Seller and Tim Robinson and Tommy James (and with other key Company executives as reasonably requested by the Buyer; however, such other key Company executives shall not be approached for purposes hereunder until after the Closing Date and the Seller shall cooperate with the Buyer in such efforts), with such employment agreements having the same current insurance benefits and an annual compensation of $100,000 for each of Messrs. Robinson and James and a term of one (1) year (with an option for the Company to extend the period for two (2) additional years), in form and substance mutually satisfactory to the Buyer and the Seller and such key Company executives.
  
 (l) The Buyer shall have received new leases for the Real Property, which shall be at market rates (but not less than $7,500 per month), have a term of five (5) years and be on a triple net basis.
  
  	 
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 (m) The Company shall have delivered evidence reasonably satisfactory to the Buyer of the Company’s corporate organization and proceedings and its existence in the jurisdiction in which it is incorporated, including evidence of such existence as of the Closing.
  
 (n) The Buyer shall have obtained on terms and conditions satisfactory to it all of the financing it needs in order to consummate the transactions contemplated hereby and fund the working capital requirements of the Company after the Closing. The Buyer shall keep the Seller reasonably informed of its efforts to obtain such financing. 
  
 (o) All actions to be taken by the Seller in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be satisfactory in form and substance to the Buyer.
  
 7.2 Conditions to Obligation of the Seller. The obligation of the Seller to consummate the Acquisition is subject to the satisfaction or waiver by the Seller of the following conditions:
  
 (a) The representations and warranties of the Buyer set forth in this Agreement will be true and correct in all respects as of the date of this Agreement and as of the Closing Date (except to the extent such representations and warranties speak as of another date, in which case such representations and warranties will be true and correct as of such other date), except where the failure of such representations and warranties to be so true and correct does not adversely affect the ability of the Buyer to consummate the Acquisition and the other transactions contemplated by this Agreement. The Seller will have received a certificate signed on behalf of the Buyer by a duly authorized officer of the Buyer to such effect.
  
 (b) The Buyer will have performed in all material respects all of the covenants required to be performed by it under this Agreement at or prior to the Closing except such failures to perform as do not materially adversely affect the ability of the Buyer to consummate the Acquisition and the other transactions contemplated by this Agreement. The Seller will have received a certificate signed on behalf of the Buyer by a duly authorized officer of the Buyer to such effect.
  
 (c) All applicable waiting periods (and any extensions thereof) will have expired or otherwise been terminated and the parties hereto will have received all other authorizations, consents and approvals of all Governmental Entities in connection with the execution, delivery and performance of this Agreement and the transactions contemplated hereby.
  
 (d) No temporary, preliminary or permanent restraining Order preventing the consummation of the Acquisition will be in effect.
  
 (e) Each party, as appropriate, shall have obtained any required consents, permits, licenses, approvals or notifications of any Governmental Entities, lenders, lessors, suppliers, customers or other third parties for which the Buyer will assume responsibility for properly completing any and all necessary forms required when applying for and securing any necessary transfers.
  
  	 
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 (f) The Buyer and the Seller shall have entered into an employment agreement for a term of one (1) year (with an option to extend the period for two additional years), in form and substance mutually satisfactory to the Buyer and the Seller.
  
 (g) An affiliate of the Seller shall have entered into new leases for the Real Property with the Buyer or its affiliate, which shall be at market rates, have a term of five (5) years and be on a triple net basis.
  
 (h) The Buyer shall have obtained on terms and conditions satisfactory to it all of the financing it needs in order to consummate the transactions contemplated hereby and fund the working capital requirements of the Company after the Closing.
  
 (i) All actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be satisfactory in form and substance to the Seller.
  
 (j) The board of directors of the Buyer shall consist of five (5) persons, including Ellery W. Roberts, two persons designated by the Seller and two persons designated by 1847 Holdings LLC.
  
 ARTICLE VIII
 TERMINATION; AMENDMENT; WAIVER
  
 8.1 Termination of Agreement. This Agreement may be terminated as follows:
  
 (a) by mutual written consent of the Buyer and the Seller at any time prior to the Closing;
  
 (b) by either the Buyer or the Seller if any Governmental Entity will have issued an Order or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated by this Agreement; 
  
 (c) by either the Buyer or the Seller if the Closing does not occur on or before December 29, 2017; provided that the right to terminate this Agreement under this Section 8.1(c) will not be available to any party whose breach of any provision of this Agreement results in the failure of the Closing to occur by such time;
  
 (d) by the Buyer if the Seller or the Company has breached their respective representations and warranties or any covenant or other agreement to be performed by it in a manner such that the Closing conditions set forth in Section 7.1(a) or 7.1(b) would not be satisfied; or
  
 (e) by the Seller if the Buyer has breached its representations and warranties or any covenant or other agreement to be performed by it in a manner such that the Closing conditions set forth in Section 7.2(a) or 7.2(b) would not be satisfied.
  
  	 
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 8.2 Effect of Termination. In the event of termination of this Agreement by either the Seller or the Buyer as provided in Section 8.1, this Agreement will forthwith become void and have no effect, without any Liability (other than with respect to any suit for breach of this Agreement) on the part of the Buyer, the Company or the Seller (or any stockholder, agent, consultant or Representative of any such party); provided, that the provisions of Sections 11.1, 11.6, 11.7, 11.8, 11.11, 11.13, 11.14 and this Section 8.2 will survive any termination hereof pursuant to Section 8.1.
  
 8.3 Amendments. This Agreement may not be amended except by an instrument in writing signed on behalf of the Buyer, the Company and the Seller.
  
 8.4 Waiver. At any time prior to the Closing, the Buyer may (a) extend the time for the performance of any of the covenants, obligations or other acts of the Seller and the Company or (b) waive any inaccuracy of any representations or warranties or compliance with any of the agreements, covenants or conditions of the Seller or any conditions to its own obligations. Any agreement on the part of the Buyer to any such extension or waiver will be valid only if such waiver is set forth in an instrument in writing signed on its behalf by its duly authorized officer. At any time prior to the Closing, the Seller and the Company, may (a) extend the time for the performance of any of the covenants, obligations or other acts of the Buyer or (b) waive any inaccuracy of any representations or warranties or compliance with any of the agreements, covenants or conditions of the Buyer or any conditions to their own obligations. Any agreement on the part of the Seller and the Company to any such extension or waiver will be valid only if such waiver is set forth in an instrument in writing signed by the Seller and the Company. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise will not constitute a waiver of such rights. The waiver of any such right with respect to particular facts and other circumstances will not be deemed a waiver with respect to any other facts and circumstances, and each such right will be deemed an ongoing right that may be asserted at any time and from time to time.
  
 ARTICLE IX
 INDEMNIFICATION
  
 9.1 Survival. The representations and warranties made herein and in any certificate delivered in connection herewith shall survive for a period of twelve (12) months following the Closing Date, at which time they shall expire; provided, however, that (i) the representations and warranties set forth in Sections 3.1, 3.3, 3.4, 4.1, 4.3, and 4.19 of this Agreement (the “Fundamental Representations”) shall survive indefinitely and (ii) the representations and warranties in Section 4.6 of this Agreement shall survive until the expiration of the applicable statute of limitations. If written notice of a claim has been given prior to the expiration of the applicable representations and warranties, then notwithstanding any statement herein to the contrary, the relevant representations and warranties shall survive as to such claim, until such claim is finally resolved. Unless a specified period is set forth in this Agreement (in which event such specified period will control), all agreements and covenants contained in this Agreement will survive the Closing and remain in effect indefinitely. All representations and warranties in this Agreement are contractual in nature only and subject to the sole and exclusive remedies set forth herein. The parties have agreed that if any representation and warranty of any party prove untrue, the other party shall have the specific rights and remedies herein specified as the exclusive remedy therefor, but that no other rights, remedies or causes of action (whether in law or in equity or whether in contract or in tort) are permitted to any party as a result of the untruth of any such representation and warranty.
  
  	 
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 9.2 Indemnification by Seller. From and after the Closing, the Seller agrees to indemnify, defend and save Buyer and its Affiliates, stockholders, officers, directors, employees, agents and representatives (each, a “Buyer Indemnified Party” and collectively, the “Buyer Indemnified Parties”) harmless from and against any and all liabilities, deficiencies, demands, claims, Actions, assessments, losses, costs, expenses, interest, fines, penalties and damages (including fees and expenses of attorneys and accountants and costs of investigation) (individually and collectively, the “Losses”) suffered, sustained or incurred by any Buyer Indemnified Party arising out of or otherwise by virtue of: (a) any breach of any of the representations or warranties of the Seller or the Company contained in ARTICLE III or IV of this Agreement, (b) the failure of Seller to perform any of its covenants or obligations contained in this Agreement, or (c) the Personal Guarantees. The amount of any Losses subject to indemnification under this Section 9.2 shall be calculated net of any tax benefit and insurance proceeds actually recognized or reasonably expected to be recognized by the party seeking indemnification arising in connection with the accrual or incurrence of such Loss (determined on a with and without basis).
  
 9.3 Indemnification by Buyer. From and after the Closing, the Buyer agrees to indemnify, defend and save the Seller and to the extent applicable, the Seller’s Affiliates, employees, agents and representatives (each, a “Seller Indemnified Party” and collectively the “Seller Indemnified Parties”) harmless from and against any and all Losses sustained or incurred by any Seller Indemnified Party arising out of or otherwise by virtue of: (a) any breach of any of the representations and warranties of Buyer contained in ARTICLE V of this Agreement or (b) the failure of Buyer to perform any of its covenants or obligations contained in this Agreement.
  
 9.4 Indemnification Procedure.
  
 (a) If a Buyer Indemnified Party or a Seller Indemnified Party seeks indemnification under this ARTICLE IX, such party (the “Indemnified Party”) shall give written notice to the other party (the “Indemnifying Party”) of the facts and circumstances giving rise to the claim. In that regard, if any Action, Liability or obligation shall be brought or asserted by any third party which, if adversely determined, would entitle the Indemnified Party to indemnity pursuant to this ARTICLE IX (a “Third-Party Claim”), the Indemnified Party shall promptly notify the Indemnifying Party of such Third-Party Claim in writing, specifying the basis of such claim and the facts pertaining thereto, and the Indemnifying Party, if the Indemnifying Party so elects, shall assume and control the defense thereof (and shall consult with the Indemnified Party with respect thereto), including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all necessary expenses. If the Indemnifying Party elects to assume control of the defense of a Third-Party Claim, the Indemnified Party shall have the right to employ counsel separate from counsel employed by the Indemnifying Party in any such action and to participate in the defense thereof, but the fees and expenses of such counsel employed by the Indemnified Party shall be at the expense of the Indemnified Party unless (i) the Indemnifying Party has been advised by the Indemnifying Party’s counsel that a reasonable likelihood exists of a conflict of interest between the Indemnifying Party and the Indemnified Party, or (ii) the Indemnifying Party has failed to assume the defense and employ counsel; in which case the fees and expenses of the Indemnified Party’s counsel shall be paid by the Indemnifying Party. All claims other than Third-Party Claims (a “Direct Claim”) may be asserted by the Indemnified Party giving notice to the Indemnifying Party. Absent an emergency or other extenuating circumstance, the Indemnified Party shall give written notice to the Indemnifying Party of such Direct Claim prior to taking any material actions to remedy such Direct Claim.
  
  	 
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 (b) In no event shall the Indemnified Party pay or enter into any settlement of any claim or consent to any judgment with respect to any Third-Party Claim without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed) if such settlement or judgment would require the Indemnifying Party to pay any amount. The Indemnifying Party may enter into a settlement or consent to any judgment without the consent of the Indemnified Party so long as (i) such settlement or judgment involves monetary damages only and (ii) a term of the settlement or judgment is that the Person or Persons asserting such Third-Party Claim unconditionally release all Indemnified Parties from all liability with respect to such claim; otherwise the consent of the Indemnified Party shall be required in order to enter into any settlement of, or consent to the entry of a judgment with respect to, any Third-Party Claim, which consent shall not be unreasonably withheld, conditioned or delayed.
  
 9.5 Failure to Give Timely Notice. A failure by an Indemnified Party to provide notice as provided in Section 9.4 will not affect the rights or obligations of any Person except and only to the extent that, as a result of such failure, any Person entitled to receive such notice was damaged as a result of such failure to give timely notice. Nothing contained in this Section 9.4 shall be deemed to extend the period for which Seller’s representations and warranties will survive Closing as set forth in Section 9.1 above.
  
 9.6 Limited on Indemnification Obligation. Notwithstanding anything in this Agreement to the contrary, the liability of the Seller to the Buyer Indemnified Parties with respect to claims for indemnification pursuant to Section 9.2(a) (but, other than Section 9.6(a), not with respect to the Fundamental Representations for which recovery shall not be so limited) is subject to the following limitations:
  
 (a) The Seller shall not, be liable to the Buyer Indemnified Parties for Losses arising under Section 9.2(a) (other than with respect to Fundamental Representations for which recovery shall not be so limited) to the extent that the amounts otherwise indemnifiable for such breaches exceeds the Cash Portion of the Purchase Price.
  
 (b) The Seller shall not be liable to the Buyer Indemnified Parties for Losses arising under Section 9.2(a) (other than with respect to Fundamental Representations for which recovery shall not be so limited) until and unless the aggregate amounts indemnifiable for such breaches exceeds $100,000. In the event the Buyer Indemnified Parties’ claim for Losses, in the aggregate, exceed $100,000, the Buyer Indemnified Parties shall be entitled to the entire amount of such Losses in excess of $100,000; provided, however, that any Losses payable by the Seller to the Buyer shall first be offset against the Buyer Note prior to the Seller having any obligation to make any payments to the Buyer. 
  
  	 
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 (c) The Seller shall not be liable to the Buyer Indemnified Parties for Losses arising under Section 9.2 unless the claim therefor is asserted in writing on or prior to the expiration of the applicable representations and warranties.
  
 (d) Losses payable by an Indemnifying Party under this ARTICLE IX shall not include punitive damages, damages related to mental or emotional distress, exemplary damages or damages calculated as a multiple of earnings.
  
 (e) Each Buyer Indemnified Party shall use commercially reasonable efforts to take and shall cause its affiliates to take all reasonable steps to mitigate any Losses upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise thereto.
  
 (f) Losses otherwise subject to indemnity hereunder will be calculated after application of any received insurance proceeds actually received by the Indemnitee (net of costs of recovery and the value of any associated increase in premiums).
  
 (g) In calculating any Losses, there shall be deducted any indemnification, contribution or other similar payment actually recovered by any Buyer Indemnified Party from any third person directly in connection with such claim, less any costs of receiving such recovery.
  
 (h) All indemnification payments pursuant to this Article IX shall be deemed to be adjustments to the Purchase Price.
  
 9.7 Payments. Payments of all amounts owing by an Indemnifying Party under this ARTICLE IX shall be made promptly upon the determination in accordance with this ARTICLE IX that an indemnification obligation is owing by the Indemnifying Party to the Indemnified Party. 
  
 9.8 Burden and Benefit; Assignment. The parties have voluntarily agreed to define their rights, liabilities and obligations respecting the sale and purchase of the Shares exclusively in contract pursuant to the express terms and provisions of this Agreement. The parties expressly disclaim that they are owed any duties or are entitled to any remedies not expressly set forth in this Agreement. The parties each hereby acknowledge that this Agreement embodies the justifiable expectations of sophisticated parties derived from arm’s-length negotiations. The parties specifically acknowledge that no party has any special relationship with another party that would justify any expectation beyond that of an ordinary buyer and an ordinary seller in an arm’s-length transaction. The sole and exclusive remedies for any breach of the terms and provisions of this Agreement (including any representations and warranties set forth herein, made in connection herewith or as an inducement to enter into this Agreement) or any claim or cause of action otherwise arising out of or related to the sale and purchase of the Shares will be those remedies available at law or in equity for breach of contract only (as such contractual remedies have been further limited or excluded pursuant to the express terms of this Agreement); and the parties agree that no party shall have any remedies or cause of action (whether in contract or in tort) for any statements, communications, disclosures, failures to disclose, representa-tions or warranties not set forth in this Agreement. The Buyer shall not assign any of its rights or obligations under this Agreement without the Seller’s prior written consent.
  
  	 
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 9.9 Exclusive Remedy. After the Closing, the sole and exclusive remedy for any and all claims arising under, out of, or related to this Agreement will be the rights of indemnification set forth in ARTICLE IX only, and no Person will have any other entitlement, remedy or recourse, whether in contract, tort or otherwise, it being agreed that all of such other remedies, entitlements and recourse are expressly waived and released by the parties to the fullest extent permitted by law. The provisions of this Section 9.9, together with the limited remedies provided in ARTICLE IX, were specifically bargained-for between the Buyer and the Seller and were taken into account by the Buyer and the Seller in arriving at the Purchase Price. The Seller and the Buyer have specifically relied on the provisions of this Section 9.9 and the limited remedies provided in ARTICLE IX in agreeing to the Purchase Price and in agreeing to provide the specific representations and warranties set forth herein.
  
 9.10 Non-Reliance on Extra-Contractual Representations. Except for the specific representations and warranties expressly made by the Seller in this Agreement:
  
 (a) The Buyer acknowledges and agrees that:
  
 (i) neither the Seller nor any Company is making or has made any representation or warranty, expressed or implied, at law or in equity, in respect of the Business or the Shares, or the Company’s operations, prospects, or conditions (financial or otherwise), including with respect to merchantability or fitness for any particular purpose of any assets, the nature or extent of any liabilities, the prospects of the Business, the effectiveness or the success of any operations, or the accuracy or completeness of any confidential information memoranda, documents, projections, material or other information (financial or otherwise) regarding the Seller furnished to the Buyer or its representatives or made available to the Buyer and its representatives in any “data rooms,” “virtual data rooms,” management presentations or in any other form in expectation of, or in connection with, the transactions contemplated hereby, or in respect of any other matter or thing whatsoever, and
  
 (ii) no officer, agent, or representative of the Seller has any authority, express or implied, to make any representations, warranties or agreements not specifically set forth in this Agreement and subject to the limited remedies herein provided;
  
 (iii) the Buyer specifically disclaims that it is relying upon or has relied upon any such other representations or warranties that may have been made by any Person, and acknowledges and agrees that the Seller has specifically disclaimed and do hereby specifically disclaim any such other representation or warranty made by any Person;
  
 (iv) the Buyer specifically disclaims any obligation or duty by the Seller to make any disclosures of fact not required to be disclosed pursuant to the specific representations and warranties set forth in this Agreement; and
  
 (v) the Buyer is acquiring the Company subject only to the specific representations and warranties set forth in this Agreement, as further limited by the specifically bargained-for exclusive remedies as set forth in ARTICLE IX.
  
  	 
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 9.11 No Recourse Against Nonparty Affiliates. All claims, obligations, liabilities, or causes of action (whether in contract or in tort, in law or in equity, or granted by statute) that may be based upon, in respect of, arise under, out or by reason of, be connected with, or relate in any manner to this Agreement, or the negotiation, execution, or performance of this Agreement (including any representation or warranty made in, in connection with, or as an inducement to, this Agreement), may be made only against (and are expressly limited to) the parties. No Person who is not a party, including, without limitation, any director, officer, employee, incorporator, member, partner, manager, stockholder, Affiliate, agent, attorney, or representative of, and any financial advisor or lender to, any party, or any director, officer, employee, incorporator, member, partner, manager, stockholder, Affiliate, agent, attorney, or representative of, and any financial advisor or lender to, any of the foregoing (the “Nonparty Affiliates”), will have any liability (whether in contract or in tort, in law or in equity, or granted by statute) for any claims, causes of action, obligations, or liabilities arising under, out of, in connection with, or related in any manner to this Agreement or based on, in respect of, or by reason of this Agreement or its negotiation, execution, performance, or breach; and, to the maximum extent permitted by law, each party hereby waives and releases all such liabilities, claims, causes of action, and obligations against any such Nonparty Affiliates. Without limiting the foregoing, to the maximum extent permitted by law, (a) each party hereby waives and releases any and all rights, claims, demands, or causes of action that may otherwise be available at law or in equity, or granted by statute, to avoid or disregard the entity form of a party or otherwise impose liability of a party on any Nonparty Affiliate, whether granted by statute or based on theories of equity, agency, control, instrumentality, alter ego, domination, sham, single business enterprise, piercing the veil, unfairness, undercapitalization, or otherwise, and (b) each party disclaims any reliance upon any Nonparty Affiliates with respect to the performance of this Agreement or any representation or warranty made in, in connection with, or as an inducement to this Agreement.
  
 ARTICLE X
 TAX MATTERS
  
 10.1 Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth in this Section 10.1:
  
 (a) “Pre-Closing Tax Period XE "Pre-Closing Tax Period" ” shall mean any taxable period ending on or before 11:59 p.m., Central Standard Time on the Closing Date (the “Effective Time”) and, with respect to any taxable period that begins before the Effective Time but does not end until after the Effective Time, the portion of such taxable period ending on and including the Effective Time.
  
 (b) “Pre-Closing Taxes XE "Pre-Closing Taxes" ” shall mean Taxes of the Company for any Pre-Closing Tax Period.
  
 (c) “Post-Closing Tax Period XE "Post-Closing Tax Period" ” shall mean any taxable period beginning after the Effective Time and, with respect to any taxable period that includes but does not end until after the Effective Time, the portion of such taxable period beginning on the day after the Effective Time.
  
 (d) “Post-Closing Taxes XE "Post-Closing Taxes" ” shall mean Taxes of the Company for any Post-Closing Tax Period.
  
  	 
	33
	 
 
	 

  
 10.2 Preparation of Tax Returns. The Buyer shall prepare, or cause to be prepared, all Tax Returns required to be filed by the Company (after taking into account all appropriate extensions) after the Effective Time with respect to a Pre-Closing Tax Period, including all Straddle Periods (as defined below). Any such Tax Return shall be prepared in a manner consistent with past practice (unless otherwise required by applicable federal, state, local and foreign laws, statutes, codes, rules, regulations, ordinances, judgments, orders, decrees and the like of any Governmental Entity, including common law) and without a change of any election or any accounting method and shall be submitted by the Buyer to the Seller (together with schedules, statements and, to the extent requested by the Seller, supporting documentation) at least thirty (30) days prior to the due date (including extensions) of such Tax Return. If the Seller objects to any item on any such Tax Return, the Seller shall, within ten (10) days after delivery of such Tax Return, notify the Buyer in writing that the Seller so objects, specifying with particularity any such item and stating the specific factual or legal basis for any such objection. If a notice of objection shall be duly delivered, the Buyer and the Seller shall negotiate in good faith and use their reasonable best efforts to resolve such items. If the Buyer and the Seller are unable to reach such agreement within ten (10) days after receipt by the Buyer of such notice, the disputed items shall be resolved by the Independent Accounting Firm and any determination by the Independent Accounting Firm shall be final. The Independent Accounting Firm shall resolve any disputed items within twenty (20) days of having the item referred to it pursuant to such procedures as it may require. If the Independent Accounting Firm is unable to resolve any disputed items before the due date for such Tax Return, the Tax Return shall be filed as prepared by the Buyer and then amended to reflect the Independent Accounting Firm’s resolution. The costs, fees and expenses of the Independent Accounting Firm shall be borne equally by each of the Buyer and the Seller. The preparation and filing of any Tax Return of the Company that does not relate to, or have any adverse effect on, a Pre-Closing Tax Period shall be exclusively within the control of the Buyer.
  
 10.3 Straddle Period. In the case of Taxes that are payable with respect to a taxable period that includes but does not end at the Effective Time (each such period, a “Straddle Period XE "Straddle Period" ”), the portion of any such Taxes that are treated as Pre-Closing Taxes for purposes of this Agreement shall be:
  
 (a) in the case of property Taxes and other similar Taxes imposed on a periodic basis, deemed to be the amount of such Taxes for the entire period multiplied by a fraction, the numerator of which is the number of days from the beginning of the period up to and through the Effective Time, and the denominator of which is the number of days in the entire period; provided, however, if as a result of the transactions contemplated by this Agreement, the value of any asset is reassessed for purposes of determining the amount of any property or other Tax, any resulting increase in Tax for such Straddle Period shall be treated as being solely with respect to the portion of the Straddle Period beginning on the day after the Effective Time; and
  
  	 
	34
	 
 
	 

  
 (b) in the case of all other Taxes (including income Taxes, sales Taxes, employment Taxes, withholding Taxes), the amount attributable to the portion of the Straddle Period ending at the Effective Time shall be determined as if the Company filed a separate Tax Return with respect to such Taxes for the portion of the Straddle Period ending as of the end of the Effective Time using a “closing of the books methodology.” For purposes of this Section 10.3(b), any item determined on an annual or periodic basis (including amortization and depreciation deductions) shall be allocated to the portion of the Straddle Period ending at the Effective Time based on the relative number of days in such portion of the Straddle Period as compared to the number of days in the entire Straddle Period.
  
 10.4 Cooperation and Exchange of Information. The Company and the Buyer shall provide each other with such cooperation and information as either of them reasonably may request of the other in filing any Tax Return pursuant to this ARTICLE X or in connection with any Tax Contest (as defined below). Such cooperation and information shall include (a) providing copies of relevant Tax Returns or portions thereof, together with accompanying schedules, related work papers and documents relating to rulings or other determinations by tax authorities, (b) assisting in the preparation and timely filing of any Tax Return of the Company for a Pre-Closing Tax Period, (c) assisting in any audit or other Proceeding with respect to Taxes or Tax Returns of the Company (whether or not an audit or other civil or criminal litigation, arbitration, mediation or other action, suit, claim, demand, summons, citations or subpoena or inquiry of any kind or nature whatsoever, civil, criminal, regulatory or otherwise, at law or in equity (a “Proceeding”) in respect of any Tax Return or Taxes of the Company) for a Pre-Closing Tax Period, and (d) providing certificates or forms, and timely executing any Tax Return, that are necessary or appropriate to establish an exemption for (or reduction in) any Transfer Tax. The Company and the Buyer shall retain all Tax Returns, schedules and work papers, records and other documents in its possession relating to Tax matters of the Company for any taxable period beginning before the Effective Time until the expiration of the statute of limitations of the taxable periods to which such Tax Returns and other documents relate, without regard to extensions except to the extent notified by the other party in writing of such extensions for the respective Tax periods.
  
 10.5 Tax Contests. If any Governmental Entity issues to the Company (a) a written notice of its intent to audit or conduct another Proceeding with respect to Taxes of the Company for any Pre-Closing Tax Period, or (b) a written notice of deficiency for Taxes for any Pre-Closing Tax Period, the Buyer shall notify the Seller of its receipt of such communication from the Governmental Entity within 30 days of receipt. The Buyer shall control any audit or other Proceeding in respect of any Tax Return or Taxes of the Company (a “Tax Contest XE "Tax Contest" ”); provided, however, that (i) the Seller, at the Company’s sole cost and expense, shall have the right to control or participate in any such Tax Contest to the extent it relates to a Pre-Closing Tax Period, (ii) the Seller, at the Company’s sole cost and expense, shall have the right to participate in any such Tax Contest to the extent it relates to a Straddle Period, and (iii) the Buyer shall not allow the Company to settle or otherwise resolve any Tax Contest if such settlement or other resolution relates to Taxes for a Pre-Closing Tax Period without the prior written permission of the Seller (which will not be unreasonably withheld, delayed, or conditioned). If the Seller assumes control of a Tax Contest, it shall not settle or resolve any such Tax Contest that could result in a Buyer Indemnified Party incurring a Tax that is not (A) Taxes of the Company for any Pre-Closing Tax Period, and (B) all Taxes (excluding Transfer Taxes) of the Seller without the prior written consent of the Buyer (which shall not be unreasonably withheld, delayed, or conditioned).
  
  	 
	35
	 
 
	 

  
 10.6 Transfer Taxes. The parties do not expect or intend for any Transfer Taxes XE "Transfer Taxes" to be applicable to, imposed upon, or arise out of the transfer of the Shares or any other transaction contemplated by this Agreement and any Transfer Taxes unexpectedly applicable to, imposed upon or arising out of the transfer of the Shares or any other transaction contemplated by this Agreement shall be paid equally by the Buyer and the Seller.
  
 10.7 Tax Refund and Prepaid Taxes.
  
 (a) All refunds of Taxes of the Company for any Pre-Closing Tax Period (whether in the form of cash received or a credit or offset against Taxes otherwise payable) shall be for the benefit of the Seller. To the extent that the Buyer, the Company, or any subsidiary of the Company receives a refund that is for the benefit of the Seller, the Buyer shall pay to the Seller the amount of such refund (and interest received from the Governmental Entity with respect to such refund). The amount due to the Seller shall be payable 30 days after receipt of the refund from the applicable Governmental Entity (or, if the refund is in the form of credit or offset, 30 days after the due date of the Tax Return claiming such credit or offset). The Buyer shall, and shall cause its Affiliates, to take commercially reasonable actions necessary, or requested by the Seller, to timely claim any refunds that will give rise to a payment under this Section 10.7(a).
  
 (b) Except to the extent the liabilities for such Taxes were included in the final Closing Working Capital, to the extent that the Buyer or the Company (or any Affiliate of either) satisfies a Tax liability (to the extent such Tax liability is not with respect to a Tax for which the Seller is liable through the use of any amounts prepaid by the Seller or the Company (or any Affiliate of either) in a Pre-Closing Tax Period, such amount shall be treated as a refund which is for the benefit of the Seller pursuant to Section 10.7(a).
  
 10.8 Tax Treatment; Allocation.
  
 (a) The Buyer and the Seller agree that the sale of the Shares is intended for all applicable income Tax purposes to be treated as a sale of assets by the Seller and a purchase of assets by the Buyer.
  
 (b) Within 60 days of the final determination of Closing Working Capital, the Buyer shall provide to the Seller a schedule allocating the Purchase Price (including the applicable liabilities of the Company) among the shares of the Company and the restrictive covenants contained herein (the “Purchase Price Allocation Schedule XE "Purchase Price Allocation Schedule" ”). The Purchase Price Allocation Schedule will be prepared in accordance with the applicable provisions of the Code and the methodologies mutually agreed upon by the parties. The parties agree that $10,000 of the Purchase Price shall be allocated to the restrictive covenants in Section 6.8.
  
 (c) If within 30 days of receiving the Purchase Price Allocation Schedule, the Seller has not objected, the Purchase Price Allocation Schedule shall be final and binding. If within 30 days the Seller objects to the Purchase Price Allocation Schedule, the Seller and the Buyer shall cooperate in good faith to resolve their differences, provided that if after 30 days, the Seller and the Buyer are unable to agree, the parties shall retain the Independent Accounting Firm to resolve their dispute; provided, that, the Independent Accounting Firm utilize the methodologies mutually agreed upon by the parties for determining fair market value. The determination of the Independent Accounting Firm shall be final and binding on all parties. The cost of the Independent Accounting Firm shall be shared equally by the Seller and the Buyer. Tim Robinson and Tommy James shall be jointly and severally, liable for the Seller’s obligations with respect to payment of such costs of the Independent Accounting Firm.
  
  	 
	36
	 
 
	 

  
 (d) The parties shall make appropriate adjustments to the Purchase Price Allocation Schedule to reflect changes in the purchase price, including payments made pursuant to Section 6.8. The parties hereto agree for all Tax reporting purposes to report the transactions in accordance with the agreements herein and the Purchase Price Allocation Schedule, as adjusted pursuant to the preceding sentence, and to not take any position during the course of any audit or other proceeding inconsistent with the agreements as to Tax treatment herein or with such schedule unless required by a determination of the applicable Governmental Entity that is final.
  
 ARTICLE XI
 MISCELLANEOUS
  
 11.1 Press Releases and Public Announcement. Neither the Buyer on the one hand, nor the Seller or the Company on the other, will issue any press release or make any public announcement relating to this Agreement, the Acquisition or the other transactions contemplated by this Agreement without the prior written approval of the other party; provided, however, that the Buyer may make regulatory filings referring to this Agreement or attaching a copy hereof as may be required by applicable law.
  
 11.2 No Third-Party Beneficiaries. This Agreement will not confer any rights or remedies upon any Person other than the parties hereto and their respective successors and permitted assigns.
  
 11.3 Entire Agreement. This Agreement (including the Exhibits and the Schedules hereto) constitutes the entire agreement among the parties hereto and supersedes any prior understandings, agreements or representations by or among the parties hereto, written or oral, to the extent they related in any way to the subject matter hereof.
  
 11.4 Succession and Assignment. This Agreement will be binding upon and inure to the benefit of the parties named herein and their respective successors and permitted assigns. No party hereto may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval, in the case of assignment by the Buyer, by the Seller, and, in the case of assignment by the Seller or the Company, the Buyer.
  
 11.5 Construction. The parties have participated jointly in the negotiation and drafting of this Agreement, and, in the event an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties, and no presumption or burden of proof will arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.
  
  	 
	37
	 
 
	 

  
 11.6 Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally against written receipt or by facsimile transmission or mailed (by registered or certified mail, postage prepaid, return receipt requested) or delivered by reputable overnight courier, fee prepaid, to the parties hereto at the addresses of the parties as specified below:
  
  	         
	 If to the Buyer:k
	 1847 Wood, Inc.
 c/o 1847 Holdings LLC
 590 Madison Avenue, 21st Floor
 New York, NY 10022
 Attn: Ellery W. Roberts, CEO
 Email: eroberts@1847companies.com 
 Facsimile: 917-793-5950 

	  
	  
	  

	  
	 with a copy to:
	 Bevilacqua PLLC
 1629 K Street, NW, Suite 300
 Washington, DC 20006
 Attn: Louis A. Bevilacqua
 Facsimile: 301-874-8635

			
		 If to the Seller
 or to the Company:
	 To The Top, Inc.
 c/o Tim Robinson
 1100 County Road 4220 
 Mount Pleasant, TX 75455
 Facsimile: 214-740-5724

  
  	 
	38
	 
 
	 

  
  	              
	 with a copy to:
  
	 Bell Nunnally & Martin LLP
 3232 McKinney Avenue, Suite 1400
 Dallas, TX 75204
 Attn: Larry L. Shosid
 Email: lshosid@bellnunnally.com
 Facsimile: 214-740-5724

  
 Any party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other parties notice in the manner set forth herein.
  
 11.7 Governing Law. This Agreement will be governed by, and construed in accordance with, the Laws of the State of Texas, without giving effect to any choice of Law or conflict of Law provision or rule that would cause the application of the Laws of any jurisdiction other than the State of Texas.
  
 11.8 Consent to Jurisdiction and Service of Process. EACH OF THE PARTIES HERETO CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE STATE OF TEXAS AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT, THE ACQUISITION OR THE OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT MAY BE LITIGATED IN SUCH COURTS. EACH OF THE PARTIES HERETO ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL AND NONAPPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE ACQUISITION OR THE OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT THE ADDRESS SPECIFIED IN THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE 15 CALENDAR DAYS AFTER SUCH MAILING. NOTHING HEREIN WILL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF ANY PARTY HERETO TO SERVE ANY SUCH LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER OR TO BRING ACTIONS, SUITS OR PROCEEDINGS AGAINST ANY OTHER PARTY HERETO IN SUCH OTHER JURISDICTIONS, AND IN SUCH MANNER, AS MAY BE PERMITTED BY ANY APPLICABLE LAW.
  
 11.9 Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and will not affect in any way the meaning or interpretation of this Agreement.
  
  	 
	39
	 
 
	 

  
 11.10 Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms of such illegal, invalid or unenforceable provision as may be possible.
  
 11.11 Expenses. Except as otherwise provided in this Agreement, whether or not the Acquisition is consummated, all expenses incurred in connection with this Agreement and the transactions contemplated hereby will be paid by the party incurring such expenses. As used in this Agreement, “expenses” means the out-of-pocket fees and expenses of the financial advisor, counsel and accountants incurred in connection with this Agreement and the transactions contemplated hereby. 
  
 11.12 Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof.
  
 11.13 Limited Recourse. Notwithstanding anything in this Agreement to the contrary, the obligations and Liabilities of the parties hereunder will be without recourse to any stockholder of such party or any of such stockholder’s Affiliates (other than such party), or any of their respective Representatives or agents (in each case, in their capacity as such).
  
 11.14 Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any provision of this Agreement was not performed in accordance with the terms hereof and that the parties will be entitled to specific performance of the terms hereof in addition to any other remedy at Law or equity.
  
 11.15 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes. 
  
 11.16 Director and Officer Liability and Indemnification. 
  
 (a) For a period of five years after the Closing, the Company shall not and the Buyer shall not permit the Company to amend, repeal or modify any provision in its articles, bylaws or other governance documents relating to exculpation or indemnification of former offices and directors (unless required by law), it being the intent of the parties that the officers and directors of the Company prior to the Closing shall continue to be entitled to such exculpation and indemnification to the greatest extent permitted under the laws of the jurisdiction of incorporation of the Company.
  
 (b) After the Closing, the Company shall exculpate (to the greatest extent permitted by applicable law), and shall indemnify, defend and hold harmless, each of the directors and officers of the Company immediately prior to the Closing against all Losses arising out of any violations or alleged violations of fiduciary care or loyalty to the Company in their capacities as officers and directors of the Company, to the fullest extent permitted under applicable law or in the articles, bylaws or other governance documents of the Company in effect as of the date of this Agreement (to the extent consistent with applicable law).
  
  	 
	40
	 
 
	 

  
 11.17 Privilege, Work Product and Conflict Waiver. 
  
 (a) It is acknowledged by the parties that Bell Nunnally & Martin LLP (“Counsel”) has represented the Seller and the Company in connection with this Agreement. The Buyer and the Company agree that any attorney/client privilege, attorney work product protection and expectation of client confidence attaching as a result of Counsel’s representation of each of the Seller and the Company in connection with this Agreement and transactions contemplated hereby, and all information and documents covered by such privilege or protection, shall belong to and be controlled by the Seller and may be waived only by Seller, and shall not pass to or be claimed or used by the Buyer or the Company.
  
 (b) The attorney/client privilege, attorney work product protection and expectation of client confidence arising from Counsel’s representation of the Seller and the Company prior to the Closing concerning any subject matter with respect to which the Seller and the Company has or may have an indemnification obligations hereunder, and all information and documents covered by such privilege or protection, shall belong to and be controlled by the Seller and may be waived only by the Seller, and shall not pass to or be claimed or used by the Buyer or the Company.
  
 (c) The Seller, the Buyer and the Company agree that, notwithstanding any current or prior representation of the Seller and the Company by Counsel, Counsel shall be allowed to represent the Seller in any existing or future matters or disputes adverse to the Buyer or the Company relating to this Agreement or the transactions contemplated thereby. The Buyer and the Company hereby waive any conflicts that may arise in connection with such representation. The Buyer and the Company agree that Counsel may represent the Seller in such a matter or dispute, before or after the Closing, even though the interests of the Company or the Buyer may be directly adverse to the Seller.
  
 (d) At or prior to the Closing, the Company shall deliver to the Seller a warranty bill of sale conveying all such documents covered under Section 11.17(a) and Section 11.17(b) in whatever format such documents may then exist.
  
 11.18 Amendment of Tax Returns. Except to the extent required by Law, following the Closing, the Company shall not file or cause to be filed any amended tax return for the Company with respect to any tax period ending on or prior to the Closing without the Seller’s prior written consent. Any tax refund for years prior to the Closing Date shall belong to the Seller.
   	 
	 41

	 
 
	 

  
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first set forth above.
  
  	  
	 BUYER:
	
				
		 1847 Wood, Inc.
	
				  

		 By:
	 /s/ Ellery W. Roberts
	
	  
	 Name:
	 Ellery W. Roberts
	
	  
	 Title:
	 Chief Executive Officer
	

  
  	  
	 COMPANY:
	
			  

		 Wood Air Conditioning, Inc.

				
		 By:
	 /s/ Tommy James 
	
	  
	 Name:
	 Tommy James 
	
	  
	 Title:
	 President
	

  
  	  
	 SELLER:
	
				
		 To The Top, Inc.
	
				  

		 By:
	 /s/ Tim Robinson 
	
	  
	 Name:
	 Tim Robinson 
	
	  
	 Title:
	 Vice President
	

  
 [Signature Page to Stock Purchase Agreement]
  
  	  

	 42ex10-1.htm

Exhibit 10.1

 

 Confidential Treatment Requested

EXECUTION COPY

 

 

 

 

LICENSE, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

by and between

windtree therapeutics, inc.

and

Lee’s pharmaceutical (hk) LTD.

 

 

 

 

 

 

 

 

 

Table of Contents

 

Page

 

	
			Article 1 DEFINITIONS

				2
	 	 
	
			Article 2 LICENSES; OTHER RIGHTS

				13
	 	 
	
			2.1.

				
			Licenses to Licensee

				
			13

			
	
			2.2.

				
			License to Licensor

				
			14

			
	
			2.3.

				
			Option

				
			15

			
	
			2.4.

				
			Negative Covenants

				
			15

			
	
			2.5.

				
			Non-Compete Covenants

				
			15

			
	
			2.6.

				
			No Implied Licenses

				
			16

			
	
			2.7.

				
			Third Party Technology

				
			16

			
	
			2.8.

				
			In-Licenses

				
			16

			
	 	 	 
	
			Article 3 GOVERNANCE

				16
	 	 	 
	
			3.1.

				
			Joint Steering Committee

				
			16

			
	
			3.2.

				
			Joint Development Committee

				
			19

			
	
			3.3.

				
			Joint Commercialization Committee

				
			20

			
	
			3.4.

				
			Good Faith

				
			22

			
	 	 	 
	
			Article 4 PRODUCT DEVELOPMENT

				22
	 	 
	
			4.1.

				
			Overview

				
			22

			
	
			4.2.

				
			Development Plan

				
			22

			
	
			4.3.

				
			Development Costs

				
			23

			
	
			4.4.

				
			Diligence

				
			23

			
	
			4.5.

				
			Data Exchange and Use

				
			23

			
	
			4.6.

				
			Development Reports

				
			24

			
	
			4.7.

				
			Development Records

				
			24

			
	
			4.8.

				
			Compliance with Laws

				
			24

			
	 	 	 
	
			Article 5 REGULATORY MATTERS

				24
	 	 
	
			5.1.

				
			Regulatory Responsibilities in the Licensed Territory

				
			24

			
	
			5.2.

				
			Regulatory Responsibilities in the Licensor Territory

				
			26

			
	
			5.3.

				
			Regulatory Costs

				
			26

			
	
			5.4.

				
			Rights of Reference to Regulatory Materials

				
			26

			
	
			5.5.

				
			No Harmful Actions

				
			27

			
	
			5.6.

				
			Notification of Threatened Action

				
			27

			
	
			5.7.

				
			Adverse Event Reporting and Safety Data Exchange

				
			27

			
	
			5.8.

				
			Remedial Actions

				
			28

			
	 	 	 
	
			Article 6 COMMERCIALIZATION

				28
	 	 
	
			6.1.

				
			Overview of Commercialization in the Licensed Territory

				
			28

			
	
			6.2.

				
			Commercialization Plan for Licensed Territory

				
			29

			
	
			6.3.

				
			Pricing

				
			29

			
	
			6.4.

				
			Pricing Approval

				
			29

			

 

-i-

 

 

Table Of Contents

(continued)

Page

 

	
			6.5.

				
			Reimbursement Approval

				
			29

			
	
			6.6.

				
			Commercial Diligence

				
			29

			
	
			6.7.

				
			Cross-Territorial Restrictions

				
			30

			
	
			6.8.

				
			Territorial Coordination

				
			30

			
	
			6.9.

				
			Reports

				
			30

			
	 	 	 
	
			Article 7 COMPENSATION

				31
	 	 
	
			7.1.

				
			Upfront Payment

				
			31

			
	
			7.2.

				
			Licensed Territory Development Costs

				
			31

			
	
			7.3.

				
			Milestone Payments

				
			31

			
	
			7.4.

				
			Royalties

				
			32

			
	
			7.5.

				
			Sublicense Income

				
			34

			
	
			7.6.

				
			Foreign Exchange

				
			34

			
	
			7.7.

				
			Payment Method; Late Payments

				
			34

			
	
			7.8.

				
			Records

				
			35

			
	
			7.9.

				
			Audits

				
			35

			
	
			7.10.

				
			Taxes

				
			35

			
	 	 	 
	
			Article 8 INTELLECTUAL PROPERTY MATTERS

				36
	 	 
	
			8.1.

				
			Ownership of and Rights to Intellectual Property

				
			36

			
	
			8.2.

				
			Filing, Prosecution and Maintenance of Patents

				
			37

			
	
			8.3.

				
			Patent Enforcement in the Licensed Territory

				
			38

			
	
			8.4.

				
			Infringement of Third Party Rights in the Licensed Territory

				
			40

			
	
			8.5.

				
			Patent Marking

				
			40

			
	
			8.6.

				
			Packaging; Trademarks

				
			40

			
	 	 	 
	
			Article 9 REPRESENTATIONS AND WARRANTIES; COVENANTS

				41
	 	 
	
			9.1.

				
			Mutual Representations and Warranties

				
			41

			
	
			9.2.

				
			Additional Representations and Warranties of Licensor

				
			42

			
	
			9.3.

				
			Additional Representations and Warranties of Licensee

				
			43

			
	
			9.4.

				
			Covenants

				
			43

			
	
			9.5.

				
			No Other Representations or Warranties

				
			44

			
	 	 	 
	
			Article 10 INDEMNIFICATION

				45
	 	 
	
			10.1.

				
			Indemnification by Licensor

				
			45

			
	
			10.2.

				
			Indemnification by Licensee

				
			45

			
	
			10.3.

				
			Indemnification Procedures

				
			46

			
	
			10.4.

				
			Limitation of Liability

				
			46

			
	
			10.5.

				
			Insurance

				
			46

			
	 	 	 
	
			Article 11 CONFIDENTIALITY

				47
	 	 
	
			11.1.

				
			Confidentiality

				
			47

			

 

-ii-

 

 

Table Of Contents

(continued)

Page

 

	
			11.2.

				
			Authorized Disclosure

				
			47

			
	
			11.3.

				
			Technical Publication

				
			48

			
	
			11.4.

				
			Publicity; Terms of Agreement

				
			48

			
	
			11.5.

				
			Prior Confidentiality Agreements

				
			50

			
	
			11.6.

				
			Return of Confidential Information

				
			50

			
	
			11.7.

				
			Unauthorized Use

				
			50

			
	
			11.8.

				
			Exclusive Property

				
			50

			
	 	 	 
	
			Article 12 TERM AND TERMINATION

				50
	 	 
	
			12.1.

				
			Term

				
			50

			
	
			12.2.

				
			Termination for Bankruptcy

				
			50

			
	
			12.3.

				
			Termination by Regulatory Authority

				
			51

			
	
			12.4.

				
			Termination for Breach

				
			51

			
	
			12.5.

				
			Effects of Early Termination

				
			52

			
	
			12.6

				
			Intellectual Property

				
			54

			
	
			12.7

				
			Termination by Licensee; Liquidated Damages

				
			54

			
	
			12.8.

				
			Survival

				
			54

			
	 	 	 
	
			Article 13 DISPUTE RESOLUTION

				55
	 	 	 
	
			13.1.

				
			Arbitration

				
			55

			
	
			13.2.

				
			Referred from JSC

				
			55

			
	
			13.3.

				
			Equitable Relief

				
			56

			
	
			13.4.

				
			No Limitation of Remedies

				
			56

			
	
			13.5.

				
			Governing Law

				
			56

			
	 	 	 
	
			Article 14 MISCELLANEOUS

				56
	 	 
	
			14.1.

				
			Entire Agreement; Amendment

				
			56

			
	
			14.2.

				
			Force Majeure

				
			57

			
	
			14.3.

				
			Notices

				
			57

			
	
			14.4.

				
			No Strict Construction; Interpretation; Headings

				
			58

			
	
			14.5.

				
			Assignment

				
			59

			
	
			14.6.

				
			Performance by Affiliates

				
			59

			
	
			14.7.

				
			Further Assurances and Actions

				
			59

			
	
			14.8.

				
			Severability

				
			59

			
	
			14.9.

				
			No Waiver

				
			60

			
	
			14.10.

				
			Relationship of the Parties

				
			60

			
	
			14.11.

				
			Independent Contractors

				
			60

			
	
			14.12.

				
			English Language

				
			60

			
	
			14.13.

				
			Counterparts

				
			60

			
	
			14.14.

				
			Schedules

				
			61

			
	
			14.15.

				
			Non-Solicitation of Employees

				
			61

			
	
			14.16.

				
			Expenses

				
			61

			
	
			14.17.

				
			Registration of Agreement

				
			61

			

 

-iii-

 

 

Table Of Contents

(continued)

Page

 

	
			Article 15 MANUFACTURING

				61
	 	 	 
	
			15.1.

				
			Non-Aerosolized Products

				
			61

			
	
			15.2.

				
			Aerosolized Products

				
			62

			
	
			15.3.

				
			Technology Transfer and Supply

				
			62

			
	
			15.4.

				
			Timing

				
			62

			
	
			15.5.

				
			Manufacturing Option for Device

				
			62

			
	 	 	 
	 	 	 
	
			EXHIBITS AND SCHEDULES

				 
	 	 	 
	
			Exhibit A

				Licensed Marks	 
	
			Schedule 1

				Licensor Patents	 

 

 

-iv-

 

 

Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

LICENSE, DEVELOPMENT AND COMMERCIALIZATION

AGREEMENT

 

This License, Development and Commercialization Agreement (this “Agreement”) is entered into as of June 12, 2017 (the “Effective Date”), by and between Windtree Therapeutics, Inc., a Delaware corporation with its principal offices at 2600 Kelly Rd., Suite 100, Warrington, PA 18976 (“Licensor”), and Lee’s Pharmaceutical (HK) Ltd., a Hong Kong company organized and existing under the laws of Hong Kong with its principal offices at Unit 110-111, Bio-Informatics Centre, No. 2 Science Park West Avenue, Hong Kong Science Park, Shatin, Hong Kong (“Licensee”). Licensor and Licensee are sometimes referred to in this Agreement individually as a “Party” and together as the “Parties.” 

 

RECITALS

 

 

Whereas, Licensor Controls rights in and to the Surfaxin Product and Surfaxin LS and certain Licensor Technology related to the Surfaxin Product and Surfaxin LS, and desires to have Licensee Develop, manufacture and Commercialize the Surfaxin Product and Surfaxin LS in the Licensed Territory;

 

Whereas, Licensor Controls rights in and to Aerosurf and certain Licensor Technology related to Aerosurf, and desires to have Licensee Develop and Commercialize Aerosurf in the Licensed Territory;

 

Whereas, Licensor is currently conducting a Phase 2 Study in respect of Aerosurf for the treatment of respiratory distress syndrome (RDS) in up to fifty (50) clinical sites in North America, Latin America and Europe under an investigational new drug application filed with the FDA and is planning for a global Phase 3 Study in respect of Aerosurf for the treatment of RDS to support the potential registration of Aerosurf for the treatment of RDS in the U.S. and other international markets;

 

Whereas, Licensee possesses resources and expertise in the development, manufacture, marketing and commercialization of pharmaceutical products and medical devices in the Licensed Territory; and

 

Whereas, Licensor and Licensee desire to collaborate with the aim of advancing the Development, registration and Commercialization of the Surfaxin Product, Surfaxin LS, Aerosurf, and any other pharmaceutical composition containing synthetic KL4 Surfactant in the Licensed Territory, and Licensor wishes to grant Licensee certain rights in respect of the Licensor Technology, the Surfaxin Product, Surfaxin LS, Aerosurf and any other pharmaceutical composition containing synthetic KL4 Surfactant in the Licensed Territory for this purpose.

 

Now, Therefore, in consideration of the foregoing premises and the mutual promises, covenants and conditions contained in this Agreement, the Parties hereby agree as follows:

 

 

 

 

 

Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

ARTICLE 1

DEFINITIONS

 

“Accounting Standards” means, with respect to a Party, as applicable, (a) United States generally accepted accounting principles as promulgated by the Financial Accounting Standards Board, (b) Hong Kong Accounting Standard and Hong Kong Financial Reporting Standards as promulgated by the Hong Kong Institute of Certified Public Accountants, or (c) international financial reporting standards as promulgated by the International Accounting Standards Board, in each case consistently applied.

 

“Acquiror” has the meaning set forth in Section 14.5.

 

“Aerosolized Product(s)” means any combination drug/device product that utilizes a pharmaceutical composition containing synthetic KL4 Surfactant and Licensor’s proprietary aerosol delivery system to produce aerosolized KL4 Surfactant and includes Aerosurf.

 

“Aerosurf” means AEROSURF® (lucinactant for inhalation), a combination drug/device product that utilizes lyophilized synthetic KL4 Surfactant and Licensor’s proprietary aerosol delivery system to produce aerosolized KL4 Surfactant for non-invasive aerosolized delivery.

 

“Affiliate” means, with respect to either Party, any person, firm, trust, corporation, partnership or other entity or combination thereof that directly or indirectly controls, is controlled by or is under common control with such Party; the term “control” (including, with correlative meaning, the terms “controlled by” or “under common control with”) meaning direct or indirect ownership of fifty percent (50%) or more, including ownership by one or more trusts with substantially the same beneficial interests, of the voting and equity rights of such person, firm, trust, corporation, partnership or other entity or combination thereof, or the power to direct the management of such person, firm, trust, corporation, partnership or other entity or combination thereof.

 

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

 

[***]

 

[***]

 

“Bankruptcy Code” means, as applicable, the U.S. Bankruptcy Code, as amended from time to time, and the rules and regulations and guidelines promulgated thereunder, or the bankruptcy laws of any Governmental Authority, as amended from time to time, and the rules and regulations and guidelines promulgated thereunder, or any applicable bankruptcy laws of any other country or competent Governmental Authority, as amended from time to time, and the rules and regulations and guidelines promulgated thereunder.

 

“Breaching Party” has the meaning set forth in Section 12.5(a).

 

-2-

 

 

Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

“Business Day” means any day other than a day on which the commercial banks in New York, New York, Hong Kong or Beijing are authorized or required to be closed.

 

“Calendar Quarter” means each successive period of three (3) calendar months commencing on January 1, April 1, July 1 and October 1, except that the first Calendar Quarter of the Term commences on the Effective Date and ends on the day immediately before the first to occur of January 1, April 1, July 1 or October 1 after the Effective Date, and the last Calendar Quarter ends on the last day of the Term.

 

“Calendar Year” means each successive period of twelve (12) calendar months commencing on January 1 and ending on December 31, except that the first Calendar Year of the Term commences on the Effective Date and ends on December 31 of the year in which the Effective Date occurs and the last Calendar Year of the Term commences on January 1 of the year in which the Term ends and ends on the last day of the Term.

 

“Change of Control” means, with respect to a Party, (a) the sale of all or substantially all of such Party’s assets or business relating to this Agreement; (b) a merger (including a reverse triangular merger), consolidation, share exchange or other similar transaction involving such Party and any Third Party which results in the holders of the outstanding voting securities of such Party, or any Affiliate that controls such Party directly or indirectly immediately before such merger, consolidation, share exchange or other similar transaction, ceasing to hold fifty percent (50%) or more of the combined voting power of the surviving, purchasing or continuing entity immediately after such merger, consolidation, share exchange or other similar transaction, or (c) the acquisition by a person or entity, or group of persons or entities acting in concert, of more than fifty percent (50%) of the outstanding voting equity securities of such Party; in all cases of clauses (a)-(c), where such transaction is to be entered into with any person or group of persons other than the other Party or its Affiliates.

 

“Claims” has the meaning set forth in Section 10.1.

 

“Clinical Studies” means any of Phase 1 Studies, Phase 2 Studies, Phase 3 Studies, Phase 4 Studies, or variations of such studies (e.g., Phase 2/3).

 

“CMC Information” means Information related to the chemistry, manufacturing and controls of a Product as specified by the FDA and/or other applicable Regulatory Authorities.

 

“Commercialization,” with a correlative meaning for “Commercialize” and “Commercializing,” means all activities undertaken before and after obtaining Regulatory Approvals relating specifically to the pre-launch, launch, promotion, detailing, marketing, pricing, reimbursement, sale and distribution of a Product in the Licensed Territory, including Medical Affairs Activities, strategic marketing, sales force detailing, advertising, market and product support, customer support, product distribution, logistics, order taking, invoicing and sales activities, shipping, and handling of returns and allowances; provided, however, “Commercialization” excludes any activities relating to Development or manufacture of a Product.

 

-3-

 

 

Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

“Commercialization Plan” has the meaning set forth in Section 6.2(a).

 

“Commercially Reasonable Efforts” means, with respect to a Party’s obligations or tasks under this Agreement, the performance of such obligations or tasks by such Party in an diligent, active and sustained manner, without undue interruption, pause or delay, using a level of efforts and employing resources consistent with the exercise of good faith and prudent scientific and business judgment as commonly practiced by similarly situated companies in the pharmaceutical industry for the development or commercialization of similarly situated products of similar commercial or strategic importance as a Product, and at a similar stage of development or commercialization based on conditions then prevailing, taking into account efficacy, safety, patent exclusivity, anticipated or approved labeling, competitive market conditions, the clinical setting in which such Product is expected to be used, and all other relevant factors.

 

“Confidential Information” of a Party means any and all Information of such Party or its Affiliates that is disclosed by such Party or its Affiliates to the other Party or its Affiliates under this Agreement, whether in oral, written, graphic, or electronic form.

 

“Control” or “Controlled” means with respect to any (a) material or item of Information or (b) intellectual property right, the possession (whether by ownership or license, other than pursuant to this Agreement) by a Party or its Affiliates of the ability to grant to the other Party access and/or a license as provided herein under such item or right without violating any Third Party rights thereto or the terms of any agreement or other arrangement with any Third Party existing before or after the Effective Date.

 

“Default Notice” has the meaning set forth in Section 12.5(a).

 

“Develop” or “Development” means all activities relating to preparing and conducting non-clinical studies, Clinical Studies and regulatory activities (e.g., preparation of regulatory applications) that are necessary or useful to obtain and maintain Drug Approval of Product in the Licensed Territory.

 

“Development Plan” has the meaning set forth in Section 4.2(a).

 

“Device” means Licensor’s proprietary aerosol delivery system, which produces and delivers an aerosolized form of Drug.

 

“Device Manufacturing Option” has the meaning set forth in Section 15.5.

 

“Distributor” means a Third Party that sells Product to the trade but to which a sublicense is not granted pursuant to Section 2.1(c).

 

“Dollars” or “$” means U.S. dollars.

 

“Drug” means KL4 Surfactant. 

 

-4-

 

 

Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

“Drug Approval” means an approval granted by the appropriate Regulatory Authority to market a Product in the Field in any particular country or jurisdiction in the Licensed Territory; provided, “Drug Approval” includes any and all Marketing Authorizations but excludes any and all Pricing Approvals and Reimbursement Approvals. The term Drug Approval also includes an approval of (a) a drug/ device combination such as Aerosurf and (b) each of Drug and Device if required to be obtained separately.

 

“Drug Approval Application” means an application to the appropriate Regulatory Authority for approval to market a Product in the Field in any particular country or jurisdiction in the Licensed Territory; provided, “Drug Approval Application” includes any and all Marketing Authorization applications but excludes any and all applications for Pricing Approvals and Reimbursement Approvals.

 

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

 

“Executive Officers” has the meaning set forth in Section 3.1(d).

 

“FD&C Act” means the U. S. Federal Food, Drug, and Cosmetic Act, as amended.

 

“FDA” means the U.S. Food and Drug Administration or any successor entity.

 

“Field” means (a) with respect to Non-Aerosolized Products, the prevention, mitigation and/or treatment of any disease, disorder or condition in humans, and (b) with respect to Aerosolized Products, the prevention, mitigation and/or treatment of any respiratory disease, disorder or condition in humans.

 

“First Commercial Sale” means, with respect to a particular Product, the first sale by Licensee or its Affiliate or Sublicensee to a Third Party of such Product in a given country or regulatory jurisdiction after Drug Approval for such Product has been obtained in such country or regulatory jurisdiction.

 

“Generic/Branded Generic” shall mean, with respect to (a) a Non-Aerosolized Product, a drug product containing [***] other than any such drug product distributed by Licensee or its Affiliates or Sublicensees on an unbranded basis or under a private label of any Affiliate or Sublicensee; and (b) an Aerosolized Product, a drug/device combination product containing [***]  For clarity, a drug/device combination product containing [***] shall not be considered a Generic/Branded Generic with respect to an Aerosolized Product, for purposes of this Agreement.

 

“Good Clinical Practices” or “GCP” means the then-current standards, practices and procedures promulgated or endorsed by the FDA as set forth in the guidelines entitled “Guidance for Industry E6 Good Clinical Practice: Consolidated Guidance,” including related regulatory requirements imposed by the FDA and comparable regulatory standards, practices and procedures promulgated by other Regulatory Authorities applicable to the Licensed Territory, the Licensor Territory, or both, as such standards, practices and procedures may be updated from time to time, including applicable quality guidelines promulgated under the ICH. 

 

-5-

 

 

Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

“Good Laboratory Practices” or “GLP” means the then-current good laboratory practice standards promulgated or endorsed by the FDA as defined in 21 C.F.R. Part 58, and comparable regulatory standards promulgated by other Regulatory Authorities applicable to the Licensed Territory, the Licensor Territory, or both, as such standards may be updated from time to time, including applicable quality guidelines promulgated under the ICH.

 

“Governmental Authority” means any multi-national, federal, state, local, municipal, provincial or other governmental authority of any nature (including any governmental division, prefecture, subdivision, department, agency, bureau, branch, office, commission, council, court or other tribunal).

 

“ICH” means the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use.

 

“ICH Guidelines” means the guidelines of the ICH.

 

“Improvements” means any and all ideas, Information, research results, writings, inventions, discoveries, modifications, enhancements, derivatives, new uses, developments, techniques, materials, compounds, products, designs, processes or other technology or intellectual property, whether or not patentable or copyrightable, and all patent rights and other intellectual property rights in any of the foregoing.

 

“In-License Agreements” means [***]

 

“In-License Agreements Royalty Rate” means the sum of the applicable royalty rates payable by Licensor pursuant to, and as specified in, the In-License Agreements.

 

“Indemnified Party” has the meaning set forth in Section 10.3.

 

“Indemnifying Party” has the meaning set forth in Section 10.3.

 

“Information” means any non-public, proprietary data, results, technology, business or financial information or information of any type whatsoever, in any tangible or intangible form, including trade secrets, practices, techniques, methods, processes, protocols, inventions, discoveries, developments, specifications, formulations, formulae, materials, drawings, illustrations or other artwork, or compositions of matter of any type or kind (patentable or otherwise), software, algorithms, marketing reports, expertise, technology, experimentation or test data (including pharmacological, biological, chemical, biochemical, clinical test data and data resulting from non-clinical studies), CMC Information, stability data and other study data and procedures, and other know-how, whether or not patentable or copyrightable.

 

“JAMS Rules” has the meaning set forth in Section 13.1.

 

“JCC” has the meaning set forth in Section 3.3(a).

 

“JDC” has the meaning set forth in Section 3.2(a).

 

“JSC” has the meaning set forth in Section 3.1(a).

 

-6-

 

 

Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

“Joint Improvements” has the meaning set forth in Section 8.1(c).

 

“Joint Patents” has the meaning set forth in Section 8.1(c).

 

“KL4 Surfactant” means a pharmaceutical composition containing the peptide known as KL4 with the following amino acid sequence KLLLLKLLLLKLLLLKLLLLK.

 

“Knowledge” means, with respect to a Party or its Affiliates, the actual knowledge of the executive officers of such Party or its Affiliates (without any inquiry).

 

“Laws” means all applicable laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision, domestic or foreign.

 

“Licensed Marks” has the meaning set forth in Section 8.6(b). 

 

“Licensed Territory” means PRC, Hong Kong, [***]Taiwan, [***] South Korea, Thailand, [***] and subject to Licensee timely exercise of the Option, Japan. 

 

“Licensed Territory Development Costs” means all costs and expenses incurred by or on behalf of Licensor or Licensee after the Effective Date in accordance with this Agreement and in accordance with the Development Plan attributable to the Development of Product in and for the Licensed Territory, including all out-of-pocket costs actually incurred by Licensor or Licensee, filing fees payable to Regulatory Authorities in the Licensed Territory, costs of Product or comparator drugs used in Clinical Studies and non-clinical studies, ethics committee fees, investigators fees, investigators meetings costs, hospital fees, and clinical research organization fees and any other development and regulatory costs in and for the Licensed Territory.

 

“Licensed Territory Infringement” has the meaning set forth in Section 8.3(a).

 

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

 

“Licensee Improvements” has the meaning set forth in Section 8.1(d).

 

“Licensee Indemnitees” has the meaning set forth in Section 10.1.

 

“Licensee Know-How” means all Information, subject to Section 8.1, that is necessary or useful for the Development, manufacture or Commercialization of a Product in the Field, and (b) is Controlled by Licensee or its Affiliates during the Term; provided, the use of “Affiliate” in this definition excludes any Third Party that becomes an Affiliate of Licensee after the Effective Date due to a Change of Control of Licensee.

 

“Licensee Marks” means the trademarks to be used by Licensee in connection with its Commercialization of Product in the Licensed Territory.

 

-7-

 

 

Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

“Licensee Patent” means any Patents, subject to Section 8.1, that (a) claim a Product, the Drug or the Device, or the manufacture or use of a Product, the Drug or the Device, in the Field, and (b) are Controlled by Licensee or its Affiliates during the Term; provided, that the use of “Affiliate” in this definition excludes any Third Party that becomes an Affiliate of Licensee after the Effective Date due to a Change of Control of Licensee.

 

“Licensee Technology” means, subject to Section 8.1, the Licensee Know-How and Licensee Patents.

 

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

 

“Licensor Improvements” has the meaning set forth in Section 8.1(b)(ii).

 

“Licensor Indemnitees” has the meaning set forth in Section 10.2.

 

“Licensor Know-How” means all Information, subject to Section 8.1, that (a) is necessary or useful for the Development or Commercialization of an Aerosolized Product in the Field but is not directed to the manufacture of Aerosolized Product, or (b) is necessary or useful for the Development, manufacture and Commercialization of Non-Aerosolized Product in the Field, and (c) in the case of either clause (a) or (b), is (i) Controlled by Licensor or its Affiliates as of the Effective Date or (ii) subject to Section 2.7, Controlled by Licensor or its Affiliates during the Term; provided, the use of “Affiliate” in this definition excludes any Third Party that becomes an Affiliate of Licensor after the Effective Date due to a Change of Control of Licensor.

 

“Licensor Patent” means any Patents, subject to Section 8.1, that (a) claim a Product, the Drug or the Device, or the manufacture or use of a Product, the Drug or the Device, in the Field, and (b)(i) are Controlled by Licensor or its Affiliates as of the Effective Date, which Patents are set forth in Schedule 1 hereto, (ii) subject to Section 2.8, are Controlled by Licensor or its Affiliates during the Term and claims priority to a Patent Controlled by Licensor or its Affiliates as of the Effective Date, or (iii) subject to Section 2.8, are Controlled by Licensor or its Affiliates during the Term; provided, that the use of “Affiliate” in this definition excludes any Third Party that becomes an Affiliate of Licensor after the Effective Date due to a Change of Control of Licensor.

 

“Licensor Prosecuted Patents” has the meaning set forth in Section 8.2(a).

 

“Licensor Technology” means, subject to Section 8.1, the Licensor Know-How and Licensor Patents.

 

“Licensor Territory” means the entire world, excluding the Licensed Territory.

 

“Manufacturing Effective Date” means the date the technology transfer contemplated in Section 15.3 is completed.

 

“Marketed” has the meaning set forth in Section 7.4(d).

 

-8-

 

 

Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

“Marketing Authorization” means an official document issued by a competent Regulatory Authority for the purpose of importation, manufacturing, marketing, sale or free distribution of a product after evaluation for safety, efficacy and quality. It must set out, subject to the prevailing Laws, inter alia, the name of the product, the pharmaceutical dosage form, the quantitative formula (including excipients) per unit dose, the shelf-life and storage conditions, and packaging characteristics. It specifies the information on which authorization is based and contains the product information approved for health professionals and the public, the sales category, the name and address of the holder of the authorization, and the period of validity of the authorization.

 

“Material Impact” means with respect to a Product, a material adverse impact on the development, regulatory status or commercial sale of the Product.

 

“Medical Affairs Activities” means, with respect to a Product, activities designed to ensure or improve appropriate medical use of, conduct medical education of, or further research regarding, such Product, including, with respect to such Product: (a) conducting service based medical activities, including providing input and assistance with consultancy meetings, recommending investigators for Clinical Studies and providing input in the design of such Clinical Studies and other research related activities, and delivering non-promotional communications and conducting non-promotional activities, including presenting new clinical trial data and other scientific information; (b) grants to support continuing medical education, symposia, or Third Party research specifically related to such Product; (c) development, publication and dissemination of publications relating to such Product and relevant disease states; (d) medical information services provided in response to inquiries communicated via sales representatives or received by letter, phone call or email; (e) conducting advisory board meetings or other consultant programs; (f) support of investigator-initiated clinical trials; (g) managing relationships with cooperative groups, physician/hospital networks and advocacy groups; and (h) establishing and implementing risk, evaluation and mitigation strategies.

 

“Net Sales” means, with respect to a particular Product, the total amount invoiced by Licensee or its Affiliates or Sublicensees to each Third Party receiving such Product in arm’s length transactions, less the following deductions from such total amounts that are actually incurred, allowed, accrued or specifically allocated in accordance with the Accounting Standards:

 

[***]

 

Upon the sale or other disposal of such Product, other than in a transaction generating revenues from or based on a sales price for such Product (which sales price is either customary or would be reasonably expected), such sale or disposal will constitute a sale with the consideration for the sale being the consideration for the relevant transaction and will constitute Net Sales hereunder or if the consideration is not a monetary amount, such sale or disposal will have the value of whatever consideration has been provided in exchange for the supply.

 

For this definition:

 

(i)     the transfer of Product by Licensee or one of its Affiliates to another Affiliate or a Sublicensee shall not be considered a sale; and

 

-9-

 

 

Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

(ii)     any disposal of Product for, or use of Product in, Clinical Studies is not a sale under this definition. 

 

The amount of Product transferred pursuant to subsections (i) and (ii) of this definition shall be determined from the books and records of Licensee or its Affiliates or Sublicensees, maintained in accordance with international financial reporting standards, consistently applied, but excluding any notes thereto.

 

“Non-Aerosolized Product” means Surfaxin Product, Surfaxin LS and any other pharmaceutical composition containing the synthetic KL4 Surfactant, in each case to be administered in any form other than as aerosol.

 

“Non-Breaching Party” has the meaning set forth in Section 12.5(a).

 

“Non-Governmental Authority” means any public body or non-Governmental Authority with the authority to control, approve, recommend or otherwise determine pricing and reimbursement of pharmaceutical products and/or medical devices, including those with authority to enter into risk sharing schemes or to impose retroactive price reductions, discounts, or rebates.

 

“Option” has the meaning set forth in Section 2.3.

 

“Other Committees” has the meaning set forth in Section 3.1(a)(ix).

 

“Party” or “Parties” has the meaning set forth in the introductory paragraph.

 

“Patents” means (a) pending patent applications, issued patents, utility models and designs; (b) reissues, substitutions, confirmations, registrations, validations, re-examinations, additions, continuations, continued prosecution applications, continuations-in-part, or divisions of or to any of the foregoing; (c) any other patent application claiming priority to any of the foregoing anywhere in the world; and (d) extension, renewal or restoration of any of the foregoing by existing or future extension, renewal or restoration mechanisms, including supplementary protection certificates or the equivalent thereof.

 

“Payee” has the meaning set forth in Section 7.7.

 

“PDF” has the meaning set forth in Section 14.13.

 

“Pharmacovigilance Agreement” has the meaning set forth in Section 5.7.

 

“Phase 1 Study” means a human clinical trial of a Product with the endpoint of determining initial tolerance, safety or pharmacokinetic information in single dose, single ascending dose, multiple dose or multiple ascending dose regimens, as described in 21 C.F.R. § 312.21(a) (or its successor regulation) or the equivalent thereof in any jurisdiction outside the U.S.

 

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“Phase 2 Study” means a human clinical trial of a Product, the principal purpose of which is a preliminary determination of safety and efficacy in the target patient population over a range of doses and dose regimens, as described in 21 C.F.R. § 312.21(b) (or its successor regulation) or the equivalent thereof in any jurisdiction outside the U.S.

 

“Phase 3 Study” means a human clinical trial of a compound or product (including a Product) in a sufficient number of subjects that is designed to establish that such compound or product is safe and efficacious for its intended use, and to determine warnings, precautions and adverse reactions that are associated with the compound or product in the dosage range to be prescribed, and to support Regulatory Approval of such compound or product or label expansion of such compound or product.

 

“Phase 4 Study” means a human clinical trial of a compound or product in patients commenced after receipt of Regulatory Approval for such compound or product, which clinical trial is conducted within the parameters of such Regulatory Approval, including clinical trials required or requested by any Regulatory Authority as a condition of, or in connection with, obtaining such Regulatory Approval of such compound or product, provided, a “Phase 4 Study” may also include clinical trials to gather additional information regarding such compound’s or product’s potential risks, medical or pharmacoeconomic benefits, justification and descriptions for other indications of such compound or product, data to be included in compendial listings, optimal use, dose, route and schedule of administration, epidemiological studies, modeling and pharmacoeconomic studies.

 

“PRC” means the People’s Republic of China.

 

“Pricing Approval” means the governmental approval, agreement, determination or decision establishing prices for a Product that can be charged in a particular country or regulatory jurisdiction where the applicable Governmental Authorities approve or determine the price of pharmaceutical products.

 

“Product License Holder” means the holder of a Marketing Authorization.

 

“Product” means an Aerosolized Product and/or a Non-Aerosolized Product, as the context requires. 

 

“Publication” has the meaning set forth in Section 11.3.

 

“RDS” means respiratory distress syndrome.

 

“Regulatory Approval” means (a) Drug Approval and all other approvals necessary for the commercial sale of a Product in a given country or regulatory jurisdiction; (b) Pricing Approval, but only in those countries or regulatory jurisdictions where Pricing Approval is required by Law for commercial sale; and (c) Reimbursement Approval, but only in those countries or regulatory jurisdictions where Reimbursement Approval is required for the price paid for a Product to be reimbursed by a Governmental Authority or a Non-Governmental Authority with the authority to approve reimbursement.

 

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“Regulatory Authority” means, in a particular country or jurisdiction, any applicable Governmental Authority or Non-Governmental Authority involved in granting Regulatory Approval in such country or jurisdiction.

 

“Regulatory Exclusivity” means, with respect to a Product, that Third Parties are prevented from legally developing, manufacturing or commercializing a product that could compete with such Product in a country, either through data exclusivity rights, orphan drug designation, or such other rights conferred by a Regulatory Authority in such country, other than through Patent rights. 

 

“Regulatory Materials” means regulatory applications, submissions, notifications, communications, correspondence, registrations, Drug Approvals or other filings made to, received from or otherwise conducted with a Regulatory Authority to Develop, manufacture, market, sell or otherwise Commercialize a Product in a particular country or jurisdiction.

 

“Regulatory Plan” means a plan regarding the timing and approach to preparing, submitting or reviewing Regulatory Materials and obtaining and maintaining Drug Approval.

 

“Reimbursement Approval” means the approval, agreement, determination or decision recommending or approving a Product for use or establishing the prices for a Product that can be reimbursed in regulatory jurisdictions where the applicable Governmental Authority or Non-Governmental Authority approves, determines or recommends the reimbursement or use of pharmaceutical products.

 

“Remedial Action” has the meaning set forth in Section 5.8.

 

“Safety Reason” has the meaning set forth in Section 13.2(a).

 

“SEC” has the meaning set forth in Section 11.4(c).

 

“Sublicense Income” means income received by Licensee or its Affiliates in consideration for a sublicense or other agreement providing the right to negotiate or obtain a sublicense pursuant to Section 2.1(c). “Sublicense Income” shall include income received from a Sublicensee in the form of [***].

 

“Sublicensee” means any entity to which a sublicense is validly granted pursuant to Section 2.1(c). For clarity, a Distributor shall not be considered a Sublicensee. Any intended full service Distributors may be reviewed by the JSC to ensure proper capabilities of safety and/or adverse event reporting. 

 

“Surfaxin Product” means Surfaxin® (lucinactant) intratracheal suspension, a pulmonary KL4 Surfactant, based on NDA No. 21-746, as approved by the FDA on March 6, 2012.

 

“Surfaxin LS” means the lyophilized dosage form of the Surfaxin Product.

 

“Term” has the meaning set forth in Section 12.1.

 

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“Third Party” means any entity other than Licensor or Licensee or an Affiliate of either of them.

 

“Third Party Claim” has the meaning set forth in Section 8.4.

 

“Third Party Technology” means any Patents, Information, inventions, or other intellectual property owned or controlled by a Third Party but not Controlled by a Party or its Affiliates.

 

“U.S.” means the United States of America, its possessions and territories.

 

“Valid Claim” means a claim of (a) an issued and unexpired Patent, which claim has not been revoked or held unenforceable, unpatentable or invalid by a decision of a court or other governmental agency of competent jurisdiction, which is not appealable or has not been appealed within the time allowed for appeal, and which has not been abandoned, disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination or disclaimer or otherwise, or (b) a patent application for a patent included within the Patents and which claim has not been cancelled, withdrawn or abandoned or finally rejected by an administrative agency action from which no appeal can be taken.

 

ARTICLE 2

LICENSES; OTHER RIGHTS

 

2.1.      Licenses to Licensee.

 

(a)     Aerosolized Products. Subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee an exclusive (even as to Licensor), milestone- and royalty-bearing license, with the right to grant sublicenses solely as permitted under Section 2.1(c), under the Licensor Technology, to Develop, use, sell, offer for sale, import, distribute and otherwise Commercialize Aerosolized Products in the Field in the Licensed Territory, provided that Licensor or an Affiliate of Licensor will be the Product License Holder for Aerosolized Products in each country of the Licensed Territory (i) unless the prevailing Laws or regulations in any given country of the Licensed Territory would not allow Licensor or its Affiliate to hold the Marketing Authorization, in which case the identity of the Product License Holder in such country and arrangements concerning the ownership, maintenance and transferability of such Marketing Authorization shall be subject to Licensor’s approval, such approval not to be unreasonably withheld or delayed, and (ii) in case, however, no alternative solution is agreed upon between the Parties, or available to the Parties in accordance with the prevailing Laws and regulations, then the Product License Holder in such country will be the Licensee (or its Affiliate or Sublicensee, as the case may be). 

 

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(b)      Non-Aerosolized Products. In addition to the rights granted under Section 2.1(a), and subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee an exclusive (even as to Licensor), milestone and royalty-bearing license, with the right to grant sublicenses solely as permitted under Section 2.1(c), under the Licensor Technology, to Develop, register, manufacture, use, sell, offer for sale, import, distribute and otherwise Commercialize Non-Aerosolized Products in the Field in the Licensed Territory. Licensee’s right to manufacture Non-Aerosolized Products is not sublicensable other than to its Affiliates in accordance with Section 2.1(c). 

 

(c)     Sublicense Rights. Licensee may grant sublicenses of the licenses granted in Sections 2.1(a) and 2.1(b) without the prior approval of Licensor, only to (A) its Affiliates, provided that such sublicense will automatically terminate if such person, corporation, partnership or entity ceases to be an Affiliate of Licensee, and (B) Third Party subcontractors for the sole purpose of performing part of Licensee’s obligations under this Agreement (excluding any Third Party manufacturers), and in each case on the condition that Licensee shall at all times Develop, use, sell, offer for sale, import, distribute, register and manufacture and otherwise Commercialize Product in Licensee’s or its Affiliate’s name. Licensee shall not grant any sublicenses of the licenses granted in Sections 2.1(a) or 2.1(b) to any Third Party (including any Third Party manufacturer but excluding any non-manufacturing Third Party subcontractors as permitted in the preceding sentence) without the prior written approval of Licensor, which approval will not be unreasonably withheld or delayed by Licensor. A Sublicensee or a subcontractor may not be a competitor or an Affiliate of a competitor identified by Licensor to Licensee in writing. Licensee shall remain responsible for and shall guarantee the performance of each Sublicensee under this Agreement, including for all payments due hereunder, even if such Sublicensee has read and agreed in writing to be bound to all of Licensee’s rights and obligations under this Agreement to the same extent as Licensee. Sublicenses granted under this Section 2.1(c) shall not include the right to sublicense. As stated in Section 2.1(b), Licensee’s right to manufacture Non-Aerosolized Products is not sublicensable other than to its Affiliates in accordance with this Section 2.1(c). 

 

(d)     Retained Rights. Notwithstanding the foregoing exclusive grant of rights to Licensee under this Section 2.1, Licensor retains the right to conduct development of Product in the Licensed Territory to support the development and commercialization of Product in the Licensor Territory. Such development activities specifically conducted by Licensor in the Licensed Territory will be subject to the Development Plan and JSC review and approval.

 

2.2.      License to Licensor.

 

Subject to the terms and conditions of this Agreement, including section 8.1, Licensee hereby grants to Licensor an exclusive (even as to Licensee), fully paid, royalty-free right and license (with the right to grant sublicenses), under the Licensee Know How, to (A) develop Product in the Field in order to obtain or maintain Regulatory Approval in the Licensor Territory, and (B) make, use, sell, offer for sale, import, distribute, warehouse, market, promote, apply for and submit applications for Drug Approval, Pricing Approval and Reimbursement Approval, and otherwise commercialize Product in the Field in the Licensor Territory. 

 

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2.3.      Option.

 

Subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee an option, exercisable in Licensee’s sole discretion, to add Japan to the Licensed Territory subject to approval of the JSC based on the JSC’s review and evaluation of the business case and a business plan for Japan presented by Licensee, as well as other market conditions and strategic options and considerations then relevant to the Japan market (an “Option”). It is expressly agreed that the JSC’s review and evaluation of the business case and business plan, and its determination as to whether or not to approve the addition of Japan to the Licensed Territory, shall not be unreasonably withheld or delayed by the JSC. The Option must be exercised no later than [***], and Licensee must also provide a written progress update to the JSC [***] on activities undertaken by Licensee with respect to its strategy in Japan.

 

2.4.      Negative Covenants. 

 

(a)     Licensee shall not, and will not permit any of its Affiliates or Sublicensees to use or practice any Licensor Technology outside the scope of the licenses granted to it under Section 2.1. Licensor shall not, and shall not permit any of its Affiliates or its Sublicensees to use or practice any Licensee Technology outside the scope of the licenses granted to it under Section 2.2.

 

(b)     Licensee shall not at any time seek to aerosolize a Non-Aerosolized Product or use it as a powder or in combination with any aerosol device, nebulizer or other delivery system, or any device that provides a liquid/gas mixture.

 

(c)     Neither Party will participate in any cross-territorial selling or distribution into the other Party’s territory without the other Party’s written consent. 

 

2.5.      Non-Compete Covenants.

 

(a)     During the Term, for a period of ten (10) years after the later of (x) the First Commercial Sale in the PRC of the first Aerosolized Product under this Agreement, and (y) the First Commercial Sale in the PRC of the first Non-Aerosolized Product under this Agreement, Licensee, Licensee’s Affiliates, and its and their respective Sublicensees shall not develop, register, manufacture, have manufactured, import, export, market, distribute, or sell anywhere in the world any product for the prevention and/or treatment of (i) RDS in premature infants, or (ii) diseases and conditions (other than RDS) in humans, in either case that administers, utilizes or contains pulmonary surfactant, other than in accordance with this Agreement, without Licensor’s prior written consent, which consent Licensor may grant or withhold in its sole discretion.

 

(b)     During the Term, Licensee shall not reverse engineer or otherwise deconstruct any active pharmaceutical ingredients or component parts of a Product for the purpose of developing a product that would compete in any way with a Product in the Field.

 

(c)     Neither Party nor any of their respective Affiliates will take, support or encourage any action with respect to any Product that is substantially likely to have a Material Impact in the other Party’s territory. 

 

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(d)     For the avoidance of doubt, the Parties intend that each of Licensor and Licensee shall have the right to enjoy the benefits of Licensor Technology in its respective territory without intrusion or interruptions by the other Party. Licensee acknowledges that the provisions of this Section 2.5 are in partial consideration of the licensed rights, including trade secrets delivered and/or all other Licensor Technology rights granted to Licensee under this Agreement.

 

2.6.      No Implied Licenses. Except as explicitly set forth in this Agreement, neither Party will be deemed by estoppel or implication to have granted the other Party any license or other right to any intellectual property of such Party.

 

2.7.      Third Party Technology. If, after the Effective Date, Licensor or any of its Affiliates (i) acquires a license with the right to sublicense under Third Party Technology for use in connection with the Development or Commercialization of a Product in or for the Licensed Territory, and (ii) would be subject to payment obligations to such Third Party on account of Licensee’s exploitation of such Third Party Technology in connection with the Development or Commercialization of such Product in or for the Licensed Territory, then Licensor will promptly provide Licensee with written notice of such acquisition and the additional financial terms to which Licensor would be subject if Licensee were to exploit a license under such Third Party Technology. If Licensee desires to obtain such license it will notify Licensor in writing and this Agreement will be deemed amended to reflect such additional financial terms and to provide that the applicable Third Party Technology will be included in Licensor Technology under this Agreement.

 

2.8.      In-Licenses. All licenses and other rights granted to Licensee by Licensor under this Article 2 are subject to the rights and obligations of the parties under the In-License Agreements. Licensee agrees to be bound by the pertinent portions of the In-License Agreements to the same extent that Licensor is bound thereby. In addition, the sublicense to Licensee of the Licensor Technology, to the extent such Licensor Technology is licensed to Licensor under each In-License Agreement, and as long as such In-License Agreement remains in force, shall automatically terminate if and to the extent such In-License Agreement terminates. In such a case, Licensor will use Commercially Reasonable Efforts to allow Licensee to negotiate the continuation of the rights and licenses granted to Licensee in Article 2 directly with Licensor’s respective licensor(s) under the In-License Agreement(s) being terminated. 

 

ARTICLE 3

GOVERNANCE

 

3.1.      Joint Steering Committee.

 

(a)      Formation and Role. Within thirty (30) days after the Effective Date, the Parties shall establish a joint steering committee (the “JSC”) for the overall coordination and oversight of the Parties’ activities under this Agreement. The role of the JSC shall be:

 

(i)     to review, discuss and approve the overall strategy for the Development and Regulatory Approval of Product in the Field in the Licensed Territory;

 

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(ii)       to review, discuss and approve the inclusion of Japan in the Licensed Territory based on the business plan presented by Licensee to the JSC;

 

(iii)      to review and discuss the overall performance of the Parties pursuant to this Agreement and to compare such performance to the objectives outlined in the Development Plan and to the diligence obligations set forth in Section 4.4;

 

(iv)      to review, discuss and approve the Development Plan (including the Regulatory Plan), and any amendments to the Development Plan proposed by the JDC;

 

(v)       to review, discuss and approve the conduct by Licensee of all country-specific or jurisdiction-specific regulatory activities in the Licensed Territory;

 

(vi)      to review and discuss the Commercialization Plan and any amendments to the Commercialization Plan proposed by either Party;

 

(vii)     to review and discuss the overall strategy for Pricing Approval and Reimbursement Approval of Product in the Field in the Licensed Territory, and all country-specific or jurisdiction-specific pricing and reimbursement negotiations in the Licensed Territory, provided global pricing of Product (including pricing floors for referencing countries) will be established collaboratively at the JSC (and in conjunction with other applicable parties, as necessary);

 

(viii)     to discuss the Parties’ activities with respect to Product in the Field in the Licensed Territory in conjunction with Licensor’s and its other licensees’ activities with respect to Product in the Field in the Licensed Territory or the Licensor Territory;

 

(ix)      to direct and oversee the JDC, JCC and any other operating committee (the “Other Committees”) established by the JSC on all significant issues that fall within the purview of such committees;

 

(x)       to appoint Other Committees, consisting of equal numbers of appropriately qualified members appointed by each Party, from time to time as it deems fit;

 

(xi)      to attempt to resolve, in a timely manner, issues presented to it by, and disputes within, the JDC, JCC and Other Committees; and

 

(xii)     to perform such other functions as appropriate to further the purposes of this Agreement, as expressly set forth in this Agreement or as mutually determined by the Parties in writing.

 

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The JSC has only the powers expressly assigned to it in this Section 3.1 and elsewhere in this Agreement. The JSC has no power to interpret, amend, modify, or waive compliance with this Agreement.

 

(b)     Members. Each Party shall initially appoint two (2) representatives to the JSC, each of whom will be an officer or employee of such Party having sufficient seniority within the applicable Party to make decisions arising within the scope of the JSC’s responsibilities. The JSC may change its size from time to time by mutual written consent of its members and each Party may replace its representatives at any time upon written notice to the other Party; provided, however, that the JSC will at all times consist of equal numbers of members appointed by each Party. If a JSC representative from either Party is unable to attend or participate in a meeting of the JSC, the Party who designated such representative may designate an appropriately qualified substitute representative for the meeting. The JSC will have a chairperson, who will be designated, on an annual basis, alternatively by Licensor or Licensee. The Licensor shall select the initial chairperson. The role of the chairperson is to convene and preside at all meetings of the JSC and to ensure the preparation of meeting minutes, but the chairperson has no additional powers or rights beyond those held by other JSC representatives.

 

(c)     Meetings. The JSC shall meet at least one (1) time every other Calendar Quarter during the Term until Regulatory Approval of each Product is achieved; thereafter, the JSC shall meet at least one (1) time per Calendar Year during the Term. Either Party may also call a special meeting of the JSC (by videoconference or teleconference) upon at least [***] prior written notice to the other Party if such Party reasonably believes that a significant matter must be addressed before the next regularly scheduled meeting, and such Party shall provide the JSC no later than [***] before the special meeting with materials reasonably adequate to enable an informed decision to be made by its members. The JSC may meet in person, by videoconference or by teleconference, provided, however, [***]; all other meetings shall alternate as between Licensor’s headquarters and Licensee’s headquarters. Each Party shall pay for its own expenses relating to such meetings. As appropriate, other employee representatives or agents of the Parties may attend JSC meetings as non-voting observers or presenters. The chairperson of the JSC shall prepare reasonably detailed written minutes of all JSC meetings that reflect and include all material decisions made at such meetings. The JSC chairperson shall send draft meeting minutes to each member of the JSC for review and approval within [***] after each JSC meeting. Such minutes will be approved unless one or more members of the JSC object to the accuracy of such minutes within [***] after receipt.

 

(d)     Decision Making. Actions to be taken by the JSC will be taken only following [***] vote, with each Party having [***] representing the views of its members. If the JSC fails to reach [***] agreement on a matter before it for decision for a period in excess of [***], either Party may submit the matter in writing to the other, and the Parties shall refer such dispute to a designated executive officer of Licensor and a designated executive officer of Licensee (or their respective designees) (the “Executive Officers”) for resolution in accordance with the decision-making procedures described in Section 13.2; provided, however, [***]. Each Party retains the rights, powers, and discretion granted to it under this Agreement and neither Party shall delegate to or vest any such rights, powers, or discretion in the JSC unless such delegation or vesting of rights is expressly provided for in this Agreement or the Parties expressly so agree in writing. Without limiting the foregoing, the JSC does not have the power to interpret, amend, modify, or waive compliance with this Agreement.

 

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3.2.      Joint Development Committee.

 

(a)      Formation and Role. Within [***] after the Effective Date, the Parties shall establish a joint development committee (the “JDC”) that will monitor the Development of Product in the Field in the Licensed Territory. The role of the JDC is:

 

(i)      to monitor the Development of Product in the Field in the Licensed Territory, and to discuss the development of Product in the Field in the Licensor Territory;

 

(ii)     to prepare the Development Plan (including the Regulatory Plan) and any amendments to the Development Plan, including the budget and anticipated timeline for performing each Development activity and the design of each Clinical Study or other study included or proposed to be included in the Development Plan, for review, discussion and approval by the JSC;

 

(iii)     to agree on the requirements for Drug Approval in the Licensed Territory;

 

(iv)     to review, discuss and coordinate the Parties’ scientific presentation and publication strategy relating to Product in the Field, if any;

 

(v)      to discuss Development activities in the Field as between the Licensed Territory and the Licensor Territory;

 

(vi)     to facilitate the flow of Information between the Parties with respect to the development of, and obtaining Drug Approval for, Product in the Field; and

 

(vii)     to perform such other functions as may be appropriate to further the purposes of this Agreement with respect to the Development of Product in the Field in the Licensed Territory, as directed by the JSC.

 

(b)       Members. Each Party shall initially appoint two (2) representatives to the JDC, each of whom will be an officer or employee of such Party having sufficient seniority within the applicable Party to make decisions arising within the scope of the JDC’s responsibilities. The JDC may change its size from time to time by mutual written consent of its members and each Party may replace its representatives at any time upon written notice to the other Party. If a JDC representative from either Party is unable to attend or participate in a meeting of the JDC, the Party who designated such representative may designate an appropriately qualified substitute representative for the meeting. The JDC will have a chairperson, who will be designated, on an annual basis, alternatively by Licensor or Licensee. The Licensee shall select the initial chairperson. The role of the chairperson is to convene and preside at all meetings of the JDC and to ensure the preparation of meeting minutes, but the chairperson has no additional powers or rights beyond those held by other JDC representatives. 

 

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(c)     Meetings. The JDC shall meet at least one (1) time per Calendar Quarter during the Term. Either Party may also call a special meeting of the JDC (by videoconference or teleconference) upon at least [***] prior written notice to the other Party if such Party reasonably believes that a significant matter must be addressed before the next regularly scheduled meeting, and such Party shall provide the JDC no later than [***] before the special meeting with materials reasonably adequate to enable an informed decision to be made by its members. The JDC may meet in person, by videoconference or by teleconference; provided, however, [***]; all other meetings shall alternate as between Licensor’s headquarters and Licensee’s headquarters. Each Party shall pay for its own expenses relating to such meetings. As appropriate, other employee representatives or agents of the Parties may attend JDC meetings as non-voting observers or presenters. The chairperson of the JDC shall prepare reasonably detailed written minutes of all JDC meetings that reflect and include all material decisions made at such meetings. The JDC chairperson shall send draft meeting minutes to each member of the JDC for review and approval within [***] after each JDC meeting. Such minutes will be approved unless one or more members of the JDC object to the accuracy of such minutes within [***] of receipt.

 

(d)     Decision Making. Actions to be taken by the JDC will be taken only following [***] vote, with each Party having [***] the views of its members. If the JDC fails to reach unanimous agreement on a matter before it for decision for a period in excess of [***] from the date first presented to the JDC in writing, the JDC shall refer the matter promptly to the JSC for timely resolution. Each Party retains the rights, powers, and discretion granted to it under this Agreement and neither Party shall delegate to or vest any such rights, powers, or discretion in the JDC unless such delegation or vesting of rights is expressly provided for in this Agreement or the Parties expressly so agree in writing. Without limiting the foregoing, the JDC does not have the power to interpret, amend, modify, or waive compliance with this Agreement.

 

3.3.     Joint Commercialization Committee.

 

(a)     Formation and Role. At least [***] before the anticipated launch of Product in the Field in [***], whichever shall occur first, the Parties shall establish a joint commercialization committee (the “JCC”) that will oversee the Commercialization of Product in the Field in the Licensed Territory. The role of the JCC is:

 

(i)     to discuss the Parties’ respective Commercialization activities in and as between the Licensed Territory and the Licensor Territory;

 

(ii)     to review and comment upon the Commercialization Plan submitted by Licensee, as well as any amendments thereto submitted by Licensee, and to submit such Commercialization Plan or amendment thereto to the JSC for review and discussion;

 

(iii)     to monitor implementation of the Commercialization Plan;

 

(iv)     to review and discuss overall strategy for Pricing Approval and Reimbursement Approval of Product in the Field in the Licensed Territory;

 

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(v)     to review, discuss and coordinate the Parties’ attendance, Product messaging and presentations (including “poster-board” presentations and industry booths) at international seminars and conferences at which Product is being discussed, if any; and

 

(vi)     to perform such other functions as appropriate to further the purposes of this Agreement with respect to the Commercialization of Product, as directed by the JSC.

 

(b)      Members. Each Party shall initially appoint two (2) representatives to the JCC, each of whom will be an officer or employee of such Party having sufficient seniority within the applicable Party to make decisions arising within the scope of the JCC’s responsibilities. The JCC may change its size from time to time by mutual written consent of its members and each Party may replace its representatives at any time upon written notice to the other Party. If a JCC representative from either Party is unable to attend or participate in a meeting of the JCC, the Party who designated such representative may designate an appropriately qualified substitute representative for the meeting. The JCC will have a chairperson, who will be designated, on an annual basis, alternatively by Licensor or Licensee. Licensee shall select the initial chairperson. The role of the chairperson is to convene and preside at all meetings of the JCC and to ensure the preparation of meeting minutes, but the chairperson has no additional powers or rights beyond those held by other JCC representatives.

 

(c)      Meetings. The JCC shall meet at least one (1) time per Calendar Year after its formation during the Term. Either Party may also call a special meeting of the JCC (by videoconference or teleconference) upon at least five (5) Business Days’ prior written notice to the other Party if such Party reasonably believes that a significant matter must be addressed before the next regularly scheduled meeting, and such Party shall provide the JCC no later than five (5) Business Days before the special meeting with materials reasonably adequate to enable an informed decision to be made by its members. The JCC may meet in person, by videoconference or by teleconference; provided, however, at least one (1) meeting every other Calendar Year occur in person at a mutually agreeable location; all other meetings shall alternate as between Licensor’s headquarters and Licensee’s headquarters. Each Party shall pay for its own expenses relating to such meetings. As appropriate, other employee representatives or agents of the Parties may attend JCC meetings as non-voting observers or presenters. The chairperson of the JCC shall prepare reasonably detailed written minutes of all JCC meetings that reflect and include all material decisions made at such meetings. The JCC chairperson shall send draft meeting minutes to each member of the JCC for review and approval within [***] after each JCC meeting. Such minutes will be approved unless one or more members of the JCC object to the accuracy of such minutes within [***] of receipt.

 

(d)      Decision Making. Actions to be taken by the JCC will be taken only following [***] vote, with each Party having [***] representing the views of its members. If the JCC fails to reach [***] agreement on a matter before it for decision for a period in excess of [***] from the date first presented to the JCC in writing, the JCC shall refer the matter promptly to the JSC for timely resolution. Each Party retains the rights, powers, and discretion granted to it under this Agreement and no such rights, powers, or discretion will be delegated to or vested in the JCC unless such delegation or vesting of rights is expressly provided for in this Agreement or the Parties expressly so agree in writing. Without limiting the foregoing, the JCC does not have the power to interpret, amend, modify, or waive compliance with this Agreement.

 

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3.4.      Good Faith. In conducting themselves on any committees, all representatives of both Parties shall consider diligently, reasonably and in good faith all input received from the other Party, and shall use Commercially Reasonable Efforts to reach consensus on all matters before them. In exercising any decision-making authority granted to it under this Article 3, each Party shall conduct its discussions in good faith with a view toward operating for the mutual benefit of the Parties and in furtherance of the successful Development and Commercialization of Product in the Licensed Territory. Notwithstanding anything to the contrary in this Agreement, neither Party nor any of their respective Affiliates will be required to take, or will be penalized for not taking, any action that is not in compliance with such Party’s ethical business practices and policies or that such Party reasonably believes is not in compliance with Laws.

 

ARTICLE 4

PRODUCT DEVELOPMENT 

 

4.1.      Overview. The Parties desire and intend to collaborate with respect to the development of Product in the Field, as and to the extent set forth in this Agreement. As between the Parties, except as set forth in this Article 4 or in the Development Plan, Licensor shall be responsible for development of Product in the Licensor Territory and Licensee shall be responsible for Development of Product in the Licensed Territory. In particular, Licensee will take primary responsibility for Development of Non-Aerosolized Products in the Licensed Territory. Furthermore, Licensor will designate Licensee its exclusive agent and exclusive representative to Develop Aerosolized Products in the name of and on behalf of Licensor (as the Product License Holder), consistent with and subject to the license grant provided to Licensee under Section 2.1(a), in the Licensed Territory. Licensor will use Commercially Reasonable Efforts to provide Licensee access to all relevant supplies, licenses, regulatory correspondence and all other information required to enable Licensee to fulfill its responsibilities.

 

4.2.      Development Plan.

 

(a)     General. The Licensee shall develop Product with respect to the Field pursuant to a comprehensive written development plan (the “Development Plan”) that specifies all Development activities for Product in the Field in the Licensed Territory, and that includes an anticipated timeline for performing those activities necessary to obtain Regulatory Approval in the Field in the PRC and other countries of the Licensed Territory (such timeline, the “Regulatory Plan”).

 

(b)     Preparation and Approval. Within [***] after the Effective Date, the JDC will prepare and submit to the JSC for its review, discussion and approval the initial Development Plan (which initial Development Plan, for clarity, shall also include the initial Regulatory Plan).

 

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(c)      Amendments.

 

(i)     The JDC shall periodically (including at the specific times specified in this Section 4.2(c)) review, and, as required, prepare an amendment to the then-current Development Plan, for review, discussion and approval by the JSC. Such amended Development Plan will reflect any changes (including additions) to the Development of Product in the Field in the Licensed Territory. Once approved by the JSC, the amended Development Plan will become effective and supersede the previous Development Plan as of the date of such approval.

 

(ii)     In addition to the foregoing, [***], and more frequently at the discretion of the JDC, the JDC shall determine if an amendment is needed to the then-current Development Plan and, if appropriate, shall prepare and submit to the JSC for its review, comment and approval, such amendment to the Development Plan.

 

(d)      Performance. The Parties shall collaborate in good faith and each Party shall use Commercially Reasonable Efforts so that the Development activities for the Licensed Territory as set forth in the Development Plan are conducted as efficiently and as timely as possible. Each Party shall conduct its activities under the Development Plan in a good scientific manner and in compliance in all material respects with all Laws and practice standards. The Parties shall only engage in Development activities that are included in the Development Plan approved by the JSC and shall not undertake or otherwise conduct any Development that is outside the scope of the Development Plan. 

 

4.3.      Development Costs. Licensee shall pay [***] of all Licensed Territory Development Costs.

 

4.4.      Diligence. Licensee shall use Commercially Reasonable Efforts to Develop each Product in the Field in the PRC as the primary target country and subsequently in the other countries or jurisdictions in the Licensed Territory, in accordance with the activities and responsibilities under the Development Plan. Licensee shall initiate the necessary Development activities in respect of the Surfaxin Product and Surfaxin LS set forth in the Development Plan (a) within [***], or (b) [***], whichever shall occur later.

 

4.5.      Data Exchange and Use. Subject to the terms and conditions of this Agreement, each Party shall promptly provide to the other Party, free of charge, all Information and all clinical and non-clinical data obtained by such Party or any of its Affiliates or sublicensees related to Product. The Party that provides such Information shall be responsible for obtaining all governmental approvals or filings required by Laws for the purpose of providing such Information to the other Party. Each Party shall cooperate in good faith to provide the other Party access to and reasonable assistance with all Licensor Technology or Licensee Technology, as applicable, and other Confidential Information as may be required for such Party to exercise the rights and licenses explicitly granted to it and to perform its obligations under this Agreement.

 

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4.6.      Development Reports. Licensee shall provide the JDC with written reports detailing its Development activities under this Agreement and the results of such activities at least [***] in advance of each regularly scheduled JDC meeting. The Parties shall discuss the status, progress and results of Licensee’s Development activities under this Agreement at such regularly scheduled JDC meetings.

 

4.7.      Development Records. Each Party shall maintain complete, current and accurate records of all Development activities conducted by it hereunder, and all data and other Information resulting from such activities. Such records will fully and properly reflect all work done and results achieved in the performance of the Development activities in good scientific manner appropriate for regulatory and patent purposes. Licensee shall document all non-clinical studies and Clinical Studies in formal written study records according to Laws, including applicable national and international guidelines such as ICH, GCP and GLP. Licensor may review and copy all such records maintained by Licensee at reasonable times, and upon reasonable notice, may also obtain access to the original records to the extent Licensor has a right to use the data and other Information contained in such records.

 

4.8.      Compliance with Laws. Each Party shall conduct its activities under this Agreement in a good scientific manner and comply in all material respects with all Laws, including applicable national and international guidelines such as ICH, GCP and GLP, and all applicable Laws related to data exchange.

 

ARTICLE 5

REGULATORY MATTERS

 

5.1.      Regulatory Responsibilities in the Licensed Territory.

 

(a)     Subject to the oversight of the JDC, Licensee shall lead and be responsible to conduct all country-specific or jurisdiction-specific regulatory activities and pricing and reimbursement negotiations in the Licensed Territory with respect to Product in the Field. Licensee shall use Commercially Reasonable Efforts in respect of Product as the primary interface with and shall otherwise handle all correspondence, meetings and other interactions with the relevant Regulatory Authorities concerning regulatory activities related to Product in the Field in the Licensed Territory, and Licensee shall prepare and file any and all Regulatory Materials for Product in the Field in the Licensed Territory at its sole expense in accordance with the Development Plan. Licensor shall assist and cooperate with Licensee in connection with the preparation and filing of such Regulatory Materials, as reasonably requested by Licensee, including preparation of ongoing Clinical Studies, study reports, Periodic Safety Update Reports, and any required Drug and Device reports. Licensor shall have the right to approve all regulatory filings and communications in the Licensed Territory for Product for which Licensor is or will be the Product License Holder. Upon the issuance of the Drug Approval for any Aerosolized Product for which Licensor is the Product License Holder, one original of the Drug Approval shall be provided to Licensor, who shall take and retain physical possession thereof. 

 

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(b)     Licensee shall keep Licensor informed at JDC meetings of regulatory developments relating to Product in the Field in the Licensed Territory and shall promptly notify Licensor in writing of any action or decision by any Regulatory Authority in the Licensed Territory regarding Product in the Field. Licensee shall provide Licensor with reasonable advance notice of all non-routine meetings, conferences and discussions scheduled with any Regulatory Authority in the Licensed Territory concerning Product, and shall consider in good faith any input from Licensor in preparing for such meetings, conferences or discussions. To the extent permitted by Laws, Licensor may participate in any such meetings, conferences or discussions and Licensee shall facilitate such participation. Upon Licensor’s request, Licensee shall provide Licensor with written summaries of such meetings, conferences or discussions in English as soon as practicable after the conclusion thereof.

 

(c)     Licensor shall compile and provide to Licensee the CMC Information that is required for Licensee to obtain and maintain Regulatory Approval of Product in the Field in the Licensed Territory. Licensee shall use the CMC Information provided to it by Licensor for obtaining and maintaining Regulatory Approval of Product in the Field in the Licensed Territory. At Licensee’s request, Licensor shall provide reasonable assistance to Licensee with respect to communications with Regulatory Authorities in the Licensed Territory regarding the manufacture of Product or the CMC Information. Furthermore, as expressly contemplated in Article 15, Licensor shall promptly provide to Licensee the CMC information, technology transfer information and relevant know-how that is necessary or useful for Licensee to be able to manufacture the Surfaxin Product, Surfaxin LS and other Non-Aerosolized Products in the Licensed Territory.

 

(d)     Further to its obligations as exclusive agent and exclusive representative to Develop Aerosolized Products in the name of and on behalf of Licensor in the Licensed Territory, consistent with and subject to the license grant provided to Licensee under Section 2.1(a) and except as otherwise determined by the JSC, Licensee shall seek Regulatory Approval of Aerosurf for the prevention and/or treatment of RDS in premature infants (or the regulatory equivalent thereof in the Licensed Territory) (i) in each of [***] after Licensor’s completion of a final, successful Phase 3 Study in respect of Aerosurf for the prevention and/or treatment of RDS in premature infants and Licensee’s completion of such other Development obligations of each of said countries’ Regulatory Authorities in respect of Aerosurf for such indication(s), or such longer period as may be required and set forth in the Development Plan, and (ii) everywhere else in the Licensed Territory, as soon as practicable following Licensor’s completion of a final, successful Phase 3 Study in respect of Aerosurf for the prevention and/or treatment of RDS in premature infants and Licensee’s completion of such other Development obligations of each of said countries’ Regulatory Authorities in respect of Aerosurf for such indication(s). In the event that the applicable Laws or Regulatory Authorities in the Licensed Territory enforce any obligations on the Licensor as the Product License Holder, to the extent permissible by Laws, Licensor hereby authorizes and delegates Licensee to perform and complete such required obligations on behalf of Licensor. 

 

(e)     Licensee shall file a Drug Approval Application in respect of the Surfaxin Product and/or Surfaxin LS, as the case may be, with the appropriate Regulatory Authority in [***] after Licensee’s completion of any Development obligations [***] in respect of Surfaxin Product and/or Surfaxin LS, as the case may be, or such longer period as may be required and set forth in the Development Plan.

 

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5.2.      Regulatory Responsibilities in the Licensor Territory.

 

(a)     Licensor shall lead and be responsible to conduct all regulatory activities in the Licensor Territory with respect to Product.

 

(b)     Licensor owns all Regulatory Materials (including Regulatory Approvals) for Product in the Licensor Territory and shall prepare and file any and all Regulatory Materials for Product in the Licensor Territory at its sole expense.

 

(c)     Licensor shall keep Licensee informed of regulatory developments relating to Product in the Field in the Licensor Territory through regular reports at the JDC meetings and shall promptly notify Licensee in writing of any action or decision by any Regulatory Authority in the Licensor Territory relating to Product in the Field.

 

(d)     Unless the Parties otherwise agree in writing: (i) Licensee shall not communicate with respect to Product with any Regulatory Authority having jurisdiction in the Licensor Territory, unless so ordered by such Regulatory Authority, in which case Licensee shall provide immediate notice to Licensor of such order; and (ii) Licensee shall not submit any Regulatory Materials or seek Regulatory Approvals for Product in the Licensor Territory.

 

5.3.      Regulatory Costs. Licensee shall pay all costs and expenses related to the preparation, filing and maintenance of all Regulatory Materials and Regulatory Approvals for Product in the Field in the Licensed Territory, subject to Section 7.2. Licensor shall pay all costs and expenses related to the preparation, filing and maintenance of all Regulatory Materials and Regulatory Approvals for Product in the Licensor Territory.

 

5.4.      Rights of Reference to Regulatory Materials. Licensor hereby grants to Licensee a right of reference to all Regulatory Materials filed by or on behalf of Licensor, which right of reference Licensee may use for the sole purpose of seeking, obtaining and maintaining Regulatory Approvals and Developing and Commercializing the Aerosolized Products in the Field in the Licensed Territory and Developing, manufacturing and Commercializing the Non-Aerosolized Products in the Field in the Licensed Territory. Licensee hereby grants to Licensor and Licensor’s licensees in the Licensor Territory a right of reference to all Regulatory Materials filed by or on behalf of Licensee, which right of reference Licensor may use for the sole purpose of seeking, obtaining and maintaining Regulatory Approvals and developing, manufacturing (for Non-Aerosolized Products) and commercializing Product in the Licensor Territory. Each Party shall support the other Party, as reasonably requested by such other Party, in obtaining Regulatory Approvals in such other Party’s territory, including providing necessary documents or other materials required by Laws to obtain Regulatory Approval in such territory, all in accordance with the terms and conditions of this Agreement.

 

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5.5.      No Harmful Actions.

 

(a)     If Licensor reasonably believes that Licensee is taking or intends to take any action with respect to a Product that is substantially likely to have a Material Impact in the Licensor Territory, Licensor may bring the matter to the attention of the JSC. Licensee shall not proceed with any such action or alternative course of action until it is approved by the JSC in accordance with Section 3.1(d).

 

(b)     If Licensee reasonably believes that Licensor is taking or intends to take any action with respect to a Product that is substantially likely to have a Material Impact in the Field in the Licensed Territory, Licensee may bring the matter to the attention of the JSC. Licensor shall not proceed with any such action or alternative course of action until it is approved by the JSC in accordance with Section 3.1(d).

 

5.6.      Notification of Threatened Action. Each Party shall immediately notify the other Party of any information it receives regarding any threatened or pending action, inspection or communication by or from any Third Party, including a Regulatory Authority, which may affect the Development, Commercialization or regulatory status of a Product. Upon receipt of such information, the Parties shall consult with each other to arrive at a mutually acceptable procedure for taking appropriate action.

 

5.7.      Adverse Event Reporting and Safety Data Exchange. Within [***] the anticipated launch of a Product in the Licensed Territory, the Parties shall define and finalize the actions that the Parties shall employ with respect to such Product to protect patients and promote their well-being in a written pharmacovigilance agreement (the “Pharmacovigilance Agreement”). These responsibilities shall include mutually acceptable guidelines and procedures for the receipt, investigation, recordation, communication, and exchange (as between the Parties) of adverse event reports, and any other information concerning such Product’s safety. Such guidelines and procedures will be in accordance with, and enable the Parties to fulfill, local and national regulatory reporting obligations under Laws. Furthermore, such agreed procedure will be consistent with relevant ICH Guidelines, except where said guidelines may conflict with existing local regulatory or safety reporting requirements, in which case local reporting requirements shall prevail. Licensee shall report quality complaints, adverse events and safety data related to such Product in the Field to applicable Regulatory Authorities in the Licensed Territory, and shall respond to safety issues and to all requests of Regulatory Authorities relating to such Product in the Field in the Licensed Territory. Licensor shall maintain a worldwide safety database pursuant to the terms of the Pharmacovigilance Agreement. Each Party shall comply with its respective obligations under the Pharmacovigilance Agreement and shall cause its Affiliates and Sublicensees to comply with such obligations.

 

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5.8.     Remedial Actions. Each Party will notify the other Party immediately, and promptly confirm such notice in writing, if it obtains information indicating that a Product may be subject to any recall, corrective or other regulatory action taken by virtue of Laws (a “Remedial Action”). The Parties will assist each other in gathering and evaluating such information as is necessary to determine the necessity of conducting a Remedial Action. Each Party shall, and shall ensure that its Affiliates and sublicensees will, maintain adequate records to permit the Parties to trace the manufacture, distribution and use of such Product. If Licensee determines that any Remedial Action with respect to such Product in the Field in the Licensed Territory should be commenced or is required by Law or the applicable Regulatory Authority, Licensee may, at its expense (except to the extent that such Remedial Action is due to Licensor’s default or inaction), control and coordinate all efforts necessary to conduct such Remedial Action; provided that, with respect to any such Remedial Action that is not required by Laws or the applicable Regulatory Authority, the JSC will review and approve such Remedial Action. If the JSC fails to approve a Remedial Action that is not imposed upon Licensee by Laws or a Regulatory Authority within [***] after such Remedial Action is presented to the JSC for review and approval, then the Parties’ Executive Officers shall, within [***] thereafter, review and approve such Remedial Action or, if the Executive Officers fail to approve such Remedial Action within such time period, Licensee shall make the final decision regarding such Remedial Action notwithstanding Sections 13.1 and 13.2, provided that, so long as Licensor is the Product License Holder for a Product, Licensor shall make the final decision regarding such Remedial Action involving such Product notwithstanding Sections 13.1 and 13.2. Notwithstanding the foregoing, the terms and conditions of any agreements entered into by and between the Parties regarding manufacture and supply of a Product shall govern any Remedial Action that relates to the manufacture and supply of such Product.

 

ARTICLE 6

COMMERCIALIZATION

 

6.1.     Overview of Commercialization in the Licensed Territory.  Subject to the terms and conditions of this Article 6 and subject to oversight by the JSC, as between the Parties, Licensee is responsible for all aspects of the Commercialization of Product in the Field in the Licensed Territory, including: (a) developing and executing a commercial launch and pre-launch plan; (b) negotiating with applicable Governmental Authorities regarding the price and achieving reimbursement status of such Product; (c) pre-launch, launch and post-launch marketing and promotion activities (including providing appropriate marketing personnel and various marketing tools as appropriate to meet the Parties’ business objectives in the Licensed Territory); (d) booking sales, and distribution and performance of related services; (e) handling all aspects of order processing, invoicing and collection, inventory and receivables; (f) providing customer support, including handling medical queries, and performing other related functions; and (g) conforming its practices and procedures to Laws relating to the marketing, detailing and promotion of such Product in the Field in the Licensed Territory. Licensee shall bear all of the costs and expenses incurred in connection with such Commercialization activities. For clarity, Licensee shall control and execute the commercial strategy for Product in the Field within the Licensed Territory.

 

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6.2.      Commercialization Plan for Licensed Territory.

 

(a)     Commercialization. Licensee shall Commercialize Product in the Field in the Licensed Territory pursuant to a commercialization plan prepared by Licensee (the “Commercialization Plan”). The Commercialization Plan will include a reasonably detailed description and timeline of Licensee’s Commercialization activities in the Field in each country or jurisdiction in the Licensed Territory for the next year, including Medical Affairs Activities, sales forecasts and projections, pricing, reimbursement, market research, sales training, distribution channels, customer service and sales force matters (such as size, structure of promotional resources and Product positioning and messaging) related to the launch and sale of Product in such country or jurisdiction in such year.

 

(b)     Plan and Amendments. Licensee shall inform the JCC of the Commercialization Plan no later than [***] before the anticipated launch of the first Product to be Commercialized in the PRC, for review and comment, after which the JCC shall submit such Commercialization Plan to the JSC for review. On at least an annual basis, Licensee shall prepare an amendment, as appropriate, to the then-current Commercialization Plan. Licensee shall keep the JCC informed about any material amendment to the Commercialization Plan.

 

(c)     Data Sharing. Licensor shall provide at all times during the Term, relevant data or information reasonably requested by Licensee in Licensor’s possession or Control to support Commercialization of Product in the Field in the Licensed Territory. Licensee shall provide at all times during the Term, relevant data or information reasonably requested by Licensor in Licensee’s possession or Control to support commercialization of Product in the Licensor Territory.

 

6.3.      Pricing. Licensee shall determine all pricing of Product in the Field in the Licensed Territory. For the avoidance of doubt, Licensor does not have any right to direct, control, or approve Licensee’s pricing of Product in the Field in the Licensed Territory. With respect to each Product that may be subject to global price referencing affecting markets outside the Licensed Territory, Licensee and Licensor shall develop through the JCC a global pricing strategy for submission and approval by the JSC.

 

6.4.      Pricing Approval. On a country-by-country basis, Licensee shall use Commercially Reasonable Efforts to obtain and maintain Pricing Approval where applicable, for Product in the Field in each country in the Licensed Territory in which it has obtained Drug Approval for such Product. 

 

6.5.      Reimbursement Approval. On a country-by-country basis, Licensee shall use Commercially Reasonable Efforts to obtain and maintain Reimbursement Approval where applicable, for Product in the Field in each country in the Licensed Territory in which it has obtained Drug Approval for such Product.

 

6.6.      Commercial Diligence.

 

(a)     Licensee shall use Commercially Reasonable Efforts to Commercialize Product in the Field in each country or jurisdiction in the Licensed Territory in which it receives Regulatory Approval. After the launch of each Product in the Field in the Licensed Territory, Licensee shall commit at least the same number of sales representatives and the same level of resources and infrastructure in connection with the Commercialization of such Product as are expended by Licensee and similarly-sized pharmaceutical companies with similarly-sized infrastructure to support and carry out similar operations in connection with the commercialization of products with similar market potential.

 

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(b)     Licensee shall achieve First Commercial Sale of (i) the Surfaxin Product and/or Surfaxin LS, as the case may be, [***] after Drug Approval therefor has been obtained from the appropriate Regulatory Authority (or pricing and reimbursement approval where applicable) [***] to Commercialize the Surfaxin Product and Surfaxin LS, as applicable, [***]; and (ii) Aerosurf [***] after the appropriate Regulatory Authority [***] has approved Licensor’s imported product registration permitting Licensee to Commercialize Aerosurf [***], provided that Aerosurf is made available [***] by Licensor within a reasonable period of time in advance of the deadlines set forth in this Section 6.6(b). 

 

(c)      Licensee’s FTE and marketing spend (inclusive of costs of sales force, marketing materials, trade show attendance and medical affairs team) in respect of Commercializing the Surfaxin Product, Surfaxin LS and Aerosurf in the Licensed Territory shall be not less than [***] of the gross forecasted revenues expected to be derived from the sale of such Products as set forth in the Commercialization Plan.

 

6.7.      Cross-Territorial Restrictions. As permitted by Law, Licensee shall not, and shall ensure that its Affiliates and Sublicensees will not, either directly or indirectly, knowingly promote, market, distribute, import, sell or have sold Product, including via internet or mail order, into countries in the Licensor Territory. As to such countries in the Licensor Territory, Licensee shall not, and shall ensure that its Affiliates and Sublicensees will not: (i) establish or maintain any branch, warehouse or distribution facility for Product in such countries, (ii) engage in any advertising or promotional activities relating to Product that are directed primarily to customers or other purchasers or users of Product located in such countries, (iii) solicit or accept orders from any prospective purchaser located in such countries, or (iv) sell or distribute Product to any person in the Licensed Territory who it knows intends to sell Product in such countries. If Licensee receives any order from a prospective purchaser located in a country in the Licensor Territory, Licensee shall refer that order to Licensor, and Licensee shall not accept any such orders. Licensee shall not deliver or tender (or cause to be delivered or tendered) Product into a country in the Licensor Territory.

 

6.8.      Territorial Coordination. The Parties shall, where appropriate, coordinate their Commercialization activities between the Licensor Territory and the Licensed Territory through the JCC, which coordination may include implementation of a global branding strategy for each Product in the Field.

 

6.9.      Reports. Each Party shall update the JCC at each regularly scheduled JCC meeting regarding its commercialization activities and results metrics with respect to Product in the Field in its applicable territory. Each such update will be in a form to be agreed by the JCC and will summarize such Party’s significant commercialization activities with respect to Product in the Field in its applicable territory pursuant to this Agreement, covering subject matter at a level of detail reasonably requested by the Parties and sufficient to enable each Party to assess the other Party’s compliance with its obligations pursuant to Section 6.6.

 

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ARTICLE 7

COMPENSATION

 

7.1.      Upfront Payment. In partial consideration of Licensor’s investment in development of Product in the Field before the Effective Date and Licensor’s grant of exclusive licenses to Licensee under the Licensor Technology, on or before July 5, 2017, Licensee shall pay to Licensor a one-time upfront fee of One Million Dollars ($1,000,000). Such fee shall be non-creditable and non-refundable.

 

7.2.      Licensed Territory Development Costs. Pursuant to Section 4.3, Licensee shall solely bear [***] Licensed Territory Development Costs and shall reimburse Licensor for any expenses paid by Licensor with respect to Development costs directly incurred in or for the Licensed Territory. Such costs will be discussed with Licensee and approved by Licensee in advance. Notwithstanding the above, so long as Licensor is the Product License Holder of a Product in the Licensed Territory, Licensor shall solely bear all Licensed Territory Development costs in connection with any filing fees payable to Regulatory Authorities in the Licensed Territory relative to such Product. 

 

7.3.      Milestone Payments.

 

(a)     Regulatory/Commercial Milestones. In addition to the payment set forth in Section 7.1, Licensee shall pay the following one-time non-refundable regulatory/commercial milestone payments to Licensor, each within [***] after the first achievement of each regulatory/commercial milestone event indicated below:

 

	
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(b)      Net Sales Milestone Payments in the Licensed Territory. Licensee shall make the following one-time, non-refundable, non-creditable milestone payments to Licensor when the aggregate Net Sales of a given Product or Products, as applicable, in the Field in the Licensed Territory first reaches the specified amount listed in the “Milestone Event” column below in any Calendar Year. Licensee shall pay to Licensor such amount within [***] in which such Milestone Event is achieved.

 

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(c)      Milestones for [***]

 

7.4.      Royalties.

 

(a)      Royalty Rates. Licensee shall pay to Licensor non-refundable, non-creditable royalties on Net Sales of each Product in the Field in the Licensed Territory during the Term, as calculated by multiplying the applicable royalty rate set forth below by the corresponding amount of incremental, aggregated Net Sales of each Product or Products, as applicable, in the Field in the Licensed Territory each Calendar Year.

 

(i)     Royalty Rates for [***]

 

	
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			[***]

			
	
			[***]

				
			[***]

			
	
			[***]

				
			[***]

			
	
			[***]

				
			[***]

			

 

(ii)     Royalty Rates for Products other than [***]

 

	
			Annual Net Sales of [***]Products (other than [***]) in the Licensed Territory

				
			Royalty Rate,%

			
	
			[***]

				
			[***]

			
	
			[***]

				
			[***]

			
	
			[***]

				
			[***]

			

 

(b)      Duration. Licensee shall pay to Licensor royalties under this Section 7.4 on a country-by-country and Product-by-Product basis as follows:

 

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(i)     [***] In consideration of licensed rights to Regulatory Materials, the technology transfer contemplated under Section 15.3 and trade secrets delivered and/or any other Licensor Technology rights granted to Licensee under this Agreement, with respect to [***] as applicable, from the time of First Commercial Sale of such Product in such country until the latest of (A) the expiration of the last Valid Claim of all Licensor Patents claiming or covering such Product, as applicable, in the country of sale, (B) the expiration or revocation of any applicable Regulatory Exclusivity in the country of sale, and (C) ten (10) years from the date of First Commercial Sale of such Product in such country, at the rates set forth in Section 7.4(a)(i). Thereafter, for the remainder of the Term, Licensee shall pay to Licensor royalties on a country-by-country basis equal to (x) [***] of the royalty rates set forth in Section 7.4(a)(i) for a period of [***], and (y) [***] of the royalty rates set forth in Section 7.4(a)(i) thereafter.

 

(ii)     Product other than [***], from the date of First Commercial Sale of such Product in such country until the latest of (A) the expiration of the last Valid Claim of all Licensor Patents claiming or covering such Product, the Drug or the Device, as applicable, or a component thereof, in the country of sale, (B) the expiration or revocation of any applicable Regulatory Exclusivity in the country of sale, and (C) ten (10) years from the date of First Commercial Sale of such Product in such country, at the rates set forth in Section 7.4(a)(ii); provided, thereafter, in consideration of trade secrets delivered and/or any other Licensor Technology rights granted to Licensee under this Agreement, for the remainder of the Term, Licensee shall pay to Licensor royalties on a country-by-country basis of [***] the rates set forth in Section 7.4(a)(ii) for a period of (x) [***] and, thereafter, of [***] of the royalty rates set forth in Section 7.4(a)(ii) or (y) [***], if any, whichever is the higher.

 

(c)      Reports and Payments. Within [***] following the end of each Calendar Quarter, commencing with the Calendar Quarter in which the First Commercial Sale of a Product is made anywhere in the Licensed Territory, Licensee shall provide Licensor with a report containing the following information for such Calendar Quarter, on a country-by-country basis: (i) the amount of gross sales of each Product in the Licensed Territory, (ii) an itemized calculation of Net Sales of each Product in the Licensed Territory showing deductions provided for in the definition of “Net Sales” and any rebates that are known to be required in respect of the Calendar Quarter in question, (iii) the conversion of such Net Sales from the currency of sale into Dollars, and (iv) the calculation of the royalty payment due on such sales, showing the application of the reduction, if any, made in accordance with the terms of Sections 7.4(a) or 7.4(b). Concurrent with the delivery of the applicable quarterly report, Licensee shall pay in Dollars all amounts due to Licensor pursuant to this Section 7.4 with respect to Net Sales by Licensee, its Affiliates and their respective Sublicensees for such Calendar Quarter.

 

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(d)     Royalty Adjustment. In the event that, at any time during the Term, a Generic/Branded Generic of a Product is Marketed by a Third Party in any country in the Licensed Territory, the royalty rate applicable to such Product in such country shall be reduced by (i) [***] for as long as there is only one Generic/Branded Generic of such Product being Marketed in such country; and (ii) [***] for as long as there is more than one Generic/Branded Generic of such Product being Marketed in such country. Notwithstanding the foregoing: [***]. Prior to any royalty reduction pursuant to this Section 7.4(d), Licensee shall provide evidence of such Generic/Branded Generic of Product in such country. Solely for purposes of this Section 7.4(d), “Marketed” means the Third Party is active in its marketing and promotional efforts with respect to such Generic/Branded Generic of Product. Examples of “active” include: (x) pursuing inclusion in a tender process, and (y) marketing and promotional activities that are similar to those undertaken by Licensee with respect to such Product. 

 

7.5.      Sublicense Income. In partial consideration of Licensor’s investment in development of Products in the Field before the Effective Date and Licensor’s grant of exclusive licenses to Licensee under the Licensor Technology, Licensee shall pay to Licensor [***] of any Sublicense Income it receives during the Term. Licensee will make such payment to Licensor on or before the following dates:

 

(a)     February 28 for any Sublicense Income received by Licensee on or before the last day of the Calendar Quarter ending December 31 of the prior Calendar Year;

 

(b)     May 31 for any Sublicense Income received by Licensee on or before the last day of the Calendar Quarter ending March 31 of such Calendar Year;

 

(c)     August 31 for any Sublicense Income received by Licensee on or before the last day of the Calendar Quarter ending June 30 of such Calendar Year; and

 

(d)     November 30 for any Sublicense Income received by Licensee on or before the last day of the Calendar Quarter ending September 30 of such Calendar Year.

 

Within [***] after the end of each Calendar Quarter (i.e. Feb. 28, May 31, August 31 and Nov. 30), Licensee shall deliver to Licensor a report setting out all details necessary to calculate Sublicense Income due under this Section 7.5 for such Calendar Quarter, including the method and currency exchange rates (if any) used to calculate Sublicense Income.

 

7.6.      Foreign Exchange. Conversion of sales recorded in local currencies to Dollars will be calculated, on a quarterly basis, using the mid-point rate of exchange for the last Business Day of the Calendar Quarter as reported in the Financial Times (London edition) on the last Business Day of each Calendar Quarter in the quarter before the date of payment. 

 

7.7.      Payment Method; Late Payments. Each Party shall make all payments due hereunder in Dollars by wire transfer of immediately available funds into an account designated by the Party that is owed such payment (such Party, the “Payee”). For the avoidance of doubt, to the extent permissible by Laws, the Payee for Licensee shall be a non-PRC entity. If the Payee does not receive payment of any sum due to it on or before the due date, simple interest will thereafter accrue on the sum due to the Payee until the date of payment at the per annum rate of two percent (2%) over the then-current prime rate as reported in The Wall Street Journal or the maximum rate allowable by Laws, whichever is lower.

 

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7.8.      Records. Each Party shall keep (and shall ensure that its Affiliates and Sublicensees keep) such records as are required to determine, in accordance with the Accounting Standards, and this Agreement, the sums or credits due under this Agreement, including Licensed Territory Development Costs, Net Sales and Sublicense Income. Such Party shall retain all such books, records and accounts until the later of (a) three (3) years after the end of the period to which such books, records and accounts pertain and (b) the expiration of the applicable tax statute of limitations (or any extensions thereof), or for such longer period as may be required by Laws. Licensee shall require its Sublicensees to provide to it a report detailing the foregoing expenses and calculations incurred or made by such Sublicensee, which report will be made available to Licensor in connection with any audit conducted by Licensor pursuant to Section 7.9.

 

7.9.      Audits. Each Party may have an independent certified public accountant, reasonably acceptable to the audited Party, have access during normal business hours, and upon reasonable prior written notice, to examine only those records of the audited Party (and its Affiliates and sublicensees) as may be reasonably necessary to determine, with respect to any Calendar Year ending not more than three (3) years before such Party’s request, the correctness or completeness of any report or payment made under this Agreement. The foregoing right of review may be exercised only once per year and only once with respect to each such periodic report and payment. Reports of the results of any such examination will be (a) limited to details of any discrepancies in the audited Party’s records relating to Product together with an explanation of the discrepancy and the circumstances giving rise to the discrepancy (b) made available to both Parties and (c) subject to Article 11. If the audit report concludes that (i) additional amounts were owed by the audited Party, the audited Party shall pay the additional amounts, with interest from the date originally due as provided in Section 7.7 or (ii) excess payments were made by the audited Party, the auditing Party shall reimburse such excess payments, with interest from the date when the original payment was made, in either case ((i) or (ii)), within thirty (30) days after the date on which such audit report is delivered to both Parties. The Party requesting the audit shall bear the full cost of the performance of any such audit, unless such audit, which covers the entire Calendar Year, discloses a variance to the detriment of the auditing Party of more than five percent (5%) from the amount of the original report, royalty or payment calculation, in which case the audited Party shall bear the full cost of the performance of such audit. The results of such audit will be final, absent manifest error.

 

7.10.      Taxes.

 

(a)     Taxes on Income. Each Party shall pay all taxes imposed on its share of income arising directly or indirectly from the efforts of the Parties under this Agreement.

 

(b)     Tax Cooperation. The Parties agree to cooperate with one another and use reasonable efforts to reduce or eliminate tax withholding or similar obligations in respect of royalties, milestone payments, and other payments made by one Party to the other Party under this Agreement. To the extent a Party is required to deduct and withhold taxes on any payment to the other Party, it shall pay the amounts of such taxes to the proper Governmental Authority in a timely manner and promptly transmit to the other Party an official tax certificate or other evidence of such withholding sufficient to enable the other Party to claim such payment of taxes. The other Party shall provide the deducting Party any tax forms that may be reasonably necessary in order for it to not withhold tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty. Each Party shall provide the other with reasonable assistance to enable the recovery, as permitted by Laws, of withholding taxes, value added taxes, or similar obligations resulting from payments made under this Agreement, such recovery to be for the benefit of the Party bearing such withholding tax or value added tax. 

 

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ARTICLE 8

INTELLECTUAL PROPERTY MATTERS

 

8.1.      Ownership of and Rights to Intellectual Property. 

 

(a)      As between the Parties, (i) Licensor is and shall remain the sole owner of the Licensor Technology, and (ii) Licensee is and shall remain the sole owner of the Licensee Technology existing as of the Effective Date. 

 

(b)       Licensor shall own:

 

(i)     all Improvements to the Licensor Technology and all Improvements to the Licensee Technology that are conceived, created and reduced to practice solely by Licensor or Licensee or jointly by the Parties during the Term, which Improvements relate to (A) Device, its manufacture and use; and (B) Aerosolized Product, its manufacture and use.  Licensee hereby assigns to Licensor all Improvements to the Licensor Technology and all Improvements to the Licensee Technology that are identified or developed by Licensee during the Term; and

 

(ii)     all Improvements to the Licensor Technology and all Improvements to the Licensee Technology that are conceived, created and reduced to practice solely by Licensor during the Term, which Improvements relate to Drug, its manufacture and use (collectively (i) and (ii) are “Licensor Improvements”);

 

(c)       Licensor and Licensee shall jointly own all Improvements to the Licensor Technology and all Improvements to the Licensee Technology that are jointly conceived, created and reduced to practice by Licensor and Licensee during the Term, which Improvements relate to Drug, its manufacture and use (“Joint Improvements”) and all Patents arising under this Section 8.1(c) are referred to as “Joint Patents”.

 

(d)       Licensee shall own all Improvements to the Licensor Technology and all Improvements to the Licensee Technology that are conceived, created and reduced to practice solely by Licensee during the Term, which Improvements relate to Drug, its manufacture and use (“Licensee Improvements”);

 

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(e)      Subject to the terms and conditions of this Agreement, Licensee, to the extent not already granted in Section 2.2, hereby grants to Licensor during the Term, an exclusive (even as to Licensee), sublicensable license under the Licensee Technology and Licensee Improvements, including any Joint Improvements and Joint Patents, to (i) Develop Product in the Field to obtain or maintain Regulatory Approval in the Licensor Territory, and (ii) use, sell, offer for sale, import, export, make, have made, distribute, warehouse, market, promote, apply for and submit applications for Drug Approval and Reimbursement Approval and otherwise commercialize Product in the Field in the Licensor Territory. If Licensor desires to use any of the Licensee Technology, Licensee Improvements or any Joint Improvements in the Licensor Territory during the Term pursuant to the foregoing license grant, Licensor shall notify Licensee in writing and such license shall be royalty-free except as set forth below with respect to Licensee Patents and/or Joint Patents. If Licensor desires to exclusively license any of the Licensee Technology, Licensee Improvements or any Joint Improvements in the Licensor Territory after the termination or expiration of this Agreement, Licensor shall notify Licensee in writing. Following Licensee’s receipt of such notice, the Parties shall negotiate in good faith and on a case-by-case basis the terms and conditions of such license, including commercially reasonable royalty rates, provided that such royalty shall, in no event, exceed [***] and provided further that such terms and conditions relating to quarterly reporting and payment, currency exchange, audit rights, prosecution, maintenance and enforcement of intellectual property, and indemnification for Licensor’s use of such intellectual property, will otherwise be substantially similar to the comparable terms contained in this Agreement. Notwithstanding the first sentence of this Section 8.1(e), if Licensor desires to exclusively license any of the Licensee Patents and/or Joint Patents in the Licensor Territory during the Term and/or after the termination or expiration of this Agreement, Licensor shall notify Licensee in writing. Following Licensee’s receipt of such notice, the Parties shall negotiate in good faith and on a case-by-case basis, the terms and conditions of such license, including commercially reasonable royalty rates, provided that such royalty shall, in no event, exceed [***], and provided further that such terms and conditions relating to quarterly reporting and payment, currency exchange, audit rights, prosecution, maintenance and enforcement of intellectual property, and indemnification for Licensor’s use of such intellectual property, will otherwise be substantially similar to the comparable terms contained in this Agreement. 

 

(f)     Licensor hereby provides a license to Licensee to use Licensor Improvements under the same conditions as described in Section 2.1.

 

(g)      For purposes of this Article 8, the term “Party” includes Affiliates, Sublicensees and designees in the performance of this Agreement. 

 

8.2.      Filing, Prosecution and Maintenance of Patents.

 

(a)     Subject to Section 8.2(b), as between the Parties, Licensor may prepare, file, prosecute and maintain Licensor Patents and any Patents arising under Section 8.1(b) (the “Licensor Prosecuted Patents”). As between the Parties, Licensor shall bear all costs incurred by Licensor in connection with the preparation, filing, prosecution and maintenance of any Licensor Prosecuted Patent.

 

(b)     If Licensor decides anywhere in the Licensed Territory to abandon any Licensor Prosecuted Patent or not to apply for an extension of any Licensor Prosecuted Patent, including a supplementary protection certificate or equivalent thereof, Licensee may assume Licensor’s rights and responsibilities under this Section 8.2 with respect to such Licensor Prosecuted Patent in the Licensed Territory, and in connection with assuming such rights and responsibilities, Licensee may apply for any such extension (including a supplementary protection certificate or equivalent thereof) and Licensee will thereafter be responsible at Licensee’s cost and expense for the prosecution and maintenance of such Licensor Prosecuted Patent in the Licensed Territory.

 

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(c)     Subject to Section 8.2(d), as between the Parties, Licensee may prepare, file, prosecute and maintain all Licensee Patents that are not assigned to Licensor pursuant to Sections 8.1(b). As between the Parties, Licensee shall bear all costs incurred by Licensee in connection with the preparation, filing, prosecution and maintenance of any Licensee Patent.

 

(d)     If Licensee decides anywhere in the Licensor Territory to abandon any Licensee Patent or to not apply for an extension of any Licensee Patent, including a supplementary protection certificate or equivalent thereof, Licensor may assume Licensee’s rights and responsibilities under this Section 8.2 with respect to such Licensee Patent, and in connection with assuming such rights and responsibilities, Licensor may apply for any such extension (including a supplementary protection certificate or equivalent thereof) and Licensor will thereafter become responsible for the prosecution and maintenance of such Licensee Patent in the Licensor Territory.

 

(e)     The Parties shall agree on a case-by-case basis the appropriate allocation of costs and control concerning matters regarding the prosecution, maintenance, defense and infringement of any Joint Patent. 

 

8.3.      Patent Enforcement in the Licensed Territory.

 

(a)     Notification. If either Party become aware of any existing or threatened infringement of any of the Licensor Patents, Joint Patents, or Licensee Patents in the Field in the Licensed Territory by a Third Party (“Licensed Territory Infringement”), such Party shall promptly notify the other Party in writing to that effect and the Parties will consult with each other regarding any actions to be taken with respect to such Licensed Territory Infringement.

 

(b)     Enforcement Rights. For any Licensed Territory Infringement, each Party shall share with the other Party all Information available to it regarding such actual or alleged infringement. As between the Parties, Licensor may bring an appropriate suit or other action against any person or entity engaged in such Licensed Territory Infringement, at Licensor’s cost and expense. Licensor shall have a period of [***] after its receipt or delivery of notice under Section 8.3(a) to elect to so enforce the Joint Patents, Licensor Patents or Licensee Patents against such Licensed Territory Infringement (or to settle or otherwise secure the abatement of such Licensed Territory Infringement). If Licensor fails or declines to commence a suit to enforce the applicable Joint Patents, Licensor Patents or Licensee Patents against such Licensed Territory Infringement or to settle or otherwise secure the abatement of such Licensed Territory Infringement within such period, then Licensee may commence a suit or take action to enforce such Joint Patents, Licensor Patents or Licensee Patents against such Licensed Territory Infringement at its own cost and expense. In this case, Licensor shall take appropriate actions to enable Licensee to commence a suit or take the actions set forth in the preceding sentence, at Licensee’s expense.

 

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(c)      Collaboration. Each Party shall provide to the enforcing Party reasonable assistance in such enforcement, at such enforcing Party’s request and expense, including joining such action as a party plaintiff if required by Laws to pursue such action. The enforcing Party shall keep the other Party regularly informed of the status and progress of such enforcement efforts, shall reasonably consider the other Party’s comments on any such efforts, and shall seek consent of the other Party in any important aspects of such enforcement, including determination of litigation strategy and filing of material papers to the competent court, which consent will not be unreasonably withheld, conditioned or delayed. The non-enforcing Party may obtain separate representation in such matter by counsel of its own choice and at its own expense, but such Party shall at all times cooperate fully with the enforcing Party.

 

(d)      Settlement.

 

(i)     Licensee shall not settle any claim, suit or action that it brought under Section 8.3(b) in any manner that would negatively impact the applicable Licensor Patents, Joint Patents or Licensee Patents or that would limit or restrict the ability of Licensor to develop, make, use, import, offer for sale, sell or otherwise Commercialize a Product anywhere in the Licensor Territory, or to make or have made such Product anywhere in the world, without the prior written consent of Licensor, which consent will not be unreasonably withheld or delayed. Nothing in this Article 8 requires Licensor to consent to any settlement that is reasonably anticipated by Licensor to have a substantially adverse impact upon any Licensor Patent, Joint Patent or Licensee Patent in the Licensor Territory, or on the development, commercialization, use, importation, offer for sale or sale of a Product in the Licensor Territory, or to the manufacture of such Product anywhere in the world.

 

(ii)     Licensor shall not settle any claim, suit or action that it brought under Section 8.3(b) in any manner that would negatively impact the applicable Licensor Patents, Joint Patents or Licensee Patents or that would limit or restrict the ability of Licensee to Develop, make, use, import, offer for sale, sell or otherwise Commercialize a Product in the Field anywhere in the Licensed Territory, without the prior written consent of Licensee, which consent will not be unreasonably withheld, conditioned or delayed. Nothing in this Article 8 requires Licensee to consent to any settlement that is reasonably anticipated by Licensee to have a substantially adverse impact upon any Licensor Patent, Joint Patent or Licensee Patent in the Licensed Territory, or to the Development, manufacture, Commercialization, use, importation, offer for sale or sale of a Product in the Field in the Licensed Territory.

 

(e)      Expenses and Recoveries. The enforcing Party bringing a claim, suit or action under Section 8.3(b) shall pay for any expenses incurred by such Party as a result of such claim, suit, or action. If such Party recovers monetary damages in such claim, suit or action, such recovery will be allocated first to the reimbursement of any expenses incurred by the Parties in such litigation, and any remaining amounts will be retained by the Party bringing suit; provided that, if Licensee is the Party bringing suit, such remaining amounts (after deduction of expenses (including legal fees)) will be deemed Net Sales and Licensee shall make a royalty payment to Licensor with respect thereto in accordance with Section 7.4.

 

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8.4.      Infringement of Third Party Rights in the Licensed Territory. Subject to Article 10, if a Product used or sold by Licensee, its Affiliates or Sublicensees becomes the subject of a Third Party’s claim or assertion of infringement of a Patent granted by a jurisdiction within the Licensed Territory (each such claim or assertion a “Third Party Claim”), Licensee shall promptly notify Licensor and the Parties shall agree on and enter into a common interest agreement, pursuant to which the Parties will agree to work toward their shared, mutual interest in the outcome of such potential dispute, and thereafter, the Parties shall promptly meet to consider the Third Party Claim and the appropriate course of action. Licensee shall defend any such Third Party Claim, at Licensee’s cost and expense; provided that the provisions of Section 8.3 govern the right of Licensee to assert a counterclaim of infringement of any Licensor Patents, Joint Patents or Licensee Patents.

 

8.5.      Patent Marking. Licensee and its Affiliates and Sublicensees shall mark any Product marketed and sold by Licensee or its Affiliates or Sublicensees hereunder with appropriate patent numbers or indicia; provided, however, that Licensee will only be required to so mark such Product to the extent such markings or such notices would affect recoveries of damages or equitable remedies available under Laws with respect to infringement of Patents in the Licensed Territory.

 

8.6.      Packaging; Trademarks.

 

(a)     Packaging. Licensee shall design all final commercial packaging and labeling of each Product for use in the Licensed Territory, and may select the trademark (s) of each Product in the Licensed Territory and register any Licensee Mark(s) resulting therefrom at Licensee’s sole cost and expense and in consultation with Licensor to explore the benefit of a global brand. Licensee shall provide the design of the packaging and labeling for Aerosolized Products to Licensor for manufacturing purposes and be responsible for insuring such design complies with applicable Laws in the Licensed Territory. To the extent practicable and allowed by Laws as to size, location, and prominence, all Product packaging and package inserts and any promotional materials associated with each Product, as applicable, in the Licensed Territory will carry, in a conspicuous location, the Licensee Mark(s) and the Licensed Marks, if applicable. Licensor authorizes the use of its Licensed Marks pursuant to Section 8.6(b). Licensor shall not register or use, in either the Licensor Territory or the Licensed Territory, any Licensee Mark without Licensee’s prior written consent.

 

(b)     Trademark License. Licensor grants to Licensee the exclusive right to use, free of charge, in the Licensed Territory, the trademarks set forth on Exhibit A and any future Product’s trademarks available to and Controlled by Licensor in the Licensor Territory (the “Licensed Marks”), and Licensee may elect, at its discretion, to use such Licensed Marks in the Licensed Territory. Licensee shall not use any Licensed Mark outside the scope of this Agreement, or take any action that would materially adversely affect the value of any Licensed Mark. Licensor retains the right to monitor the use of the Licensed Marks to the extent necessary to maintain its trademark rights and goodwill therein. Licensee shall not use any Licensed Mark in packaging materials, package inserts, labels, labeling and marketing, sales, or advertising and promotional materials in a manner that has not been approved by Licensor before such use. Notwithstanding the foregoing, Licensor reserves the right to use the Licensed Marks in the Licensed Territory for purposes consistent with Licensor’s rights and obligations under this Agreement.

 

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(c)     Enforcement of Licensed Marks. If either Party or its Affiliate becomes aware of actual or threatened infringement in the Licensed Territory of any Licensed Mark, Licensee Mark or of a mark or name confusingly similar to any Licensed Mark or Licensee Mark, such Party shall promptly notify the other Party in writing. Licensee may bring infringement or unfair competition actions in the Licensed Territory involving a Licensed Mark or Licensee Mark. Licensor shall, at the request and expense of Licensee, cooperate and provide reasonable assistance in any action described in this Section 8.6(c) and, if required by Law, join such action. Licensee shall bear the entire cost and expense associated with such action, and any recovery resulting from such proceeding will belong entirely to Licensee. Notwithstanding the foregoing, Licensee shall not settle or accept any settlement from any Third Party in connection with the adverse use of any Licensed Mark without the prior written consent of Licensor (such consent not to be unreasonably withheld, conditioned or delayed).

 

ARTICLE 9

REPRESENTATIONS AND WARRANTIES; COVENANTS

 

9.1.      Mutual Representations and Warranties. Each Party hereby represents and warrants to the other Party as of the Effective Date as follows:

 

(a)     Corporate Existence. It is a company or corporation duly organized, validly existing, and in good standing under the Laws of the jurisdiction in which it was incorporated or formed;

 

(b)     Corporate Power, Authority and Binding Agreement. (i) It has the corporate power and authority and the legal right to enter into this Agreement and perform its obligations hereunder; (ii) it has taken all necessary corporate action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder; and (iii) this Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, and binding obligation of such Party that is enforceable against it in accordance with its terms, subject to enforcement of remedies under applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting generally the enforcement of creditors’ rights and subject to a court’s discretionary authority with respect to the granting of a decree ordering specific performance or other equitable remedies;

 

(c)     No Conflict. The execution and delivery of this Agreement, the performance of such Party’s obligations hereunder and the licenses and sublicenses to be granted pursuant to this Agreement (i) do not and will not conflict with or violate any requirement of Laws existing as of the Effective Date; (ii) do not and will not conflict with or violate the certificate of incorporation, by-laws or other organizational documents of such Party; and (iii) do not and will not conflict with, violate, breach or constitute a default under any contractual obligations of such Party or any of its Affiliates existing as of the Effective Date;

 

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(d)      Other Rights. Neither Party nor any of their respective Affiliates is a party to or otherwise bound by any oral or written contract or agreement that will result in any other person obtaining any interest in, or that would give to any other person any right to assert any claim in or with respect to, any of such Party’s rights under this Agreement;

 

(e)      No Violation. Neither Party nor any of their respective Affiliates is under any obligation to any person, contractual or otherwise, that is in violation of the terms of this Agreement or that would impede the fulfillment of such Party’s obligations hereunder; and

 

(f)      No Debarment. As of the Effective Date, none of such Party’s employees, consultants or contractors:

 

(i)      is debarred under Section 306(a) or 306(b) of the FD&C Act or by the analogous Laws of any Regulatory Authority;

 

(ii)     has, to such Party’s Knowledge, been charged with, or convicted of, any felony or misdemeanor within the ambit of 42 U.S.C. §§ 1320a-7(a), 1320a-7(b)(l)-(3), or pursuant to the analogous Laws of any Regulatory Authority, or is proposed for exclusion, or the subject of exclusion or debarment proceedings by a Regulatory Authority; and

 

(iii)     is excluded, suspended or debarred from participation, or otherwise ineligible to participate, in any U.S. or non-U.S. healthcare programs (or has been convicted of a criminal offense that falls within the scope of 42 U.S.C. §1320a-7 but not yet excluded, debarred, suspended, or otherwise declared ineligible), or excluded, suspended or debarred by a Regulatory Authority from participation, or otherwise ineligible to participate, in any procurement or non-procurement programs.

 

9.2.      Additional Representations and Warranties of Licensor. Licensor represents and warrants to Licensee as of the Effective Date as follows:

 

(a)     Licensor Controls the Licensor Patents existing as of the Effective Date and is entitled to grant the rights and licenses specified herein. The Licensor Technology existing as of the Effective Date constitutes all of the Licensor Patents and the Licensor Know-How Controlled by Licensor as of the Effective Date that are necessary or useful to Develop and Commercialize Product in the Field in the Licensed Territory. Licensor has not previously assigned, transferred, conveyed or otherwise encumbered its right, title and interest in the Licensor Technology in the Field in the Licensed Territory in a manner that conflicts with any rights granted to Licensee hereunder.

 

(b)     To the Knowledge of Licensor and except as publicly disclosed by Licensor in its SEC filings, there is no actual or threatened infringement of the Licensor Patents in the Field in the Licensed Territory by any Third Party that would adversely affect Licensee’s rights under this Agreement.

 

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(c)      To the Knowledge of Licensor and except as publicly disclosed by Licensor in its SEC filings, the Licensor Patents existing as of the Effective Date are subsisting and are not invalid or unenforceable, in whole or in part; there are no claims, judgments or settlements against or amounts with respect thereto owed by Licensor or any of its Affiliates relating to the Licensor Patents; and no claim or litigation has been brought or threatened by any Third Party alleging same.

 

(d)      There are no claims, judgments or settlements against or owed by Licensor or its Affiliates or, except as publicly disclosed by Licensor in its SEC filings, pending or, to the Knowledge of Licensor, threatened claims or litigation relating to the Licensor Technology in the Field in the Licensed Territory.

 

9.3.      Additional Representations and Warranties of Licensee. Licensee represents and warrants to Licensor as of the Effective Date as follows:

 

(a)      Each of Licensee and its relevant Affiliates has obtained all licenses, approvals, permits, registrations, qualifications and authorizations necessary to carry out and perform its obligations in the Licensed Territory.

 

(b)      None of Licensee or, to the Knowledge of Licensee, its Affiliates have received written notice of any proceedings before or threatened by any Regulatory Authority with respect to Licensee or its Affiliates or any facility at which the Drug, any Product or the Device may be manufactured.

 

9.4.      Covenants

 

(a)      In the course of the Development and Commercialization of Product in the Licensed Territory, neither Party shall use any employee, consultant or contractor:

 

(i)       who has been debarred under Section 306(a) or 306(b) of the FD&C Act or pursuant to the analogous Laws of any Regulatory Authority;

 

(ii)      who, to such Party’s Knowledge, has been charged with, or convicted of, any felony or misdemeanor within the ambit of 42 U.S.C. §§ 1320a-7(a), 1320a-7(b)(l)-(3), or otherwise pursuant to the analogous Laws of any Regulatory Authority, or is proposed for exclusion, or the subject of exclusion or debarment proceedings by a Regulatory Authority, during the employee’s or consultant’s employment or contract term with such Party; and

 

(iii)     who is excluded, suspended or debarred from participation, or otherwise ineligible to participate, in any U.S. or non-U.S. healthcare programs (or who has been convicted of a criminal offense that falls within the scope of 42 U.S.C. §1320a-7 but has not yet been excluded, debarred, suspended, or otherwise declared ineligible), or excluded, suspended or debarred by a Regulatory Authority from participation, or otherwise ineligible to participate, in any procurement or non-procurement programs.  Each Party shall notify the other Party promptly, but in no event later than five (5) Business Days, upon becoming aware that any of its employees or consultants has been excluded, debarred, suspended or is otherwise ineligible, or is the subject of exclusion, debarment or suspension proceedings by any Regulatory Authority.

 

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(b)     Each Party and its Affiliates shall comply in all material respects with all Laws in the Development and Commercialization of Product in the Licensed Territory and the performance of its obligations under this Agreement, including where applicable the statutes, regulations and written directives of the FDA and any Regulatory Authority having jurisdiction in the Licensed Territory, the FD&C Act, and the Foreign Corrupt Practices Act of 1977, each as may be amended from time to time and each to the extent applicable;

 

(c)     Neither Party shall practice or exploit the intellectual property licensed to such Party under this Agreement except to the extent expressly permitted under the terms and conditions of this Agreement.

 

(d)     Neither Party shall grant any right or license to any Third Party relating to any of the intellectual property rights it Controls which would conflict or interfere with any of the rights or licenses granted to the other Party under this Agreement.

 

(e)     Each of Licensee and its relevant Affiliates and Sublicensees shall maintain in full force and effect all licenses, approvals, permits, registrations, qualifications and authorizations necessary to carry out and perform its obligations in the Licensed Territory.

 

(f)     Licensee will promptly notify Licensor in writing if Licensee, its Affiliates, Sublicensees or subcontractors receive written notice of any proceedings before or threatened by any Regulatory Authority with respect to Licensee, its Affiliates, Sublicensees or subcontractors or any facility at which the Drug, any Product or the Device may be manufactured.

 

(g)     None of Licensee or any of its officers, employees or agents shall make to any Regulatory Authority or in any filing submitted to any Regulatory Authority any untrue statement of a material fact or omit to state a material fact required to be provided to such Regulatory Authority or stated in such filing, or necessary in order to make the statements thereto or therein, in the light of the circumstances under which they were made, not misleading.

 

9.5.     No Other Representations or Warranties.  EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR NON-MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS, ARE MADE OR GIVEN BY OR ON BEHALF OF A PARTY, AND ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY EXPRESSLY EXCLUDED.

 

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ARTICLE 10

INDEMNIFICATION

 

10.1.     Indemnification by Licensor. Licensor shall, at its sole expense, defend, indemnify and hold Licensee and its Affiliates and their respective officers, directors, shareholders or owners, employees, and agents (the “Licensee Indemnitees”) harmless from and against any and all Third Party claims, suits, proceedings, damages, losses, liabilities, costs, expenses (including court costs and reasonable attorneys’ fees and expenses) and recoveries (collectively, “Claims”) to the extent such Claims arise out of, are based on, or result from (a) the Development of Product by or on behalf of Licensor or its Affiliates or its or their sublicensees (other than Licensee and its Affiliates or Sublicensees), (b) the commercialization of Product by or on behalf of Licensor or its Affiliates or its or their sublicensees (other than Licensee or its Affiliates or Sublicensees), (c) Licensor’s manufacturing of Aerosolized Products, (d) the breach of any of Licensor’s obligations under this Agreement, including Licensor’s representations and warranties, covenants and agreements, or (e) the willful misconduct or negligent acts of Licensor, its Affiliates, its or their sublicensees (other than Licensee and its Affiliates or Sublicensees) or the officers, directors, employees, or agents of Licensor or its Affiliates or its or their sublicensees (other than Licensee and its Affiliates or Sublicensees). The foregoing indemnity obligation will not apply (i) to the extent that the Licensee Indemnitees fail to comply with the indemnification procedures set forth in Section 10.3 and Licensor’s defense of the relevant Claim is prejudiced by such failure; or (ii) to Claims for which Licensee has an obligation to indemnify Licensor pursuant to Section 10.2, as to which Claims each Party shall indemnify the other to the extent of its respective liability for such Claims.

 

10.2.     Indemnification by Licensee. Licensee shall, at its sole expense, defend, indemnify and hold Licensor and its Affiliates and their respective officers, directors, shareholders or owners, employees, and agents (the “Licensor Indemnitees”) harmless from and against any and all Claims to the extent such Claims arise out of, are based on, or result from (a) the Development of Product by or on behalf of Licensee or its Affiliates or its or their Sublicensees, (b) Licensee’s manufacturing of Non-Aerosolized Products, (c) Commercialization of Product by or on behalf of Licensee or its Affiliates or its or their Sublicensees, (d) the breach of any of Licensee’s obligations under this Agreement, including Licensee’s representations and warranties, covenants and agreements, or (e) the willful misconduct or negligent acts of Licensee, its Affiliates, or the officers, directors, employees, or agents of Licensee or its Affiliates. The foregoing indemnity obligation will not apply (i) to the extent that the Licensor Indemnitees fail to comply with the indemnification procedures set forth in Section 10.3 and Licensee’s defense of the relevant Claim is prejudiced by such failure; or (ii) to Claims for which Licensor has an obligation to indemnify Licensee pursuant to Section 10.1, as to which Claims each Party shall indemnify the other to the extent of its respective liability for such Claims.

 

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10.3.     Indemnification Procedures. The Party claiming indemnity under this Article 10 (the “Indemnified Party”) shall give written notice to the Party from whom indemnity is being sought (the “Indemnifying Party”) promptly after learning of such Claim. The Indemnified Party shall provide the Indemnifying Party with reasonable assistance, at the Indemnifying Party’s expense, in connection with the defense of the Claim for which indemnity is being sought. The Indemnified Party may participate in and monitor such defense with counsel of its own choosing at its sole expense; provided, however, the Indemnifying Party may assume and conduct the defense of the Claim with counsel of its choice. The Indemnifying Party shall not settle any Claim without the prior written consent of the Indemnified Party, not to be unreasonably withheld, conditioned or delayed, unless the settlement involves only the payment of money. So long as the Indemnifying Party is actively defending the Claim in good faith, the Indemnified Party shall not settle or compromise any such Claim without the prior written consent of the Indemnifying Party. If the Indemnifying Party does not assume and conduct the defense of the Claim as provided above, (a) the Indemnified Party may defend against, consent to the entry of any judgment, or enter into any settlement with respect to such Claim in any manner the Indemnified Party may deem reasonably appropriate (and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in connection therewith), and (b) the Indemnifying Party will remain responsible to indemnify the Indemnified Party as provided in this Article 10.

 

10.4.     Limitation of Liability. EXCEPT AS SET FORTH IN SECTION 12.7, NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 10.4 IS INTENDED TO OR SHALL LIMIT OR RESTRICT (A) THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTIONS 10.1 OR 10.2, (B) DAMAGES AVAILABLE FOR A PARTY’S BREACH OF CONFIDENTIALITY OBLIGATIONS IN Article 11, OR (C) DAMAGES TO THE EXTENT ARISING FROM OR RELATING TO WILLFUL MISCONDUCT OR FRAUDULENT ACTS OF A PARTY.

 

10.5.     Insurance. Each Party shall procure and maintain insurance, including product liability insurance, or shall self-insure, in each case in a manner adequate to cover its obligations under this Agreement and consistent with normal business practices of prudent companies similarly situated at all times during which Product is being clinically tested or commercially distributed or sold by such Party. Each Party shall procure insurance or self-insure at its own expense. Such insurance does not create a limit of either Party’s liability with respect to its indemnification obligations under this Article 10. Each Party shall provide the other Party with written evidence of such insurance or self-insurance upon request. Each Party shall provide the other Party with written notice at least thirty (30) days before the cancellation, non-renewal or material change in such insurance.

 

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ARTICLE 11

CONFIDENTIALITY

 

11.1.     Confidentiality. Each Party agrees that, during the Term and for a period of [***] thereafter (except in respect of trade secrets, for which the obligations under this Section 11.1 shall expire upon such trade secret no longer being a trade secret through no fault of the receiving Party or anyone to whom the receiving Party disclosed the trade secret), it and its Affiliates shall keep confidential and shall not publish or otherwise disclose and shall not use for any purpose other than as provided for in this Agreement (which includes the exercise of any rights or the performance of any obligations hereunder) any Confidential Information furnished to it or its Affiliate by the other Party or its Affiliate pursuant to this Agreement, except to the extent expressly authorized by this Agreement or as otherwise agreed to in writing by the Parties. The foregoing confidentiality and non-use obligations do not apply to any portion of the other Party’s Confidential Information that the receiving Party can demonstrate by competent written proof:

 

(a)     was already known to the receiving Party or its Affiliate, other than under an obligation of confidentiality, at the time of disclosure by the other Party or its Affiliate;

 

(b)     was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party or its Affiliate;

 

(c)     became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party or its Affiliate in breach of this Agreement;

 

(d)     was disclosed on a non-confidential basis to the receiving Party or its Affiliate by a Third Party who had a legal right to make such disclosure and who did not obtain such information directly or indirectly from the other Party or its Affiliate; or

 

(e)     was independently discovered or developed by the receiving Party or its Affiliate without access to or aid, application or use of the other Party’s Confidential Information, as evidenced by a contemporaneous writing.

 

11.2.     Authorized Disclosure. Notwithstanding the obligations set forth in Section 11.1, a Party or its Affiliate may disclose the other Party’s Confidential Information and the terms of this Agreement to the extent:

 

(a)     such disclosure is reasonably necessary (i) for the filing or prosecuting of Patent rights as contemplated by this Agreement; (ii) to comply with the requirements of Regulatory Authorities with respect to obtaining and maintaining Regulatory Approval of a Product; or (iii) for prosecuting or defending litigation as contemplated by this Agreement;

 

(b)     such disclosure is reasonably necessary to its officers, directors, employees, agents, consultants, contractors, licensees, sublicensees, attorneys, accountants, lenders, insurers or licensors on a need-to-know basis for the sole purpose of performing its obligations or exercising its rights under this Agreement; provided that in each case, the disclosees are bound by obligations of confidentiality and non-use no less stringent than those contained in this Agreement;

 

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(c)     such disclosure is reasonably necessary to any bona fide potential or actual investor, acquiror, merger partner, or other financial or commercial partner for the sole purpose of evaluating an actual or potential investment, acquisition or other business relationship; provided that in each case, the disclosees are bound by written obligations of confidentiality and non-use having a minimum term of [***] (or in respect of trade secrets, for such longer period as is set forth in the initial clause of Section 11.1); or

 

(d)     such disclosure is reasonably necessary to comply with Laws, including regulations promulgated by applicable security exchanges, court order, administrative subpoena or other order.

 

Notwithstanding the foregoing, if a Party or its Affiliate is required to make a disclosure of the other Party’s Confidential Information pursuant to Section 11.2(a) or 11.2(d), such Party shall promptly notify the other Party of such required disclosure and, upon the other Party’s request, such Party and its Affiliates shall use reasonable efforts to obtain, or to assist the other Party in obtaining, a protective order preventing or limiting the required disclosure.

 

11.3.     Technical Publication. Licensee shall ensure that all publications, and other forms of public disclosure such as abstracts and presentations, of results of studies carried out under this Agreement or otherwise relating to a Product (each of the foregoing, a “Publication”) comply with the strategy established by the JDC pursuant to Section 3.2(a)(iv). Licensee shall not submit for publication, publish or present a Publication without the opportunity for prior review by Licensor, except to the extent required by Laws. If Licensee or its Affiliate seeks to submit, publish or present a Publication, it shall provide Licensor the opportunity to review and comment on the proposed Publication at least sixty (60) days before its intended submission for publication or presentation. Licensor shall provide Licensee or its Affiliate with Licensor’s reasonable comments in writing, if any, within thirty (30) days after receipt of such proposed Publication. Licensee or its Affiliate shall consider in good faith such comments provided by Licensor and shall comply with Licensor’s request to remove any and all of Licensor’s Confidential Information from the proposed Publication. In addition, Licensee or its Affiliate shall delay the submission for a period of up to forty-five (45) days if Licensor can demonstrate reasonable need for such delay to prepare and file a patent application for which it has prosecution control pursuant to this Agreement. If Licensor fails to provide its comments to Licensee or its Affiliate within such thirty (30)-day period, Licensor will be deemed to not have any comments, and Licensee or its Affiliate may submit for publication or present in accordance with this Section 11.3 after the thirty (30)-day period has elapsed. Licensee or its Affiliate shall provide Licensor a copy of the manuscript, abstract or presentation at the time of the submission or presentation, as applicable. Licensee or its Affiliate agrees to acknowledge the contributions of Licensor and its Affiliates and their respective employees in all publications, as scientifically appropriate.

 

11.4.     Publicity; Terms of Agreement.

 

(a)     The Parties agree that the material terms of this Agreement are the Confidential Information of both Parties, subject to the special authorized disclosure provisions set forth in this Section 11.4.

 

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(b)     The Parties shall make a joint public announcement of the execution of this Agreement in a form acceptable to both Parties, which press release will be issued on or promptly after the Effective Date. 

 

(c)     After release of such press release, if Licensee or its Affiliate desires to make a public announcement concerning this Agreement or any scientific, clinical or regulatory announcements, Licensee or its Affiliate shall give reasonable prior advance notice of the proposed text of such announcement to Licensor for its prior review and approval (except as otherwise provided), such approval not to be unreasonably withheld, conditioned or delayed. Licensor shall provide its comments, if any, within five (5) Business Days after receiving the announcement for review, or such shorter period as may be reasonably required in order for Licensee or its Affiliate to comply with any applicable deadline for making such announcement (as such deadline is communicated by Licensee or its Affiliate to Licensor). In addition, where required by Laws, including regulations promulgated by applicable security exchanges, Licensee or its Affiliate may make a press release announcing the achievement of each milestone under this Agreement as it is achieved, the achievements of Regulatory Approvals in the Licensed Territory as they occur, or any other material event with respect to this Agreement or Licensee’s performance thereof, subject to the review procedure set forth in the preceding sentence; provided that the review period will be reduced to two (2) Business Days (or such shorter period as may be reasonably required in order for Licensee or its Affiliate to comply with any applicable deadline for making such press release, as such deadline is communicated by Licensee or its Affiliate to Licensor) if the deadline for making such disclosure is five (5) or fewer Business Days after such achievement or event. In relation to Licensor’s review of such an announcement, Licensor may make specific, reasonable comments on such proposed press release within the prescribed time for commentary, but shall not withhold, condition, or delay its consent to disclosure of the information that the relevant milestone or Regulatory Approval has been achieved or material event has occurred. Neither Licensee nor its Affiliate is required to seek the permission of Licensor to repeat any information regarding the terms of this Agreement that has already been publicly disclosed by Licensee or its Affiliate in accordance with this Section 11.4, if such information remains accurate as of such time.

 

(d)     The Parties acknowledge that either or both Parties may be obligated to file under Laws a copy of this Agreement with the U. S. Securities and Exchange Commission (“SEC”), the Hong Kong Securities and Exchange Commission or other Governmental Authorities. Each Party shall make such a required filing and shall request confidential treatment of the commercial terms and sensitive technical terms hereof and thereof to the extent such confidential treatment is reasonably available to such Party. In the event of any such filing, each Party shall provide the other Party with a copy of this Agreement marked to show provisions for which such Party intends to seek confidential treatment and shall reasonably consider and incorporate the other Party’s comments thereon to the extent consistent with the legal requirements, with respect to the filing Party, governing disclosure of material agreements and material information that must be publicly filed.

 

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11.5.     Prior Confidentiality Agreements. Any prior confidentiality agreements (including the Mutual Confidential Disclosure Agreement dated [***] between the Parties) shall remain in full force and effect. All Information disclosed by a Party or its Affiliate to the other Party or its Affiliate pursuant to any prior confidentiality agreements is such Party’s Confidential Information disclosed hereunder and the other Party shall, and its Affiliates and disclosees will have, the confidentiality, non-use and non-disclosure obligations set forth in this Article 11. If any such obligations conflict with the obligations set forth in such prior confidentiality agreements, then the other Party and its Affiliates and disclosees shall comply with the obligations set forth in this Article 11.

 

11.6.     Return of Confidential Information. Except as otherwise set forth in this Agreement, upon termination of this Agreement, the receiving Party will promptly return all of the disclosing Party’s Confidential Information, including all reproductions and copies thereof in any medium, except that the receiving Party may retain one copy for its legal files.

 

11.7.     Unauthorized Use. If either Party becomes aware or has Knowledge of any unauthorized use or disclosure of the other Party’s Confidential Information, it will promptly notify the other Party of such unauthorized use or disclosure.

 

11.8.     Exclusive Property. All Confidential Information is the sole and exclusive property of the disclosing Party and the permitted use thereof by the receiving Party will be in accordance with the license and other rights granted by either Party to the other Party as provided for in this Agreement.

 

ARTICLE 12

TERM AND TERMINATION 

 

12.1.     Term. This Agreement becomes effective on the Effective Date, and, unless sooner terminated as specifically provided in this Agreement, continues in effect on a country-by-country basis for the commercial life of each Product in each country in the Licensed Territory (the “Term”).

 

12.2.     Termination for Bankruptcy. Either Party shall have the right to terminate this Agreement in its entirety upon immediate written notice to the other Party in the event such other Party (i) applies for or consents to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) makes a general assignment for the benefit of its creditors, (iii) commences a voluntary case under the Bankruptcy Code of any country, (iv) files a petition seeking to take advantage of any applicable Laws relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, (v) fails to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in any involuntary case under the Bankruptcy Code of any country, (vi) takes any corporate action for the purpose of effecting any of the foregoing, (vii) has a proceeding or case commenced against it in any court of competent jurisdiction, seeking (A) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (B) the appointment of a trustee, receiver, custodian, liquidator or the like of all or any substantial part of its assets, or (C) similar relief under the Bankruptcy Code of any country, or an order, judgment or decree approving any of the foregoing is entered and continues unstayed for a period of sixty (60) days, or (viii) has an order for relief against it entered in an involuntary case under the Bankruptcy Code of any country.

 

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12.3.     Termination by Regulatory Authority. Should any serious and unexpected events or issues occur with respect to the safety of a Product as a result of which (i) Regulatory Approval for such Product is terminated or suspended in one or more regulatory jurisdictions or countries in the Licensed Territory, or (ii) a Regulatory Authority directs or requests discontinuance of Development, use or sale of such Product in one or more jurisdictions or countries in the Licensed Territory, then each Party’s obligations under this Agreement with respect to such Product will be suspended in such regulatory jurisdictions or countries (as applicable) until such serious safety event is resolved and Regulatory Approval for such Product is no longer terminated or suspended or the Regulatory Authority has given approval again to distribute or sell such Product (as applicable) in such regulatory jurisdictions or countries. Either Party may, at its discretion and upon written notice to the other Party, terminate this Agreement with respect to such Product in such regulatory jurisdictions or countries pursuant to this Section 12.3 if such Party’s obligations under this Agreement are suspended pursuant to this Section 12.3 for a period in excess of eighteen (18) months.

 

12.4.     Termination for Breach. Each Party (the “Non-Breaching Party”) may terminate this Agreement in its entirety or on a country-by-country basis immediately upon written notice to the other Party (the “Breaching Party”) if the Breaching Party materially breaches its obligations under this Agreement and, after receiving written notice identifying such material breach in reasonable detail (a “Default Notice”), fails to cure such material breach within [***] after delivery of the Default Notice (or within [***] after delivery of the Default Notice if such material breach is solely based on the Breaching Party’s failure to pay any amounts due hereunder). If a Party gives notice to the Breaching Party pursuant this Section 12.4 as a result of a material breach (or alleged material breach) by the Breaching Party and, on or before the end of the cure period therefor, either Party has referred the matter to arbitration pursuant to Section 13.1, in either case where the Breaching Party is in good faith disputing such basis for termination pursuant to this Section 12.4, then (i) such cure period will be suspended, and (ii) this Agreement will not terminate, unless and until such senior executives resolve the dispute or such arbitrator issues a final ruling or award upholding such basis for termination (or unless and until the Breaching Party is no longer disputing such basis in good faith, if earlier). If such arbitrator issues a final ruling or award upholding such basis for termination, then the cure period will resume, and the Breaching Party will have the remainder of the cure period to cure the material breach. If the material breach is so cured within the remainder of the cure period, then this Agreement will remain in full force and effect, otherwise this Agreement will terminate. If such court issues a final ruling rejecting such basis for termination, then this Agreement will remain in full force and effect.

 

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12.5.     Effects of Early Termination. Upon early termination of this Agreement in its entirety, or with respect to a Product or country in the Licensed Territory by Licensor pursuant to Sections 12.2 (subject to Section 12.6), 12.3 or 12.4, or by Licensee pursuant to Sections 12.2 (subject to Section 12.6),12.3 or 12.4, the following will apply only with respect to such Product or country: 

 

(a)     Reversion of Rights. All rights and licenses granted to Licensee in Article 2 will terminate, all rights of Licensee under the Licensor Technology will revert to Licensor, and Licensee and its Affiliates will cease all use of the Licensor Technology. Except as set forth below, all rights and licenses granted to Licensor in Article 2 will terminate, all rights of Licensor under the Licensee Technology will revert to Licensee, and Licensor and its Affiliates will cease all use of the Licensee Technology.

 

(b)     Regulatory Materials and Approvals. Licensee will assign, and hereby does assign effective as of the effective date of such early termination, to Licensor all Regulatory Materials and Regulatory Approvals and all other documents necessary to further Develop and Commercialize any terminated Product in the Licensed Territory, as they exist as of the date of such early termination (and all of Licensee’s right, title and interest therein and thereto). Licensee will provide to Licensor one (1) copy of the foregoing documents, all documents and filings contained in or referenced in any such Regulatory Materials and Regulatory Approvals, together with the raw and summarized data for any preclinical and Clinical Studies of such terminated Product. For clarity, Licensor will have the right to use the foregoing material information, materials and data developed by Licensee solely in connection with Licensor’s development, manufacture and commercialization of the terminated Product. Licensor will have the right to seek specific performance of Licensee’s obligations referenced in this Section 12.5(b) and/or in the event of failure to obtain assignment, Licensee hereby consents and grants to Licensor the right to access and reference (without any further action required on the part of Licensee, whose authorization to file this consent with any Regulatory Authority is hereby granted) any and all such Regulatory Materials and Regulatory Approvals for any regulatory or other use or purpose. Without limiting the foregoing in this paragraph, to the extent applicable, Licensee’s obligations under this Section 12.5(b) will continue with respect to all countries in the Licensed Territory for which there is a failure to obtain assignment of all Regulatory Materials and Regulatory Approvals.

 

(c)     Information Transfer. Licensee will provide to Licensor all data and Information generated during the Term necessary for the development and/or commercialization of the terminated Product and assign (or, if applicable, cause its Affiliate to assign) to Licensor all of Licensee’s (and such Affiliate’s) entire right, title and interest in and to all such data and Information. Licensee will provide to Licensor the tangible embodiments of all other Information Controlled by Licensee and its Affiliates in existence as of the effective date of such early termination relating to the development, manufacturing, and commercialization of the terminated Product, including without limitation Licensee’s manufacturing processes, techniques and trade secrets necessary for and used in the manufacture of such terminated Product as of the effective date of such early termination and all Information specifically relating to any composition, formulation, method of use or manufacture of the terminated Product. Licensee will grant, and hereby does grant effective as of the effective date of such early termination, to Licensor a non-exclusive, irrevocable, royalty-free, transferable, sublicensable, worldwide right and license under such Information for developing, making, using, importing, selling and offering for sale the terminated Product in the Licensed Territory. Licensee will reasonably cooperate with Licensor to assist Licensor with understanding and using the Information provided to Licensor under this Section 12.5(c).

 

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(d)     Trademarks. All rights and licenses granted to Licensee under Section 8.6(b) will terminate, all rights of Licensee to use the Licensed Marks will revert to Licensor, and Licensee and its Affiliates will cease all use of the Licensed Marks. To the extent that Licensee owns any Licensee Marks (including without limitation any Product trademarks) and/or domain names that pertain specifically to the terminated Product that Licensor believes would be necessary for the commercialization of the terminated Product (as then currently marketed, but not including any marks that include, in whole or part, any corporate name or logo of Licensee), except as provided in Section 12.6, Licensee will assign (or, if applicable, cause its Affiliate to assign), and hereby does assign effective as of the effective date of such early termination, to Licensor all of Licensee’s (and such Affiliate’s) right, title and interest in and to any such Licensee Marks (including any registered or unregistered trademark, trademark application, trade name or internet domain name) in such country.

 

(e)     Continuing Obligations. Neither Party will be relieved of any obligation that accrued prior to the effective date of such early termination. All amounts due or payable to Licensor or to Licensee, as the case may be, that were accrued prior to the effective date of early termination will remain due and payable. Except as otherwise expressly provided herein, no additional amounts will be payable based on events occurring after the effective date of termination; provided that the foregoing will not be deemed to limit either Party’s indemnification obligations under this Agreement for acts or omissions incurring prior to the effective date of such early termination that are the subject of such indemnification even if the indemnification amount cannot be accrued or determined as of the effective date of such early termination.

 

(f)     Retention of Payments. Licensor will have the right to retain all amounts previously paid to Licensor by Licensee and Licensee will have the right to retain all amounts previously paid to Licensee by Licensor.

 

(g)     No Compensation. Licensor will not owe any compensation to Licensee for the research, development, manufacture, or commercialization of the terminated Product in the event of any such early termination of this Agreement by Licensor, without prejudice to any rights that either Party may have to bring a claim for damages arising out of this Agreement and the termination thereof or any other amounts payable with respect to activities conducted prior to the effective date of such early termination.

 

(h)     Costs. Any costs and expenses incurred by Licensee in connection with the assignments and transfers made by Licensee under this Section 12.5 will be borne by Licensee.

 

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Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

(i)     Transition Assistance. In addition to the obligations of Licensee set forth above in this Section 12.5, upon early termination of this Agreement by Licensor in its entirety or with respect to a Product or country in the Licensed Territory pursuant to Sections 12.2, 12.3 or 12.4 or by Licensee pursuant to Section 12.3, the following will apply only with respect to such terminated Product and/or country: Licensee shall provide such assistance, as expeditiously as possible, at no cost to Licensor, and as may be, and for so long as, reasonably necessary for Licensor to continue Development and/or Commercialization of the terminated Product throughout the Licensed Territory (to the extent Licensee, its Affiliates and Sublicensees are then performing or having performed such activities), including (i) furnishing to Licensor any safety information owned or Controlled by Licensee and (ii) assigning or amending as appropriate, upon request of Licensor, any agreements or arrangements with Third Party contractors to Develop, distribute, sell or otherwise Commercialize the terminated Product in the Licensed Territory. To the extent that any such contract between Licensee and a Third Party is not assignable to Licensor, Licensee shall reasonably cooperate with Licensor to arrange to continue to provide such services for a reasonable time after such early termination. 

 

12.6      Intellectual Property. Notwithstanding Sections 12.2 and 12.5, the Parties acknowledge and agree that the licenses granted by the Parties pursuant to Sections 2.1, 2.2 and all other rights granted under or pursuant to this Agreement are and shall otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code (or analogous provisions of the bankruptcy laws of any foreign Governmental Authority), licenses of rights to “intellectual property” as defined under Section 101(35A) of the Bankruptcy Code (or analogous foreign provisions), and that this Agreement is an executory contract governed by Section 365(n) of the Bankruptcy Code (or analogous foreign provisions) in the event that a bankruptcy proceeding is commenced involving either Party (as licensor hereunder). Licensee, as the licensee of such rights under Sections 2.1 and 8.6 (b), and Licensor, as the licensee of such rights under Section 2.2, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code (or analogous foreign provisions). The foregoing provisions of this Section 12.6 are without prejudice to any rights the Parties may have arising under the Bankruptcy Code or other applicable Laws.

 

12.7     Termination by Licensee; Liquidated Damages. Notwithstanding Sections 12.4 and 12.5, in the event Licensor and/or its Affiliates is in material breach of its obligation(s) under this Agreement due to a material failure to honor Licensee’s exclusive rights in and for the Licensed Territory as set forth in Section 2.1 of this Agreement, and such breach is not cured in accordance with the cure provisions and modalities set forth in Section 12.4, then Licensee may either (a) terminate this Agreement in accordance with Section 12.4, in which case the effects of termination set forth in Section 12.5 shall apply, or (b) not terminate this Agreement,[***]  For clarity, such [***] shall not eliminate or in any way compromise Licensee’s right to also seek an injunction that orders Licensor and its Affiliates to cure its/their material breach to honor Licensee’s exclusive rights in and for the Licensed Territory as set forth in Section 2.1 of this Agreement.

 

12.8.     Survival. Early termination or expiration of this Agreement will not affect rights or obligations of the Parties under this Agreement that have accrued before the date of early termination or expiration. Notwithstanding anything to the contrary contained herein, the following provisions will survive any expiration or early termination of this Agreement: Article 1 (Definitions) to the extent applicable, Sections 7.8, 7.9 and 7.10, Article 8 (Intellectual Property Matters) to the extent applicable, Article 10 (Indemnification), Article 11 (Confidentiality), Article 12 (Term and Termination), Article 13 (Dispute Resolution) and Article 14 (Miscellaneous). 

 

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Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

ARTICLE 13

DISPUTE RESOLUTION

 

13.1.     Arbitration. In the event of any disputes, controversies or differences between the Parties (except for disputes arising from the JSC, which will be handled pursuant to Section 13.2 and only handled pursuant to this Section 13.1 as provided in Section 13.2), arising out of, in relation to, or in connection with, this Agreement, including any alleged failure to perform or breach of this Agreement, or any issue relating to the validity, construction, interpretation, enforceability, performance, application or early termination of this Agreement (each, a “Dispute”), upon the written request of either Party, the Parties agree to meet and discuss in good faith an amicable resolution thereof, which good faith efforts shall include at least one in-person meeting between the Executive Officers of each Party. If the Dispute is not resolved within thirty (30) days following the written request for amicable resolution, then either Party may then initiate arbitration under this Section 13.1. Any Dispute that the Parties do not resolve through amicable resolution will be settled by binding arbitration administered by JAMS, Inc., pursuant to its Comprehensive Arbitration Rules and Procedures then in effect (the “JAMS Rules”), except as otherwise provided. The number of arbitrators will be three (3). The first arbitrator will be selected by Licensor, the second arbitrator will be selected by Licensee, and the third arbitrator will be selected by mutual agreement of the first and second arbitrators. The arbitration will be conducted in London (United Kingdom). The language of the arbitration will be English. Judgment on the award may be entered in any court having jurisdiction. Except as may be required by Law, neither Party may disclose the existence, content or results of any arbitration hereunder without the prior written consent of the other Party.

 

13.2.     Referred from JSC. With respect to disputes arising from matters delegated or referred to the JSC pursuant to the terms of this Agreement, either Party may, by written notice to the other Party, have such dispute referred to each Party’s Executive Officers for attempted resolution by good faith negotiations within [***] after such notice is received. If the Executive Officers of the Parties are not able to resolve the dispute within the [***] period described above, then the Executive Officer of Licensor or Licensee, as the case may be, may cast the deciding vote for the JSC as provided in Section 13.2(a) or 13.2(b). If neither Party has the right to cast the deciding vote for the JSC pursuant to Section 13.2(a) or 13.2(b) (e.g., where Section 13.2(a) or 13.2(b) provides for exceptions to the Executive Officer’s right to make the final decision), then either Party may submit the dispute for resolution pursuant to Section 13.1.

 

(a)     Licensor Decisions. The Executive Officer of Licensor may make the final decision with respect to: [***] Nothing in this Section 13.2(a) will be construed to limit Licensor’s (A) ability to carry out day-to-day decisions related to its Development activities, if any, as set forth in the Development Plan, (B) compliance with Laws or reporting requirements to Regulatory Authorities, or (C) sole discretion with respect to pricing decisions for Product in the Licensor Territory.

 

(b)     Licensee Decisions. The Executive Officer of Licensee may make the final decision with respect to: [***] Nothing in this Section 13.2(b) will be construed to limit Licensee’s (A) ability to carry out day-to-day decisions related to its Development activities as set forth in the Development Plan, (B) compliance with Laws or reporting requirements to Regulatory Authorities, or (C) sole discretion with respect to pricing decisions for Product in the Field in the Licensed Territory.

 

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13.3.     Equitable Relief. Notwithstanding Sections 13.1 and 13.2, each Party acknowledges that its breach of Article 11 may cause irreparable harm to the other Party, which cannot be reasonably or adequately compensated by damages in an action at law. By reason thereof, each Party agrees that the other Party may, in addition to any other remedies it may have under this Agreement or otherwise, seek preliminary and permanent injunctive and other equitable relief from any court of competent jurisdiction to prevent or curtail any actual or threatened breach of Article 11 that is reasonably likely to cause it irreparable harm. In addition, notwithstanding Sections 13.1 and 13.2, to the fullest extent provided by Law, either Party may bring an action in any court of competent jurisdiction for injunctive relief (or any other provisional remedy) to protect a Party’s rights or enforce a Party’s obligations under this Agreement pending final resolution of any claims related thereto pursuant to the dispute resolution procedure set forth in Section 13.1.

 

13.4.     No Limitation of Remedies. Each Party shall be free, pursuant to Section 13.1, to seek (without restriction as to the number of times it may seek) damages, costs and remedies that may be available under Laws or in equity and shall be entitled to offset the amount of any damages and costs obtained in a final determination under Section 13.1 of monetary damages or costs (as permitted by this Agreement) against the other Party against any amounts otherwise due to such other Party under this Agreement. It is understood and agreed that either Party shall be entitled to seek specific performance as a remedy to enforce the provisions of this Article 13, in addition to any other remedy to which such Party may be entitled by Laws. Nothing in this Article 13 shall be deemed to limit any remedy to which either Party may be entitled by Laws.

 

13.5.     Governing Law. This Agreement and all disputes arising out of or related to this Agreement or any breach hereof shall be governed by and construed under the Laws of England and Wales, without giving effect to any choice of law principles that would require the application of the Laws of a different state.

 

ARTICLE 14

MISCELLANEOUS

 

14.1.     Entire Agreement; Amendment. This Agreement, including the Exhibits hereto, together with the Development Plan, the Pharmacovigilance Agreement and any other documents delivered pursuant hereto or thereto sets forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties hereto and thereto and their Affiliates with respect to the subject matter hereof and supersedes, as of the Effective Date, all prior and contemporaneous agreements and understandings between the Parties with respect to the subject matter hereof. There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties with respect to the subject matter of this Agreement other than as are set forth in this Agreement, the Development Plan and the Pharmacovigilance Agreement. No subsequent alteration, amendment, change or addition to this Agreement will be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party.

 

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14.2.     Force Majeure. Both Parties will be excused from the performance of their obligations under this Agreement to the extent that such performance is prevented by force majeure and the non-performing Party promptly provides notice of the prevention to the other Party. Such excuse will continue for so long as the condition constituting force majeure continues and the non-performing Party takes reasonable efforts to remove the condition. For purposes of this Agreement, force majeure includes conditions beyond the control of the Parties, including an act of God, war, civil commotion, terrorist act, epidemic, failure or default of public utilities or common carriers, destruction of production facilities or materials by fire, earthquake, and storm or like catastrophe. Notwithstanding the foregoing, except in the case of a force majeure event that directly prohibits or otherwise directly prevents a Party from performing its payment obligations under this Agreement, a Party will not be excused from making payments owed hereunder because of a force majeure affecting such Party. If a force majeure persists for more than [***], then the Parties will discuss in good faith the modification of the Parties’ obligations under this Agreement to mitigate the delays caused by such force majeure.

 

14.3.     Notices. Any notice required or permitted to be given under this Agreement will be in writing, will specifically refer to this Agreement, and will be addressed to the appropriate Party at the address specified below or such other address as may be specified by such Party in writing in accordance with this Section 14.3, and will be deemed to have been given for all purposes (a) when received, if hand-delivered or sent by confirmed facsimile or a reputable courier service, or (b) five (5) Business Days after mailing, if mailed by first class certified or registered airmail, postage prepaid, return receipt requested.

 

	
			If to Licensor:

				
			Windtree Therapeutics, Inc.

			2600 Kelly Rd., Suite 100

			Warrington, PA 18976

			
	 	
			Attn:  Legal Department

			
	 	
			Fax:    215-488-9557

			
	 	 

With copies to (which will not constitute notice):

 

	 	
			Pepper Hamilton LLP

			400 Berwyn Park

			899 Cassatt Road

			Berwyn, PA 19312

			
	 	
			Attn:   Timothy C. Atkins

			
	 	
			Fax:    610-640-7835

			

 

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Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

	
			If to Licensee:

				
			Lee’s Pharmaceutical (HK) Ltd.

			Unit 110-111, Bio-Informatics Centre

			No. 2 Science Park West Avenue

			Hong Kong Science Park

			Shatin, Hong Kong

			
	 	
			Attn:  CEO 

			
	 	
			Fax:   +852 2314 1708

			

 

 

14.4.     No Strict Construction; Interpretation; Headings. The language in this Agreement is to be construed in all cases according to its fair meaning. Except where the context otherwise requires, wherever used, the singular includes the plural, the plural the singular, and the use of any gender applies to all genders. The word “or” is used in the disjunctive sense and the word “and” is used in the conjunctive sense. The captions of this Agreement are for convenience of reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement. The terms “including,” “include,” or “includes” mean including, without limiting the generality of any description preceding such term. Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document will be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or therein), (ii) any reference to any Laws will be construed as referring to such Laws as from time to time are enacted, repealed or amended, (iii) any reference to any person will be construed to include the person’s successors and permitted assigns, (iv) the words “herein”, “hereof,” and “hereunder”, and words of similar import, will be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (v) any reference to the words “mutually agree” or “mutual written agreement” will not impose any obligation on either Party to agree to any terms relating thereto or to engage in discussions relating to such terms except as such Party may determine in such Party’s sole discretion, (vi) all references to Sections, Exhibits or Schedules will be construed to refer to Sections, Exhibits and Schedules to this Agreement, (vii) the word “days” means calendar days unless otherwise specified, and (viii) the words “copy” and “copies” and words of similar import when used in this Agreement include, to the extent available, electronic copies, files or databases containing the information, files, items, documents or materials to which such words apply. The headings of each Article and Section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section. Each Party represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has participated in the drafting hereof. In interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption will apply against the Party which drafted such terms and provisions.

 

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14.5.     Assignment. Neither Party may assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the other Party, except that a Party may make such an assignment without the other Party’s consent to its Affiliates or to a Third Party successor to all or substantially all of the business of such Party to which this Agreement relates (such Third Party, an “Acquiror”), whether in a merger, sale of stock, sale of assets or other transaction. Any successor or assignee of rights or obligations permitted hereunder will, in a writing to the other Party, expressly assume performance of such rights or obligations. The Licensor Technology, in the case of Licensor as assignor or transferor, or the Licensee Technology, in the case of Licensee as assignor or transferor, excludes any Patents and Information Controlled by any Acquiror (or any Affiliate thereof, but excluding a Party as a result of such transaction). Any permitted assignment will be binding on the successors of the assigning Party. Any assignment or attempted assignment by either Party in violation of the terms of this Section 14.5 is null, void and of no legal effect.

 

14.6.     Performance by Affiliates. Each Party may discharge any obligations and exercise any right hereunder through any of its Affiliates. Each Party hereby guarantees the performance by its Affiliates of such Party’s obligations under this Agreement, and shall cause its Affiliates to comply with the provisions of this Agreement in connection with such performance. Any breach by a Party’s Affiliate of any of such Party’s obligations under this Agreement is a breach by such Party, and the other Party may proceed directly against such Party without any obligation to first proceed against such Party’s Affiliate.

 

14.7.     Further Assurances and Actions. Each Party, upon the request of the other Party, whether before or after the Effective Date and without further consideration, will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered all such further acts, deeds, documents, assignments, transfers, conveyances, powers of attorney, instruments and assurances as may be reasonably necessary to effect complete consummation of the transactions contemplated by this Agreement, and to do all such other acts, as may be necessary or appropriate to carry out the purposes and intent of this Agreement. The Parties agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be reasonably necessary to consummate or implement expeditiously the transactions contemplated by this Agreement.

 

14.8.     Severability. Each of the provisions contained in this Agreement will be severable, and the unenforceability of one will not affect the enforceability of any others or of the remainder of this Agreement. If any one or more of the provisions of this Agreement, or the application thereof in any circumstances, is held to be invalid, illegal or unenforceable in any respect for any reason, the Parties shall negotiate in good faith with a view to the substitution therefor of a suitable and equitable solution to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid provision; provided, however, that the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions of this Agreement will not be in any way impaired thereby, it being intended that all of the rights and privileges of the Parties will be enforceable to the fullest extent permitted by Law.

 

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Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

14.9.     No 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. The waiver, delay or the failure of any Party to enforce or exercise any term, condition or part of this Agreement at any time or in any one or more instances will not be deemed to be or construed as a waiver of the same or any other term, condition or part, nor will it forfeit any rights, power or privilege to future enforcement thereof. No single or partial exercise of any right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by Laws, (a) no claim or right arising out of this Agreement or any of the documents referred to in this Agreement can be discharged by one Party, in whole or in part, by a waiver or renunciation of the claim or right unless in a writing signed by the other Party; (b) no waiver that may be given by a Party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one Party will be deemed to be a waiver of any obligation of that Party or of the right of the Party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. Except as expressly set forth in this Agreement, all rights and remedies available to a Party, whether under this Agreement or afforded by Laws or otherwise, will be cumulative and not in the alternative to any other rights or remedies that may be available to such Party.

 

14.10.     Relationship of the Parties. Neither Party will have any responsibility for the hiring, termination or compensation of the other Party’s employees or for any employee benefits of such employee. No employee or representative of a Party will have any authority to bind or obligate the other Party for any sum or in any manner whatsoever, or to create or impose any contractual or other liability on the other Party without said Party’s written approval. For all purposes, and notwithstanding any other provision of this Agreement to the contrary, Licensor’s legal relationship to Licensee under this Agreement will be that of independent contractor. This Agreement is not a partnership agreement. Nothing in this Agreement will be construed to establish a relationship of partners or joint venturers between the Parties. The relationship between Licensee and Licensor does not constitute a partnership, joint venture, or agency. Neither Licensee nor Licensor shall make any statements, representations, or commitments of any kind, or take any action that is binding on the other, without the prior written consent of the other Party.

 

14.11.     Independent Contractors. Each Party shall act solely as an independent contractor, and nothing in this Agreement gives either Party the power or authority to act for, bind or commit the other Party in any way. Nothing in this Agreement creates the relationship of partners, principal and agent, or joint-venture partners as between the Parties.

 

14.12.     English Language. This Agreement was prepared in the English language, which language shall govern the interpretation of, and any dispute regarding, the terms of this Agreement. Any formal notices referred to in this Agreement, plans and clinical trial, safety and related summary reports of any committee, and any progress and sales reports will, in each case be written in the English language.

 

14.13.     Counterparts. This Agreement may be executed in one or more counterparts, each of which is an original, but all of which together constitute one and the same instrument. Each Party may execute this Agreement by facsimile transmission or in AdobeTM Portable Document Format (“PDF”) sent by electronic mail. In addition, facsimile or PDF signatures of authorized signatories of any Party will be deemed to be original signatures and will be valid and binding, and delivery of a facsimile or PDF signature by any Party will constitute due execution and delivery of this Agreement.

 

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Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

14.14.     Schedules. The disclosure of any matter in any Section of or on any Schedule to this Agreement will only be deemed to be a disclosure for the Section or subsection of this Agreement to which it corresponds in number, unless the applicability of such Schedule to any other Section is readily apparent. The disclosure of any matter in any Schedule to this Agreement will expressly not be deemed to (a) constitute an admission by either Party hereto, or (b) imply that any such matter is material for purposes of this Agreement.

 

14.15.     Non-Solicitation of Employees. During the Term, neither Party may, directly or indirectly, recruit or solicit any employee of the other Party who became known to the other Party through contact or interactions for negotiating or performing this Agreement, without the prior written consent of the other Party. For purposes of the foregoing, “recruit” or “solicit” shall exclude: (a) circumstances where an employee of a Party initiates contact with the other Party solely on its own with regard to possible employment without being encouraged, suggested or otherwise induced to make such contact by the other Party; or (b) general solicitations of employment not specifically targeted at employees of a Party, including responses to general advertisements.

 

14.16.     Expenses. Each Party will bear its own direct and indirect expenses incurred in connection with the negotiation and preparation of this Agreement and, except as set forth in this Agreement, the performance of the obligations contemplated hereby.

 

14.17.     Registration of Agreement. Licensee shall take all reasonable and necessary steps to register this Agreement in any country where such registration is required to permit the transfer of funds and/or payment of royalties to Licensor hereunder or is otherwise required by a Governmental Authority or Laws of such country to effectuate or carry out this Agreement. Notwithstanding anything contained in this Agreement to the contrary, Licensee shall not be relieved of any of its obligations under this Agreement by any failure to register this Agreement in any country, and, specifically, Licensee shall not be relieved of its obligation to make any payment due to Licensor hereunder where such payment is blocked due to any failure to register this Agreement.

 

ARTICLE 15

MANUFACTURING 

 

15.1.     Non-Aerosolized Products. Pursuant to the rights granted under Section 2.1(b), Licensee shall manufacture the Surfaxin Product, Surfaxin LS and other Non-Aerosolized Products in the Licensed Territory. Licensor shall provide sourcing for active pharmaceutical ingredients, including the Drug, to be used in the manufacture of the Surfaxin Product, Surfaxin LS and other Non-Aerosolized Products in the Licensed Territory pursuant to the terms of a written supply agreement (if Licensee desires to obtain such active pharmaceutical ingredients from Licensor). In such a case, the transfer price for such active pharmaceutical ingredients, including the Drug, shall correspond to Licensor [***] Licensee shall maintain standards no less rigorous than those required by FDA in connection with its manufacture of the Surfaxin Product, Surfaxin LS and other Non-Aerosolized Products. Licensor will provide the necessary support to Licensee in the selection, contracting and certification of approved (pursuant to Section 2.1(c)) third party manufacturers, if any, for the manufacture of the Drug, the Surfaxin Product, Surfaxin LS and other Non-Aerosolized Products, as the case may be, in the Licensed Territory.

 

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15.2.     Aerosolized Products. Licensor shall manufacture or cause to be manufactured Drug and Device components of Aerosurf and other Aerosolized Products in the Licensor Territory and supply Aerosurf and such components and other Aerosolized Products to Licensee during the Term pursuant to the terms of a written supply agreement at a transfer price equal to Licensor’s [***] 

 

15.3.     Technology Transfer and Supply. Promptly after the Effective Date, Licensor shall commence a technology transfer to Licensee of the manufacturing process for the Surfaxin Product, Surfaxin LS and other Non-Aerosolized Products, such technology transfer to be completed no later than [***] after the Effective Date. The Parties shall negotiate the terms of an appropriate technology transfer agreement within [***] after the Effective Date which, among other things, identifies the roles and responsibilities of the Parties necessary to accomplish such technology transfer. Upon the successful completion of such technology transfer and upon Licensor’s written request, the Parties shall enter into a supply agreement providing for the supply of Surfaxin Product and Surfaxin LS and other Non-Aerosolized Products by Licensee to Licensor, for use by or on behalf of Licensor of such Surfaxin Product and Surfaxin LS and other Non-Aerosolized Products outside the Licensed Territory.

 

15.4.     Timing. The supply agreements described in Sections 15.1 and 15.2 shall be entered into between the Parties, subject to the terms and conditions set forth in this Article 15 and elsewhere in this Agreement, within [***] after the Effective Date. The technology transfer agreement described in Section 15.3 shall be entered into between the Parties, subject to the terms and conditions set forth in this Article 15 and elsewhere in this Agreement, within [***] from the Effective Date. Additionally, the supply agreement described in the last paragraph of Section 15.3 shall be entered into between the Parties, subject to the terms and conditions set forth in this Article 15 and elsewhere in this Agreement, within [***] after Licensor’s written request under Section 15.3.

 

15.5.     Manufacturing Option for Device. Notwithstanding any other provision of this Agreement to the contrary, Licensor hereby grants to Licensee an option, exercisable in Licensee’s sole discretion, to manufacture and assemble the Device in and for the Licensed Territory (the “Device Manufacturing Option”). The Device Manufacturing Option shall be exercisable by Licensee for a period of [***] beginning upon Licensor’s completion of a final, successful Phase 3 Study in respect of Aerosurf for the prevention and/or treatment of RDS and Licensee’s completion of such other Development obligations as may be required by the Regulatory Authority in the PRC in respect of Aerosurf. [***] Licensee may exercise the Device Manufacturing Option by notifying Licensor in writing of Licensee’s intent to exercise the Device Manufacturing Option. Within thirty (30) days of Licensor’s receipt of such notice, the Parties will enter into good faith discussions to reach definitive agreements as to a manufacturing plan and any amendments to this Agreement as may be required to enable the provision by Licensor to Licensee of such rights and information, including technology transfer, as are necessary for Licensee to manufacture the Device in and for the Licensed Territory with all related costs to be borne by Licensee. Such manufacturing plan shall be submitted to the JSC for its review and approval.

 

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In Witness Whereof, the Parties hereto have caused this Agreement to be executed by their duly authorized officers as of the Effective Date.

 

	
			WINDTREE THERAPEUTICS, INC.

			 

				
			LEE’S PHARMACEUTICAL (HK) LTD.

			
	 	 
	
			By: /s/ Craig Fraser                    

				
			By: /s/Benjamin Li, Ph.D

			
	
			Name: Craig Fraser

				
			Name: Benjamin Li, Ph.D

			
	
			Title:   President and Chief Executive Officer

				
			Title:   Chief Executive Officer

			

 

 

 

 

 

Confidential Materials Omitted and Filed Separately with the Securities and Exchange Commission Pursuant to a Request for Confidential Treatment under Rule 24b-2 under the Exchange Act of 1934, as amended.  Confidential Portions are marked: [***]

 

exhibit a

 

licensed marks

 

 

	
			Trademark

				
			Registration No. 

				
			Class /Goods

				
			Country

			
	
			[***]

				
			[***]

				
			[***]

				
			[***]

			

 

 

 

 

 

SCHEDULE 1

LICENSOR PATENTS

 

 

1.1 AEROSURF® Aerosol Delivery System Portfolio (licensed from PHILIP MORRIS PRODUCTS S.A. (PMPSA)) 

 

	
			Ref #

				
			Application No

				
			Patent No.

				
			Filing Date

				
			Issue 

			Date

				
			Expiration Date

				
			Title

				
			Status

				
			Country

			
	
			[***]

				
			[***]

				
			[***]

				
			[***]

				
			[***]

				
			[***]

				
			[***]

				
			[***]

				
			[***]

			

 

 

 

1.2 KL4 Pulmonary Surfactant Portfolio (AEROSURF and SURFAXIN LS)

 

	
			Ref. #

				
			Program

				
			Application 

			Serial No./

			Patent No.

				
			Filing Date/

			Expiration 

			Date

				
			Title

				
			Status

				
			Country

			
	
			[***]

				
			[***]

				
			[***]

				
			[***]

				
			[***]

				
			[***]

				
			[***]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00274-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00274-of-00352.parquet"}]]