Document:

ex10-1.htm

Exhibit 10.1

 

 

	
 

 

ENERGY RECOVERY INC

ANNUAL INCENTIVE PLAN (AIP)

 

A.     SCOPE

 

This Annual Incentive Plan (the “Plan”) of Energy Recovery, Inc. (the “Company”) and its subsidiaries is effective as of January 1, 2016 and covers eligible employees designated by the Company and approved by the Compensation Committee (“Compensation Committee”) of the Board of Directors (the “Board”). The Plan shall continue until terminated in accordance with paragraph J. This Plan replaces and supersedes any and all other agreements for participants in this Plan, representations, or understandings (either written or oral) with respect to incentive compensation.

 

B.     PURPOSE

 

The purpose of the Plan is to encourage the performance and retention of eligible employees in recognition of individual achievement that contributes to the strategic and financial success of the Company.

 

C.     ELIGIBLE EMPLOYEES

 

Full-time and in certain cases part-time, regular employees, unless otherwise required by applicable law and who are employed as of October 1 of the applicable Plan Year (as defined below) are eligible to be selected as participants in the Plan (“Participants”). A committee comprised of the Company’s Chief Executive Officer, Chief Financial Officer, and Human Resources Vice President (“Plan Committee”), as administrator of the Plan, shall designate among the eligible employees of the Company and its subsidiaries described in the preceding sentence who are to be participants (the “Participants”) in the Plan for the applicable fiscal year (the “Plan Year”). Participation in the Plan in one Plan Year is not a guarantee of participation in a future Plan Year.

 

D.     INDIVIDUAL TARGETS

 

The Plan Committee will establish an incentive award target (“Individual Target”) for each Participant that shall be expressed as a percentage of such Participant’s annual base compensation. For exempt employees, the percentage will be of the Participant’s annual base compensation for the Plan Year, prorated as necessary, to adjust for date of hire, changes in salary, working hours, status, target percentage, and / or transfers. For non-exempt employees, the percentage will be of the Participant’s wages for the Plan Year, inclusive of regular wages, prorated as necessary, to adjust for date of hire, changes in salary, working hours, status, target percentage, and / or transfers. Individual Targets will be reviewed and approved by the Plan Committee on an annual basis, and the Compensation Committee will approve Individual Targets for all executive officers of the Company.

 

 

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E.     ANNUAL BONUS POOL

 

Except as may otherwise be set forth herein or as determined by the Plan Committee under certain circumstances, the aggregate amount allocated for payment of bonuses under the Plan is based on Company performance as measured by the actual attainment level of the Adjusted Operating Income (Loss) for the associated Plan Year (the “Annual Bonus Pool”). Through the annual budgeting process, the Board will approve the Company target for Adjusted Operating Income (Loss) (the “Profitability Target”), and the Annual Bonus Pool will be determined by comparing the actual Adjusted Operating Income (Loss) achieved during the Plan Year to the Profitability Target approved by the Board. The “Target Annual Bonus Pool”, which shall be equal to the aggregate amount of the Individual Targets for the entire population of Participants designated to participate with respect to a Plan Year, will become payable upon achievement of the approved corporate MBOs which includes meeting the approved budgeted operating income for the associated Plan Year. For actual performance below the Profitability Target, the Annual Bonus Pool will be calculated based on the formula described in Paragraph G below. The Company shall accrue for accounting purposes for payment of awards under the Plan on a monthly basis in accordance with the Plan Committee’s assessment of interim results as compared to the comparable Profitability Target. 

 

F.     ADJUSTED OPERATING INCOME (LOSS)

 

For purposes of this Plan, “Adjusted Operating Income (Loss)” shall be defined as “operating income (loss) before bonus expense and non-recurring items” of the Company for the Plan Year. Specifically, Adjusted Operating Income (Loss) shall reflect the consolidated operating income of the Company during the fiscal year, as determined by the Plan Committee in conformity with accounting principles generally accepted in the United States of America and contained in financial statements that are subject to an audit report of the Company's independent public accounting firm, but excluding:

 

(i) the accrued bonus expense under the provisions of this Plan;

 

(ii) transaction and financing costs associated with an acquisition or in anticipation thereof;

 

(iii) restructuring costs for an initiative approved by the Board;

 

(iv) losses associated with the write-down of assets of a subsidiary, business unit, or division that has been designated by the Board as a discontinued business operation or to be liquidated;

 

(v) gains or losses on the sale of any subsidiary, business unit or division, or the assets or business thereof;

 

(vi) gains or losses from the disposition of material capital assets (other than in a transaction described in subsection (iii) through (v) above;

 

(vii) the refinancing of indebtedness, including, among other things, any make-whole payments and prepayment fees;

 

 

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(viii) losses associated with the write-down of goodwill or other intangible assets of the Company due to the determination under applicable accounting standards that the assets have been impaired;

 

(ix) any income statement effect resulting from a change in generally accepted accounting principles, except to the extent that the effect of such a change is already reflected in the Profitability Target; 

 

(x) any other material income or loss item, the realization of which is not directly attributable to the actions of current senior management of the Company; and

 

(xi) other non-recurring or unpredicted items proposed by the Plan Committee and accepted by the Compensation Committee. 

 

The Compensation Committee shall have final authority with respect to any determination by the Plan Committee regarding the definition of “Adjusted Operating Income (Loss)” and, in exercising such authority, may consult with the Company’s independent auditor and/or Audit Committee as it deems necessary and advisable.

 

G.     ANNUAL BONUS POOL DETERMINATION

 

At the onset of each Plan Year, the Compensation Committee shall determine the Profitability Target and Target Annual Bonus Pool. The actual amount that becomes payable under the Plan shall be determined upon calculation of achievement of the approved corporate objectives which includes Adjusted Operating Income (Loss) at the end of the Plan Year, subject to any adjustments required pursuant to Section F herein.

 

	 	
●
	
If Adjusted Operating Income (Loss) equals the Profitability Target, 100% of the Annual Bonus Pool will be funded.

	 	
●
	
If Adjusted Operating Income (Loss) exceeds the Profitability Target, the Annual Bonus Pool will be calculated based on the allocation curve as illustrated in Exhibit A, capped at 100%.

	 	
●
	
If Adjusted Operating Income (Loss) exceeds the Minimum Performance Threshold, but is less than 100%, of the Profitability Target, the Annual Bonus Pool will be calculated based on the allocation curve as illustrated in Exhibit A. 

	 	
●
	
If Adjusted Operating Income (Loss) is less than The Minimum Performance Threshold of the Profitability Target, the Annual Bonus Pool will be equal to minimum discretionary funding established and approved by the Compensation Committee; provided, however, that such minimum amount shall only be awarded to individual Participants for extraordinary performance as determined by the Plan Committee and approved by the Compensation Committee.

 

The “Allocation Ratio,” which is defined as the Annual Bonus Pool divided by the Target Annual Bonus Pool, will be applied for computation of individual bonus payments made to Participants. To derive the Allocation Ratio for the purposes of calculating individual bonus payments, the Company will use the allocation curve depicted in Exhibit A. The Compensation Committee, subject to any required approval of the Board, shall have the ability and authority to increase or decrease the amount of the Annual Bonus Pool calculated in accordance with the provisions of this Plan to reflect any extraordinary or unforeseen events or occurrences during the Plan Year. In addition, amounts payable are subject to adjustment at the sole discretion of the Plan Committee, and any amounts payable may be increased or reduced, including to zero. 

 

 

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H.     BONUS CALCULATION

 

A Participant’s bonus payment under this Plan shall be calculated using the following formula:

 

BONUS = BASE x IND TARGET x CORP PERF x IND ACH x PRORATION

 

Where: 

	 	
●
	
BASE represents the Participant’s base compensation as defined in Paragraph D;

	 	
●
	
IND TARGET represents the Participant’s Individual Target as defined in Paragraph D; equals the Annual Bonus Pool divided by the Target Annual Bonus Pool and derived from the allocation curve in Exhibit A;

	 	
●
	
CORP PERF represents the results of the Measurable Business Objectives (MBOs) defined by Management and approved by the Compensation Committee 

	 	
●
	
IND ACH represents the individual achievement for the Participant in question and is calculated from the supervisor’s assessment of the Participant’s performance against Measurable Business Objectives (“MBOs”) as documented in the Plan Year and approved by the Plan Committee; and

	 	
●
	
PRORATION represents the amount of time (in months) that the Participant worked for the Company during the Plan Year in an eligible position divided by twelve months.

 

For example, consider a Participant, hired on April 1st, 2016 with a base salary of $100,000 and an Individual Target of 10%. During the Plan Year, the Company achieves 100% of its MBOs. Moreover, the Participant’s supervisor determines that the Participant achieved 90% of the targeted performance specified in his/her MBOs for the respective Plan Year. The bonus payment is calculated as follows:

 

BONUS CALCULATION

 

$100K x 10% x 100% x 90% x 75% = $6750

 

Total Bonus = $6750

 

To the extent permitted by applicable law, rules, and regulations, the Company reserves the right to prorate the bonus award of any Participant who was not in an eligible position for the entire applicable Plan Year, or was not actively working full-time throughout the applicable Plan Year. Plan bonus awards, if any, will generally be prorated based on the number of full months (rounded to the nearest full month) that a Participant is working in an eligible position; however, the Company reserves the right, in its sole discretion, to prorate bonuses based on hours of service, days, or on any other basis. For example, the proration factor for a Participant who is eligible for the entire applicable Plan Year will be 1.00; for a Participant who is eligible to participate in the Plan for one-half of the Plan Year, the proration factor will be 0.50. In summary, Participants in the following situations may have a proration factor that is less than 1.00, to the extent permissible by applicable law: (a) new hires and individuals who transfer into an eligible position during the applicable Plan Year; (b) individuals who transfer between an eligible position and a non-eligible position within the Company; (c) Participants who work less than the applicable full-time standard work week; (d) Participants who take a leave of absence, as described more fully below; (e) Participants who experience a change in salary during the applicable Plan Year; and (f) Participants who experience a change in target percentage during the applicable Plan Year.

 

 

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To the extent permitted by applicable law, rules, and regulations, Participants who take unpaid days off or leaves of absence that are not protected by statute or other applicable law will have their bonus awards, if any, prorated based by the number of full months that such Participant is actively working in an eligible position. 

 

I.     TIMING OF AWARDS

 

Eligible Employees must be designated as Participants as of October 1 in a Plan Year to be eligible to participate in, and receive payment of an award, under the Plan for that same year, unless otherwise required by applicable law. A Participant who is employed after January 1 but prior to October 1 of a Plan Year shall only be eligible to receive an award prorated for the amount of time the Participant was employed by the Company in an eligible position during the Plan Year. Awards for a Plan Year are payable annually in cash and shall be earned and paid in the first quarter of the calendar year following the end of the corresponding Plan Year. Participants must be an employee in good standing at the time of the bonus payment to earn or receive the same; except where prohibited by applicable law, participants who involuntarily or voluntarily resign or otherwise terminate employment for any reason before the time the awards are paid will not be eligible to earn or receive payment of the bonus, prorated or otherwise. 

 

J.     NATURE OF PLAN

 

This Plan is a statement of intent and is not a contract. There is no guarantee of an actual payout. Moreover, it is not a guarantee of employment. U.S. Participants’ employment with the Company remains “at will.” This Plan may be modified, suspended, or terminated at any time, and all awards are at the discretion of the Board or the Compensation Committee, subject to applicable law. This Plan may be changed during a Plan Year or prior to bonus payments without any obligation of the Company to pay for the elapsed part of the Plan Year in the manner described in the Plan, subject to applicable law. The decisions of Company management, the Plan Committee, the Compensation Committee, and/or the Board in administering and interpreting the Plan are final and binding on all Participants. Information regarding an employee’s annual incentive payment will be part of the employee’s personnel record.

 

 

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K.     WITHHOLDING TAXES

 

Whenever the payment of an award is made, such payment shall be net of an amount sufficient to satisfy federal, state, and local income and employment tax withholding requirements and authorized deductions as determined by the Plan Committee in its sole discretion.

 

L.     NONASSIGNMENT; PARTICIPANTS ARE GENERAL CREDITORS

 

Except as otherwise provided by the Plan Committee in its sole discretion, the interest of any Participant under the Plan shall not be assignable or transferable either by voluntary or involuntary assignment or by operation of law, and any attempted assignment shall be null, void, and of no effect. 

 

Amounts paid under the Plan shall be paid from the general funds of the Company, and each Participant shall be no more than an unsecured general creditor of the Company with no special or prior right to any assets of the Company for payment of any obligations hereunder. Nothing contained in the Plan shall be deemed to create a trust of any kind for the benefit of any Participant or create any fiduciary relationship between the Company and any Participant with respect to any assets of the Company.

 

M.     SUCCESSORS AND ASSIGNS 

 

This Plan shall be binding on the Company and Participant and their respective successors, permitted assigns, executors, administrators, and legal representatives.

 

N.     CODE SECTION 409A 

 

The Plan and all Awards made hereunder shall be interpreted, construed, and operated to reflect the intent of the Company that all aspects of the Plan and the Awards shall be interpreted to be exempt from the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and any regulations and other guidance thereunder. This Plan may be amended at any time, without the consent of any party, to avoid the application of Section 409A of the Code in a particular circumstance or that is necessary or desirable to satisfy any of the requirements under Section 409A of the Code, but the Company shall not be under any obligation to make any such amendment. Nothing in the Plan shall provide a basis for any person to take action against the Company or any affiliate based on matters covered by Section 409A of the Code, including the tax treatment of any amount paid or Award made under the Plan, and neither the Company nor any of its affiliates shall under any circumstances have any liability to any Participant or his estate or any other party for any taxes, penalties, or interest due on amounts paid or payable under the Plan, including taxes, penalties, or interest imposed under Section 409A of the Code.

 

 

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O.     INTERPRETATION AND SEVERABILITY

 

In case any one or more of the provisions contained in the Plan shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of the Plan, but the Plan shall be construed as if such invalid, illegal, or unenforceable provisions had never been contained herein.

 

P.     GOVERNING LAW

 

This Plan and all awards made and actions taken hereunder shall be governed by and construed in accordance with the laws of California excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Participants are deemed to submit to the exclusive jurisdiction and venue of the Federal or state courts of California to resolve any and all issues that may arise out of or relate to the Plan or any related award.

 

 

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Exhibit A

 

AIP Funding Curve

 

 

	 	
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Profitability Target = 2016 Budgeted Operating Income (Loss) + Budget Annual Bonus Pool 

 

	 	
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Minimum Discretionary Funding = Assumes 60% achievement of adjusted OI

 

	 	
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Target Annual Bonus Pool = Dollar sum of the aggregate target percentage of base salaries for all budgeted Participants as of January 31, 2016

 

	 	
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If Adjusted Operating Income (Loss) <= Minimum Performance Threshold, then Annual Bonus Pool = Minimum Discretionary Funding

 

	 	
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If Adjusted Operating Income (Loss) > Minimum Performance Threshold, then Annual Bonus Pool = 2.02*(Adjusted Operating Income (Loss) - Minimum Performance Threshold) + Minimum Discretionary Funding

	 	
●
	
If Adjusted Operating Income (Loss) >= Profitability Target, then Annual Bonus Pool = Target Annual Bonus Pool

 

 

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 Page 8ex10_1.htm

EXHIBIT `10.1

 

 

STRATEGIC COLLABORATION AND LICENSE AGREEMENT

 

by and between

 

pH PHARMA Co., Ltd

and

 

ANTRIABIO, INC.

 

Dated as of February 29, 2016

 

 

 

  

  

  

 

STRATEGIC COLLABORATION AND LICENSE AGREEMENT

 

THIS STRATEGIC COLLABORATION AGREEMENT (the “Agreement”) is made and entered into as of February 29, 2016 (“Effective Date”) by and between:

 

pH Pharma Co., Ltd., a corporation incorporated under the laws of Korea, located at 2F, Artside Gallery, 15 Jahamun-Ro 6-Gil, Jongno-Gu, Seoul 03044, Korea (“PH”), and

 

AntriaBio, Inc., a corporation incorporated under the laws of Delaware, located at 1450 Infinite Drive, Louisville, Colorado 80027 (“Company”).

 

PH and the Company may be individually referred to as a “Party” and together as the “Parties.”

 

RECITALS

 

WHEREAS, Company applies its sustained release formulation platform to known, well-characterized molecules to significantly advance existing standards of care;

WHEREAS, PH pursues strategic endeavors in the healthcare market;

WHEREAS, PH would like the option to license AB101 in the Territory (as defined below) and the Parties wish to work together to explore synergistic opportunities to collaborate on selected molecules; and

 

WHEREAS, concurrently with the execution hereof, the Parties will enter into a stock purchase agreement for the acquisition by PH of shares of the Company’s Series A Preferred Stock (the “Stock Purchase Agreement”).

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual representations, warranties and covenants contained herein, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

	
1.      

	

Rules of Interpretation for this Agreement

 

	
1.1       

	

In this Agreement, words importing the singular will include the plural and vice-versa, words importing any gender will include all other genders, and references to persons will include partnerships, corporations and unincorporated associations.

 

	
1.2       

	

The words “including” and “includes” mean including, without limiting the generality of any description preceding such terms.

 

	
1.3       

	

Section and paragraph headings will not affect the interpretation of this Agreement.

 

	
2.     

	
Joint Collaboration Committee

 

	
2.1       

	
Establishment and Membership.  As of the Effective Date, the Company and PH will appoint a Joint Collaboration Committee to monitor and coordinate all aspects of the relationship between the Parties (the “Joint Collaboration Committee” or “JCC”).  Each Party will designate two (2) 

 

 

2

  

  

 

 

	
 

	
 representatives with appropriate expertise to serve as members of the JCC.  Each Party may replace its representatives on the JCC at any time upon written notice to the other Party.  Each Party shall alternate in designating one of their representatives to the JCC to serve as its chairperson for a one-year term.  PH will select from its representatives the initial chairperson for the JCC.  From time to time during the term of any chairperson, either Party may change the representative nominated by such Party who will serve as chairperson on written notice to the other Party.  

 

	
2.2       

	
Duties.  The JCC will: (a) periodically meet (no less often than once per year) to review potential molecules that may be jointly selected by the Parties for further development utilizing the Company’s sustained release platform (“Targets”), (b) to the extent that PH shall satisfy the Condition Precedent (as defined below), meet in person to discuss the details regarding the exclusive license for AB101 including among other matters, the royalty rate and the related parameters  involving the commercial sale and distribution of AB101 in the Territory (as defined below), and (c) perform such other functions as are set forth herein or as the Parties may mutually agree in writing.  The JCC may appoint a subcommittee to perform any of the above functions; provided, however, that any such subcommittee will report to the JCC.

 

	
2.3        

	
Meetings.  The location of such meetings alternating between locations designated by PH and locations designated by Company.  Each Party will be responsible for all travel and related costs and expenses for its members and other representatives to participate in or attend committee meetings.  Meetings may be held in person, by telephone, or by video conference call, at the discretion of each Party.  Each Party will make proposals for agenda items and will provide all appropriate information with respect to such proposed items at least ten (10) Business Days in advance of the applicable meeting.  For purposes of this Agreement, “Business Day” shall mean will mean any day, except that if an activity to be performed or an event to occur falls on a Friday, Saturday, Sunday or any other day which is recognized as a national holiday in the US or Korea, then the activity may be performed or the event may occur on the next day that is not a Friday, Saturday, Sunday or such nationally recognized holiday.

 

The chairperson of the JCC will prepare and circulate for review and approval of the minutes of each meeting within thirty (30) days after the meeting.  The Parties will agree on the minutes of each meeting promptly, but in no event later than the next meeting of the JCC.

 

	
2.4       

	
Decision Making.  Regardless of the number of representatives attending any JCC meeting, the representatives of PH and Company will each have a single vote.  The JCC will attempt in good faith to reach unanimity with respect to all matters that come before it for discussion and will give consideration to the views, positions and recommendations of each Party on such matters.  If the JCC is unable to reach unanimity upon any issue or matter within its jurisdiction within seven (7) days after it has first met and attempted to reach a decision, then in each such event, the JCC will refer the matter to Chief Executive Officers of the Company and PH for resolution and if the parties are still unable to resolve, then they shall proceed with binding arbitration.

	
2.5       

	
R&D Program.  To the extent that Parties jointly elect to develop additional Targets other than AB101  following the recommendation of the JCC, the Parties will promptly meet in good faith to discuss the work plan of activities for such Target, including time and resource allocation as well as budget and licensing terms (an “R&D Program”).  The R&D Program will be supplemented by appropriate detailed programs at each stage of development for each Target, and will be updated from time to time during the performance of such R&D Program, at the direction of the JCC.  Each such update will form part of this Agreement and will be appended to the signature copies for the sake of good order.

 .

	
2.6       

	
Dismissal of JCC.  The Parties will have the right to disband the JCC upon mutual agreement.  Disbanding of JCC shall not result in termination of this agreement/option license to pH Pharma. If the JCC is not disbanded pursuant to such mutual agreement, and absent a mutual written agreement by the Parties to continue the JCC, the JCC will be automatically divested of 

 

 

3

  

  

 

	
  

	
responsibility for and authority over activities related to a particular Target immediately following the termination of this Agreement or the termination of the R&D Program for such Target.

 

	
2.7       

	
Limitation of Powers.  The JCC will have only the powers expressly assigned to it in this Agreement.  All activities conducted by the JCC will be consistent with and subject to the provisions of this Agreement, and the JCC will not have any power to take any action that conflicts with the terms of this Agreement or to amend, modify or waive compliance with any of the terms of this Agreement.

 

 

 

	 3.  AB101 License

 

 Grant of Rights.  Subject to the satisfaction of the Condition Precedent (as defined and in Section 3.2 below), the Company hereby grants to PH the following rights:

 

	
3.1       

	
Exclusive License.  An exclusive, transferable, sublicenseable, through multiple tiers of sublicensees, royalty-bearing right and license under AB101 patents, patent applications and all other relevant Company intellectual property, including know-how, that is or may be useful or necessary (collectively “Intellectual Property”) to manufacture and or offer for sale, sell and import, export, and otherwise dispose of, commercialize, and exploit in any manner the Company’s once weekly injectable basal insulin known as “AB101” in Korea, Cambodia, Laos, Myanmar, Thailand, Malaysia, Singapore and Vietnam (collectively, the “Territory”).

 

	
3.2       

	
Condition Precedent. Concurrently with execution of this Agreement, PH is purchasing $1,000,000 of the Company’s Series A Preferred Stock at $1.95 per share pursuant to the Stock Purchase Agreement, to be followed by the purchase of an additional $1,000,000 of the Company’s Series A Preferred Stock upon the same price and terms by March 31, 2016 (the “Second Purchase”).  Further, as a condition precedent to the granting of the license set forth in Section 3.1 above (the “Condition Precedent”), PH shall have consummated the Second Purchase and shall have purchased an additional $6,000,000 of the Company’s Common Stock (“Additional Equity”) after March 31, 2016, in one or more private placement transactions at prices to be negotiated in good faith by the parties based upon commercially reasonable terms.

 

	
3.3       

	
No Implied Licenses.  PH acknowledges that the license granted in this Agreement is limited to the scope expressly granted and that, subject to the terms and conditions of this Agreement, all other rights under all Intellectual Property are expressly reserved by the Company.

 

	
3.4       

	
Sublicenses.  Licensee shall have the right to sublicense its rights hereunder (through multiple tiers of sublicensees) without the consent of the Company; provided, that PH must provide 30 days prior written notice to the Company before granting any sublicense to a third party. PH shall not be obligated to disclose the identity of the sublicensee or any terms of such sublicense.

 

	
3.5       

	
Platform Technology; Third Party Technology.  Notwithstanding the provisions of this Agreement, it is recognized and agreed that Company is not obligated to disclose to PH the technology and Intellectual Property that it uses to perform research and development on compounds, whether created or developed by Company or in-licensed from third parties. 

 

 

	
4.      

	
Representations and Warranties

 

	
4.1       

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

 

	
4.1.1       

	
it has the full power and authority to enter into this Agreement and to perform its obligations hereunder, and all corporate approvals required have been obtained;

 

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4.1.2       

	
entering into this Agreement will not constitute a breach of any agreement, contract, understanding and/or obligation, including such Party’s documents of incorporation which it is currently bound; and

 

	
4.1.3       

	
it is not under any obligation, contractual or otherwise, to any third party that conflicts with or is inconsistent in any material respect with the terms or conditions of this Agreement, or that would impede the material fulfillment of its obligations hereunder.

 

   

	
4.2       

	
Mutual Covenants.  Each Party hereby covenants to the other Party that:

 

	
4.2.1      

	
it will not use in any capacity, in connection with the performance of the activities contemplated by this Agreement, any third party who has been debarred pursuant to Section 306 of the United States Federal Food, Drug, and Cosmetic Act, or who is the subject of a conviction described in such section.  Each Party agrees to inform the other Party in writing immediately if it or any Person who is performing services hereunder on its behalf is debarred or is the subject of a conviction described in Section 306, or if any action, suit, claim, investigation, or legal or administrative proceeding is pending or, to its knowledge, is threatened, relating to the debarment or conviction of it or any third party performing services hereunder; and

	
4.2.2     

	
in carrying out its obligations and responsibilities pursuant to this Agreement, each Party will use commercially reasonable efforts to obtain or procure all necessary approvals and consents and will comply with all applicable laws and, licenses, permits, approvals and procedures.

 

	
4.3       

	
Obligation to Correct Inaccuracies.  Without derogating from any of the remedies available to either Party hereunder or under applicable laws, if either Party will become aware of the inaccuracy of any of the above representations and warranties, such Party will immediately notify the other Party of such in writing.

 

	
4.4       

	
Disclaimer.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, EACH PARTY HEREBY DISCLAIMS AND MAKES NO OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, PATENTABILITY AND VALIDITY OF ANY PATENTS ISSUED OR PENDING.  Without derogating from the generality of the foregoing, nothing contained in this Agreement is a warranty or representation by any Party that any efforts to be exerted by such Party in connection with this Agreement, including without limitation any research or development activities to be performed by them under this Agreement will achieve their aims or succeed, and the Parties make no warranties whatsoever as to any results to be achieved in consequence of the carrying out of any such efforts or activities.

 

	
5.  

	
Term and Termination

 

	
5.1.       

	
Term.  This Agreement will commence on the Effective Date and, unless earlier terminated in accordance with Section 5.2, will terminate with respect to each Target (including the associated Intellectual Property upon the termination or expiration of an R&D Program (such period with respect to each Target, the “Term”).

 

	
5.2       

	
Termination.

 

	
5.2.1.      

	
This agreement may be terminated by mutual consent of both parties at any time.  

 

5

  

  

 

 

	
5.2.2      

	
Without derogating from any other remedies that either Party may have under the terms of this Agreement, the Stock Purchase Agreement or applicable laws, each Party will have the right to terminate this Agreement upon the occurrence of any of the following:

 

	
(a)      

	
the other Party commits a material breach of this Agreement and fails to remedy that breach within forty-five (45) days after being requested to do so, in writing, by the non-breaching Party; or

 

	
(b)      

	
upon the filing or institution of bankruptcy, reorganization, liquidation or receivership proceedings, or upon an assignment of a substantial portion of the assets for the benefit of creditors by the other Party; provided, however, in the case of any involuntary bankruptcy, reorganization, liquidation, receivership or assignment proceeding, such right to terminate will only become effective if such other Party consents to the involuntary proceeding or such proceeding is not dismissed within ninety (90) days after the filing thereof.

 

Notwithstanding the immediately preceding provision of this Section 8.2.3(b), all rights granted pursuant to this Agreement are, and will otherwise be deemed to be, for purposes of Section 365(n) of Title 11, U.S. Code (the “Bankruptcy Code”) licenses of rights to “intellectual property” as defined under Section 101(35A) of the Bankruptcy Code.  The Parties agree that PH and the Company will retain and may fully exercise all of their respective rights, remedies and elections under the Bankruptcy Code.  The Parties further agree that, in the event of the commencement of a bankruptcy or reorganization case by or against a Party under the Bankruptcy Code, the other Party will be entitled to all applicable rights under Section 365 (including Section 365(n)) of the Bankruptcy Code.  

	
5.3       

	
Rights and Obligations Upon Termination.

 

	
5.3.1      

	
Except as provided herein, upon termination of this Agreement for any reason, each Party, at the request of the other Party, will immediately return to the other Party all materials, reports, updates, documentation, written instructions, notes, memoranda, discs or records or other documentation or physical matter of whatsoever nature or description provided by the other Party, except in the event that such material is owned by such Party pursuant to the terms of this Agreement, and provided that each Party will be allowed to retain one copy for archival purposes.

	  	  
	
 5.3.2      

	
At the request of either Party, the other Party will execute and deliver such assignments and licenses and other documents as may be necessary to fully vest in the requesting Party all right, title and interest to which it is entitled pursuant to this Section 5.

 

	
5.3.3.     

	
Upon termination of this Agreement for any reason each Party will be entitled to collect any debt or accrued obligation then owed to it by the other Party.

 

	
6.  

	
Confidentiality

 

	
6.1       

	
No Disclosure.  Other than as expressly set forth herein, PH and Company undertake to treat and to maintain and to ensure that their Representatives (as defined below) will treat and maintain, in strict confidence and secrecy any information disclosed by either Party under this Agreement or the Stock Purchase Agreement, whether disclosed in oral or visual form or in writing and will keep in confidence the existence and contents of this Agreement (the “Confidential Information”) and will not disclose, publish, or disseminate in any manner, any Confidential Information including, without limitation, any aspect thereof, to a third party other than those of its Representatives with a need to know such Confidential Information.  In addition, each Party agrees to treat and maintain (and to ensure that its Representatives treat and maintain) in strict confidence and secrecy and to prevent any unauthorized use, disclosure, publication, or dissemination of the Confidential Information, except for the purposes of this Agreement.  

 

 

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Each Party agrees to be responsible for any use or disclosure of the other Party's Confidential Information by any of its Representatives.  This Agreement shall be deemed to be the Confidential Information of both Parties.  It is recognized and agreed that the results of the R&D Program with respect to any Target is the Confidential Information of the Company.

 

	
6.2       

	
Maintaining Confidentiality.  Each Party will:

 

	
6.2.1      

	
safeguard and keep secret all Confidential Information, and will not directly or indirectly disclose to any third party the Confidential Information without written permission of the other Party; and

 

	
6.2.2      

	
in performing its duties and obligations hereunder, use at least the same degree of care as it does with respect to its own confidential information of like importance but, in any event, at least reasonable care.

 

	
6.3       

	
Exceptions.  The undertakings and obligations under Sections 6.1 and 6.2 will not apply to any part of the Confidential Information which:

 

	
6.3.1      

	
was known to the recipient of the Confidential Information (the “Recipient”) prior to disclosure by the disclosing Party (the “Discloser”);

 

	
6.3.2      

	
was generally available to the public prior to disclosure to the Recipient;

 

	
6.3.3      

	
is disclosed to the Recipient by a third party who is not bound by any confidentiality obligation, having a legal right to make such disclosure;

 

	
6.3.4      

	
has become through no act or failure to act on the part of the Recipient public information or generally available to the public;

	
6.3.5      

	
was independently developed by the Recipient without reference to or reliance upon the Confidential Information; or

 

	
6.3.6      

	
is required to be disclosed by the Recipient by law, by court order, or governmental regulation (including securities laws and/or exchange regulations), provided that the Recipient gives the Discloser reasonable notice prior to any such disclosure and cooperates (at the Discloser’s expense) with the Discloser to assist the Discloser in obtaining a protective order or other suitable protection from disclosure (if available) with respect to such Confidential Information.

 

	
6.4       

	
Disclosure Required by Law, Non-Disclosure Agreements.  Notwithstanding the foregoing:

 

	
6.4.1      

	
in the event that either Party is required to disclose the other Party’s Confidential Information pursuant to securities laws, then, prior to such disclosure, the text of such disclosure will be provided to the other Party for its comment and review, and such disclosing Party shall consider the comments of the other Party in good faith; and

 

	
6.4.2      

	
each Party may disclose the terms of this Agreement to the extent required, in the reasonable opinion of such Party’s legal counsel, to comply with applicable laws, provided, however, that prior to any disclosure, the disclosing Party will consult with the non-disclosing Party and give good faith consideration to deleting information requested by the non-disclosing Party, including business sensitive information.

 

	
6.5       

	
Notice of Breach.  Each Party agrees to inform the other Party of any breach or threatened breach of the provisions hereof by its Representatives.

 

	
6.6       

	
Remedies.  PH and Company each acknowledges that their respective Confidential Information is 

 

 

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of special and unique significance to each of them and that any unauthorized disclosure or use of the Confidential Information could cause irreparable harm and significant injury to the Discloser that may be difficult to ascertain.  Accordingly, any breach of this Agreement may entitle the aggrieved Party in addition to any other right or remedy that it may have available to it by law or in equity, to remedies of injunction, specific performance and other relief, including recourse in a court of law.

 

	
6.7       

	
Duration.  The provisions relating to confidentiality in this Section 6 will remain in effect during the Term and for a period of seven (7) years thereafter.

 

	
6.8       

	
Representatives Defined.  For the purposes of this Section 6, “Representatives” will mean employees, officers, agents, subcontractors, consultants, and/or any other person or entity acting on either Party’s behalf, individually or collectively, including prospective Affiliates, acquirors, investors and lenders who have executed a confidentiality agreement with terms substantially similar to the restrictions imposed by this Section 6, which will be exposed to Confidential Information.

	
7.      

	
Independent Contractors

 

	
7.1       

	
Status.  In performing under and with respect to this Agreement, the Parties will be independent contractors and their relationship will not constitute a partnership, joint venture or agency.  Neither Party will have the authority to make any statements, representations or commitments of any kind, or to take any action, which will be binding on the other Party, without the prior consent of such other Party.

 

	
7.2       

	
Responsibility.  Each Party agrees that its employees, officers, agents, subcontractors, consultants, and/or any other person or entity acting on its behalf, individually or collectively, will be the sole responsibility of such Party and will not be considered at any time as employees of the other Party and will not have any claims against the other Party whatsoever.

 

	
8.      

	
Assignment

 

This Agreement may not be assigned or otherwise transferred by a Party without the prior written consent of the other Party. Any permitted assignee shall agree in writing to be bound by the provisions of this Agreement.  Any such assignment shall not relieve the Party of its responsibilities for performance of its obligations under this Agreement.  This Agreement shall be binding upon and inure to the benefit of the successors and permitted assignees of the Parties.  Any assignment not in accordance with this Agreement shall be null and void.

 

	
9.      

	
Amendments

 

No amendment of this Agreement will be valid unless it is in writing and signed by, or on behalf of, each of the Parties.

 

	
10.      

	
Severance

 

Should any part or provision of this Agreement be held unenforceable or in conflict with the applicable laws of any applicable jurisdiction, the invalid or unenforceable part or provision will, provided that it does not go to the essence of this Agreement, be replaced with a revision which accomplishes, to the extent possible, the original commercial purpose of such part or provision in a valid and enforceable manner, and the balance of this Agreement will remain in full force and effect and binding upon the Parties.

 

	
11.      

	
Entire Agreement

 

This Agreement, and the Stock Purchase Agreement and their respective annexes, exhibits and schedules constitute the entire agreement between the Parties with respect to its subject matter and supersede all prior agreements, arrangements, dealings or writings between the Parties.  The English original of this Agreement will prevail over any translations thereof.

 

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12.      

	
Waiver

 

No waiver of a breach or default hereunder will be considered valid unless in writing and signed by the Party giving such waiver and no such waiver will be deemed a waiver of any subsequent breach or default of the same or similar nature.

 

	
 13.      

	
Further Assurances

 

Each Party agrees to execute, acknowledge and deliver such further documents and instruments and do any other acts, from time to time, as may be reasonably necessary, to effectuate the purposes of this Agreement.

 

	
14.      

	
Third Parties

 

None of the provisions of this Agreement will be enforceable by any person who is not a party to this Agreement.

 

	
15.      

	
Notices

 

Any notice, declaration or other communication required or authorized to be given by any Party under this Agreement to the other Party will be in writing in the English language and will be personally delivered, sent by email (with a copy by ordinary mail in either case) or dispatched by courier addressed to the other Party at the address stated below or such other address as will be specified by the Parties by notice in accordance with the provisions of this Section 15.  Any notice will operate and be deemed to have been served, if personally delivered, sent by fax or by courier on the next following Business Day.

 

PH’s and Company’s addresses for the purposes of this Agreement will be as follows:

 

If to PH:

 

Attention: Chief Executive Officer

pH Pharma Co., Ltd.

2F, Artside Gallery,

15 Jahamun-Ro 6-Gil,

Jongno-Gu, Seoul 03044.

Korea

Tel: +82-10-9510-0429

With a copy (that will not constitute notice) to:

Attn: Chief Executive Officer

pH Pharma Inc.,

530 Lytton Ave, #257,

Palo Alto, CA 94301.

Tel: (650) 868-0941

If to the Company:

 

Attention: Chief Executive Officer

1450 Infinite Drive

Louisville, CO 80027

Telephone: (303) 222-2128

 

With a copy (that will not constitute notice) to:

 

 

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Dorsey & Whitney

Attention: Michael Weiner

1400 Wewatta Street Suite 400

Denver, CO  80202

Telephone: (303) 629-3400

 

 

	
16.      

	
Governing Law and Jurisdiction

 

This Agreement will be governed by and construed under the substantive laws of the State of California without reference to any choice of law principles thereof that would cause the application of the laws of a different jurisdiction.  All actions, suits or proceedings arising out of or relating to this Agreement will be heard and determined in any state or federal court having jurisdiction of the Parties and the subject matter of the dispute, sitting in the Northern District of California, and the Parties hereby irrevocably submit to the exclusive jurisdiction of such courts in any such action or proceeding and irrevocably waive any defense of an inconvenient forum to the maintenance of any such action or proceeding.  Each Party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by notice in accordance with Section 21 (with evidence of delivery) to such Party at the address in effect for notices to it under this Agreement and agrees that such service will constitute good and sufficient service of process and notice thereof.  Nothing contained herein will be deemed to limit in any way any right to serve process in any manner permitted by law.  Prior to commencement of any legal action, suit or proceeding arising out of or relating to this Agreement, the Parties will first present their dispute to the Chief Executive Officers of PH and the Company for resolution.  If the Chief Executive Officers are unable to resolve the dispute within thirty (30) days through good faith negotiations, either Party may then seek resolution of the dispute at law or equity in the forum set forth above.

 

	
17.      

	
Force Majeure

 

	  	
17.1

	
If either Party is prevented from fulfilling its obligations under this Agreement by reason of any supervening event beyond its control (including but not limited to war, national emergency, flood, earthquake, strike or lockout), the Party unable to fulfill its obligations (the “Incapacitated Party”) will immediately give notice of this incapacity and the period during which such incapacity is expected to continue to the other Party and will do everything reasonably within its power to resume full performance of its obligations as soon as possible.

 

	  	
23.2

	
Subject to compliance with the requirements of Section 17.1, the Incapacitated Party will not be deemed to be in breach of its obligations under this Agreement during the period of incapacity in the circumstances referred to in Section 17.1 and the other Party will continue to perform its obligations under this Agreement save only in so far as they are dependent on the prior performance by the Incapacitated Party of its obligations which it cannot perform during the period of incapacity.

 

	
18.      

	
Interpretation

 

The Parties have had the opportunity to have this Agreement reviewed by an attorney; therefore, neither this Agreement nor any provision hereof will be construed against the drafter of this Agreement.

 

	
19.      

	
Counterparts

 

This Agreement may be executed in any number of counterparts (including counterparts transmitted by fax or by portable document format), each of which will be deemed to be an original, but all of which taken together will be deemed to constitute one and the same instrument.

 

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IN WITNESS WHEREOF, each Party has caused this Agreement to be executed by its duly authorized representatives:

 

 

	PH 	 THE COMPANY
	 	 
	By:  _____________________________	 By:  /s/ Nevan Charles Elam         
	Sanjeev Satyal, Vice President   	Nevan Charles Elam, CEO & President
	 	 

 

 

 

 

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