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WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE COMMISSION.

LICENSE AGREEMENT

 

This License Agreement (the “Agreement”) is entered into as of December 9th, 2010 (“Signing Date”) by and between Novavax Inc., having its principal place of business at 9920 Belward Campus Drive, Rockville, MD  20850, USA (“NOVAVAX”) and LG Life Sciences, Ltd., having its principal place of business at LG Gwanghwamun Bldg., 92 Sinmunno 2-ga, Jongno-gu, Seoul, Republic of Korea (“LGLS”).  NOVAVAX and LGLS may each be referred to as a “Party” and collectively as the “Parties.”

 

WHEREAS, NOVAVAX has invented proprietary seasonal and pandemic influenza vaccines based on NOVAVAX’s proprietary virus-like particle vaccine (VLP) baculovirus, insect cell expression and manufacturing system ;

 

WHEREAS, NOVAVAX has been diligently developing such vaccines for regulatory approval and reasonably expects to obtain regulatory approval in the United States by the end of year [* * *];

 

WHEREAS, LGLS is prepared to diligently build a Korean manufacturing facility to develop such vaccines for regulatory approval and reasonably expects to obtain regulatory approval in the Republic of Korea within [* * *] after Novavax obtains regulatory approval in the United States; and

 

WHEREAS, LGLS wishes to obtain a license to such vaccines and related intellectual property in certain countries, and NOVAVAX wishes to grant LGLS such license, all in accordance with the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth, the sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:

 

	
1.

	
DEFINITIONS.

 

The initial capitalized terms used in this Agreement and not defined elsewhere herein shall have the meanings set forth in this Article1.

 

	
1.1

	
“Affiliate” means any Person which controls, is controlled by or is under common control with another Person.  A Person shall be regarded as in control of another Person if it owns or directly or indirectly controls more than 50% of the voting securities or other ownership interest of the other Person, or if it possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the Person.

 

	
1.2

	
“Annual Seed Stock” means [* * *].  Seed Stock is intended for use as the infectious agent that produces the virus-like particles (“VLPs”) and the accompanying reagents.

	
1.3

	
“CDC” has the meaning specified in the definition of “Improvements” under Section 1.15.

  

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1.4

	
“CEO” means the Chief Executive Officer of NOVAVAX(or an executive of NOVAVAX designated by such Chief Executive Officer) and the Chief Executive Officer of LGLS (or an executive of LGLS designated by such Chief Executive Officer).

	
  

	
1.5

	
“Change of Control” means, with respect to any Party, (a) the sale of all or substantially all of the assets of such Party, (b) the merger or consolidation of such Party with or into any other Person where the shareholders of such Party fail to own fifty per cent (50%) or more of the voting power of the surviving entity, (c) the sale (whether through one sale or multiple sales to a single person or group of related persons during any period of time after the date hereof) by the shareholders of such Party (as of the Signing Date) of an aggregate of fifty percent (50%) or more of the capital stock (by voting power) of such Party owned by such stockholders in the aggregate (as of the Signing Date), or (d) any other transaction which results in a Party becoming an Affiliate controlled by, or under common control with, a third party.  Either Party shall promptly notify the other if it undergoes a Change of Control.

	
  

	
1.6

	
“Cover” means use, manufacture, offer for sale, sale, import or export of a product, process, good, or service that infringes a valid and issued claim under a Patent absent a license.

	
  

	
1.7

	
“Disclosing Party” means a Party hereto that discloses its Proprietary Information to the other Party hereto.

	
  

	
1.8

	
“Effective Date”means the date that this Agreement becomes effective in accordance with Section 12.1.

	
  

	
1.9

	
“Escrow Agreement” shall have the meaning set forth in Section 5.3(e).

	
  

	
1.10

	
“Exclusive Territory” means the Republic of Korea.

	
  

	
1.11

	
“Expression System Technology” means any and all information and materials relating to the NOVAVAX’s recombinant baculovirus expression vector system and methods for the introduction and expression of heterologous genes in cultured insect cells using the recombinant baculovirus expression vector system.

	
  

	
1.12

	
“FDA” means the U.S. Food and Drug Administration or any successor agency thereto, or any equivalent drug regulatory authority in any other country, as applicable.

	
  

	
1.13

	
“Field of Use” means the prevention of infection and/or disease in humans caused by any type, subtype or strain of influenza virus, including, without limitation, human, swine and avian influenza virus, in all age groups and health conditions, including, without limitation, any seasonal or pandemic application.

	
  

	
1.14

	
“Governmental Authority” means any legislative, executive or judicial unit of any  governmental authority or instrumentality (international, national, federal, state, provincial, or municipal, in any country or other jurisdiction), or any department, agency, board, bureau, commission, official or other regulatory, administrative or judicial authority thereof, including any administrative or regulatory agency or commission, and any court or arbitration tribunal, in each instance having legal jurisdiction over the subject matter before it.

	
  

	
1.15

	
“Improvements” means any modifications to a Product or Products that are developed, licensed, held, owned or otherwise controlled by or on behalf of either Party, including but not limited to changes: to any excipient; arising from a change in manufacturing process; in dosage; by substitution of one or more seasonal influenza HAs and/or NAs as designated by the U.S. Center for Disease Control (CDC) or by the corresponding authority in a country in the Territory; associated with another active ingredient, antigen or adjuvant; and associated with the reformulation of a Product, including without limitation by the addition of preservatives and controlled or extended release or other formulation technology.

  

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1.16

	
“Milestone Payment” shall have the meaning set forth in Section 6.2.

	
  

	
1.17

	
“Net Sales” means, [***] less deductions for the following invoiced or itemized items:

 

	
  

	
(i)

	
[***]

 

If a Product is sold as part of a combination product, the Net Sales from the combination product shall be determined by multiplying the Net Sales (as determined above) of the combination product by [***]  In case the average sales price of the Product when sold alone or any of the other product(s) cannot be determined, then the Parties shall negotiate in good faith and agree upon in writing an appropriate methodology for determining the basis of calculating the Net Sales of the combination product based on the fair market value thereof and other reasonable assessments.

 

[***]

 

	
  

	
1.18

	
“New Flu Product” means any influenza vaccine product other than the Products or Improvements thereto.

	
  

	
1.19

	
“Non-Exclusive Territory” means the countries as set forth in Schedule C attached hereto [* * *].

	
  

	
1.20

	
“NOVAVAX Patent Rights” means all Patent Rights related to a Product owned, licensed, held or otherwise controlled by or on behalf of NOVAVAX before, on or after the Signing Date. [* * *].

	
  

	
1.21

	
“NOVAVAX Proprietary Rights” means any and all Proprietary Rights related to a Product owned, licensed, held or otherwise controlled by or on behalf of NOVAVAX before, on or after the Signing Date.

	
  

	
1.22

	
“Pandemic Product” means the pandemic influenza vaccine products comprised of VLPs and consisting of the Proteins.

	
  

	
1.23

	
“Patent Rights” means (i) issued patents and any extensions, supplemental protection certificates, registrations, confirmations, substitutions, reissues, refilings, continued prosecution applications, reexaminations, renewals, revalidations, revisions, and additions thereof, inventor’s certificates, pediatric data package exclusivity extensions, and utility model filings; (ii) all provisional and non-provisional patent applications; (iii) all continuation, divisional, or continuation-in-part applications that claim priority from any of the foregoing; and (iv) all counterparts to any of the forgoing in any jurisdiction and all documentation associated therewith.

	
  

	
1.24

	
“Person” means any individual, corporation, partnership, limited liability company, firm, association, joint venture, joint stock company, trust, unincorporated organization or other entity, or any Governmental Authority.

	
  

	
1.25

	
“Phase III Clinical Trial” means one or more clinical trials on sufficient number of patients, which trial(s) are designated as a “Phase III Clinical Trial” in any submission to the FDA and designed to (i) establish that a drug is safe and efficacious for its intended use, (ii) define warnings, precautions and adverse reactions that are associated with the drug in the dosage range to be prescribed and (iii) support the Regulatory Approval of such drug for the proposed therapeutic indication.

	
  

	
1.26

	
“Product(s)” means the Seasonal Product and the Pandemic Product.

  

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1.27

	
“Product Specifications” shall be the specifications for the Products as described in the U.S. Regulatory Approval of the Products; provided, however, that prior to NOVAVAX obtaining the U.S. Regulatory Approval of the Products, the Product Specifications shall mean the most current specifications of the Product in NOVAVAX’s filings with the U.S. FDA or Biologics License Application as updated by NOVAVAX from time to time, as applicable.

	
  

	
1.28

	
“Proprietary Information” of a Disclosing Party shall mean any and all confidential,  proprietary, technical, commercial, scientific, financial and other information, know-how and materials relating to (a) the Patent Rights, the Products, and the Technology disclosed or otherwise made available or known to the Receiving Party whether or not before, on or after the Signing Date, including but not limited, to regulatory dossiers, preclinical data, non-clinical data, clinical trials materials, clinical data, clinical specimens, adverse event records, study protocols, Regulatory Approval data and strategies, information about safety, efficacy or effectiveness of any Product, information about toxicology, pharmacology, and analytical methodologies, the properties, composition, structure, manufacture or processing of any Product, formulas, processes, ideas, inventions (whether patentable or not), schematics, trade secrets, customer and product development plans and forecasts; and (b) the contents of this Agreement and the terms and conditions of the transactions contemplated hereby.

	
  

	
1.29

	
“Proprietary Rights” of a Party shall mean the Patent Rights, the Proprietary Information and the Technology owned, licensed, held or controlled by or on behalf of such Party before, on or after the Effective Date.

	
  

	
1.30

	
“Proteins” has the meaning set forth in Section 1.2.

	
  

	
1.31

	
“Receiving Party” shall mean a Party hereto that receives Proprietary Information of the other Party hereto.

	
  

	
1.32

	
“Regulatory Approval” means any and all approvals (including supplements, amendments, pre- and post-approvals, pricing and reimbursement approvals), licenses, registrations or authorizations, including marketing approvals and authorizations, required by relevant Governmental Authorities for the development, manufacture, packaging, storage, distribution, marketing, promotion, use, offer for sale, sale, export and import of a Product.

	
  

	
1.33

	
“Royalties” shall have the meaning set forth in Section 6.4.

	
  

	
1.34

	
“Seasonal Product” means the seasonal influenza vaccine product comprised of VLPs and consisting of Proteins.

	
  

	
1.35

	
“Technology” means any and all information and materials relating to the manufacture of the Products, or either of them[* * *].

	
  

	
1.36

	
“Technology Transfer” shall mean the transfer and provision of any and all Technology and NOVAVAX Proprietary Information to LGLS by NOVAVAX under Sections 3.1 and 3.2.

	
  

	
1.37

	
“Territory” means the Exclusive Territory and the Non-Exclusive Territory.

	
  

	
1.38

	
[* * *].

	
2.

	
LICENSES

 

	
  

	
2.1

	
NOVAVAX hereby grants to LGLS an irrevocable, exclusive license under all NOVAVAX Proprietary Rights, to research, develop, make, distribute, promote, market, use, register, offer to sell, sell, export and import the Products and all Improvements thereto in the Exclusive

  

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Territory in the Field of Use, and to have third parties exercise any of the foregoing rights for the benefit of LGLS.

In addition, NOVAVAX hereby grants to LGLS an irrevocable, non-exclusive license under all NOVAVAX Proprietary Rights, to research, develop, make, have made, distribute, promote, market, use, register, offer to sell, sell, export and import the Products and all Improvements thereto in the Non-Exclusive Territory in the Field of Use, and to have third parties exercise any of the foregoing rights for the benefit of LGLS.

[* * *]

	
  

	
2.2

	
LGLS shall have the right to use any trademark(s) of its choice for the Products in the Territory. LGLS will notify NOVAVAX of such trademark s used in the Territory.

	
  

	
2.3

	
Except as expressly provided under this Agreement, nothing in this Agreement shall be deemed to grant LGLS any right to any NOVAVAX Proprietary Rights.

	
  

	
2.4

	
NOVAVAX shall not, either directly or indirectly, research, develop, make, have made, distribute, promote, market, sell, offer for sale, import, export and/or use the Products (alone or in combination with other products) or any New Flu Products in the Exclusive Territory.  

 

LGLS shall not, either directly or indirectly, research, develop, make, have made, distribute, promote, market, sell, offer for sale, import, export and/or use the Products outside the Territory. 

 

In addition, LGLS shall not, either directly or indirectly, distribute, promote, market, sell, or offer for sale any New Flu Products in the Exclusive Territory[* * *].

 

	
  

	
2.5

	
Notwithstanding Section 2.4 above, in the event that NOVAVAX wishes to research, develop, make, have made, distribute, promote, market, sell, offer for sale, import, export and/or use a New Flu Product in the Exclusive Territory, it shall offer to LGLS a right of first refusal whereby NOVAVAX will first offer such New Flu Product to LGLS, by written notice to LGLS.  Such notice shall set forth in detail the terms of such offer, including financial terms.

 

LGLS shall evaluate the information provided by NOVAVAX and communicate its decision in writing to NOVAVAX within [* * *] from the receipt of such information from NOVAVAX , and the Parties shall thereafter negotiate in good faith the terms and conditions with respect to such New Product.  In case LGLS decides it is not interested in such New Product, then NOVAVAX may be free to research, develop, make, have made, distribute, promote, market, sell, offer for sale, import, export and/or use such New Flu Product in the Exclusive Territory; provided, however, that NOVAVAX shall not offer to any such third party any terms and conditions more favorable than those offered to LGLS.  [* * *].

	
3.

	
MANUFACTURING AND TRANSFER OF TECHNOLOGY

 

	
  

	
3.1

	
NOVAVAX shall provide to LGLS any and all information and materials related to the manufacture of the Products as listed in Schedule B by no later than [* * *].

	
  

	
3.2

	
In addition, NOVAVAX shall complete the Technology Transfer to LGLS by no later than [* * *].   For purposes of this Section 3.2, Technology Transfer shall be deemed completed if LGLS is able to manufacture the Products at its manufacturing site with the same productivity, quality and other specifications as specified in the Product Specifications.

  

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3.3

	
[***]  In addition, to the extent that NOVAVAX technical employees spend more than [***] documented hours during any year of this Agreement (measured from the Effective Date) performing the Technology Transfer in accordance with Sections 3.1 and 3.2, then LGLS shall pay NOVAVAX [***]  Except as expressly provided in this Section 3.3, NOVAVAX shall not charge and LGLS shall not be responsible for any costs and expenses related to the Technology Transfer..

	
  

	
3.4

	
In addition, NOVAVAX shall timely provide to LGLS all NOVAVAX Proprietary Rights and any and all other information and assistance related to the manufacture of the Products as reasonably required by LGLS, including without limitation updates and Improvements to NOVAVAX Proprietary Rights.

	
4.

	
PROJECT MANAGEMENT TEAM

 

	
  

	
4.1

	
Each Party shall appoint two individuals to form a team (“Project Management Team”) to discuss, review, oversee and manage the Technology Transfer, LGLS’s manufacture and qualification of Product samples, the supply of clinical samples of the Product by NOVAVAX for the pre-clinical trials and clinical trials before the Phase III Clinical Trial in the Exclusive Territory, and the Regulatory Approval of the Products in the U.S. and the Territory by NOVAVAX and LGLS respectively (“Project”).

	
  

	
4.2

	
The Project Management Team will meet at least [* * *]during the term of this Agreement in person or by video- or teleconference, as the Project Management Team members may agree from time to time.  In case the meeting is held in person, the Project Management Team shall rotate between NOVAVAX’s principal place of business and LGLS’ principal place of business, or at such other locations as are mutually agreed.

	
  

	
4.3

	
Either Party may also convene special meetings of the Project Management Team for the purpose of resolving disputes or for any other special events by providing at least [* * *] prior written notice to the other Party.

	
  

	
4.4

	
Each Party shall cause its representatives to attend the meetings of the Project Management Team.  If a representative of a Party is unable to attend a meeting, such Party may designate an alternate employee representative to attend such meeting in place of the absent representative.  In addition, each Party may, at its discretion, invite additional employees and, with the consent of the other Party, consultants or scientific advisors to attend the meetings of the meeting.

	
  

	
4.5

	
The Project Management Team will exchange (in written and/or electronic form) and discuss on a good faith basis any and all information and data generated or acquired by each of them in connection with the Project and use good faith and reasonable efforts to determine any decisions or activities to be undertaken with regard to the Project by consensus.  [* * *].

	
  

	
4.6

	
Each Party may, in its sole discretion, replace any of its members of the Project Management Team upon prior written notice to the other Party.

	
5.

	
REGULATORY APPROVAL & CLINICAL TRIALS

 

	
  

	
5.1

	
Regulatory Approval by NOVAVAX.

 

(a) NOVAVAX, at its own cost and expense, shall be solely responsible for conducting and completing the clinical trials for the Products in the U.S. NOVAVAX shall initiate the Phase III Clinical Trial for the Seasonal Products by [* * *].

  

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(b) NOVAVAX, at its own cost and expense, shall be solely responsible for obtaining and maintaining U.S. Regulatory Approvals for the Products. [* * *].

 

For purposes of this Agreement, “U.S. Regulatory Approval” shall mean Regulatory Approval in the United States [* * *].

 

(c) NOVAVAX shall disclose and provide to LGLS, and thereafter timely update, any and all information, data and materials related to clinical trials and U.S. Regulatory Approval of the Products which shall include but is not limited to the master virus bank, working virus bank, any and all plasmids related to the production of the working virus bank and host cells, any and all clinical data, registration dossiers, progress and results, communications, memoranda, reports and correspondence exchanged or relating to or any meetings held between applicable Governmental Authorities (including without limitation FDA and any advisory committee thereto) and NOVAVAX, and communications, memoranda, reports, and correspondence relating to any of the foregoing and any meeting held between applicable consultants and NOVAVAX. Any translation and related fees and expenses shall be borne by LGLS.

 

(d) In the event NOVAVAX does not or has reason to believe that it will not timely conduct or complete the Phase III Clinical Trial or obtain U.S. Regulatory Approval for the Seasonal Products in accordance with Sections 5.1(a) or 5.1(b) above, [***]  In the event that LGLS reasonably determines that NOVAVAX will be unable to conduct the Phase III Clinical Trial or obtain U.S. Regulatory Approval of the Seasonal Products in the United States in accordance with Sections 5.1(a) and 5.1(b) above, LGLS may [***].

 

	
  

	
5.2

	
Regulatory Approval by LGLS.

 

(a) Subject to Section 5.1 above, LGLS, at its own cost and expense, shall be solely responsible for obtaining and maintaining the Regulatory Approval for the Products in the Exclusive Territory.  LGLS shall use its best efforts to obtain the Regulatory Approval for the Seasonal Product in the Exclusive Territory within [* * *] from the date NOVAVAX obtains the Regulatory Approval of the Products in the United States.

 

(b) The costs and expenses for conducting clinical trials as required to obtain the Regulatory Approvals of Products in the Non-Exclusive Territory shall be borne by LGLS.  In the event NOVAVAX or any licensee of NOVAVAX, other than LGLS, seeks Regulatory Approval of a Product in a country in the Non-Exclusive Territory within [* * *] of LGLS seeking Regulatory Approval, NOVAVAX agrees to reimburse [* * *].

 

(c) LGLS shall disclose and provide to NOVAVAX any information regarding the Regulatory Approval in the Territory as reasonably requested by NOVAVAX to submit to the U.S. FDA. Any translation and related fees and expenses shall be borne by NOVAVAX.

 

	
  

	
5.3

	
Additional Obligations of NOVAVAX

 

(a) NOVAVAX, at its own expense (subject to Section 3.3) shall cooperate with LGLS to provide all reasonable assistance and take all actions reasonably requested by LGLS that are necessary or desirable to enable LGLS to obtain and maintain Regulatory Approvals and to comply with any and all laws applicable to the Products in the Territory.

  

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(b) NOVAVAX shall use its best efforts to obtain a contract from the U.S. Department of Health and Human Services, Biomedical Advanced Research and Development Authority, for the development, manufacture and commercialization of the Products.  NOVAVAX shall continue to inform LGLS of the progress and results related thereto.

 

(c) NOVAVAX shall supply to LGLS, at NOVAVAX’s [* * *] all of LGLS’s requirements of the clinical samples of the Products for LGLS to conduct preclinical and clinical trials and obtain the Regulatory Approvals in the Territory. All such Products shall conform to the Product Specifications in effect on the date of delivery thereof to LGLS.  Promptly after the Signing Date, the Parties shall negotiate in good faith and agree on a separate supply agreement governing the supply and purchase of the clinical samples hereunder.

 

(d) NOVAVAX shall timely supply Annual Seed Stock [* * *] and LGLS will acquire such Annual Seed Stock from NOVAVAX. LGLS shall use the Annual Seed Stock supplied by NOVAVAX solely to manufacture Products in accordance with this Agreement. NOVAVAX shall determine the Annual Seed Stock based on its analysis of the anticipated influenza strains as identified by WHO (World Health Organization). Promptly after the Signing Date, the Parties shall negotiate in good faith and use their commercially reasonable efforts to agree on a separate supply agreement setting forth the terms and conditions on which NOVAVAX will supply Annual Seed Stock to LGLS.

 

(e) [* * *].

 

	
6.

	
UPFRONT FEE; MILESTONES; ROYALTIES; AUDIT

 

	
  

	
6.1

	
Subject to the occurrence of the Effective Date and in consideration of NOVAVAX’s grant of the license to LGLS under Article 2 and the performance of NOVAVAX’s obligations under this Agreement, LGLS shall pay NOVAVAX an upfront fee in the amount of two and a half million U.S. dollars (US$2,500,000).  The upfront fee shall be paid by wire transfer to NOVAVAX within thirty (30) days after the Effective Date.

	
  

	
6.2

	
Subject to the occurrence of the Effective Date, LGLS shall pay to NOVAVAX each of the following payments, by wire transfer within [* * *] after NOVAVAX meets each of the following milestones (each a “Milestone Payment”):

	
[* * *]

	
[* * *]

	  	  
	
[* * *]

	
[* * *]

	  	  
	
[* * *]

	
[* * *]

	  	  
	
[* * *]

	
[* * *]

	
  

	
6.3

	
[* * *]

  

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6.4

	
Subject to the occurrence of the Effective Date, during the term of the Agreement, LGLS shall pay NOVAVAX a royalty equal to [* * *] of Net Sales (the “Royalties”); provided, however, that (i) if NOVAVAX does not receive U.S. Regulatory Approval for a Seasonal Product by [* * *], then the Royalties shall reduce to [* * *] of Net Sales, (ii) if NOVAVAX does not receive U.S. Regulatory Approval for a Seasonal Product by [* * *], then the Royalties shall reduce to [* * *] of Net Sales, and (iii) if NOVAVAX does not receive U.S. Regulatory Approval for a Seasonal Product by [* * *], then the Royalties shall reduce to [* * *] of Net Sales.

	
  

	
6.5

	
To the extent that any withholding tax is required to be deducted from the payment of any payments made by LGLS to NOVAVAX under this Article 6, then LGLS will (i) deduct such taxes from the remitting payment, (ii) timely pay the taxes to the proper taxing authority, and (iii) send proof of payment to NOVAVAX, such as receipt by the taxing authority or other documentary evidence for any such taxes paid, that are reasonably necessary for NOVAVAX to claim any foreign tax credit from such taxes.

	
  

	
6.6

	
The Royalties shall be paid within [* * *] of the end of each calendar quarter with respect to the Net Sales occurring in that quarter.  Subject to Section 6.8 below, the Royalties shall be paid by LGLS in U.S. dollars.  Each payment of the Royalties shall be accompanied by a report, setting forth, in reasonable detail, the Net Sales made for the applicable quarter and LGLS’s calculation of the Royalties paid.

	
  

	
6.7

	
In case, in the written opinion of LGLS’s independent patent counsel, any third party license or licenses are necessary for LGLS to exercise its rights hereunder in one or more countries of the Territory, then LGLS may obtain such license under reasonable terms and conditions, LGLS may deduct any royalty due to such third party licensor(s) from any Royalties owed to NOVAVAX from such countries of the Territory hereunder with the understanding that the Royalties owed to NOVAVAX shall not be less than NOVAVAX’s royalty obligations to Wyeth under the Wyeth License, as in effect on the date hereof.

	
  

	
6.8

	
With respect to the Net Sales invoiced or expenses incurred in U.S. dollars, the Net Sales or expense amounts and the amounts due to LGLS hereunder shall be expressed in U.S. dollars.  With respect to the Net Sales invoiced or expenses incurred in a currency other than U.S. dollars, the Net Sales or expense shall be expressed in the domestic currency, together with the U.S. dollar equivalent, calculated using the closing exchange rate on the last day of the calendar quarter during which such Net Sales occurred, as published by THE FINANCIAL TIMES or any other publication as agreed to in writing by the Parties. If at any time legal restrictions in any jurisdiction in any Territory prevent the prompt remittance of any payments with respect to sales in that jurisdiction, the paying Party shall have the right and option to make such payments by depositing the amount thereof in local currency to the receiving Party’s account in a bank or depository in such jurisdiction.

	
  

	
6.9

	
Except as expressly provided under this Article 6, LGLS shall not be responsible for and NOVAVAX shall not be entitled to any other fees, payments or amounts whatsoever.

	
7.

	
AUDITS

 

	
  

	
7.1

	
LGLS shall keep and maintain detailed and accurate books and records with regard to the Net Sales, the Royalties, and the calculation thereof.  LGLS shall retain all such books and records for at least [* * *] following the end of the reporting period to which they relate.

  

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7.2

	
NOVAVAX shall, at its sole cost and expense except as provided herein, have the right to engage an international accounting firm mutually acceptable to the Parties to review and audit such books and records and/or compliance with Article 7 no more than once a year, during normal business hours upon reasonable written notice to LGLS.  In the event of any underpayment of the Royalties, LGLS shall promptly pay such additional Royalties that would have been payable to NOVAVAX hereunder, and if the result of any such review and audit indicates the amount of any such underpayment is [* * *] or more for the period under review and audit, then the reasonable cost of such review and audit shall be borne by LGLS.

	
8.

	
REPRESENTATIONS AND WARRANTIES

 

	
  

	
8.1

	
NOVAVAX hereby represents and warrants as follows:

 

(a) NOVAVAX is a corporation duly organized and in good standing under the laws of its jurisdiction of incorporation.  NOVAVAX has all necessary corporate power and authority to enter into this Agreement and perform its obligations hereunder.  Except as otherwise provided herein, the execution, delivery and performance of its obligations under this Agreement by NOVAVAX have been duly authorized and do not conflict with or contravene the certificate of incorporation or by-laws of NOVAVAX, nor will the execution, delivery or performance of this Agreement contravene, conflict with or result in a breach of, or entitle any Party thereto to terminate, any agreement or instrument to which NOVAVAX is a party.  This Agreement has been duly authorized, executed and delivered by NOVAVAX and constitutes a legal, valid and binding agreement of NOVAVAX, enforceable against NOVAVAX in accordance with its terms.

(b) The execution, delivery and performance of this Agreement by NOVAVAX do not require any consent of or notice to any person or third party including Wyeth Holdings Corporation.

(c) The execution, delivery and performance of this Agreement by NOVAVAX will not cause NOVAVAX to violate, any judgment, decision, order or applicable laws, rules or regulations.

(d) NOVAVAX is not in violation, default or breach of any agreement, license, contract, indenture, note or other instrument to which NOVAVAX is bound or by which NOVAVAX’s assets, properties or intellectual properties are bound that, in any way, adversely affects NOVAVAX’s ability to grant the license to LGLS and to perform its obligations hereunder.

(e) The execution, delivery and performance of this Agreement by NOVAVAX will not create any claim, liability, mortgage, lien, pledge, condition, charge or encumbrance whatsoever upon NOVAVAX or any of its assets, properties or intellectual properties.

(f) All NOVAVAX Patent Rights that Cover the Products are listed on Schedule A, and NOVAVAX shall promptly update Schedule A from time to time, by written notice to LGLS, to add any NOVAVAX Patent Rights necessary for this representation and warranty to remain true and correct after the Signing Date.

(g) To NOVAVAX’s actual knowledge after diligent inquiry, there is no relevant or material prior art for any of the NOVAVAX Patent Rights which NOVAVAX is obliged to disclose to the United States Patent and Trademark Office (“USPTO”) other than what has been cited to the USPTO during prosecution of the relevant NOVAVAX Patent Rights.

(h) NOVAVAX solely controls, by ownership, license, acquisition or otherwise, any and all right, title and interest in and to NOVAVAX Proprietary Rights and has the sole right to grant the license to LGLS under this Agreement and perform all of its obligations under this Agreement.

  

10/24

  

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A

CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED

WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE COMMISSION.

(i) There are no events, pledges, restrictions, security interests, charges, liens, encumbrances, changes or other conditions of any character to NOVAVAX or any of its business, plans, assets, intellectual property, liabilities, operations, properties, prospects, financial condition or results of operations that may in any way adversely affect NOVAVAX’s ability to grant the license to LGLS hereunder, or to perform NOVAVAX’s obligations under this Agreement.

(j) The NOVAVAX Proprietary Rights constitute all intellectual property rights necessary for LGLS to exercise its rights under this Agreement. No third party has any right, title or interest in or to any NOVAVAX Proprietary Rights in the Territory.  There have been no claims made against NOVAVAX, or, to the best of NOVAVAX’s knowledge, threatened, asserting the invalidity or unenforceability of, or the misuse or misappropriation of NOVAVAX Proprietary Rights.  NOVAVAX has not received any notice or is otherwise aware that the NOVAVAX Proprietary Rights, or the research, development, making, use, marketing, sale, import or export of any Product, conflict with or infringe upon the rights of third parties.

(k) There are no events, procedures, actions, suits, investigations or claims pending or threatened against NOVAVAX, its Affiliates, or any of their respective directors, officers, representatives or employees that may adversely affect the execution, delivery or performance of this Agreement.

(l) There are no pending or threatened insolvency or bankruptcy related proceedings or actions by or against NOVAVAX.

(m) Any and all NOVAVAX Proprietary Information and Technology provided by NOVAVAX to LGLS hereunder shall not contain any false, inaccurate or misleading information. 

 

In addition, NOVAVAX represents and warrants the continued correctness and completeness of representations and warranties set forth in this Section 8.1.

	
  

	
8.2

	
LGLS hereby represents and warrants as follows:

 

(a) LGLS is a corporation duly organized and in good standing under the under the laws of the Republic of Korea.  LGLS has all necessary power and authority to enter into this Agreement and perform its obligations hereunder. Except as otherwise provided herein, the execution, delivery and performance of its obligations under this Agreement by LGLS have been duly authorized and do not conflict with or contravene the certificate of incorporation or by-laws or other organizational documents of LGLS, nor will the execution, delivery or performance of this Agreement contravene, conflict with or result in a breach of, or entitle any third party thereto to terminate, any agreement or instrument to which LGLS is a party.  This Agreement has been duly authorized, executed and delivered by LGLS and constitutes a legal, valid and binding agreement of LGLS, enforceable against LGLS in accordance with its terms.

 

(b) The execution, delivery and performance of this Agreement by LGLS will not cause LGLS to violate, any judgment, decision, order or applicable laws, rules or regulations.

 

(c) There are no pending or threatened insolvency or bankruptcy related proceedings or actions by or against LGLS.

 

(d) In addition, LGLS represents and warrants the continued correctness and completeness of representations and warranties set forth in this Section 8.2.

  

11/24

  

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A

CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED

WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE COMMISSION.

	
9.

	
CONFIDENTIALITY.

	
  

	
9.1

	
The Receiving Party agrees (i) to hold the Disclosing Party’s Proprietary Information in confidence and to take all reasonable precautions to protect such Proprietary Information (including, without limitation, all precautions the Receiving Party employs with respect to its confidential materials), (ii) not to divulge any such Proprietary Information to any third person, and (iii) not to make any use whatsoever at any time of such Proprietary Information, except for the purposes of this Agreement.  Any employee or consultant given access to any such Proprietary Information must have a legitimate “need to know.” Each Party’s obligations under this Section 9.1 shall continue for [* * *] from any termination or expiration of this Agreement.

	
  

	
9.2

	
The Disclosing Party agrees that Section 9.1 shall not apply with respect to information which the Receiving Party can establish with competent written proof (i) is, at the time of disclosure to the Receiving Party, in the public domain, or through no fault of the Receiving Party enters the public domain, or (ii) was rightfully in the Receiving Party’s possession or known by it prior to receipt from the Disclosing Party, or (iii) was rightfully disclosed to it by another person without restriction, or (iv) was independently developed by it by persons without access to such information and without use of any Proprietary Information of the Disclosing Party.  In the event that a Receiving Party is required to disclose any of the Disclosing Party’s Proprietary Information by law, regulation, rule, court order or any governmental authority, the Receiving Party shall use reasonable efforts to provide notice thereof to the Disclosing Party and cooperate reasonably with the Disclosing Party in seeking additional measures to guard the confidentiality thereof.

	
  

	
9.3

	
Upon termination or expiration of the Agreement, the Receiving Party will turn over to the Disclosing Party all Proprietary Information of the Disclosing Party and all documents, media or other items containing any such Proprietary Information and any and all copies or extracts thereof at the cost of the Disclosing Party; provided however, the Receiving Party may retain one (1) archival copy of the Proprietary Information at a secure location for archival purposes only.

	
  

	
9.4

	
The Receiving Party acknowledges and agrees that there may be no adequate remedy at law for any breach of its obligations hereunder to the Disclosing Party, resulting in irreparable harm to the Disclosing Party, and therefore, that upon any such breach or any threat thereof, the Disclosing Party shall be entitled to appropriate equitable relief (without the posting of any bond) in addition to whatever remedies it might have at law.

	
10.

	
INTELLECTUAL PROPERTY

	
  

	
10.1

	
NOVAVAX shall, at its sole cost and expense, be responsible for the prosecution and maintenance of all NOVAVAX Patent Rights throughout the world including the Territory.  NOVAVAX shall inform and update LGLS of its prosecution and maintenance progress, results or any information related to the Territory.

	
  

	
10.2

	
NOVAVAX shall timely inform in writing any updates or changes to the NOVAVAX Patent Rights in the Territory and the Parties shall thereafter duly update and revise Schedule A accordingly.  If NOVAVAX at any time determined to abandon any NOVAVAX Patent Rights then NOVAVAX shall provide LGLS with reasonable notice prior thereto and LGLS may require NOVAVAX to assign to LGLS such NOVAVAX Patent Rights and LGLS shall thereafter be responsible for the prosecution and maintenance, as applicable, of such NOVAVAX Patent Rights.

  

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A

CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED

WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE COMMISSION.

	
  

	
10.3

	
Any Improvements (whether or not patentable or copyrightable) that either Party develops, controls or otherwise acquires shall be owned solely by such Party.

	
  

	
10.4

	
Notwithstanding any provision to the contrary, in case of any Improvement by NOVAVAX, such Improvement shall be deemed a Product.  For avoidance of doubt, LGLS shall have an exclusive license to such Improvement in the Exclusive Territory, and a non-exclusive license to such Improvement in the Non-Exclusive Territory.

	
  

	
10.5

	
If either Party becomes aware of any product or activity of any third party that may involve infringement or violation of any NOVAVAX Proprietary Rights in the Territory, such Party shall promptly notify the other Party in writing of such infringement or violation.  NOVAVAX shall take all actions necessary at its sole cost and expense, to enforce such NOVAVAX Proprietary Rights in the Territory, but shall discuss such actions, progress and decisions with LGLS.

	
  

	
10.6

	
If NOVAVAX does not, within ninety (90) days after receipt of such notice of infringement or violation, commence action directed toward restraining or enjoining such patent infringement, LGLS may, at its discretion and at its own cost and expense, take or not take whatever action as it deems necessary or appropriate to enforce NOVAVAX Proprietary Rights.

	
  

	
10.7

	
NOVAVAX agrees to cooperate reasonably in any such action LGLS initiates or wishes to initiate, including, without limitation, supplying essential documentary evidence and making essential witnesses then in NOVAVAX’s employment available.  As part of such cooperation, at the request of LGLS, NOVAVAX shall join any such action brought by LGLS as a party, if NOVAVAX is a necessary party thereto.

	 	
11.

	
INDEMNIFICATION

 

	
  

	
11.1

	
Each Party (the “Indemnifying Party”) shall indemnify and hold harmless the other Party and its Affiliates (the “Indemnified Party”) against any and all liabilities, losses, damages and costs, as incurred, (including reasonable attorneys’ fees, “Losses”), whether or not incurred in connection with a third party claim, arising out of or resulting from (i) any breach of any terms (including representation or warranty of the Indemnifying Party) contained in this Agreement, (ii) the failure by the Indemnifying Party to comply with any of the covenants or agreements of the Indemnifying Party contained in this Agreement, (iii) negligence, gross negligence or willful misconduct of the Indemnifying Party; except to the extent any such Losses are due to (i) any breach of any terms  contained in this Agreement by the Indemnified Party (including any representation or warranty of the Indemnified Party), (ii) the failure by the Indemnified Party to comply with any of the covenants or agreements of the Indemnified Party contained in this Agreement, or (iii) the negligence, gross negligence or willful misconduct of the Indemnified Party.

	
  

	
11.2

	
In addition, NOVAVAX shall indemnify and hold harmless LGLS and its Affiliates against any and all Losses incurred in connection with any and all third party claims arising out of or related to (i) the NOVAVAX Proprietary Rights, or (ii) any personal injury or death caused by any use of the Products, provided that such personal injury or death is directly attributable to any intrinsic property of the Annual Seed Stock, or NOVAVAX’s role in manufacturing the Annual Seed Stock.

	
  

	
11.3

	
In addition, LGLS shall indemnify and hold harmless NOVAVAX and its Affiliates against any and all Losses incurred in connection with any and all third party claims arising out of or related to any personal injury or death caused by any use of the Products, provided that such personal injury or death is directly attributable to LGLS’s failure to manufacture the Product in accordance with the applicable Regulatory Approval, this Agreement and all applicable laws and regulations.

  

13/24

  

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A

CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED

WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE COMMISSION.

	
  

	
11.4

	
As soon as practicable after an Indemnified Party becomes aware of a claim against it for which it intends to seek indemnification from the Indemnifying Party, the Indemnified Party shall promptly notify the Indemnifying Party of such claim, in writing (provided that the failure of an Indemnified Party to give such notice of any such claim shall not release the Indemnifying Party from its obligations under this Article 11 except to the extent the Indemnifying Party is actually prejudiced by such failure). As soon as practicable thereafter, the Indemnified Party and the Indemnifying Party shall meet to discuss how to respond to such claim. In any proceeding, the Indemnified Party shall have the right to retain its own counsel and participate in the defense of such claim, at its own cost and expense. The Indemnifying Party shall not approve the settlement or compromise of any claim for any Losses without the prior written consent of the Indemnified Party, which shall not be unreasonably withheld of delayed, provided that any such settlement or compromise does not obligate the Indemnified Party to contribute to such settlement or compromise or admit any wrongdoing.  If the Indemnifying Party does not assume liability for a claim for which the Indemnified Party seeks indemnification, the Indemnified Party may immediately retain counsel to defend the claim and submit the matter to the dispute resolution procedures set forth in Section 16.6.  If the results of the dispute resolution procedures determine that the Indemnified Party was entitled to indemnification for such claim, then the Indemnifying Party shall immediately assume the defense of such claim and indemnify the Indemnified Party for all of the reasonable costs of the defense of such claim already incurred.

	 	
12.

	
EFFECTIVE DATE; TERM AND TERMINATION

 

	
  

	
12.1

	
This Agreement shall be and become effective on the first date that all of the following conditions precedent have been satisfied (the “Effective Date”):

(a)    Each Party’s board of directors approves the execution, delivery and performance of this Agreement by each Party respectively;

(b)    The Parties have entered into the supply agreements contemplated by Sections 5.3(c) and 5.3(d), in form and substance satisfactory to LGLS;

(c)     The Parties and an independent third-party escrow agent acceptable to LGLS shall have entered into the escrow agreement contemplated by Section 5.3(e) and the Parties have entered into any other agreements or arrangements contemplated by Section 5.3(e), in form and substance satisfactory to LGLS; and

(d) [* * *]

Notwithstanding the foregoing, the obligations of each Party that by their express terms arise after the Signing Date and before the Effective Date shall become effective on the Signing Date.

	
  

	
12.2

	
If the Effective Date has not occurred by January 14th, 2011, then either Party may terminate this Agreement by written notice to the other.

	
  

	
12.3

	
For the Exclusive Territory, this Agreement shall be in full force and effect from the Effective Date, and unless earlier terminated in accordance with the terms hereof, shall remain in full force and effect until the later of [* * *] following the first Regulatory Approval of a Product or the date of expiration of any issued patent from application [* * *].

  

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A

CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED

WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE COMMISSION.

For the Non-Exclusive Territory, this Agreement shall be in full force and effect on a country-by-country basis and Product-by-Product basis in each country of the Non-Exclusive Territory from the Effective Date, and unless earlier terminated in accordance with the terms hereof, shall remain in full force and effect until [* * *] following the first Regulatory Approval of a Product.

	
  

	
12.4

	
If a Party breaches a material provision of this Agreement, the non-breaching Party may terminate this Agreement, as to the Product and country relating to such breach, upon forty-five (45) days’ prior written notice unless the breach is cured within the notice period, provided that if such breach requires additional time to be cured, and the breaching Party has commenced in a reasonable manner to cure such breach following receipt of such notice, then the breaching Party shall be afforded up to an additional forty-five (45) days to cure such breach..

	
  

	
12.5

	
A Party may terminate this Agreement immediately upon written notice to the other Party (i) in the event that the other Party becomes insolvent, or (ii) in the event of any pending or threatened bankruptcy action or any other insolvency proceeding against the other Party.

	
  

	
12.6

	
[* * *]

	
  

	
12.7

	
In the event that a Party, its Affiliates or any of their respective directors or officers, or any of its assets, properties or intellectual properties becomes or is likely to become the subject of any actions, suits, claims or events that may adversely affect such Party’s performance of this Agreement, the other Party may, at its discretion, terminate this Agreement upon forty five (45) days’ prior written notice to the original Party.

	
  

	
12.8

	
If LGLS does not receive Regulatory Approval for the commercial sale of a Product in the Exclusive Territory within [* * *] after NOVAVAX receives U.S. Regulatory Approval for a Seasonal Product, and after good faith discussion and trial by the Parties to resolve any issues and the Parties are unable to resolve such issues, then either party may, at its discretion, terminate this Agreement as to the Exclusive Territory, upon prior written notice to the other party on or after [* * *] after NOVAVAX receives U.S. Regulatory Approval for a Seasonal Product.

	
  

	
12.9

	
Notwithstanding any other provision to the contrary, in the event of expiration or termination of this Agreement due to a breach by NOVAVAX or in accordance with Section 12.5, LGLS shall have an exclusive, fully paid, perpetual, irrevocable right and license, under the NOVAVAX Proprietary Rights, to research, develop, make, have made, distribute, market, sell, offer to sell and use the Products in the Field of Use in the Exclusive Territory and a non-exclusive, fully paid, perpetual, irrevocable right and license, under the NOVAVAX Proprietary Rights, to research, develop, make, have made, distribute, market, sell, offer to sell and use the Products in the Field of Use in the Non-Exclusive Territory.

	
  

	
12.10

	
In the event of termination of this Agreement caused by or attributable to a breach hereof by a Party, the rights and licenses granted to each Party under this Agreement and the obligations of each Party shall cease.

	
  

	
12.11

	
Except as expressly provided herein, the termination or expiration of this Agreement shall not relieve any Party from its obligations arising prior to such expiration or termination.

  

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WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE COMMISSION.

Without limiting foregoing, the following provisions of this Agreement shall survive termination or expiration of this Agreement: Section 2.2 (trademarks); Sections 5.1 and 5.3 (relating to transfer of Regulatory Approval); Article 7 (audits); Article 9 (confidentiality); Section 10.1 (prosecution and maintenance of patents); Section 10.3 (improvements); Article 11 (indemnification); Section 12.9 (retained rights); Section 12.13 (remedy); Article 13 (incidental and consequential damages; Article 14 (independent contractors); Section 16.2 (governing law); Section 16.5 (entire agreement); Section 16.6 (arbitration); Section 16.9 (severability); and Section 16.11 (third party beneficiaries).

	
  

	
12.12

	
Termination is not the exclusive remedy under this Agreement and, whether or not termination is effected, all other rights and remedies at law or equity will remain available.

13. INCIDENTAL AND CONSEQUENTIAL DAMAGES.

 

IN NO EVENT WILL ANY PARTY BE LIABLE TO ANY OTHER PARTY OR ANY THIRD PARTY CLAIMING THROUGH OR UNDER ANY SUCH PARTY, FOR ANY LOST PROFITS, OR FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY LAW, AND IRRESPECTIVE OF WHETHER THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

14. INDEPENDENT CONTRACTORS.

 

The Parties are independent contractors and not partners, joint-venturers or otherwise affiliated and neither has any right or authority to bind the other in any way.

 

15. ASSIGNMENT.

 

Each Party’s rights and obligations under this Agreement may not be directly or indirectly assigned, delegated or transferred, in whole or in part, to a third party by assignment or other means without the prior written consent of the other Party, which consent shall not be unreasonably withheld. Subject to the foregoing, this Agreement shall be binding on and inure to the benefit of the Parties, their heirs, executors, administrators, successors, and permitted assigns.

 

16. MISCELLANEOUS.

 

	
  

	
16.1

	
Amendment and Waiver.  Except as otherwise expressly provided herein, any provision of this Agreement may be amended and the observance of any provision of this Agreement may be waived (either generally or any particular instance and either retroactively or prospectively) only with the written consent of the Parties.

	
  

	
16.2

	
Governing Law.  This Agreement shall be governed by and construed under the laws of the State of New York, USA, without regard to conflicts of laws provisions thereof.

	
  

	
16.3

	
Headings.  Headings and captions are for convenience only and are not to be used in the interpretation of this Agreement.  The Parties have had an equal role in the negotiation and preparation of this Agreement and, in the event of any ambiguity in this Agreement, no negative inference shall be drawn against either Party as the primary draftsperson of the Agreement and all provisions shall be construed in accordance with their fair meaning.

  

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WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE COMMISSION.

	
  

	
16.4

	
Notices.  Notices under this Agreement shall be sufficient if personally delivered or by facsimile or email transmission, or delivered by a recognized international courier service to a Party at its addresses set forth in the signature block below or as amended by notice pursuant to this subsection.

	
  

	
16.5

	
Entire Agreement.  This Agreement supersedes all prior or contemporaneous proposals, oral or written, all negotiations, conversations, or discussions between or among the Parties relating to the subject matter of this Agreement and all past dealing or industry custom.

	
  

	
16.6

	
Arbitration.  Any dispute, controversy or claim arising out of or in relation to this Agreement or at law, or the breach, termination or invalidity thereof, that cannot be settled amicably by agreement of the Parties hereto, shall be finally and exclusively settled by binding arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce, before three (3) neutral arbitrators selected in accordance with the procedures of the International Chamber of Commerce. The place of arbitration shall be New York, New York.  The arbitrators shall not have the authority to grant any award or relief that is not permitted by the terms of this Agreement, or to vary the terms of this Agreement.  All documents and agreements relative to any such dispute shall be read, interpreted, and construed from the English versions thereof.  The award rendered shall be final and binding upon both Parties.  Judgment upon the award may be entered in any court having jurisdiction, or application may be made to such court for judicial acceptance of the award and/or an order of enforcement as the case may be. Unless the arbitrators determine that equity requires otherwise, the arbitrators shall award to the prevailing Party (as determined by the arbitrators) the costs of the arbitration, as well as the reasonable, out-of-pocket fees and expenses of the prevailing Party’s attorneys.  Any arbitration subject to this Section shall be completed within six (6) months from the filing of notice of a request for such arbitration, and the decision of the arbitrators shall be in written form, setting forth findings of fact and conclusions of law with the reasons for such findings and conclusions stated. The arbitration proceedings and the decision shall, except as required by applicable laws, not be made public without the joint consent of the Parties and each Party shall maintain the confidentiality of such proceedings and decision unless otherwise permitted by the other Party.  The decision of the arbitrators shall be the sole, exclusive and binding remedy of the Parties regarding any and all disputes, controversies, claims and counterclaims presented to the arbitrators. The decision of the arbitrators will be final and not subject to further review, except pursuant to the United States Federal Arbitration Act.  Any award may be entered in a court of competent jurisdiction for a judicial recognition of the decision and an order of enforcement. Each Party has the right before or, if the arbitrators cannot hear the matter within an acceptable period, during the arbitration, to seek and obtain from the appropriate court provisional remedies such as attachment, preliminary injunction and replevin, to avoid irreparable harm, maintain the status quo, or preserve the subject matter of the arbitration.  Notwithstanding the foregoing, any dispute relating to a Party’s Patent Rights shall be submitted to a court of competent jurisdiction.

	
  

	
16.7

	
Publicity.  Neither Party shall issue any press release or make any other public announcement concerning the execution or existence of this Agreement or any of the terms hereof without the prior written consent of the other Party, which may not be unreasonably withheld or delayed.

  

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EXCHANGE COMMISSION.

	
  

	
16.8

	
Force Majeure.  If a Party is unable to perform its obligations or enjoy the benefits of the Agreement because of the occurrence of any contingency beyond the reasonable control of such Party, including, but not limited to, war (whether a declaration thereof is made or not), terrorism, sabotage, insurrection, rebellion, riot or other act of civil disobedience, act of a public enemy, act of any government or any agency or subdivision thereof, judicial action, general strikes, fire, accident, explosion, epidemic, quarantine, restrictions, storm, flood, earthquake, adverse weather conditions, other natural disasters, Acts of God, unless such occurrence is caused by a Party's negligent act or omission, (a “Force Majeure Event”), the Party who has been affected shall give prompt written notice to the other and shall use all commercially reasonable efforts to resume performance as soon as practicable.  Upon receipt of such notice, all obligations affected by such Force Majeure Event under this Agreement (other than any payment obligations here under), which shall remain in full force and effect) shall be suspended for the duration of such Force Majeure Event. Upon the termination of any Force Majeure Event, the Party affected shall be obligated to cure or remedy any failure to perform by reason of such Force Majeure Event.  If the period of nonperformance exceeds sixty (60) days from the notice, the Party whose performance has not been affected may terminate the Agreement in its entirety or on a Product-by-Product or country-by-country basis.

	
  

	
16.9

	
Severability.  If any provision of this Agreement shall be held to be invalid or unenforceable, then the meaning of said provision will be construed, to the extent feasible, so as to render the provision enforceable, and if no feasible interpretation would save such provision, it will be severed from the remainder of this Agreement which will remain in full force and effect unless the severed provision is essential and material to the rights or benefits received by any Party.  In such event, the Parties will use their respective best commercial efforts to negotiate, in good faith, a substitute, valid and enforceable provision or agreement which most nearly effects the Parties’ intent in entering into this Agreement.

	
  

	
16.10

	
Counterparts. This Agreement may be executed in counterparts, each of which will be an original, but which together will constitute one and the same instrument.  Execution and delivery of this Agreement by exchange of facsimile copies, or electronic copies in PDF format, bearing the facsimile signature of a Party shall constitute a valid and binding execution and delivery of this Agreement by such Party.

	
  

	
16.11

	
No Third Party Beneficiaries.  None of the provisions of this Agreement shall be for the benefit of or be enforceable by any creditor of either Party or by any other third party.  This Agreement is not intended to confer any rights or remedies hereunder upon and shall not be enforceable by any person other than the Parties hereto, their respective successors and permitted assigns.

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first above written.

	
  NOVAVAX, INC.

	  	
  LG LIFE SCIENCES, LTD.

	  	  	  
	  	  	  
	
  By: /s/ Rahul Singhvi

	  	
  By: /s/ Iljae Jung

	
  Name: Rahul Singhvi

	  	
  Name: Dr. Iljae Jung

	
  Title: CEO and President

	
  

	
  Title: CEO and President

  

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Schedule A

 

Patents and Patent Applications

	
[***]

	
[***]

	  
	  
	  
	
[***]

	
[***]

	 
	
[***]

	
[***]

  

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Schedule B

 

Technology Transfer

 

[***]1

 

1 Four pages omitted and filed separately with the Commission.

  

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Schedule C

 

Non-Exclusive Territory

 

[***]

  

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Schedule D

Clinical Development Plan

[see the attached page]

  

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A

CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED

WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE COMMISSION.

 

[***]2

 

2 One page omitted and filed separately with the Commission.

  

24/24UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

	
 

 

IN RE ACURA PHARMACEUTICALS, INC.

SECURITIES LITIGATION

	
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             Case No. 10-CV-5757

 

 

            Hon. Virginia M. Kendall

STIPULATION OF SETTLEMENT

  

  

  

This Stipulation of Settlement (including documents executed pursuant thereto and Exhibits) (collectively, the “Stipulation”) is entered into this 31st day of October, 2011 between Lead Plaintiff (on behalf of themselves and each of the Class Members) and Defendants Acura Pharmaceuticals, Inc., Jennifer Reddick (as executrix of the estate of Andrew D. Reddick), Peter A. Clemens, Bruce F. Wesson, William A Sumner, and Immanuel Thangaraj. This Stipulation is intended by the Settling Parties (as defined below) to fully, finally, and forever resolve, discharge, and settle the Released Claims (as defined below) upon and subject to the terms and conditions herein.

 

	
I.

	
DEFINITIONS

 

As used in the Stipulation, the following terms have the meanings specified below:

 

The Parties

 

1.1             “Acura,” “Acura Pharmaceuticals,” or “the Company” means Acura Pharmaceuticals, Inc.

 

1.2             “Acura Shareholders Investors Group” or “ASIG” means John E. Clark, Jr., Glenn Farmer, and John Sliwa.

 

1.3             “Defendants” means Acura, Jennifer Reddick (as executrix of the estate of Andrew D. Reddick), Peter A. Clemens, Bruce F. Wesson, William A Sumner, and Immanuel Thangaraj.

 

1.4             “Individual Defendants” means Jennifer Reddick (as executrix of the estate of Andrew D. Reddick), Peter A. Clemens, Bruce F. Wesson, William A Sumner, and Immanuel Thangaraj;

 

1.5             “KSF” means Kahn Swick & Foti, LLC and its successors.

  

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1.6             “Lead Counsel” means KSF.

 

1.7             “Lead Plaintiff” means ASIG, both individually and collectively as the ASIG, which was appointed Lead Plaintiff by order of the Court dated January 11, 2011.

 

1.8             “Local Counsel” means Susman Heffner & Hurst LLP and its successors;

 

1.9             “Related Parties” means each Defendant’s past or present predecessors, successors, parent entities, affiliates, employers, and subsidiaries, and, in the case of the Defendants and their respective predecessors, successors, parent entities, affiliates, and subsidiaries, each of their past or present directors, officers, employees, partners, insurers, co-insurers, reinsurers, agents, controlling shareholders, attorneys, accountants, auditors, advisors, investment advisors, personal or legal representatives, predecessors, successors, parent entities, subsidiaries, divisions, joint ventures, assigns, spouses, heirs, related or affiliated entities, and any person, firm, trust, corporation, partnership, limited liability company, officer, director, or other individual or entity in which any Defendant or its past or present predecessors, successors, parent entities, affiliates and subsidiaries has or had a controlling interest or which has or had a controlling interest in any Defendant or its past or present predecessors, successors, parent entities, affiliates and subsidiaries, and the Individual Defendants’ families, and any trust of which an Individual Defendant is the settlor or which is for the benefit of an Individual Defendant’s family, and the legal representatives, heirs, successors or assigns of each of the foregoing;

 

1.10           “Released Persons” means each and all of the Defendants and each and all of the Related Parties;

  

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1.11           “Settling Parties” means, collectively, the Lead Plaintiff (on behalf of themselves and the Class Members) and each of the Defendants who has signed this Stipulation by and through his, her or its respective counsel;

 

Additional Defined Terms

 

1.12           “Action” means the above-captioned case.

 

1.13           “Authorized Claimant” means any Class Member whose claim for recovery has been allowed pursuant to the terms of the Stipulation.

 

1.14           “Confidential Witnesses” means any Person identified or referred to as a Confidential Witness or “CW” in the Complaint.

 

1.15           “Claimant” means any Class Member who files a Proof of Claim in such form and manner, and within such time, as the Court shall prescribe.

 

1.16           “Claims Administrator” means Strategic Claims Services.

 

1.17           “Claim Form” shall have the meaning set forth in ¶3.1 of this Stipulation.

 

1.18            “Class” means all Persons who purchased or otherwise acquired the securities of Acura Pharmaceuticals between February 21, 2006 and April 22, 2010, inclusive. Excluded from the Class are the Defendants; any officers or directors of Acura Pharmaceuticals during the Class Period and any current officers or directors of Acura Pharmaceuticals; any corporation, trust or other entity in which any Defendant has a controlling interest; and the members of the immediate families of Andrew D. Reddick, Peter A. Clemens, Bruce F. Wesson, William A Sumner, and Immanuel Thangaraj and their successors, heirs, assigns, and legal representatives. Also excluded from the Class are those Persons who timely and validly request exclusion from the Class pursuant to the Notice of Pendency and Proposed Settlement of Class Action.

  

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1.19           “Class Member” means a Person who falls within the definition of the Class.

 

1.20           “Class Notice and Administration Fund” shall have the meaning set forth in ¶2.9 of this Stipulation.

 

1.21           “Class Period” means February 21, 2006 through April 22, 2010, inclusive.

 

1.22           “Court” means the United States District Court for the Northern District of Illinois.

 

1.23            “Effective Date” means the first date by which all of the events and conditions specified in ¶7.1 of the Stipulation have been met and have occurred

 

1.24           “Escrow Account” means an interest-bearing account maintained by the Escrow Agent.

 

1.25           “Escrow Agent” means First NBC Bank.

 

1.26           “Exhibits” means all of the exhibits to this Stipulation, including Exhibit A, Exhibit A-1, Exhibit A-2, Exhibit A-3 and Exhibit B.

 

1.27           “Fee and Expense Application” shall have the meaning set forth in ¶6.1 of this Stipulation.

 

1.28           “Fee and Expense Award” shall have the meaning set forth in ¶5.2(c) of this Stipulation.

  

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1.29           “Final” means when the last of the following with respect to the Judgment shall occur: (i) the expiration of the time to file a motion to alter or amend the Judgment under Federal Rule of Civil Procedure 59(e) has passed without any such motion having been filed; (ii) the expiration of the time in which to appeal the Judgment has passed without any appeal having been taken, which date shall be deemed to be thirty (30) days following the entry of the Judgment, unless the date to take such an appeal shall have been extended by Court order or otherwise, or unless the 30th day falls on a weekend or a Court holiday, in which case the date for purposes of this Stipulation shall be deemed to be the next business day after such 30th day;  (iii) if such motion to alter or amend is filed, the motion is denied; and (iv) if an appeal is taken, either (a) the appeal has been dismissed and the time, if any, for commencing any further appeal has expired, or (b) the Judgment has been affirmed in its entirety and the time, if any, for commencing any further appeal has expired.  For purposes of this paragraph, an “appeal” shall include any petition for a writ of certiorari or other writ that may be filed in connection with approval or disapproval of this Settlement but shall not include any appeal that concerns only the issue of attorneys’ fees and reimbursement of costs or the Plan of Allocation of the Settlement Fund.

 

1.30            “Judgment” means the final order and judgment approving the Settlement and dismissing the Action with prejudice, to be entered by the Court substantially in the form attached hereto as Exhibit B.

 

1.31           “Net Settlement Fund” means the balance of the Settlement Fund after payment of items (a) through (d) of ¶5.2 of this Stipulation.

 

1.32           “Notice” shall have the meaning set forth in ¶3.1 of this Stipulation.

 

1.33           “Person” means an individual, corporation, partnership, limited partnership, association, joint stock company, estate, legal representative, trust, unincorporated association, government, or any political subdivision or agency thereof, and any entity, including any business or legal entity, and, as to each of the foregoing, their spouses, heirs, predecessors, successors, representatives, or assignees.

  

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1.34           “Plan of Allocation” means a plan or formula of allocation of the Settlement Fund, to be proposed by Lead Counsel and approved by the Court, whereby the Settlement Fund shall be distributed to Authorized Claimants after payment of the items set forth in ¶5.2(a)-(d) herein.

 

1.35           “Preliminary Approval Order” means the preliminary order issued by the Court for mailing and publication as defined in ¶3.1 herein and substantially in the form of Exhibit A hereto.

 

1.36           “Released Claims” shall mean any and all claims (including Unknown Claims), debts, demands, damages, losses, rights, obligations, liabilities, suits, actions, causes of action, allegations, and arguments of every nature and description whatsoever (including, but not limited to, any claims for damages, interest, attorneys’ fees, expert or consulting fees, and any other costs, expenses or liability whatsoever), whether based on federal, state, local, statutory or common law, or any other law, rule, or regulation, whether fixed or contingent, accrued or un-accrued, liquidated or unliquidated, at law or in equity, matured or unmatured, known or unknown, whether class or individual in nature, and whether or not concealed or hidden, that have been asserted or could have been asserted in the Action or any forum by Lead Plaintiffs or any Class Member, arising from, relating in any way to, or in connection with:  (i) the facts alleged in the Action; (ii)  investments (including, but not limited to, purchases, sales, exercises, and decisions to hold) in securities issued by Acura Pharmaceuticals, including, but not limited to, the purchase or sale of Acura Pharmaceuticals stock between February 21, 2006 and April 22, 2010, inclusive; (iii) any disclosures, registration statements, or other statements by Acura Pharmaceuticals, including, and any other any disclosures, registration statements, or other statements disclosed, made, released, distributed, or disseminated during the time period covered by the Complaint, including but not limited to the time period between February 21, 2006 and April 22, 2010, inclusive; (iv) the Securities Act of 1933 and/or the Securities Exchange Act of 1934, arising from, relating in any way to, or in connection with the purchase or acquisition of the securities of Acura Pharmaceuticals between February 21, 2006 and April 22, 2010, inclusive; or (v) any alleged negligence, gross negligence, recklessness, intentional conduct, breach of duty of care and/or breach of duty of loyalty, unjust enrichment, fraud, or breach of fiduciary duty, arising from, or relating in any way to, or in connection with the facts alleged in the Action;

  

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1.37           “Settlement” means the settlement embodied in this Stipulation.

 

1.38           “Settlement Amount” means the sum of One Million, Five Hundred Thousand Dollars ($1,500,000.00), in cash.

 

1.39           “Settlement Fairness Hearing” shall have the meaning set forth in ¶3.2 of this Stipulation.

 

1.40           “Settlement Fund” means the principal amount of One Million, Five Hundred Thousand Dollars ($1,500,000.00), in cash, deposited, or to be deposited into the Escrow Account, pursuant to ¶2.2 of this Stipulation, and in accordance with the other terms of this Stipulation, plus all interest earned thereon pursuant to ¶¶2.2, 2.3, and 2.6 of this Stipulation.

 

1.41            “Stipulation” shall have the meaning set forth in the introductory paragraph of this document.

 

1.42           “Summary Notice” shall have the meaning set forth in ¶3.1 of this Stipulation.

  

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1.43           “Unknown Claims” means any and all claims, debts, demands, damages, losses, rights, obligations, liabilities, suits, actions, causes of action, allegations, and arguments of every nature and description whatsoever (including, but not limited to, any claims for damages, interest, attorneys’ fees, expert or consulting fees, and any other costs, expenses or liability whatsoever), whether based on federal, state, local, statutory or common law, or any other law, rule, or regulation, whether fixed or contingent, accrued or un-accrued, liquidated or unliquidated, at law or in equity, matured or unmatured, whether class or individual in nature, and whether or not concealed or hidden, that any Lead Plaintiff or any Class Member does not know or suspect to exist at the time of the release of the Released Persons that, if known, might have affected this Stipulation or any of the terms hereof, or the decision by any Class Member not to object to this Settlement or not to opt out from the Class.

 

	
II.

	
THE ACTION

 

This litigation is a putative federal securities class action lawsuit brought on behalf of all those who purchased or otherwise acquired Acura securities during the Class Period alleging that Defendants made materially false and misleading statements and omissions regarding, inter alia, the safety and efficacy of Acura’s lead drug candidate, Acurox; the results of the Company’s clinical studies and the design of such studies; Acurox’s product labeling and commercialization; communications between Acura and the FDA; Acura’s compliance with its code of ethics; and the likelihood of FDA approval for Acurox.   The Complaint alleges that on April 22, 2010, the previously omitted or misstated facts were fully revealed to the public.

  

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In their Complaint, Lead Plaintiff alleged that Defendants engage in the research, development, and manufacture of pharmaceutical product candidates that utilize Acura’s Aversion Technology, Impede Technology, and other technologies that purportedly provide orally administered pharmaceutical drug products containing commonly-abused ingredients with deterrent features designed to reduce the likelihood of such abuse.  Acura’s lead product candidate during the Class Period, “Acurox,” was an orally administered immediate release tablet containing the pain reliever oxycodone and the purported adversive agent, niacin.  Acurox was designed to relieve pain while discouraging common methods of abuse, including intentional overdosing, intravenous injection of dissolved tablets or capsules, and nasal snorting of crushed tablets or capsules.  The Complaint alleges that Defendants, throughout the Class Period, knew that the niacin additive rendered Acurox non-approvable by the FDA because only non-abusers would experience the adverse niacin effects, while abusers could easily avoid them.

 

The Complaint alleges that Acura’s clinical studies, from the inception of the Class Period, had already demonstrated that Acurox did little to deter oral abuse and caused a negative side effect in normal users. The Complaint also alleges that Defendants knew and/or recklessly disregarded that Acurox would not deter abusers from swallowing excessive numbers of tablets, and, as a result, Acura was unlikely to receive FDA approval for Acurox, was unlikely to be permitted to label Acurox as an abuse deterrent, and was unlikely to be able to viably promote or commercialize Acurox.

  

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The Complaint further alleges that Acura’s stock value dropped by approximately 45% after the FDA and Acura filed their respective briefing materials on Acurox and the FDA Advisory Committee determined by a vote of 19-1 that it did not have sufficient evidence to support the approval of the Acurox NDA.1

 

All Defendants deny that any of them made any material misstatement or omission, or violated the federal securities laws, or committed any other legal wrong.

 

This lawsuit was commenced on September 10, 2010.  On November 9, 2010, competing motions for appointment as lead plaintiff and lead counsel were filed.  On December 20, 2010, the court heard oral arguments from counsel for both lead plaintiff movants and on January 11, 2011, the Court appointed ASIG as Lead Plaintiff, and approved its selection of KSF as Lead Counsel, and Susman Heffner & Hurst LLP as Local Counsel.  On March 14, 2011, Lead Plaintiff, through lead counsel and local counsel, filed the Amended Complaint.

 

On May 13, 2011, Defendants moved to dismiss the Amended Complaint in its entirety.  In accordance with the Private Securities Litigation Reform Act of 1995 (“PSLRA”), discovery was stayed during the pendency of the motions to dismiss.  ASIG filed its opposition to the Defendants’ Motion to Dismiss on July 12, 2011 and Defendants filed their Reply Brief on August 11, 2011. The Motion to Dismiss is currently pending before the Court.

 

On July 21, 2011, the Parties conducted a full-day mediation before retired Judge Nicholas H. Politan, in New York City.  The mediation did not result in a settlement of the action.

1 Acurox was never approved by the FDA.  On June 17, 2011, the FDA approved Oxecta, a drug that contains just a single active ingredient, Oxycodone Hydrochloride, and no niacin.

  

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On May 13, 2011, Defendants filed a Notice of the Death of Andrew D. Reddick, and after several conversations between Lead Counsel and Counsel for Defendants, Plaintiff filed a Motion to Substitute Ms. Jennifer Reddick as the proper defendant on August 4, 2011. On August 15, 2011, the Court held a hearing and granted Plaintiff’s Motion to Substitute Ms. Reddick as the proper defendant.

 

Following the unsuccessful mediation, counsel for the parties engaged in informal settlement negotiations.  This Settlement was the product of those negotiations.  In connection with the Settlement, Lead Plaintiff (on their own behalf and behalf of the putative Class) has agreed to dismiss with prejudice all claims and causes of action asserted against all Defendants.

 

On September 29, 2011, the Court held a status conference, wherein the Court was advised by Lead Counsel that the parties have reached an agreement in principle.  After being fully advised in the matter, the Court set another status hearing for November 3, 2011, at which time the parties anticipate the Court will consider preliminary approval of the settlement and related issues.

 

	
III.

	
DEFENDANTS’ DENIALS OF WRONGDOING AND LIABLITY

 

Defendants have denied and continue to deny all charges of wrongdoing or liability against them arising out of any of the conduct, statements, acts, or omissions alleged, or that could have been alleged, in the Action and believe they have meritorious defenses to the claims. Defendants also have denied and continue to deny, inter alia, the allegations that Lead Plaintiff and the Class have suffered damages, that the prices of Acura Pharmaceuticals securities were artificially inflated by reasons of alleged misrepresentations, non-disclosures, or otherwise, and that Lead Plaintiff and the Class were harmed by the conduct alleged in the Amended Complaint. Moreover, Defendants believe that the evidence developed to date supports their position, and assert that the Action has no merit.

  

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Nonetheless, the undersigned Defendants have concluded that further conduct of the Action would be protracted and expensive, and have taken into account the uncertainty and risks inherent in any litigation, especially in a complex case like this Action.  As set forth below in ¶8.3 of this Stipulation, neither this Stipulation nor any act performed or document executed pursuant to or in furtherance of the Stipulation or the Settlement shall constitute an admission or finding of wrongful conduct, acts, or omissions on the part of any Defendant.

 

	
IV.

	
CLAIMS OF LEAD PLAINTIFF AND BENEFITS OF SETTLEMENT

 

Lead Plaintiff believes that the claims asserted in this Action have merit and that the evidence developed to date supports the claims. However, Lead Plaintiff recognizes and acknowledges the expense and length of continued proceedings necessary to prosecute the Action against Defendants through trial and possible appeals. Lead Plaintiff also has taken into account the uncertain outcome and the risk of any litigation, especially complex litigation such as this Action.

 

Further, Lead Plaintiff has considered the Action’s inherent difficulties and delays as well as the possibility that the Defendants may be unable to satisfy any eventual judgment awarded in favor of the Lead Plaintiff and the Class. Lead Plaintiff also is mindful of the inherent problems of proof and the possible defenses to the securities law violations asserted in the Action. Based on their evaluation, Lead Plaintiff and Lead Counsel believe that the Settlement set forth in the Stipulation confers substantial benefits upon and is in the best interests of the Class.

  

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V.

	
TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT

 

	
  

	
1.

	
The Agreement

 

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the Lead Plaintiff (for themselves and the Class Members) and the undersigned Defendants, by and through their counsel, that, subject to Court approval, the Action and the Released Claims shall be finally and fully compromised, settled, and released, and the Action shall be dismissed with prejudice as to all Settling Parties, upon and subject to the terms and conditions of the Stipulation, as follows.

 

	
  

	
2.

	
The Settlement

 

	
  

	
a.

	
The Settlement Class

 

2.1         The Settling Parties stipulate, for purposes of this Stipulation and Settlement only, to the certification of the Class pursuant to Rules 23(a) and (b)(3) of the Federal Rules of Civil Procedure.  If for any reason (including the exercise of a right to terminate under the Stipulation) Final Approval of the Settlement is not granted, then the certification of the Class shall become null and void without further order of any court.

 

	
  

	
b.

	
The Settlement Fund

 

2.2          Acura Pharmaceuticals shall pay or cause to be paid the Settlement Amount within the time set forth in ¶2.3 of this Stipulation, below, into the Escrow Account in settlement of the Action and the Released Claims which, with any accrued interest, shall constitute the Settlement Fund.  Other than the sole and exclusive obligation of Acura Pharmaceuticals to pay or cause to be paid the Settlement Amount to the Escrow Agent, no Defendant shall have any obligation to make any payment pursuant to this Stipulation or the Settlement.  Under no circumstances will Acura Pharmaceuticals be required to pay more than the Settlement Amount pursuant to this Stipulation or the Settlement, subject to any interest payments allowed and required under ¶2.3 below.

  

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2.3           Subject to the terms of this Stipulation, Acura Pharmaceuticals shall pay or cause to be paid the Settlement Amount into the Escrow Account within thirty (30) business days after entry of the Preliminary Approval Order. To enable the timely payment of the Settlement Amount, Lead Counsel shall, no later than two (2) days after the entry of the Preliminary Approval Order, provide counsel for the undersigned Defendants with mailing instructions and a taxpayer identification number for the Escrow Account. If the Settlement Amount is not paid within thirty (30) business days after entry of the Preliminary Approval Order (and provided that Lead Counsel has timely provided the mailing instructions and taxpayer identification detailed above), Lead Plaintiff may require interest to be paid by Acura Pharmaceuticals at the published three-month LIBOR rate per annum on such dates, from thirty (30) business days after entry of the Preliminary Approval Order until the Settlement Amount is paid.

 

2.4           This is not a claims-made settlement, and Defendants will have no ability to recapture any of the Settlement Amount, unless the Settlement does not become effective as set forth in Section 7 of this Stipulation.

 

2.5           The Released Persons shall have no responsibility for or incur any liability with respect to the management, investment, or distribution of the Settlement Fund or Net Settlement Fund or for any losses suffered by, or fluctuations in the value of, the Settlement Fund or Net Settlement Fund.

  

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c.

	
The Escrow Agent

 

2.6         The Escrow Agent shall not disburse the Settlement Fund except as provided in the Stipulation, by Court order, or by written agreement of counsel for all Settling Parties. Upon Final Approval of the Settlement and completion of the claims processing, the Escrow Agent shall distribute the Net Settlement Fund (as defined below) in accordance with the Court-approved Plan of Allocation without further order of the Court.

 

2.7         Subject to further order and/or direction as may be made by the Court, the Escrow Agent is authorized to execute transactions on behalf of the Class Members that are consistent with the terms of the Stipulation.

 

2.8         All funds held by the Escrow Agent shall be deemed and considered to be in custodia legis of the Court, and shall remain subject to the jurisdiction of the Court until such time as such funds shall be distributed pursuant to the Stipulation and/or further order(s) of the Court.

 

2.9         After payment of the Settlement Fund to the Escrow Agent, the Escrow Agent may establish a “Class Notice and Administration Fund” of up to $116,250 from the Settlement Fund. The Class Notice and Administration Fund may be used by Lead Counsel, without prior approval of the Court, only to pay costs and expenses reasonably and actually incurred in connection with providing notice to the Class (including any reimbursement of banks, brokerage houses or other nominees solely for their reasonable out-of-pocket expenses incurred in providing notice to beneficiaries who are Class Members, which expenses would not have been incurred except for the sending of such notice, subject to further order of the Court with respect to any dispute concerning such compensation), locating Class Members, assisting with the filing of claims, administering and distributing the Settlement Fund to Authorized Claimants, processing Proof of Claim and Release forms, and paying escrow fees and costs.

  

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2.10        The Released Persons shall not have any responsibility for or incur any liability with respect to: any act, omission, or determination of or by the Escrow Agent, Lead Counsel, or any designees or agents thereof; the Class Notice and Administration Fund; the administration of, distribution of, or disbursement from the Class Notice and Administration Fund; the Settlement Fund; the administration of, distribution of, or disbursement from the Settlement Fund; the Net Settlement Fund; or the administration of, distribution of, or disbursement from the Net Settlement Fund.

 

	
  

	
d.

	
Taxes

 

2.11       The Settling Parties and the Escrow Agent agree to treat the Settlement Fund as being at all times a “qualified settlement fund” within the meaning of Treas. Reg. §1.468B-1. In addition, the Escrow Agent shall timely make such elections as necessary or advisable, including the “relation-back election” (as defined in Treas. Reg. §1.468B-1) back to the earliest permitted date. Such elections shall be made in compliance with the procedures and requirements contained in such regulations. It shall be the responsibility of the Escrow Agent to timely and properly prepare and deliver the necessary documentation for signature by all necessary parties, and thereafter to cause the appropriate filing to occur.

  

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2.12           For the purpose of Section 468B of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, the “administrator” shall be the Escrow Agent. The Escrow Agent shall timely and properly file all informational and other tax returns necessary or advisable with respect to the Settlement Fund (including, without limitation, the returns described in Treas. Reg. §1.468B-2(k)). Such returns shall reflect that all Taxes (including any estimated Taxes, interest or penalties) on the income earned by the Settlement Fund shall be paid out of the Settlement Fund as provided in ¶2.13 of this Stipulation.

 

2.13         All Taxes (including any estimated Taxes, interest, or penalties) arising with respect to the income earned by the Settlement Fund, including: (i) any Taxes or tax detriments that may be imposed upon the Released Persons with respect to any income earned by the Settlement Fund for any period during which the Settlement Fund does not qualify as a “qualified settlement fund” for federal or state income tax purposes (“Taxes”); and (ii) expenses and costs incurred (including, without limitation, expenses of tax attorneys and/or accountants and mailing and distribution costs and expenses relating to filing (or failing to file) tax returns) (“Tax Expenses”), shall be paid out of the Settlement Fund; in no event shall the Released Persons have any responsibility for or liability with respect to the Taxes or the Tax Expenses. The Escrow Agent shall indemnify and hold each of the Released Persons harmless for Taxes and Tax Expenses (including, without limitation, Taxes payable by reason of any such indemnification). Further, Taxes and Tax Expenses shall be treated as, and considered to be, a cost of administration of the Settlement Fund and shall be timely paid by the Escrow Agent out of the Settlement Fund without prior order from the Court and the Escrow Agent shall be obligated (notwithstanding anything herein to the contrary) to withhold from distribution to Authorized Claimants any funds necessary to pay such amounts including the establishment of adequate reserves for any Taxes and Tax Expenses (as well as any amounts that may be required to be withheld under Treas. Reg. §1.468B-2(1)(2)). The Settling Parties hereto agree to cooperate with the Escrow Agent, each other, and their tax attorneys and accountants to the extent reasonably necessary to carry out the provisions of ¶¶2.11 to 2.13 of this Stipulation.

  

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2.14       For the purpose of ¶¶2.11 to 2.13 of this Stipulation, references to the Settlement Fund shall include the Settlement Fund, the Class Notice and Administration Fund and the Net Settlement Fund, and shall also include any earnings on each of the foregoing.

 

	
  

	
e.

	
CAFA Notice

 

The undersigned Defendants shall, no later than ten (10) calendar days following the filing of this Stipulation in Court, serve a notice of the proposed Settlement in compliance with the requirements of the Class Action Fairness Act, 28 U.S.C. § 1711 et seq.

 

	
  

	
f.

	
Termination of Settlement

 

In the event that the Effective Date does not occur or the Stipulation shall terminate, or be canceled, or shall not become effective for any reason, including, without limitation, in the event that the Settlement is not approved by the Court or the Judgment is reversed or vacated following any appeal taken therefrom, the Settlement Fund and the Class Notice and Administration Fund and the Net Settlement Fund (in each case, including accrued interest), less certain expenses actually incurred and properly due and owing in connection with the Settlement provided for herein, shall be refunded pro rata to Acura Pharmaceuticals and/or any other entities contributing to the Settlement Fund, as provided in ¶7.3 of this Stipulation, below.

  

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3.

	
Preliminary Approval Order and Settlement Fairness Hearing

 

3.1           Promptly after execution of the Stipulation, the Settling Parties shall submit the Stipulation together with its Exhibits to the Court and shall apply for entry of the Preliminary Approval Order, substantially in the form of Exhibit A hereto, requesting, inter alia, the preliminary approval of the Settlement set forth in the Stipulation, and approval for mailing the Notice of Pendency and Proposed Settlement of Class Action (the “Notice”) substantially in the form of Exhibit A-1 hereto, mailing the Proof of Claim and Release (the “Claim Form”) substantially in the form of Exhibit A-2 hereto, and publication of a Summary Notice substantially in the form of Exhibit A-3 hereto.  The Notice shall include the general terms of the Settlement set forth in the Stipulation, the proposed Plan of Allocation, the general terms of the Fee and Expense Application (as defined below), and the date of the Settlement Fairness Hearing (as defined below).

 

3.2           Lead Counsel shall request that after notice is given, the Court hold a hearing (the “Settlement Fairness Hearing”) and approve the Settlement of the Action as set forth herein. At or after the Settlement Fairness Hearing, as set forth in ¶3.1 of this Stipulation, above, and ¶¶6.1 to 6.4 of this Stipulation, below, Lead Counsel also will request that the Court approve the proposed Plan of Allocation and the Fee and Expense Application; Lead Counsel also may request Court approval of an application by each of the Lead Plaintiffs for reimbursement for reasonable costs and expenses, including their time spent on the Action. The Preliminary Approval Order submitted to the Court shall specifically include provisions that, among other things, will:

 

(a)           Preliminarily approve this Stipulation and the Settlement as being fair, just, reasonable and adequate to all Settling Parties;

 

  

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(b)          Preliminarily certify the Class, solely for purposes of the Settlement, and find, solely for purposes of the Settlement, that each element for certification of the Class pursuant to Rule 23 of the Federal Rules of Civil Procedure is met;

 

(c)          Approve the form of the Notice for mailing to Members of the Class;

 

(d)          Approve the form of the Claim Form for mailing to Members of the Class;

 

(e)           Approve the Summary Notice for publication;

 

(f)           Direct Lead Counsel to mail or cause to be mailed by first class mail the Notice and the Claim Form to those Persons in the Class who can be identified through reasonable effort, on or before the date specified in the Preliminary Approval Order;

 

(g)          Direct nominees who purchased or otherwise acquired Acura Pharmaceuticals common stock or call options or who sold Acura Pharmaceuticals put options for the benefit of Class Members between February 21, 2006 and April 22, 2010, inclusive, to send the Notice and Claim Form to all such Class Members within ten (10) days after receipt of the Notice or send a list of the names and addresses of such beneficiaries to the Claims Administrator within ten (10) days of receipt of the Notice;

 

(h)          Direct Lead Counsel to cause the Summary Notice to be published once in the Investor’s Business Daily, on or before the date specified in the Preliminary Approval Order, and once online over the PR Newswire, on or before the date specified in the Preliminary Approval Order, and to place a copy of the Complaint and the Stipulation (including Exhibits) on the website of Lead Counsel or a website maintained by Lead Counsel, on or before the date specified in the Preliminary Approval Order;

  

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(i)           Provide that Class Members who wish to participate in the Settlement shall complete and file Claim Forms pursuant to the instructions contained therein;

 

(j)           Find that the notice given pursuant to subparagraphs (b)-(g) above constitutes the best notice practicable under the circumstances, including individual notice to all Class Members who can be identified upon reasonable effort, and constitutes valid, due and sufficient notice to all Class Members, complying fully with the requirements of Rule 23 of the Federal Rules of Civil Procedure, the Constitution of the United States, and any other applicable law;

 

(k)          Schedule the Settlement Fairness Hearing to be held by the Court to consider and determine whether the Settlement should be approved as fair, reasonable and adequate, and whether the Judgment approving the Settlement should be entered;

 

(l)           Provide that any Class Member who so desires may exercise the right to exclude themselves from the Class but only if they comply with the requirements for so doing as set forth in the Notice;

 

(m)         Provide that at or after the Settlement Fairness Hearing, the Court shall determine whether the proposed Plan of Allocation should be approved;

 

(n)          Provide that at or after the Settlement Fairness Hearing, the Court shall determine and enter an Order regarding whether and in what amount attorneys’ fees and reimbursement of expenses should be awarded to Lead Counsel out of the Settlement Fund;

  

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(o)           Provide that pending final determination of whether the Settlement should be approved, neither Lead Plaintiffs nor any Class Member, either directly, representatively, or in any other capacity, shall commence or prosecute any action or proceeding in any court or tribunal asserting any of the Released Claims against any of the Released Persons;

 

(p)           Provide that any objections to: (i) the Settlement; (ii) entry of the Judgment approving the Settlement; (iii) the proposed Plan of Allocation; (iv) Lead Counsel’s fee and expense application(s); or (v) Lead Plaintiff’s application(s) for expenses, and any papers submitted in support of said objections, shall be considered by the Court at the Settlement Fairness Hearing only if, on or before the date specified in the Preliminary Approval Order, Persons making objections shall have filed and served written objections (which shall set forth each objection and the basis therefore) and copies of any papers in support of their position as set forth in the Preliminary Approval Order; and

 

(q)           Provide that the Settlement Fairness Hearing may be continued or adjourned by Order of the Court without further notice to the Class.

 

	
  

	
4.

	
Releases

 

4.1           Upon the Effective Date, as defined in ¶1.23 of this Stipulation, Lead Plaintiff and each of the Class Members, on behalf of themselves, their respective present and former parent entities, subsidiaries, divisions, and affiliates, the present and former employees, officers, directors, advisors, partners, and agents of each of them, and the predecessors, heirs, executors, administrators, trusts, family members, successors and assigns of each of them, and anyone claiming through or on behalf of any of them, shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever released, relinquished, and discharged all Released Claims as against the Released Persons, whether or not such Class Member executes and delivers a Claim Form or participates in the Settlement Fund, unless such person validly and timely seeks to exclude themselves from the Class pursuant to the terms set forth in the Notice.

  

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4.2         Upon the Effective Date, all Class Members and anyone claiming through or on behalf of any of them, will be forever barred and enjoined from commencing, instituting, intervening in or participating in, prosecuting, or continuing to prosecute any action or other proceeding in any court of law or equity, arbitration tribunal, administrative forum, or other forum of any kind or character (whether brought directly, in a representative capacity, derivatively, or in any other capacity), asserting any of the Released Claims against any of the Released Persons, unless such person validly and timely seeks to exclude themselves from the Class pursuant to the terms set forth in the Notice.

 

4.3         With respect to any and all Released Claims, the Settling Parties stipulate and agree that upon the Effective Date, the Class shall expressly waive, and each Class Member shall be deemed to have waived, and by operation of the Judgment shall have expressly waived, any and all provisions, rights and benefits conferred by California Civil Code § 1542 (to the extent it applies to the Action) or any other law of any state or territory of the United States, or principle of common law, which is similar, comparable, or equivalent to California Civil Code § 1542, which provides:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

  

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Lead Plaintiff and Class Members expressly acknowledge that they may hereafter discover facts in addition to or different from those that any of them or their counsel now knows or believes to be true with respect to the subject matter of the Released Claims or otherwise, but upon the Effective Date Lead Plaintiff shall expressly have, each Class Member shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever settled and released any and all Released Claims, known or unknown, suspected or unsuspected, contingent or non-contingent, whether or not concealed or hidden, that now exist or heretofore have existed, upon any theory of law or equity now existing or coming into existence in the future, including, but not limited to, conduct that is negligent, reckless, intentional, with or without malice, or a breach of any duty, law, or rule, without regard to the subsequent discovery or existence of such different or additional facts.  Lead Plaintiff acknowledges, and the Class Members shall be deemed to have acknowledged, and by operation of the Judgment shall have acknowledged, that the foregoing waiver was separately bargained for and a key element of the Settlement of which this release is a part.

 

4.4         Upon the Effective Date, each of the Released Persons shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever released, relinquished, and discharged Lead Plaintiff, each and all of the Class Members, any confidential witness, any individual contacted by Lead Counsel in the course of their investigation, and Lead Counsel from all claims whatsoever arising out of, relating to, incidental to or in connection with the investigation, institution, prosecution, assertion, settlement, or resolution of the Action or the Released Claims, except for those claims brought to enforce the Settlement.

  

24

  

 

	
  

	
5.

	
Administration and Calculation of Claims, Final Awards, and Supervision and Distribution of Settlement Fund

 

5.1         The Claims Administrator shall administer and calculate the claims submitted by Class Members under the supervision of Lead Counsel and pursuant to the Preliminary Approval Order entered by the Court.

 

5.2         Subject to the terms of this Stipulation and any orders of the Court, the Settlement Fund shall be applied as follows:

 

(a)           to pay all the costs and expenses reasonably and actually incurred in connection with providing notice, locating Class Members, assisting with the filing of claims, administering and distributing the Settlement Fund to Authorized Claimants, processing Claim Forms, and paying escrow fees and costs, if any;

 

(b)           to pay Taxes and Tax Expenses;

 

(c)           after the Effective Date, to pay Lead Counsel’s attorneys’ fees and expenses, to the extent allowed by the Court (the “Fee and Expense Award”);

 

(d)           after the Effective Date, to distribute the Net Settlement Fund to Authorized Claimants as allowed by the Stipulation (including ¶¶5.3-5.7 below) and the Plan of Allocation and any other applicable order of the Court. 

 

5.3         Upon the Effective Date and thereafter, and in accordance with the terms of the Stipulation and the Plan of Allocation, the Net Settlement Fund shall be distributed to Authorized Claimants, subject to and in accordance with ¶¶5.4 through 5.7 below.

  

25

  

 

5.4         Any Person falling within the definition of the Class may be excluded from the Class by submitting to the Claims Administrator a request for exclusion which complies with the requirements set forth in the Notice and is postmarked no later than fourteen (14) days prior to the date of the Settlement Hearing.  Any Person who submits a valid and timely request for exclusion (and does not subsequently revoke this request for exclusion) shall have no rights under the Stipulation, shall not share in the distribution of the Net Settlement Fund, and shall not be bound by the Stipulation (including the releases herein) or the Judgment. However, a Class Member may submit a written revocation of a request for exclusion within ninety (90) days after the mailing of the Notice, or such other period as may be ordered by the Court, and may receive payments pursuant to this Stipulation and Settlement provided the Class Member also submits a valid Claim Form, as set forth in ¶5.6 below, within ninety (90) days after the mailing of the Notice, or such other period as may be ordered by the Court.

 

5.5         Within ninety (90) days after the mailing of the Notice or such other time as may be set by the Court, each Person claiming to be an Authorized Claimant shall be required to submit to the Claims Administrator a completed Claim Form, signed under penalty of perjury and supported by such documents as are specified in the Claim Form and as are reasonably available to the Authorized Claimant.

 

5.6         All Class Members who fail to timely submit a Claim Form within ninety (90) days after the mailing of the Notice, or such other period as may be ordered by the Court, shall be forever barred from receiving any payments pursuant to the Stipulation and the Settlement, but will in all other respects be subject to and bound by the provisions of the Stipulation, the releases contained herein, and the Judgment.

  

26

  

 

5.7         The Net Settlement Fund shall be distributed to the Authorized Claimants substantially in accordance with a Plan of Allocation to be described in the Notice and approved by the Court. If there is any balance remaining in the Net Settlement Fund after six (6) months from the date of distribution of the Net Settlement Fund (whether by reason of tax refunds, uncashed checks or otherwise), Lead Counsel shall, if feasible, reallocate such balance among Authorized Claimants in an equitable and economic fashion. Thereafter, any balance which still remains in the Net Settlement Fund shall be donated to an appropriate, non-profit organization agreed upon by Lead Counsel and approved by the Court.

 

5.8         No Person shall have any claim against Lead Counsel, Defense Counsel, the Claims Administrator, or any entity designated by Lead Counsel based on distributions made substantially in accordance with the Stipulation and the Settlement contained herein, the Plan of Allocation, or further order(s) of the Court.

 

5.9         It is understood and agreed by the Settling Parties that any proposed Plan of Allocation of the Net Settlement Fund including, but not limited to, any adjustments to an Authorized Claimant’s claim set forth therein, is not a part of the Stipulation and is to be considered by the Court separately from the Court’s consideration of the fairness, reasonableness, and adequacy of the Settlement, and any order or proceeding relating to the Plan of Allocation shall not operate to terminate or cancel the Stipulation or affect or delay the finality of the Judgment or Settlement of the Action (including the releases contained in the Stipulation), or any other orders entered pursuant to the Stipulation.

 

5.10       The undersigned Defendants will take no position with respect to the Proposed Plan of Allocation or such plan as may be approved by the Court, except that the Plan of Allocation shall be in accordance with the statutory limitation on damages set forth at 15 U.S.C. § 77k(e). The Plan of Allocation is a matter separate and apart from the Settlement and any decision by the Court concerning the Plan of Allocation shall not affect the validity or finality of the Settlement.

  

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5.11       The Released Persons shall not have any responsibility for or incur any liability with respect to: any act, omission, or determination of or by the Claims Administrator, Lead Counsel, or any designees or agents thereof; any act, omission, or determination of or by any other entity designated by Lead Counsel as referenced in ¶5.8 of this Stipulation; the Plan of Allocation; or the administration of the Plan of Allocation.  This provision shall have no impact on any responsibility for or liability regarding the holding and management of the Settlement Fund by the Escrow Agent, which is governed by separate escrow agreement among the parties and the Escrow Agent.

 

	
  

	
6.

	
Lead Counsel’s Attorneys’ Fees and Reimbursement of Expenses

 

6.1         Lead Counsel intends to submit an application or applications for distributions to them from the Settlement Fund for: (a) an award of attorneys’ fees; and (b) reimbursement of actual expenses, including the fees of any experts or consultants incurred in connection with prosecuting the Action, plus any interest on such attorneys’ fees and expenses accrued at the same rate and for the same periods as earned by the Settlement Fund (until paid), as may be awarded by the Court (the “Fee and Expense Application”).  Defendants will not take any position on any Fee and Expense Application that Lead Counsel may file, provided that such Fee and Expense Application seeks an award of attorneys’ fees in an amount not greater than one third (331/3%) of the Settlement Fund and reimbursement of expenses incurred in connection with the prosecution of this Action not to exceed fifty-two thousand dollars ($52,000.00), and further provided that any such Fee and Expense Application is subject to the approval of the Court.

 

  

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6.2         The attorneys’ fees and expenses, as awarded by the Court, shall be paid to Lead Counsel from the Settlement Fund, as ordered, immediately after the Effective Date of the Settlement, subject to the joint and several obligation of Lead Counsel to make appropriate refunds or repayments to the Settlement Fund plus interest (accrued as from the date the funds of the Settlement Fund are deposited with the Escrow Agent until the date the appropriate refunds or repayments are made), if and when, as a result of any appeal and/or further proceedings on remand, or successful collateral attack, the fee or expense award is reduced or reversed.

 

6.3         The procedure for and the allowance or disallowance by the Court of any applications by Lead Counsel for attorneys’ fees and expenses, including the fees of experts and consultants, and for any reimbursement to Lead Plaintiffs for reasonable time, costs, and expenses incurred directly related to representation of the Class, all to be paid out of the Settlement Fund, are not part of the Settlement, and are to be considered by the Court separately from the Court’s consideration of the fairness, reasonableness and adequacy of the Settlement. The Settling Parties agree that the Fee and Expense Award are not settlement terms and will not be grounds for terminating the Settlement or proposed Settlement. Any order or proceedings relating to the Fee and Expense Application, or any appeal from any order relating to either of the foregoing or reversal or modification of either of the foregoing, shall not operate to terminate or cancel the Stipulation, or affect or delay the finality of the Judgment or the Settlement (including the releases contained therein).

  

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6.4         The Released Persons shall have no responsibility for, and no liability whatsoever with respect to: any Fee and Expense Application that Lead Counsel may file; any payments to Lead Counsel pursuant to ¶¶6.1 and 6.2, above; any Fee and Expense Award that the Court may make in the Action. The Released Persons also shall have no responsibility for, and no liability whatsoever, with respect to any other Person who may seek fees and expenses in connection with prosecuting or helping to prosecute this Action against Defendants, or to any other Person who may assert some claim to:  any payments to Lead Counsel pursuant to ¶¶6.1 and 6.2, above; or any Fee and Expense Award that the Court may make in the Action;.

 

	 	
7.

	
Conditions of Settlement, Effect of Disapproval, Cancellation, or Termination

 

7.1         The Effective Date of the Stipulation and the Settlement shall be conditioned on the occurrence of all of the following events:

 

(a)        the Settlement Fund has been funded as required by ¶2.2 of this Stipulation;

 

(b)        The undersigned Defendants have not exercised their option to terminate the Stipulation pursuant to the terms of the Supplemental Agreement referenced in ¶7.8 of this Stipulation;

 

(c)         the Court has entered the Preliminary Approval Order referenced in ¶3.1 of this Stipulation;

 

(d)         the Court has entered the Judgment, or a judgment substantially in the form of Exhibit B hereto, which, inter alia, dismisses the Action with prejudice as to all Defendants and includes the releases set forth in this Stipulation; and

 

(e)          the Judgment has become Final, as defined in ¶1.30 of this Stipulation.

  

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7.2         Upon the occurrence of all of the events referenced in ¶7.1 of this Stipulation, any and all remaining interest or right of Defendants in or to the Settlement Fund, if any, shall be absolutely and forever extinguished. If all of the conditions specified in ¶7.1 of this Stipulation are not met, then the Stipulation shall be canceled and terminated subject to ¶7.4 of this Stipulation unless Lead Counsel and counsel for the undersigned Defendants mutually agree in writing to proceed with the Stipulation.

 

7.3         Unless otherwise ordered by the Court, in the event that the Effective Date does not occur or the Stipulation shall terminate, or be canceled, or shall not become effective for any reason, including, without limitation, in the event that the Settlement is not approved by the Court or the Judgment is reversed or vacated following any appeal taken therefrom, then within ten (10) business days after written notification of such event is sent by counsel for the undersigned Defendants (or any of them) to the Escrow Agent, the Settlement Fund (including accrued interest), including the Settlement Amount, plus the Class Notice and Administration Fund (including accrued interest), and the Net Settlement Fund, and all payments disbursed, including all expenses, costs, and any Fee and Expense Award– excluding only expenses and costs which have either been disbursed or are determined to be chargeable to the Class Notice and Administration Fund, in connection with providing notice and other reasonable administrative costs of implementing the Settlement, pursuant to ¶2.09 of this Stipulation, and Taxes and Tax Expenses that have been paid or that have accrued and will be payable at some later date – shall be refunded by the Escrow Agent to the respective entities that contributed to the Settlement Fund, pursuant to written instructions from Acura Pharmaceuticals or its successor-in-interest.  Such amount due to Acura Pharmaceuticals or the respective entities and/or persons that contributed to the Settlement Fund shall not be reduced by any investment losses on funds in escrow and any such losses shall be an obligation of the Escrow Agent.  If said amount or any portion thereof is not returned within such ten (10) day period, then interest shall accrue thereon at the rate earned on the Settlement Fund until the date that amount is returned.  At the request of counsel for Defendants, the Escrow Agent or its designee shall apply for any tax refund owed on the Settlement Fund and Class Notice and Administration Fund and pay the proceeds, after deduction of any fees or expenses reasonably incurred in connection with such application(s) for refund, pursuant to written direction from Acura Pharmaceuticals or its successor-in-interest.

  

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7.4         In the event that the Stipulation is not approved by the Court or the Settlement is not approved by the Court or is terminated or fails to become effective in accordance with its terms, the Settling Parties shall be restored to their respective positions in the Action as of the moment immediately before this Stipulation was fully executed. In such event, the terms and provisions of the Stipulation and any document executed pursuant to or in furtherance of the Stipulation or the Settlement, with the exception of ¶¶2.11, 7.3-7.5, and 8.4, shall have no further force and effect with respect to the Settling Parties and shall not be used in this Action or in any other proceeding for any purpose, and any judgment or order entered by the Court in accordance with the terms of the Stipulation shall be treated as vacated, nunc pro tunc. No order of the Court or modification or reversal on appeal of any Court order concerning the Plan of Allocation or the amount of any attorneys’ fees, costs, expenses and interest awarded by the Court to Lead Counsel shall constitute grounds for cancellation or termination of the Stipulation.

  

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7.5         If the Effective Date does not occur, or if the Stipulation is terminated, pursuant to its terms without prejudice, neither Lead Plaintiff nor Lead Counsel shall have any obligation to repay any amounts actually and properly disbursed from the Class Notice and Administration Fund. In addition, any expenses already incurred and properly chargeable to the Class Notice and Administration Fund pursuant to ¶2.10 of this Stipulation at the time of such termination or cancellation, but which have not been paid, shall be paid by the Escrow Agent in accordance with the terms of the Stipulation prior to the balance being refunded in accordance with ¶¶2.9 and 7.3 of this Stipulation.

 

7.6         If a case is commenced in respect to any Defendant under Title 11 of the United States Code (Bankruptcy), or a trustee, receiver, or conservator is appointed under any similar law, and in the event of the entry of a final order of a court of competent jurisdiction determining the transfer of the Settlement Fund, or any portion thereof, by or on behalf of such Defendant to be a preference, voidable transfer, fraudulent transfer, or similar transaction, then, at Lead Plaintiff’s option, as to such Defendant, the releases given and Judgment entered in favor of such Defendant pursuant to this Stipulation shall be null and void.

 

7.7         Notwithstanding the foregoing ¶7.6, Lead Plaintiff’s right to nullify the releases and Judgment as to any Defendant pursuant to ¶7.6 shall expire upon the Effective Date.

 

7.8         Pursuant to Federal Rule of Civil Procedure 23(e)(3), under which the parties seeking approval must file a statement identifying any agreement made in connection with the proposal, there is a Supplemental Agreement to this Stipulation of Settlement with additional provisions agreed upon between the Settling Parties.

 

  

33

  

 

	 	
8.

	
Miscellaneous Provisions

 

8.1         The Settling Parties (a) acknowledge that it is their intent to consummate this agreement; and (b) agree to cooperate to the extent reasonably necessary to effectuate and implement all terms and conditions of the Stipulation and to exercise their reasonable best efforts to accomplish the terms and conditions of the Stipulation.

 

8.2         Subject to the terms of this Stipulation, the Settling Parties intend this Settlement, along with the Stipulation and [Proposed] Judgment, to be a final and complete resolution of all disputes that Lead Plaintiffs and the Class have with the Released Persons, and that Defendants have with Lead Plaintiff and the Class, with respect to the Released Claims. The Settlement compromises claims which are contested and shall not be deemed an admission by any Lead Plaintiff or Defendant as to the merits of any claim or defense. The Judgment will contain a statement that during the course of the Action, Lead Plaintiff, Defendants, and their respective counsel at all times complied with the requirements of Federal Rule of Civil Procedure 11.  In addition, Lead Plaintiff and the Class will not make applications against Released Persons, and Defendants will not make applications against Lead Plaintiffs and the Class for fees, costs or sanctions, pursuant to Rule 11, Rule 37, Rule 45 or any other court rule or statute, with respect to any claims or defenses in this Action or to any aspect of the institution, prosecution, or defense of the Action. While retaining their right to deny liability, the undersigned Defendants agree that the amount paid to the Settlement Fund and the other terms of the Settlement were negotiated in good faith by the Settling Parties, and reflect a settlement that was reached voluntarily after consultation with competent legal counsel.  Each Lead Plaintiff and each Defendant reserves his, her or its right to rebut, in a manner that such party determines to be appropriate, any contention made in any public forum that the Action was brought, defended or settled in bad faith or without a reasonable basis.

  

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8.3         Neither the Stipulation nor the Settlement, nor any act performed or document executed pursuant to or in furtherance of the Stipulation or the Settlement: (a) is or may be deemed to be or may be used as an admission of, or evidence of, the validity of any Released Claim, or of any wrongdoing or liability of the Released Persons, or; (b) is or may be deemed to be or may be used as an admission of, or evidence of, any fault or omission of any of the Released Persons in any civil, criminal, administrative, or other proceeding before any court, administrative agency, arbitration tribunal, or other body. Any Released Person may file the Stipulation and/or the Judgment in any action or other proceeding that may be brought against them in order to support a defense, argument, or counterclaim based on principles of res judicata, collateral estoppel, release, good faith settlement, judgment bar or reduction, or any other theory of claim preclusion or issue preclusion or similar defense, argument, or counterclaim.

 

8.4         All agreements made and orders entered during the course of the Action relating to the confidentiality of information shall survive this Stipulation, pursuant to their terms.

 

8.5         All of the Exhibits to the Stipulation are material and integral parts hereof and are fully incorporated herein by reference.  In the event there exists a conflict or inconsistency between the terms of the Stipulation, on the one hand, and any Exhibit or the Supplemental Agreement, on the other, the terms of this Stipulation shall govern.

 

8.7         The Stipulation may be amended or modified only by a written instrument signed by or on behalf of all Settling Parties or their respective successors-in-interest.

  

35

  

 

8.8         The Stipulation, Supplemental Agreement, and the executed or so ordered versions of those ancillary documents which are attached hereto as Exhibits constitute the entire agreement among the Settling Parties and no representations, warranties or inducements have been made to any party concerning the Stipulation or its Exhibits other than the representations, warranties, and covenants contained and memorialized in such documents. Except as otherwise provided herein, Lead Plaintiff shall not be responsible for any costs borne by Defendants or their counsel, and Defendants shall not be responsible for any costs borne by Lead Plaintiff or their counsel.

 

8.9         Lead Counsel, on behalf of the Class, are expressly authorized by Lead Plaintiff to take all appropriate action required or permitted to be taken by the Class pursuant to the Stipulation to effectuate its terms and also are expressly authorized to enter into any modifications or amendments to the Stipulation on behalf of the Class which Lead Counsel deem appropriate.

 

8.10       Each counsel or other Person executing the Stipulation or any of its Exhibits on behalf of any party hereto hereby warrants that such Person has the full authority to do so.

 

8.11       The Stipulation may be executed in one or more counterparts. All executed counterparts and each of them shall be deemed to be one and the same instrument. A complete set of original executed counterparts shall be filed with the Court.

 

8.12       The Stipulation shall be binding upon, and inure to the benefit of, the successors and assigns of the Settling Parties.

  

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8.13       The Court shall retain jurisdiction with respect to implementation and enforcement of the terms of the Stipulation, and all Settling Parties submit to the jurisdiction of the Court for purposes of implementing and enforcing the Settlement.  The Settling Parties agree that any action based on this Stipulation or to enforce any of its terms shall be brought in this Court.

 

8.14       Lead Plaintiff and Lead Counsel represent and warrant that none of Lead Plaintiff’s claims or causes of action in the Action have been assigned, encumbered, or in any manner transferred in whole or in part.

 

8.15       All terms of this Stipulation and the executed or so ordered versions of those ancillary documents which are attached hereto as Exhibits shall be governed by and interpreted according to the substantive laws of the State of Illinois, without giving regard or effect to its choice-of-law rules, except to the extent that federal law requires the application of federal law.

 

8.16       The headings herein are used for the purpose of convenience only and are not meant to have legal effect.

 

8.17       The waiver by one Settling Party of any breach of this Stipulation by any other Settling Party shall not be deemed a waiver of any other prior or subsequent breach of this Stipulation.  Unless otherwise stated herein, any breach of any provision of this Stipulation by any Settling Party hereto shall not constitute grounds for rescission of this Stipulation, but shall constitute grounds only for a claim for specific performance for breach of this Stipulation.

 

8.18       The Settling Parties agree that no further discovery is necessary to confirm the fairness, reasonableness, and adequacy of the Settlement.

  

37

  

 

IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be executed, by their duly authorized attorneys dated this 31st day of October, 2011.

 

	
Dated: October 31, 2011

	
SUSMAN HEFFNER & HURST LLP

	  	  
	  	
/s/ Matthew T. Heffner by GH

	  	
Matthew T. Heffner

	  	
Two First National Plaza

	  	
Suite 600

	  	
Chicago, IL

	  	
Tel: (312) 346-3466

	  	
Fax: (312) 346-2829

	  	
Email: mheffner@shhllp.com

	  	  
	  	
Local Counsel for Lead Plaintiffs and the Class

	  	  
	  	
KAHN SWICK & FOTI, LLC

	  	
Kim E. Miller, pro hac vice

	  	
500 5th Avenue, Suite 1810

	  	
New York, NY 10110

	  	
Tel:  973-696-3730

	  	
kim.miller@ksfcounsel.com

	  	  
	  	
Lead Counsel for Lead Plaintiff and the Class

	  	  
	  	
LATHAM & WATKINS LLP

	  	  
	  	
/s/ Sean Berkowitz

	  	
Sean M. Berkowitz

	  	
233 South Wacker Drive, Suite 5800

	  	
Chicago IL 60606

	  	
Tel: 312-777-7016

	  	
sean.berkowitz@lw.com

	  	  
	  	
-and-

	  	  
	  	
LATHAM & WATKINS LLP

	  	
J. Christian Word

	  	
555 Eleventh Street, NW, Suite 1000

	  	
Washington DC 20004-1304

	  	
Tel: 202-637-2223

	  	
christian.word@lw.com

	 	 
	 	Counsel for Defendants

 

  

38

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