Document:

Exhibit
10.3

 

FORM
OF INTELLECTUAL PROPERTY LICENSE AGREEMENT BETWEEN

 

CQENS
TECHNOLOGIES INC. AND LEAP TECHNOLOGY LLC-

 

This
Intellectual Property License Agreement
(this “Agreement”) is
made as
of July 24,
2020, by and between

 

CQENS
Technologies Inc. a
corporation
organized under the
laws of
the State
of Delaware,
with its
principal place of business at
5550
Nicollet
Avenue,
Minneapolis,
MN 55419
(“CQENS”),
and

 

LEAP
TECHNOLOGY LLC, a
limited
liability company, organized under the
laws of
the State
of Delaware,
with its
registered agent at 16192 Coastal Highway, Lewes, DE 19958. The name of its initial ‎registered agent ‎at such address
is Harvard Business Services, Inc.

 

WHEREAS:

 

(a)
CQENS is the assignee of
the following assets with respect to the
configuration, ‎design, manufacture, marketing, sales, and merchandising of a heated tobacco ‎product (collectively,
the “IP Assets”):

 

(i)
trademark and service mark common law rights,
pending trademark and service mark applications and registrations including intention to use trademark and service mark rights
in the Asia Pacific Countries, and related goodwill (“Trademarks”), including (without limitation) those Trademarks
listed in Exhibit 1 attached hereto and any Trademarks developed in the future (which shall be included in an updated Exhibit
1);

 

(ii)
inventions, patents and patent applications in
the Asia Pacific Countries (“Patents”), including (without limitation) those Patents listed in Exhibit 1 attached
hereto and any Patents developed in the future (which shall be included in an updated Exhibit 1); and

 

(iii)
any other intellectual property rights (including
future intellectual property rights).

 

(b)
CQENS wishes to
provide exclusive licenses
to LEAP,
and LEAP wishes to obtain
exclusive licenses
from CQENS for the IP Assets
for the countries and jurisdictions
of China, India, Indonesia, Pakistan, Bangladesh,
Philippines, Vietnam, Thailand, Myanmar, Afghanistan, Malaysia, Nepal, Australia, Taiwan, Sri Lanka, Cambodia, Hong Kong, Papua,
New Guinea, Laos, Singapore, New Zealand, Mongolia, Timor-Leste, Fiji, Bhutan, Solomon Islands, Macau, Brunei, Maldives, New Caledonia,
French Polynesia, Vanuatu, Samoa, Guam, Kiribati Federated States of Micronesia, and Tonga (collectively, the “Asia Pacific
Countries”).

 

NOW,
THEREFORE,
in consideration of the
mutual covenants,
conditions,
and promises
contained herein, the
parties agree
as follows:

 

    	1

     

    

 

ARTICLE
1 INTERPRETATION

 

	1.01	Definitions

 

The
following terms will
have the
following meanings:

 

(a)
The IP Assets shall mean
all rights in the Asia
Pacific Countries for all appropriate and lawful uses.

 

(b)
“Business Day” shall mean Monday to Friday
inclusive, except
statutory or civic holidays observed
in the State
of Delaware.

 

(c)
“Product” means the
purposes for
which the license is granted
and refers specifically to
the use of the
IP Assets in any
product or embodiment
where the IP Asset is
employed and/or cited in
the label.

 

(d)
“Territory” shall mean the
Asia Pacific Countries as defined herein.

 

(e)
“Term” shall mean the term of this
Agreement as
provided in Article 7.00 hereof.

 

	1.02	Construction
    of Agreement

 

In
this Agreement:

 

	 	(a)	words
    denoting the
    singular include the
    plural and
    vice versa;
	 	 	 
	 	(b)	words
    importing the
    use of any gender shall include
    all genders;
	 	 	 
	 	(c)	the
    word” include”,
    “ includes”
    or” including
    “ shall
    mean “
    include/includes/including
    without limitation “;
	 	 	 
	 	(d)	when
    calculating the period of
    time within which or following which any act is
    to be done
    or step taken,
    the date which is the reference
    day in
    calculating such
    period shall
    be excluded.
    If the last day of
    such period is not
    a Business Day,
    the period
    shall end on the next
    Business Day;
	 	 	 
	 	(e)	the
    division of
    this Agreement into
    separate articles,
    sections,
    subsections and exhibits,
    are for convenience
    of reference only and shall
    not affect
    the construction or
    interpretation of
    this Agreement; and
	 	 	 
	 	(f)	words
    or abbreviations which have
    well known
    or trade meanings
    are use
    d herein in accordance
    with their recognized
    meanings.

 

    	2

     

    

 

ARTICLE
2 THE LICENSE

 

	2.01	Grant
    of License

 

Subject
to the terms and conditions of
this Agreement, CQENS
hereby
grants to LEAP an exclusive license
for the IP Assets for the purpose
of sublicensing and/or producing
and marketing products under
the license or
a granted sublicense within the Territory during
the term, and LEAP
may grant sublicenses under this Agreement on terms acceptable to LEAP ‎in its sole discretion, subject to the Sublicensee
being bound by this Agreement. With the consent of CQENS, LEAP shall be
permitted to sublicense the patent to any other party
and such sublicense shall be honored by
CQENS in the event that LEAP or its legal
successor is dissolved,
declares bankruptcy or is
otherwise no longer
able or willing to pursue to
the normal and anticipated course of its business
activities. For the avoidance of doubt, should CQENS develop additional IP Assets that are
related to the heat not burn technology, those IP Assets will be added to Exhibit 1 and the exclusive license granted herein will
extend to those additional IP Assets.

 

	2.02	Proprietary
    Rights

 

Subject
to the rights granted herein, CQENS retains all of its rights,
title and interests in
and to all trademark, patent
rights,
inventions, copyrights,
know-how,
and trade secrets relating to
the IP Assets outside of the Asia Pacific Countries except as otherwise expressly agreed between
the parties.
CQENS shall not
sell,
dispose,
or alienate in any way this
Agreement without respecting
LEAP’s legal rights hereunder,
and requiring any assignee to
assume CQENS’s obligations hereunder
in a form satisfactory to LEAP.

 

    	3

     

    

 

ARTICLE
3 CQENS REPRESENTATIONS AND WARRANTIES

 

	3.01	Representations
    and Warranties Generally

 

CQENS
hereby makes the representations
and warranties contained
in this Article
3.00
to LEAP
and acknowledges that LEAP
is relying upon the accuracy
of
each such
representation and warranty in
connection with its
entering into
this Agreement.

 

	3.02	Power
    and Authority

 

CQENS
has the
right,
full corporate power,
and absolute authority
to enter into this
Agreement and to
grant the rights herein described
to LEAP in
the manner
herein contemplated. CQENS
has taken
all necessary or desirable actions,
steps,
and corporate
or other
proceedings to approve or authorize,
validly and effectively,
the entering in
to, and
the execution, delivery,
and performance
of this Agreement
and the granting of
the rights
herein described. This Agreement
is a legal,
valid,
and binding
obligation of
CQENS, enforceable against CQENS
and LEAP in accordance
with its terms.

 

	3.03	Intellectual
    Property

 

CQENS
is the exclusive
assignee of the Trademarks, Patents and Applications in Exhibit 1 and is
authorized to
license the Trademarks, Patents
and Applications. CQENS
has not received any notice,
complaint, threat,
or claim alleging
infringement of the Trademarks,
Patents and Application
in Exhibit 1 or other intellectual
property or proprietary right
of any other person in connection
with the Trademarks, Patents
and Patent Applications. There
are no charges,
encumbrances,
pledges,
security interests,
liens,
actions,
claims,
demands or equities
of any nature or kind,
nor any rights or privileges
capable of becoming any of
the foregoing,
affecting the Trademarks, Patents
and Patent Applications.

 

	3.04	No
    Other Obligations

 

No
person has or has made any
claim or notification to
CQENS alleging any written or
oral agreement,
understanding or
commitment,
or any
right or
privilege (whether by law or
contractual) capable of becoming
an agreement or
commitment, to obtain
rights in and to
the Trademarks, Patents
and Patent Applications that would
conflict with
the rights herein granted
to LEAP.

 

	3.05	Warranty
    Disclaimer

 

CQENS
makes
and LEAP
receives no warranties
of
any kind,
either expressed
or
implied,
statutory or otherwise.
CQENS
specifically disclaims
any and
all implied
warranties
or conditions
of merchantability,
satisfactory
quality
or fitness
for a particular
purpose.

 

	3.06	Infringement
    Actions

 

(a)‎
As between CQENS and LEAP, LEAP is granted the sole right to sue and ‎collect damages and/or profits for both past and present
infringements of and any IP Assets in the Asia Pacific ‎Countries. If LEAP becomes aware of potential infringement of any
of the IP Assets, ‎LEAP shall provide CQENS with written notice of any such infringement within 90 days of ‎learning of
such infringement, and similarly, if CQENS becomes aware of any infringement of ‎any IP Asset, CQENS must provide written
notice to LEAP of such potential infringement ‎within 90 days of learning of such infringement (both notices referred to as
the “Infringement ‎Notice”). If LEAP elects by written notice to CQENS to not enforce LEAP’s rights within
60 ‎days of the Infringement Notice to CQENS, then CQENS shall have the sole right to sue and ‎collect all damages for
the infringement.

‎

(b)
In the event litigation is instituted against a third party for infringement of the ‎IP Assets under this Agreement in
the Asia Pacific Countries, the party instituting the ‎lawsuit shall bear the cost of the litigation and shall control
the litigation proceedings. The party ‎who did not institute the lawsuit will cooperate with the party who did institute
the lawsuit at ‎the expense of the party who instituted the lawsuit. The party who did not institute the lawsuit ‎can
be represented by counsel of its choice at its own expense.

 

    	4

     

    

 

ARTICLE
4 LEAP COVENANTS

 

	4.01	Covenants
    Generally

 

LEAP
hereby makes the covenants contained in this
Article 4.00 to  CQENS and 
acknowledges that
CQENS is
relying upon the accuracy of
such covenant in connection with
its entering
into this Agreement.

 

	4.02	No
    Competing

 

LEAP
hereby agrees to not market any
products in competition with
the IP Assets.

 

	4.03	Patent
    Marking

 

LEAP
will mark all
products sublicensed,
manufactured or
sold pursuant to this Agreement
with the relevant
numbers indicating the Trademarks, Patents or Patent Applications.
The marking
will be
in conformance with the patent
laws and other laws
of the country
of manufacture
or sale.

 

ARTICLE
5 ROYALTIES

 

	5.01	Royalty
    Consideration

 

In
consideration for the rights
it has been granted, CQENS has
received value it deems sufficient and appropriate and will not charge LEAP royalties nor will LEAP be required to pay
royalties in connection with
the licenses and rights extended. In no event shall LEAP be obligated to make any payment or other remuneration to CQENS in connection
with this Agreement; it being acknowledged and agreed that all such remuneration has been paid to CQENS in connection with that
certain Contribution Agreement entered into by and between the parties as of the date hereof (the “Contribution Agreement”).

 

    	5

     

    

 

ARTICLE
6 INDEMNIFICATIONS

 

	6.01	CQENS
    Indemnity

 

CQENS
agrees to indemnify and
hold LEAP harmless from
and against all
claims,
demands,
proceedings,
losses,
damages, liabilities,
deficiencies,
costs and
expenses (including all
legal and
other professional fees
and disbursements,
interest, penalties
and amounts
paid in settlement) suffered
or incurred by
LEAP as a result
of or
arising directly
or indirectly out of or in connection
with:

 

	 	(a)	any
    breach by CQENS
    of or
    any material inaccuracy of
    any representation or warranty
    of
    CQENS contained
    in this Agreement;
	 	 	 
	 	(b)	any
    breach or non-performance
    by CQENS of
    any covenant to be
    performed by it that is contained
    in this Agreement;
    and
	 	 	 
	 	(c)	infringement
    of any third party intellectual
    property rights in
    respect of the
    IP Assets, other
    than any claim arising
    as a result of modifications
    to the product
    performed by or on behalf
    of LEAP.

 

Notwithstanding
the foregoing but subject to Section 3.06,
in the
event that the IP Assets,
or any part thereof
is held to constitute an
infringement on the
intellectual property of any
third party,
CQENS,
at its option
and expense,
may either
(a) indemnify
LEAP as
above or (b) indemnify
LEAP from and against
any damages for
such pre-existing infringement,
and (i) amend the Patent
and/or Patent Application to make it
non-infringing,
(ii) procure for
LEAP the right to
use the
infringing materials,
and/or (iii)
replace the infringing Patent
or Patent Applications with other suitable non-infringing
rights having functionality
that is substantially
the same
in all
material respects to those
held to infringe.

 

	6.02	LEAP
    Indemnity

 

LEAP
agrees to indemnify
and hold CQENS harmless
from and against all claims,
demands,
proceedings,
losses, damages,
liabilities, deficiencies, costs
and expenses (including all legal
and other
professional fees and disbursements,
interest,
penalties and
amounts paid in settlement)
suffered or
incurred by the
Licensor as
a result of or
arising directly or indirectly
out of or in connection
with:

 

	 	(a)	any
    material breach or non-performance
    by LEAP of any covenant
    to be
    performed by it that
    is contained in this Agreement;
	 	 	 
	 	(b)	any
    breach arising
    from or relating to
    any use and
    distribution of
    the product
    by LEAP
    other than as expressly provided
    herein; and
	 	 	 
	 	(c)	infringement
    of any third
    party intellectual property
    rights which infringement
    arises from modifications
    to the Product
    performed by or on behalf of
    LEAP,
    except to the extent such
    claim is covered under Section
    6.01.

 

	6.03	Indemnification
    Procedure

 

Any
party seeking indemnification under Article 6.00 (the “Indemnitee”) in
respect of a third
party claim shall (i) promptly
notify the indemnifying party (the “Indemnitor”) of such
claim, (ii) provide the Indemnitor sole control
over the defense and/or
settlement thereof, and
(iii) at the Indemnitor’s
request and expense, provide
full information and reasonable assistance
to Indemnitor with respect
to such claims. Without limiting the
foregoing, with respect
to third party claims brought under Sections 6.01 and 6.02, the Indemnitee, at its
own expense, shall
have the right to participate with counsel
of its own choosing
in the defense
and/or settlement of
any such claims.

 

    	6

     

    

 

ARTICLE
7.00 TERM AND
TERMINATION

 

	7.01	Term

 

The
term of
this Agreement
shall be
for the life
of the patent
commencing on the date of execution
of
this Agreement
and shall continue
in full force and effect unless
terminated in accordance with
this Article 7.00.

 

	7.02	Termination
    for Cause

 

Either
party
may terminate
this Agreement
for cause
as follows:

 

7.02.1
Nonperformance re: Other Relevant
Agreement

 

Notwithstanding
the terms and conditions of the license, this Agreement shall be terminated if the IP Assets are repurchased by CQENS pursuant
to and in accordance with the terms of that certain Amended and Restated Limited Liability Company Agreement of LEAP dated as
of ‎date hereof (the “LLC Agreement”).

 

7.02.2
Breach of Agreement

 

If
any representation or
warranty provided for
herein proves to
be materially inaccurate,
or if
either party
material breaches any
covenant provided for
herein and such
breach is not cured within
thirty (30) days (if
capable of
being cured
within that time) after the non-breaching
party gives written notice
to the breaching
party of such breach,
the non-breaching party shall
have the
right to
terminate this
Agreement immediately
upon the
expiration of
such thirty (30) day
period. If the nature
of the breach
is such that more
than thirty (30)
days are required for cure,
the non-breaching
party shall have
the right to
terminate upon
written notice
if the breaching party fails
to commence efforts
to cure such
default within
the thirty (30) day period and
in any event such cure
is not completed within a reasonable
period of time after the commencement
of such 30
day period.

 

ARTICLE
8 GENERAL

 

8.01
Governing Law and Jurisdiction

 

This
Agreement shall be governed by and construed under the laws of the State of Delaware, without reference to conflict of laws principles.
The parties agree that any dispute arising under this Agreement or out of the negotiation of or the relationship that is being
formed pursuant to this Agreement will only be venued in the State or Federal Courts of Delaware, and hereby consent to such jurisdiction
and venue.

 

8.02
Assignment

 

This
Agreement may not be assigned by either party without the prior written consent of the other party (not to be unreasonably withheld,
conditioned or delayed). This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.

 

    	7

     

    

 

8.03
Notices

 

Any
notice, demand, or other communication ( “Notice” ) required or permitted to be given or made shall be in writing
and shall be sufficiently given or made if delivered in person, sent by facsimile transmission, or sent by prepaid first class
registered mail during normal business hours on a Business Day and addressed as follows:

 

8.04
Entire Agreement

 

The
parties hereto acknowledge
that this Agreement
and its Schedules, the Contribution Agreement and the LLC Agreement set forth the entire agreement and
understanding of the parties
hereto as
to the subject matter hereof,
and supersedes all prior
discussions, agreements
and writings in respect
hereto,
including the Letter
of intent.

 

8.05
Counterparts

 

This
Agreement may be executed in
any number of counterparts and
when so executed and delivered
shall have
the same force and effect as
though all signatures appeared on one document.

 

8.06
Further Assurances

 

Each
party covenants and
agrees to do and cause all
things to be done
and execute and deliver
all such documents as
may be
required in order to carry out the provisions of this Agreement.

 

8.07
Severability

 

The
provisions of
this agreement shall be severable,
and if any
provision of
this Agreement shall be held
or declared to be illegal,
invalid,
or unenforceable,
such illegal,
invalid or unenforceable provision
shall be severed
from this Agreement and the remainder
of this Agreement shall remain
in full force
and effect, and
the parties
shall negotiate a substitute,
legal,
valid and enforceable provision
that most nearly reflect
the parties’
intent in
entering into this Agreement.

 

[Signature
Page Follows]

 

    	8

     

    

 

IN
WITNESS WHEREOF, the
parties,
by their
duly authorized
representatives, have entered
into this Agreement.

 

	CQENS
    TECHNOLOGIES INC.
	 	 	 
	By:	                 	 
	 	 	 
	Name:	 	 
	 	 	 
	Title:	 	 

 

	LEAP
    TECHNOLOGY LLC
	 	              	 
	By:	 	 
	 	 	 
	Name:	 	 
	 	 	 
	Title:	 	 

 

    	9

     

    

 

Exhibit
1

 

INTELLECTUAL
PROPERTY LICENSED PURSUANT TO THIS AGREEMENT

 

The
following IP Assets are exclusively licensed by the assignee, CQENS, and by virtue of the document to which this exhibit is attached
in the countries of China, India, Indonesia, Pakistan, Bangladesh, Philippines, Vietnam, Thailand, Myanmar, Afghanistan, Malaysia,
Nepal, Australia, Taiwan, Sri Lanka, Cambodia, Hong Kong, Papua, New Guinea, Laos, Singapore, New Zealand, Mongolia, Timor-Leste,
Fiji, Bhutan, Solomon Islands, Macau, Brunei, Maldives, New Caledonia, French Polynesia, Vanuatu, Samoa, Guam, Kiribati Federated
States of Micronesia, and Tonga.

 

	1.‎	USPTO
    TRADEMARK Registration for CQENS
	 	 
	‎2.‎	PEOPLES’
    REPUBLIC OF CHINA TRADEMARK Registration for CQENS
	 	 
	‎3.‎	US
    PATENT APPLICATION No. 16/022482‎
	 	 
	‎4.‎	PCT
    PATENT APPLICATION No. PCT/US 19/12204‎

 

National
Phase Applications for Heat-not-Burn Device and Method in the following countries filed 7/03.2020.

 

	COUNTRY	 	DATE
    FILED	 	APPLICATION
    NO.
	Peoples’
    Republic of China	 	7/03/2020	 	TBD
	India	 	7/03/2020	 	TBD
	Indonesia	 	7/03/2020	 	TBD
	Vietnam	 	7/03/2020	 	TBD
	Philippines	 	7/03/2020	 	TBD
	Thailand	 	7/03/2020	 	TBD
	Malaysia	 	7/03/2020	 	TBD
	Singapore	 	7/03/2020	 	TBD
	Taiwan	 	7/03/2020	 	TBD
	Hong
    Kong	 	7/03/2020	 	TBD

 

This
Exhibit 1 is as of the date hereof and may be updated regularly as additional trademarks, patents are issued and patent applications
are submitted and numbers are assigned. For the avoidance of doubt, should CQENS develop additional
IP Assets in the Territory that are related to the heat not burn technology, those IP Assets will be added to Exhibit 1 and the
exclusive license granted herein will extend to those additional IP Assets.

 

    	10Exhibit

CONTINGENT VALUE RIGHTS AGREEMENT

THIS CONTINGENT VALUE RIGHTS AGREEMENT, dated as of July 17, 2020
(this “Agreement”), is entered into by and between La Jolla Pharmaceutical Company, a California corporation (“Parent”), and American Stock Transfer & Trust Company, LLC, as Rights Agent (the “Rights Agent”).

RECITALS

WHEREAS, Parent, TTP Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), and Tetraphase Pharmaceuticals, Inc., a Delaware corporation (including in its capacity as the surviving corporation in the Merger, the “Company”), have entered into an Agreement and Plan of Merger dated as of June 24, 2020 (as it may be amended or supplemented from time to time pursuant to the terms thereof, the “Merger Agreement”);

WHEREAS, capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Merger Agreement;

WHEREAS, pursuant to the Merger Agreement, Merger Sub has agreed to commence a tender offer (the “Offer”) to purchase all of the outstanding shares of Company Common Stock in exchange for: (i) the Cash Consideration, and (ii) one contingent value right per Share, as hereinafter described (together with the Cash Consideration, the “Consideration”);

WHEREAS, following completion of the Offer, at the Effective Time, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and as a wholly owned subsidiary of Parent;

WHEREAS, pursuant to and on the terms set forth in the Merger Agreement, each Share shall be converted at the Effective Time into the right to receive the Consideration, including the contingent value rights as hereinafter described; and

WHEREAS, the Rights Agent is willing to act in connection with the issuance, transfer, exchange and payment of such contingent value rights as provided herein.

NOW, THEREFORE, in consideration of the premises and mutual agreements herein, Parent and the Rights Agent hereby agree as follows:

		
	1.
	DEFINITIONS

1.1    Definitions. As used in this Agreement, the following terms shall have the following meanings:

“Acting Holders” means, at the time of determination, Holders of at least 40% of the outstanding CVRs as set forth on the CVR Register.

“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person; “control” means the ownership, directly or indirectly, of more than 50% of the voting securities entitled to vote for the directors (or similar officials) of a 

Person or the possession, by contract or otherwise, of the authority to direct the management and policies of a Person.

“Calendar Quarter” means each period of three consecutive months commencing on January 1, April 1, July 1 and October 1 of each calendar year.

“Calendar Year” means the period of four consecutive Calendar Quarters beginning on January 1 and ending on December 31 of each calendar year.

“Change of Control” means (i) a sale or other disposition of all or substantially all of the assets of either Parent or the Company on a consolidated basis (other than to any direct or indirect wholly owned subsidiary of Parent), (ii) a merger or consolidation involving either Parent or the Company in which Parent or the Company, respectively, is not the surviving entity, and (iii) any other transaction involving either Parent or the Company in which Parent or the Company, respectively, is the surviving entity but in which the stockholders of Parent or the Company, respectively, immediately prior to such transaction own less than fifty percent (50%) of the surviving entity’s voting power immediately after the transaction, other than any bona fide equity financing transaction solely related to the continued financing of the operations of Parent and its subsidiaries.

“Commercially Reasonable Efforts” means, with respect to a task related to a product, the efforts required to carry out such task in a diligent and sustained manner without undue interruption, pause or delay, which level is at least commensurate with the level of efforts that a pharmaceutical company of comparable size and resources as those of Parent and its controlled Affiliates would devote to a product of similar potential (including commercial potential), taking into account its proprietary position and profitability (including pricing and reimbursement status, but excluding the obligation to pay the Milestone Amounts under this Agreement), anticipated or actual market conditions and economic return potential, the regulatory environment, and other relevant technical, commercial, legal, scientific and/or medical factors.

“CVRs” means the rights of Holders to receive contingent payments of cash pursuant to the Merger Agreement and this Agreement.

“CVR Register” has the meaning set forth in Section 2.3(b).

“DTC” means The Depository Trust Company or any successor entity thereto.

“Event of Default” has the meaning set forth in Section 6.1(a).

“Holder” means a Person in whose name a CVR is registered in the CVR Register at the applicable time.

“Independent Accountant” has the meaning set forth in Section 4.5(a).

“Licensee” means any non-Affiliate third party granted a license by Parent or its Affiliates under the Company IP to make, have made, use, sell, offer for sale, or import XERAVA in the U.S., but shall exclude any (i) third party distributor of XERAVA that has no royalty or other payment obligations to any Parent or any of its Affiliates that are calculated based on amounts invoiced or received by such third party for sales of XERAVA or (ii) a third party distributor of XERAVA that (x) does not take title to XERAVA, (y) does not invoice XERAVA sales to third party customers and (z) is responsible only for inventory management and distribution with respect XERAVA on behalf of Parent or its Affiliates.

“Milestone” means each of Milestone 1, Milestone 2 and Milestone 3.

“Milestone 1” means the first achievement of annual Net Sales of at least $20,000,000 during the Calendar Year ending on December 31, 2021.

“Milestone 2” means the first achievement of annual Net Sales of at least $35,000,000 during any Calendar Year ending on or before December 31, 2024.

“Milestone 3” means the first achievement of annual Net Sales of at least $55,000,000 during any calendar year ending on or before December 31, 2024.

“Milestone Amount” means each of Milestone 1 Amount, Milestone 2 Amount and Milestone 3 Amount.

“Milestone 1 Amount” means, with respect to the achievement of Milestone 1, an amount per CVR equal to the quotient of $2,500,000, divided by the aggregate number of CVRs issued pursuant to the Merger Agreement and this Agreement, without interest (it being understood and agreed that all Milestones or a combination of any two Milestones can be earned in the same year, in which case all such applicable Milestone Amounts shall be payable).

“Milestone 2 Amount” means, with respect to the achievement of Milestone 2, an amount per CVR equal to the quotient of $4,500,000, divided by the aggregate number of CVRs issued pursuant to the Merger Agreement and this Agreement, without interest (it being understood and agreed that all Milestones or a combination of any two Milestones can be earned in the same year, in which case all such applicable Milestone Amounts shall be payable).

“Milestone 3 Amount” means, with respect to the achievement of Milestone 3, an amount per CVR equal to the quotient of $9,000,000, divided by the aggregate number of CVRs issued pursuant to the Merger Agreement and this Agreement, without interest (it being understood and agreed that all Milestones or a combination of any two Milestones can be earned in the same year, in which case all such applicable Milestone Amounts shall be payable).

“Milestone Cap” means $16,000,000.

“Milestone Non-Achievement Certificate” has the meaning set forth in Section 2.4(e). “Milestone Notice” has the meaning set forth in Section 2.4(a)(i).

“Milestone Payment Date” has the meaning set forth in Section 2.4(a).

“Net Sales” means the gross amount invoiced by Parent, any of its Affiliates (including the Surviving Corporation) or any of its Licensees (each, a “Selling Party”) to a third party for sales or distribution of XERAVA in the U.S., less the following deductions as calculated in accordance with GAAP consistently applied:

		
	(i)
	customary trade, cash and quantity discounts given to customers;

(ii)rebates, credits and allowances given by reason of rejections returns, damaged or defective product or recalls;

		
	(iii)
	government-mandated rebates, credits and adjustments paid or deducted;

(iv)customary price adjustments, allowances, credits, chargeback payments, discounts, rebates, free of charge concessions, fees and reimbursements granted or made to managed care organizations, group purchasing organizations or other buying groups, pharmacy benefit management companies, health maintenance organizations and any other providers of health insurance coverage, health care organizations or other health care institutions (including hospitals), health care administrators, patient assistance or other similar programs, or to federal state/provincial, local and other governments, including their agencies;

(v)reasonable and customary freight, shipping, insurance and other transportation expenses, if borne by the applicable Selling Party without reimbursement from any third party;

(vi)amounts written off as uncollectable debt; provided that the amount of any uncollectable debt deducted pursuant to this exception and actually collected in a subsequent Calendar Quarter shall be included in Net Sales for such subsequent Calendar Quarter; and

(vii)sales, value-added, excise taxes, tariffs and duties, and other taxes and government charges directly related to the sale, delivery or use of XERAVA (but not including taxes assessed against the net income derived from such sale).

Furthermore, Net Sales shall not include use of or sale at or below the direct manufacturing cost of XERAVA by Parent, its Affiliates (including the Surviving Corporation) and/or its sublicensees of XERAVA for non-clinical or clinical studies, patient-assistance programs or charitable donations.

Resales or sales of XERAVA made in good faith between or among any Selling Party shall not be included in the calculation of Net Sales but the subsequent resale or sale to a non- Affiliate third party (other than a Selling Party) shall be included in the computation of Net Sales.

All Net Sales shall be computed in Dollars, and where any Net Sales are calculated in a currency other than Dollars, they shall be translated into Dollars in accordance with GAAP.

“Officer’s Certificate” means a certificate signed by the chief executive officer, president, chief financial officer, any vice president, the controller, the treasurer or the secretary,

in each case of Parent, in his or her capacity as such an officer, and delivered to the Rights Agent.

“Permitted Transfer” means a transfer of CVRs (a) upon death of a Holder by will or intestacy; (b) by instrument to an inter vivos or testamentary trust in which the CVRs are to be passed to beneficiaries upon the death of the trustee; (c) pursuant to a court order; (d) by operation of law (including by consolidation or merger) or without consideration in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; (e) in the case of CVRs held in book-entry or other similar nominee form, from a nominee to a beneficial owner and, if applicable, through an intermediary, as allowable by DTC; or (f) as provided in Section 2.10.

“Rights Agent” means the Rights Agent named in the first paragraph of this Agreement, until a successor Rights Agent becomes such pursuant to the applicable provisions of this Agreement, and thereafter “Rights Agent” shall mean such successor Rights Agent.

“Share” means each share of Company Common Stock outstanding immediately prior to the Effective Time, except any (i) shares of Company Common Stock held by the Company or any wholly-owned Subsidiary of the Company as of immediately prior to the Effective Time (or held in the Company’s treasury), (ii) shares of Company Common Stock held by Parent, Merger Sub or any other wholly-owned Subsidiary of Parent as of immediately prior to the Effective Time or (iii) Dissenting Company Shares.

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

1.2    Rules of Construction. For purposes of this Agreement, the parties hereto agree that: (a) whenever the context requires, the singular number shall include the plural, and vice versa; (b) the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include masculine and feminine genders; (c) the word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and does not simply mean “if”; (d) the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation;” (e) the meaning assigned to each capitalized term defined and used in this Agreement is equally applicable to both the singular and the plural forms of such term, and words denoting any gender include all genders; (f) where a word or phrase is defined in this Agreement, each of its other grammatical forms has a corresponding meaning unless the context otherwise requires; (g) a reference to any specific Legal Requirement or to any provision of any Legal Requirement includes any amendment to, and any modification, re-enactment or successor thereof, any legislative provision substituted therefor and all rules, regulations and statutory instruments issued thereunder or pursuant thereto; (h) references to any agreement or Contract are to that agreement or Contract as amended, modified or supplemented; (i) they have been represented by legal counsel during the negotiation and execution and delivery of this Agreement and therefore waive the application of any Legal Requirement, holding or rule of construction providing that ambiguities in an 

agreement or other document will be construed against the party drafting such agreement or document; and (j) the word “or” shall not be exclusive (i.e., “or” shall be deemed to mean “and/or”) unless the subjects of the conjunction are mutually exclusive. The headings contained

in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement. All references to “Dollars” or “$” are to United States Dollars, unless expressly stated otherwise.

		
	2.
	CONTINGENT VALUE RIGHTS

		
	2.1
	CVRs.

		
	(a)
	As provided in the Merger Agreement:

(i)    effective as of the Acceptance Time, Merger Sub will accept for payment and pay the Consideration, including one CVR, for each share of Company Common Stock validly tendered and not validly withdrawn pursuant to the Offer; and

(ii)    effective as of the Effective Time, (A) each Share shall be converted into the right to receive the Consideration, which includes one CVR, and (B) each Company Warrant that is assumed and converted pursuant to Section 5.2(c) of the Merger Agreement shall be treated in accordance with its terms.

(b)    The initial Holders shall be determined pursuant to the terms of the Merger Agreement and this Agreement, and a list of the initial Holders shall be furnished to the Rights Agent by or on behalf of Parent in accordance with Section 4.1 hereof.

2.2    Non-transferable. The CVRs may not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than through a Permitted Transfer, and, in the case of a Permitted Transfer, only in accordance with Section 2.3(c) hereof and in compliance with applicable United States federal and state securities laws and the terms and conditions hereto. Any such sale, assignment, transfer, pledge, encumbrance or disposal of CVRs, in whole or in part, in violation of this Section 2.2, shall be null and void and of no effect.

		
	2.3
	No Certificate; Registration; Registration of Transfer; Change of Address.

		
	(a)
	The CVRs shall not be evidenced by a certificate or other

instrument.

		
	(b)
	The Rights Agent shall keep a register (the “CVR Register”) for

the purpose of identifying the Holders and registering CVRs and transfers of CVRs as herein provided. The CVR Register will initially show one position for Cede & Co. representing all of the CVRs that are issued to the holders of Shares held by DTC on behalf of the street holders of the Shares. The Rights Agent will have no responsibility whatsoever directly to the street name holders or DTC participants with respect to transfers of CVRs. With respect to any payments to 

be made under Section 2.4 below, the Rights Agent will accomplish such payment to any former street name holders of the Shares by sending such payments to DTC. The Rights Agent will have no responsibilities whatsoever with regard to the distribution of payments by DTC to such street name holders.

(c)    Subject to the restrictions on transferability set forth in Section 2.2, every request made to transfer a CVR must be in writing and accompanied by a written instrument of transfer in form reasonably satisfactory to the Rights Agent pursuant to its written guidelines, duly executed by the Holder thereof, the Holder’s attorney duly authorized in writing, the Holder’s personal representative or the Holder’s survivor, as applicable, and setting forth in reasonable detail the circumstances relating to the transfer. Upon receipt of such written notice, the Rights Agent shall, subject to its reasonable determination that the transfer instrument is in proper form and the transfer otherwise complies with the other terms and conditions of this Agreement (including the provisions of Section 2.2), register the transfer of the CVRs in the CVR Register and notify the Parent of the same. Any registration, transfer or assignment of the CVRs shall be without charge to the Holder (other than payment of a sum to the extent necessary to cover any stamp or other Tax or other governmental charge that is imposed in connection with any such registration, transfer or assignment). All duly transferred CVRs registered in the CVR Register shall be the valid obligations of Parent and shall entitle the transferee to the same benefits and rights under this Agreement as those held immediately prior to the transfer by the transferor. No transfer of a CVR shall be valid unless and until registered in the CVR Register.

(d)    A Holder may make a written request to the Rights Agent to change such Holder’s address of record in the CVR Register. The written request must be duly executed by the Holder. Upon receipt of such written request, the Rights Agent is hereby authorized to, and shall promptly, record the change of address in the CVR Register.

		
	2.4
	Payment Procedures.

(a)    If any Milestone is achieved, then, in each case, on a date (a “Milestone Payment Date”) that is within 60 days following the last day of such Calendar Quarter in which such Milestone is achieved:

(i)    Parent will deliver to the Rights Agent (A) a notice (a “Milestone Notice”) indicating the achievement of such Milestone and that the Holders are entitled to receive the applicable Milestone Amount, and (B) for each CVR, cash in the aggregate amount of the Milestone Amount.

(ii)    Subject to the terms of this Agreement, each CVR shall entitle the Holder thereof to receive from the Rights Agent (on behalf of Parent), for each CVR, the Milestone Amount, in each case subject to any applicable withholding Tax.

(b)    The Rights Agent shall promptly, and in any event within 10 Business Days of receipt of a Milestone Notice, as well as any letter of instruction reasonably required by the Rights Agent, send each Holder at its registered address a copy of such Milestone Notice. At the time the Rights Agent sends a copy of such Milestone Notice to the Holders, the 

Rights Agent shall also pay to each Holder, subject to any applicable withholding Tax, the applicable Milestone Amount (the amount of which each Holder is entitled to receive shall be based on the applicable Milestone Amount multiplied by the number of CVRs held by such Holder as reflected in the CVR Register), in accordance with the corresponding letter of instruction (i) by check mailed to the address of such Holder reflected in the CVR Register as of 5:00 p.m. New York City time on the date of the applicable Milestone Notice or (ii) with respect

to any such Holder that is due an amount in excess of $100,000 in the aggregate who has provided the Rights Agent wiring instructions in writing as of the close of business on the date of the Milestone Notice, by wire transfer of immediately available funds to the account specified on such instruction.

(c)    Notwithstanding any other provisions of this Agreement, any portion of the amounts payable pursuant to Section 2.4(b) that remains unclaimed as of the first anniversary of the applicable Milestone Payment Date (including by means of uncashed checks or invalid addresses on the CVR Register) shall be delivered to Parent or its designee and not disbursed to the Holders, and, thereafter, such Holders shall be entitled to look to Parent (subject to abandoned property, escheat and other similar Laws) only as general creditors thereof with respect to such cash that may be payable.

(d)    Neither Parent, the Rights Agent nor any of their Affiliates shall be liable to any Holder for any payments delivered to a public official pursuant to any abandoned property, escheat law or other similar Legal Requirements.

(e)    If a Milestone is not achieved during any one of the 2021, 2022, 2023 or 2024 Calendar Years, then on or before the date that is 60 days after the expiration of each such applicable Calendar Year period, Parent shall deliver to the Rights Agent a certificate certifying that such Milestone has not occurred, accompanied by a statement setting forth, in reasonable detail, a calculation of Net Sales for the applicable period (each, a “Milestone Non- Achievement Certificate”). The Rights Agent shall promptly, and in any event within 10 Business Days of receipt of a Milestone Non-Achievement Certificate, send each Holder at its registered address a copy of such Milestone Non-Achievement Certificate, including detail regarding the ability of a Holder or Holders to dispute or contest such determination of non- achievement of a Milestone pursuant to this Agreement. If the Rights Agent does not receive from the Acting Holders a written objection to (i) a Milestone Non-Achievement Certificate with respect to Milestone 1, if any, within 180 days of the delivery by the Rights Agent of such Milestone Non-Achievement Certificate to the Holders in accordance with this Section 2.4(e), the Holders shall be deemed to have accepted such Milestone Non-Achievement Certificate and Parent and its Affiliates shall have no further obligation with respect to Milestone 1 and the Milestone 1 Amount, and/or (ii) a Milestone Non-Achievement Certificate with respect to Milestone 2 Milestone 3, and/or Milestone 4, if any, within 180 days of the delivery by the Rights Agent of such Milestone Non-Achievement Certificate with respect the 2024 Calendar Year to the Holders in accordance with this Section 2.4(e), the Holders shall be deemed to have accepted such Milestone Non-Achievement Certificate and Parent and its Affiliates shall have no further obligation with respect to each such Milestone and the applicable Milestone Amount.

(f)    Notwithstanding anything herein to the contrary, in no event shall the aggregate payments to Holders under this Section 2 exceed the Milestone Cap.

2.5    Withholding. Each of Parent, the Rights Agent, the Exchange Agent, the Surviving Corporation, their respective Affiliates, and any other Person who has any obligation to deduct or withhold from any consideration payable pursuant to this Agreement shall be entitled to deduct and withhold from the amounts otherwise payable pursuant to this Agreement such amounts as are required by any law to be deducted and withheld, as may be reasonably

determined by such Person. To the extent that amounts are so withheld and remitted to the appropriate Governmental Body in accordance with applicable Legal Requirements, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

		
	2.6
	Adjustment of CVRs.

(a)    In case of any Change of Control, appropriate adjustment shall be made in the application of the provisions herein set forth with respect to the rights and interests of Holders so that the provisions set forth herein shall thereafter be applicable, as nearly as possible, in relation to any cash thereafter deliverable upon payment of CVRs.

(b)    Whenever an adjustment is made to the terms of the CVRs pursuant to this Section 2.6, Parent will deliver to the Rights Agent a notice of such Change of Control within 3 Business Days of the closing of such Change of Control, setting forth in reasonable detail the terms of such Change of Control and any adjustments made pursuant to this Section 2.6. The Rights Agent shall promptly, and in any event within 10 Business Days of receipt of such a notice, send each Holder a copy of such notice in accordance with Section 7.2.

(c)    The Rights Agent has no duty to determine when an adjustment under this Section 2.6 should be made, how it should be made or what it should be. The Rights Agent shall not be responsible for the Parent’s failure to comply with this Section 2.6.

2.7    Notices to CVR Holders. Upon any adjustment pursuant to Section 2.6, Parent shall give prompt written notice of such adjustment to the Rights Agent and shall cause the Rights Agent, on behalf of and at the expense of Parent, within 10 days after notification is received by the Rights Agent of such adjustment, to mail by first class mail, postage prepaid, to each Holder a notice of such adjustment(s) and shall deliver to the Rights Agent a certificate of the Chief Financial Officer of Parent, setting forth in reasonable detail (i) the terms of such adjustment(s), (ii) a brief statement of the facts requiring such adjustment(s) and (iii) the computation by which such adjustment(s) was made. Where appropriate, such notice by Parent may be given in advance and included as a part of the notice to the Holders required under the other provisions of this Section 2.7.

2.8    Holding of Funds. All funds received by the Rights Agent under this Agreement that are to be distributed or applied by the Rights Agent in the performance of services hereunder (the “Funds”) shall be held by the Rights Agent as agent for Parent and deposited in one or more bank accounts to be maintained by the Rights Agent in its name as agent for Parent. Until paid pursuant to the terms of this Agreement, the Rights Agent will hold the Funds through such accounts in: deposit accounts of commercial banks with Tier 1 capital exceeding $1 billion or with an average rating above investment grade by S&P (LT Local Issuer Credit Rating), Moody’s (Long Term Rating) and Fitch Ratings, Inc. (LT Issuer Default Rating) (each as reported by Bloomberg Finance L.P.). The Rights Agent shall have no responsibility or liability for any diminution of the Funds that may result from any deposit made by the Rights Agent in accordance with this paragraph, including any losses resulting from a default by any bank, financial institution or other third party; provided that in the event the Funds are diminished below the level required for the Rights Agent to make cash payments as required

under this Agreement, including any such diminishment as a result of investment losses, Parent shall promptly pay additional cash to the Rights Agent in an amount equal to the deficiency in the amount required to make such payments. The Rights Agent may from time to time receive 

interest, dividends or other earnings in connection with such deposits. The Rights Agent shall not be obligated to pay such interest, dividends or earnings to the Parent, any Holder or any other Person, unless there is a diminution of the Funds due to a deposit or investment made by the Rights Agent, in which case, the Rights Agent agrees that such interest, dividends or earnings shall accrue to the benefit of Parent to the extent of such diminution of the Funds.

		
	2.9
	No Voting, Dividends or Interest; No Equity or Ownership Interest.

(a)    Nothing contained in this Agreement shall be construed as conferring upon any Holder, by virtue of being a Holder of a CVR, the right to receive dividends or the right to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of Parent or any constituent company to the Merger or any of their respective Subsidiaries or Affiliates or any other matter, or any other rights of any kind or nature whatsoever as a stockholder of Parent or in any constituent company to the Merger or any of their respective Subsidiaries or Affiliates, either at law or in equity.

(b)    The CVRs shall not represent any equity or ownership interest in Parent or in any constituent company to the Merger or any of their respective Subsidiaries or Affiliates. The rights of a Holder in respect of the CVRs are limited to those expressed in this Agreement and the Merger Agreement.

2.10    Ability to Abandon CVR. A Holder may at any time, at such Holder’s option, abandon all of such Holder’s remaining rights in a CVR by transferring such CVR to Parent or any of its Affiliates without consideration therefor. Nothing in this Agreement shall prohibit Parent or any of its Affiliates from offering to acquire or acquiring any CVRs for consideration from the Holders, in private transactions or otherwise, in its sole discretion. Any CVRs acquired by Parent or any of its Affiliates shall be automatically deemed extinguished and no longer outstanding for purposes of the definition of Acting Holders and Section 5 and Section 6.

		
	3.
	THE RIGHTS AGENT

3.1    Certain Duties and Responsibilities. Parent hereby appoints the Rights Agent to act as rights agent for Parent in accordance with the express terms and conditions set forth in this Agreement (and no implied terms and conditions), and the Rights Agent hereby accepts such appointment. The Rights Agent shall not have any liability for any actions taken, suffered or omitted to be taken in connection with this Agreement, except to the extent of its gross negligence, bad faith or willful or intentional misconduct.

3.2    Certain Rights of the Rights Agent. The Rights Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Rights Agent. In addition:

(a)    the Rights Agent may rely and shall be protected and held harmless by Parent in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or 

document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties;

(b)    whenever the Rights Agent shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Rights Agent may rely upon an Officer’s Certificate, which certificate shall be full authorization and protection to the Rights Agent, and the Rights Agent shall, in the absence of gross negligence, bad faith or willful or intentional misconduct on its part, incur no liability and be held harmless by Parent for or in respect of any action taken, suffered or omitted to be taken by it under the provisions of this Agreement in reliance upon such certificate;

(c)    the Rights Agent may engage and consult with counsel of its selection and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection and shall be held harmless by Parent in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

(d)    the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

(e)    the Rights Agent shall not be required to give any note or surety in respect of the execution of such powers or otherwise in respect of the premises;

(f)    the Rights Agent shall not be liable for or by reason of, and shall be held harmless by Parent with respect to any of the statements of fact or recitals contained in this Agreement or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by Parent only;

(g)    the Rights Agent shall have no liability and shall be held harmless by Parent in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution and delivery hereof by the Rights Agent and the enforceability of this Agreement against the Rights Agent assuming the due execution and delivery hereof by Parent); nor shall it be responsible for any breach by Parent of any covenant or condition contained in this Agreement;

(h)    Parent agrees to indemnify the Rights Agent for, and hold the Rights Agent harmless against, any loss, liability, damage, judgement, fine, penalty, claim, demands, suits or expense arising out of or in connection with Rights Agent’s duties under this Agreement, including the reasonable out-of-pocket costs and expenses of counsel in defending Rights Agent against any loss, liability, damage, judgement, fine, penalty, claim, demands, suits or expense, unless such loss has been determined by a court of competent jurisdiction to be a result of Rights Agent’s gross negligence, bad faith or willful or intentional misconduct;

(i)    Anything to the contrary notwithstanding, in the absence of fraud or willful or intentional misconduct on the part of the Rights Agent, (i) the Rights Agent shall not be liable for any special, punitive, indirect, consequential or incidental loss or damage of any

kind whatsoever (including but not limited to lost profits) arising out of any act or failure to act hereunder, even if the Rights Agent has been advised of the likelihood of such loss or damage or has foreseen the possibility or likelihood of such damages and (ii) the aggregate liability of the Rights Agent arising in connection with this Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, the amounts paid or payable hereunder by Parent to the Rights Agent as fees and charges;

(j)    Parent agrees (i) to pay the fees and expenses of the Rights Agent in connection with this Agreement agreed upon in writing by the Rights Agent and Parent prior to the date hereof, and (ii) to reimburse the Rights Agent for all taxes and governmental charges, reasonable out-of-pocket expenses and other charges of any kind and nature incurred by the Rights Agent in the execution of this Agreement (other than Taxes imposed on or measured by the Rights Agent’s net income and franchise or similar Taxes imposed on it (in lieu of net income Taxes)); and

(k)    No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

		
	3.3
	Resignation and Removal; Appointment of Successor.

(a)    The Rights Agent may resign at any time by giving written notice thereof to Parent specifying a date when such resignation shall take effect, which notice shall be sent at least 60 days prior to the date so specified but in no event shall such resignation become effective until a successor Rights Agent has been appointed and accepted such appointment in accordance with Section 3.3(e). Parent has the right to remove the Rights Agent at any time by specifying a date when such removal shall take effect but no such removal shall become effective until a successor Rights Agent has been appointed and accepted such appointment in accordance with Section 3.3(e). Notice of such removal shall be given by Parent to the Rights Agent, which notice shall be sent at least 60 days prior to the date so specified.

(b)    If the Rights Agent provides notice of its intent to resign, is removed or becomes incapable of acting, Parent shall, as soon as is reasonably practicable, appoint a qualified successor Rights Agent who shall be a stock transfer agent of national reputation or the corporate trust department of a commercial bank. Notwithstanding the foregoing, if Parent shall fail to make such appointment within a period of sixty (60) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent, then the incumbent Rights Agent may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. The successor Rights Agent so appointed shall, forthwith upon its acceptance of such appointment in accordance with Section 3.3(e), become the successor Rights Agent.

(c)    Parent shall give notice of each resignation and each removal of a Rights Agent and each appointment of a successor Rights Agent through the facilities of DTC in accordance with DTC’s procedures and/or by mailing written notice of such event by first-class

mail to the Holders as their names and addresses appear in the CVR Register. Each notice shall include the name and address of the successor Rights Agent. If Parent fails to send such notice within 10 Business Days after acceptance of appointment by a successor Rights Agent, the successor Rights Agent shall cause the notice to be transmitted at the expense of Parent. Failure to give any notice provided for in this Section 3.3, however, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

(d)    Notwithstanding anything else in this Section 3.3, unless consented to in writing by the Acting Holders, Parent shall not appoint as a successor Rights Agent any Person that is not a stock transfer agent of national reputation or the corporate trust department of an international commercial bank.

(e)    Acceptance of Appointment by Successor. Every successor Rights Agent appointed hereunder shall, at or prior to such appointment, execute, acknowledge and deliver to Parent and to the retiring Rights Agent an instrument accepting such appointment and a counterpart of this Agreement, and thereupon such successor Rights Agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Rights Agent. On request of Parent or the successor Rights Agent, the retiring Rights Agent shall execute and deliver an instrument transferring to the successor Rights Agent all the rights, powers, trusts and duties of the retiring Rights Agent.

		
	4.
	COVENANTS

4.1    List of Holders. Parent shall furnish or cause to be furnished to the Rights Agent the names and addresses of the Holders within 10 days of the Effective Time.

4.2    Books and Records. Parent shall, and shall cause its subsidiaries to, keep true, complete and accurate records in sufficient detail to enable the Holders and their consultants or professional advisors to determine the amounts payable hereunder.

4.3    Payment of Milestone Amounts. Parent shall duly and promptly deposit with the Rights Agent for payment to the Holders the Milestone Amounts in the manner provided for in Section 2.4 and in accordance with the terms of this Agreement.

4.4    Further Assurances. Parent agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered, all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.

		
	4.5
	Audit Rights.

(a)    Until December 31, 2025, upon reasonable advance written notice from the Acting Holders, Parent shall permit an independent certified public accounting firm of nationally recognized standing selected by such Acting Holders and reasonably acceptable to 

Parent (the “Independent Accountant”) to have access at reasonable times during normal business hours to the books and records of Parent and its Affiliates as may be reasonably

necessary to evaluate and verify Parent’s calculation of Net Sales hereunder; provided that (x) such Acting Holders (and the Independent Accountant) enter into customary confidentiality agreements reasonably satisfactory to Parent with respect to the confidential information of Parent or its Affiliates to be furnished pursuant to this Section 4.5 and (y) such access does not unreasonably interfere with the conduct of the business of Parent or any of its Affiliates. The fees charged by such accounting firm shall be borne by Parent. The Independent Accountant shall provide Parent with a copy of all disclosures made to the Acting Holders. The decision of such accounting firm shall be final, conclusive and binding on Parent and the Holders, shall be nonappealable and shall not be subject to further review, absent manifest error. Parent shall not enter into any transaction constituting a Change of Control unless such agreement contains provisions that would permit such accounting firm with such access to the records of the other party in such Change of Control if and to the extent as are reasonably necessary to ensure compliance with this Section 4.5. The audit rights set forth in this Section 4.5(a) may not be exercised by the Acting Holders more than once in any given twelve (12) month period.

(b)    If, in accordance with the procedures set forth in Section 4.5(a), the Independent Accountant concludes that any Milestone Amount should have been paid but was not paid when due, Parent shall promptly, and in any event within thirty (30) days of the date the Independent Accountant delivers to Parent the Independent Accountant’s written report, pay each Holder such Milestone Amount (to the extent not paid on a subsequent date), plus interest at the thirty (30) day U.S. dollar “prime rate” effective for the date such payment was due, as reported by Bloomberg, from when such Milestone Amount should have been paid, as applicable, to the date of actual payment, pursuant to Section 2.4(a)(i) and Section 2.4(b), as applicable.

4.6    Commercially Reasonable Efforts. Commencing upon the Closing and continuing until the earlier of December 31, 2024 or the achievement of all Milestones, Parent shall, and shall cause its controlled Affiliates and Licensees to, use Commercially Reasonable Efforts to achieve the Milestones. Without limiting the foregoing, neither Parent nor any of its controlled Affiliates shall act in bad faith for the purpose of avoiding achievement of any Milestone or the payment of any Milestone Amount.

		
	5.
	AMENDMENTS

		
	5.1
	Amendments without Consent of Holders.

(a)    Without the consent of any Holders, Parent, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes:

(i)    to evidence the succession of another person to Parent and the assumption by any such successor of the covenants of Parent herein; provided that such succession and assumption is in accordance with the terms of this Agreement;

(ii)    to evidence the succession of another Person as a successor Rights Agent and the assumption by any such successor of the covenants and obligations 

of the Rights Agent herein; provided that such succession and assumption is in accordance with the terms of this Agreement;

(iii)    to add to the covenants of Parent such further covenants, restrictions, conditions or provisions as Parent shall consider to be for the protection of the Holders; provided that, in each case, such provisions do not adversely affect the interests of the Holders;

(iv)    to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein or in the Merger Agreement, or to make any other provisions with respect to matters or questions arising under this Agreement; provided that, in each case, such provisions do not adversely affect the interests of the Holders;

(v)    as may be necessary or appropriate to ensure that the CVRs are not subject to registration under the Securities Act, the Exchange Act or any applicable state securities or “blue sky” laws; provided that, such provisions shall not adversely affect the interests of the Holders;

(vi)    to evidence the assignment of this Agreement by Parent as provided in Section 7.3; or

(vii)    as may be necessary or appropriate to ensure that the Company complies with applicable law.

In addition to the foregoing, upon the request of Parent, the Rights Agent hereby agrees to enter into one or more amendments hereto to evidence the succession of another person as a successor Rights Agent in accordance with the terms of this Agreement and the assumption by any successor of the covenants and obligations of such Rights Agent herein, without modification of such covenants or obligations other than as permitted by this Section 5.1.

(b)    Without the consent of any Holders, Parent and the Rights Agent, at any time and from time to time, may enter into one or more amendments hereto to reduce the number of CVRs, in the event any Holder agrees to renounce such Holder’s rights under this Agreement in accordance with Section 7.4 or to transfer CVRs to Parent pursuant to Section 2.10.

(c)    Promptly after the execution by Parent and the Rights Agent of any amendment pursuant to the provisions of this Section 5.1, Parent shall mail (or cause the Rights Agent to mail) a notice thereof through the facilities of DTC in accordance with DTC’s procedures and/or by first class mail to the Holders at their addresses as they appear on the CVR Register, setting forth such amendment.

		
	5.2
	Amendments with Consent of Holders.

(a)    Subject to Section 5.1 (which amendments pursuant to Section 5.1 may be made without the consent of any Holder), with the written consent of the Holders of not 

less than a majority of the outstanding CVRs as set forth in the CVR Register, whether evidenced in writing or taken at a meeting of the Holders, Parent and the Rights Agent may enter into one or more amendments hereto for the purpose of adding, eliminating or changing any

provisions of this Agreement, even if such addition, elimination or change is materially adverse to the interest of the Holders.

(b)    Promptly after the execution by Parent and the Rights Agent of any amendment pursuant to the provisions of this Section 5.2, Parent shall mail (or cause the Rights Agent to mail) a notice thereof through the facilities of DTC in accordance with DTC’s procedures and/or by first class mail to the Holders at their addresses as they appear on the CVR Register, setting forth such amendment.

5.3    Execution of Amendments. Prior to executing any amendment permitted by this Section 5, the Rights Agent shall be entitled to receive, and shall be fully protected in relying upon, an opinion of counsel selected by Parent and reasonably acceptable to Rights Agent stating that the execution of such amendment is authorized or permitted by this Agreement.

5.4    Effect of Amendments. Upon the execution of any amendment under this Section 5, this Agreement shall be modified in accordance therewith, such amendment shall form a part of this Agreement for all purposes and every Holder shall be bound thereby.

		
	6.
	REMEDIES OF THE HOLDERS

		
	6.1
	Event of Default.

(a)    “Event of Default” with respect to the CVRs, means each one of the following events which shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of Legal Requirements, pursuant to any judgment, decree or order of any court or any order, rule or regulation of any Governmental Body or otherwise): (i) default in the payment by Parent pursuant to the terms of this Agreement of all or any part of a Milestone Amount after a period of ten (10) Business Days after the Milestone Amount shall become due and payable and (ii) material default in the performance, or breach in any material respect, of any other covenant or warranty of Parent hereunder, and continuance of such default or breach for a period of sixty
(60) days after a written notice specifying such default or breach and requiring it to be remedied is given, which written notice states that it is a “Notice of Default” hereunder and is sent by registered or certified mail to Parent and the Rights Agent by the Acting Holders.

(b)    If an Event of Default described above occurs and is continuing (and has not been cured or waived), then, and in each and every such case, the Acting Holders by notice in writing to Parent and the Rights Agent, may, in their discretion, commence a suit to protect the rights of the Holders, including to obtain payment for any amounts then due and payable.

6.2    Suits by Holders. Except for the rights of the Rights Agent set forth herein, the Acting Holders will have the sole right, on behalf of all Holders, by virtue of or under any provision of this Agreement, to institute any action or proceeding with respect to this Agreement, and no individual Holder or other group of Holders will be entitled to exercise such rights. Notwithstanding the foregoing, (a) the right of any Holder of any CVR to receive payment of the amounts that a Milestone Notice indicates are payable in respect of such CVR on

or after the applicable due date, or to institute any action or proceeding for the enforcement of any such payment on or after such due date, shall not be impaired or affected without the consent of such Holder and (b) in the event of an insolvency proceeding of the Parent, individual Holders shall be entitled to assert claims in such insolvency proceeding and take related actions in pursuit of such claims with respect to any payment that may be claimed by or on behalf of the Parent or by any creditor of the Parent.

		
	7.
	OTHER PROVISIONS OF GENERAL APPLICATION

7.1    Notices to the Rights Agent and Parent. Any notice or other communication required or permitted to be delivered to Parent or the Rights Agent under this Agreement shall be in writing and shall be deemed properly delivered, given and received (a) upon receipt when delivered by hand, (b) two Business Days after being sent by registered mail or by courier or express delivery service, (c) if sent by email transmission prior to 6:00 p.m. recipient’s local time, upon transmission when receipt is confirmed or (d) if sent by email transmission after 6:00 p.m. recipient’s local time and receipt is confirmed, the Business Day following the date of transmission; provided that in each case the notice or other communication is sent to the physical address or email address, as applicable, set forth beneath the name of such party below (or to such other physical address or email address as such party shall have specified in a written notice given to the other party):

If to the Rights Agent, to it at:

American Stock Transfer & Trust Company, LLC 6201 15th Avenue, Brooklyn, NY 11219
Attn: Relationship Management Email: mmerced@astfinancial.com

If to Parent, to it at:

La Jolla Pharmaceutical Company 4550 Towne Centre Court
San Diego, California 92121 Attention: Chairman
E-mail: ktang@ljpc.com
with a copy to (which shall not constitute notice): Gibson, Dunn & Crutcher LLP

555 Mission Street
San Francisco, California 94105 Attention: Ryan A. Murr
E-mail: RMurr@gibsondunn.com

The Rights Agent or Parent may specify a different address, facsimile number or email address by giving notice in accordance with this Section 7.1.

7.2    Notice to Holders. Where this Agreement provides for notice to Holders, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and transmitted through the facilities of DTC in accordance with DTC’s procedures or mailed, first-class postage prepaid, to each Holder affected by such event, at the Holder’s address as it appears in the CVR Register, not later than the latest date, and not earlier than the earliest date, if any, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders.

7.3    Successors and Assigns. Parent may assign, in its sole discretion and without the consent of any other Person, any or all of its rights, interests and obligations hereunder to one or more direct or indirect wholly owned subsidiaries of Parent for so long as they remain wholly owned subsidiaries of Parent and any such subsidiary may assign any or all of its rights, interests and obligations hereunder to one or more other direct or indirect wholly owned subsidiaries of Parent for so long as they remain wholly owned subsidiaries of Parent; provided that each such assignee agrees to assume and be bound by all of the terms and conditions of this Agreement; provided, further, that Parent shall remain liable for the performance by each such assignee of all covenants, agreements and obligations of Parent hereunder. This Agreement will be binding upon, inure to the benefit of and be enforceable by Parent’s successors and each assignee. Each of Parent’s successors and each assignee shall, by a supplemental contingent consideration payment agreement or other acknowledgement executed and delivered to the Rights Agent, expressly agree to assume and be bound by all of the terms and conditions of this Agreement. This Agreement shall not restrict Parent’s or any successor’s ability to merge or consolidate or enter into or consummate any Change of Control; provided, that in the event of a Change of Control, Parent or the Company, as applicable, shall cause the acquirer to assume Parent’s obligations, duties and covenants under this Agreement. Except as otherwise permitted herein, Parent may not assign this Agreement without the prior written consent of the Acting Holders. Any attempted assignment of this Agreement or any such rights in violation of this Section 7.3 shall be void and of no effect.

7.4    No Third Party Beneficiaries. Nothing in this Agreement, express or implied, shall give to any Person (other than the Rights Agent and its permitted successors and assigns, Parent, Parent’s permitted successors and assignees, and the Holders and the Holders’ successors and assigns pursuant to Permitted Transfers, each of whom is intended to be, and is, a third party beneficiary hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the Rights Agent and its permitted successors and assigns, Parent, Parent’s permitted successors and assignees, and the Holders and the Holders’ 

successors and assigns pursuant to Permitted Transfers. The rights hereunder of Holders and their successors and assigns pursuant to Permitted Transfers are limited to those expressly provided in this Agreement. Notwithstanding anything to the contrary contained herein, any Holder or Holder’s successor or assign pursuant to a Permitted Transfer may at any time agree to renounce, in whole or in part, whether or not for consideration, its rights under this Agreement by written notice to the Rights Agent and Parent, which notice, if given, shall be irrevocable, and Parent may, in its sole discretion, at any time offer consideration to Holders in exchange for their agreement to irrevocably renounce their rights, in whole or in part, hereunder.

7.5    Governing Law; Jurisdiction. This Agreement, the CVRs and all actions arising under or in connection herewith and therewith (whether sounding in contract, tort or otherwise) shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any laws, rules or provisions that would cause the application of the laws of any jurisdiction other than the State of Delaware. In any action between any of the parties arising out of or relating to this Agreement or the CVRs: (a) each of the parties irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the Chancery Court of the State of Delaware; and (b) each of the parties irrevocably waives the right to trial by jury. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

7.6    Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement shall continue in full force and effect and the application of such provision to other Persons or circumstances shall be interpreted so as reasonably to effect the intent of the parties. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.

7.7    Termination. This Agreement shall be terminated and of no force or effect, the parties hereto shall have no liability hereunder (other than with respect to monies due and owing by Parent to Rights Agent), and no payments shall be required to be made, upon the earlier to occur of (a) the payment in full of the Milestone 1 Amount, the Milestone 2 Amount and the Milestone 3 Amount, by the mailing by the Rights Agent to the address of each Holder as reflected in the CVR Register the full amount of each Milestone Amount as required to be paid under the terms of this Agreement, (b) December 31, 2024, if Milestone 2 and/or Milestone 3 has not been achieved on or prior to such date, and (c) the termination of the Merger Agreement in accordance with its terms. Notwithstanding the foregoing, no such termination shall affect any rights or obligations accrued prior to the effective date of such termination or Sections 2.4(c), 2.4(d), 2.4(e), 2.4(f), 3.2, 4.5, 7.4, 7.5, 7.6, 7.8, 7.9, 7.10 or this Section 7.7, which shall survive the termination of this Agreement, or the resignation, replacement or removal of the Rights Agent.

7.8    Entire Agreement; Counterparts. As it relates to the Rights Agent, this Agreement constitutes the entire agreement of the parties hereto and supersedes all contemporaneous and prior agreements and understandings, both written and oral, among or between any of the parties hereto, with respect to the subject matter hereof. As between the 

Parent and the Company this Agreement and the Merger Agreement constitute the entire agreement and supersede all contemporaneous and prior agreements and understandings, both written and oral, among or between any of the parties, with respect to the subject matter hereof. If and to the extent that any provision of this Agreement is inconsistent or conflicts with the Merger Agreement, this Agreement shall govern and be controlling. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. The exchange of a fully executed Agreement (in counterparts or otherwise) by PDF shall be sufficient to bind the parties hereto to the terms and conditions of this Agreement.

7.9    No Fiduciary Obligations. Each of Parent and the Rights Agent acknowledges and agrees that the other party, its Affiliates and their respective officers, directors and controlling Persons do not owe any fiduciary duties to the first party or any of its respective Affiliates, officers, directors or controlling Persons. The only obligations of the Parent and the Rights Agent to each other and their Affiliates and their respective officers, directors and controlling Persons arising out of this Agreement are the contractual obligations expressly set forth in this Agreement.

7.10    Confidentiality. The Rights Agent and the Parent agree that all books, records, information and data pertaining to the business of the other party, including inter alia, personal, non-public Holder information, which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement including the fees for services set forth in the attached schedule shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by a valid order of an arbitration panel, court or governmental body of competent jurisdiction or is otherwise required by law or regulation, including SEC or Nasdaq rules and regulations, or pursuant to subpoenas from state or federal government authorities (e.g., in divorce and criminal actions).

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

LA JOLLA PHARMACEUTICAL COMPANY

    
By:     
Name: Michael Hearne

Title: Chief Financial Officer

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC

By:     

Name:  Michael A. Nespoli     

Title:  Executive Director

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