Document:

viot-ex410_758.htm

 

Exhibit 4.10

 

Business Cooperation Agreement

 

Party A: Xiaomi Communications Co., Ltd.

Address: Level 9, Phase II, the Rainbow City of China Resources, No. 68 Qinghe Middle Road, Haidian, Beijing

Tel: 010-56343888

Fax: 010-56343666

 

Party B: Foshan Yunmi Electric Appliances Technology Co., Ltd.

Legal Representative: Chen Xiaoping

Address: (2F of No.1 Building and 4F of No.7 Building) No. 2, Xinxisi North Road, Xiashi Village Committee, Lunjiao Subdistrict Office, Shunde District, Foshan City

Tel: 0757-66833887

Fax: 0757-6833886

 

WHEREAS, in consideration of both Parties’ willingness to cooperate with each other, this Agreement defines the following provisions in connection with the cooperation mode of Xiaomi Customized Products with respect to the cooperation of both Parties, and both Parties hereby jointly comply with such provisions through friendly consultation:

 

1. Scope of this Agreement

 

This Agreement applies to all customized products with which Party B provides or has provided to Party A (hereinafter referred to as “Xiaomi Customized Product”, or “XCP”), and the specific products involved herein shall be subject to Appendix IV “Xiaomi Customized Product Project Agreement” attached to this Agreement executed by both Parties before the products come into the market.

 

2. Mode of Cooperation

 

2.1 Party A shall specify the trademark, ID (industrial design), packaging design plan, etc. to be used by Xiaomi Customized Products (as defined in clause 3.1). Party B shall be responsible for the overall development, production and supply of Xiaomi Customized Products, and for manufacturing and delivering Xiaomi Customized Products according to Party A’s orders.

 

2.2 Party A shall provide Party B with the purchase order forecast based on its market projection and be responsible for the promotion and sales of Xiaomi Customized Products. Party B shall be responsible for the production of XCP based on Party A’s purchase order forecast and the delivery thereof to the warehouse designated by Party A.

 

2.3 Party A shall have the right to sell and dispose of Xiaomi Customized Products in all channels, including but not limited to the domestic, international, online and offline channels; The Xiaomi Customized Products manufactured by Party B under this Agreement shall only be supplied to Party A. Party B may not sell or re-sell Xiaomi Customized Products in any way without Party A’s written consent, including but not limited to the domestic, international, online and offline channels. In the event of Party B’s breach of this clause, Party A shall be entitled to terminate this Agreement and claim against Party B for all the losses suffered by Party A, and to take any possible measures to prevent further losses.

 

2.4 Party B shall promise will not cooperate with consumer electronics manufacturers that have a competitive relationship with Xiaomi to develop, produce or outsource products that are the same as or similar to Xiaomi Customized Products. In the event of Party B’s breach of this clause, Party A is entitled to terminate this Agreement and claim against Party B for US$1 million (1,000,000) as liquidated damages.

 

2.5 Party B shall sell Xiaomi Customized Products to Party A on cost basis, and both Parties shall share the net profits from Party A’s sale of Xiaomi Customized Products provided by Party B according to the agreed proportion.

 

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2.6 It is agreed that both Parties perform the collection, storage, transmission, use and disclosure of user data incurred during the period of the provision of Xiaomi Customized Products pursuant to Appendix III “Xiaomi’s Customized Product User Data Clause” attached to this Agreement.

 

3. Definitions

 

3.1 Xiaomi’s Customized Product or XCP: means a product manufactured or sold under a brand belonging to Party A, and/or a product under Party B’s own brand but determined by mutual written consent between the Parties as a XCP.

 

3.2 Cost and Pricing

 

3.2.1 Party A’s Costs means any shipping cost and any other costs and expenses (if any) under this Agreement.

 

Calculation of shipping cost: the shipping cost shall be calculated based on the actual cost of shipping.

 

Other cost: costs incurred for selling products.

 

3.2.2 Party B’s Costs shall include the followings:

 

3.2.2.1 Costs of raw materials: for any cost of raw material, the serial number, model and specifications, unit, quantity, and unit price of the purchased materials, and the full name and contact information of the supplier/agent shall be specified.

 

3.2.2.2 OEM costs: details of the costs and expenses in connection with OEM shall be specified in the OEM costs.

 

3.2.2.3 Amortization of mold and tooling: the amortization of mold and tooling shall be limited to the first set of molds for each Xiaomi Customized Product by mutual confirmation between both Parties (in accordance with the template provided by Party A)

 

Formula for Calculation of amortization of mold and tooling: Amortization of mold and tooling for each product = total costs of mold and tooling / (times of design for mold and tooling* number of mold cavity)

 

3.2.2.4 Logistic costs: means the converted or estimated logistic costs for the delivery of products from Party B’s manufacturer to warehouse designated by Party A (in accordance with the template provided by Party A).

 

3.2.3 Quotations shall not include the following costs and expenses: Party B’s profit and indirect costs (including without limitation, the management fee, water and electricity costs, depreciation, after-sale service fees and other indirect costs).

 

3.2.4 All quotations under this Agreement shall be inclusive of tax.

 

3.2.5 In the event that Party A is not agreeable to Party B’s Costs, Party A shall be entitled to procure, under the same terms and conditions, in such other manners including but not limited to the followings:

 

3.2.5.1 Party A may procure directly from a supplier, and Party B shall be responsible for the inspection and acceptance, inventory taking, management and use of (the materials); or

 

3.2.5.2 Party A may make available relevant procurement channel to Party B, and Party B shall enter into a procurement agreement with the supplier suggested by Party A upon the terms and conditions designated by Party A.

 

In whichever way mentioned above, Party B undertakes to use the materials and ancillary materials which are confirmed by Party A or procured in accordance with Clause 3.2.5.1 or 3.2.5.2 in the products to be provided to Party A.

 

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3.2.6 Remark: Only direct costs shall be calculated by the Parties in the cooperation mode and profit share between the Parties.

 

The one-time cost (such as R&D, trial production, certification*, sales or marketing) shall not be included in costs.

 

*note: it refers to costs for certification targeted at domestic market only. The certification costs incurred in overseas market shall be discussed separately by the Parties on case by case basis as to whether to include in costs or how to allocate between the Parties.

 

3.2.7 Each Party shall bear its own costs in relation to management, depreciation of water and electricity (facilities), business operation and others.

 

3.2.8 With respect to the after-sale maintenance/after-sale service fees/online and offline customer services, subject to Appendix V “Framework Agreement on Quality of Xiaomi Customized Product”, each Party shall bear its own after-sale service fees for defects occurred within the agreed defect ratio. (For details of provisions in relation to after-sale services, please refer to Appendix VI “Framework Agreement on After-sale Service of Xiaomi Customized Product” to be entered into upon the launch of products.)

 

3.3 Procurement, Inspection and Acceptance

 

3.3.1 BOM record: Party B shall provide the Bill of Materials (“BOM”) in a form designated by Party A, and provide a valid quotation in accordance with the template provided by Party A after the entry of BOM is successfully recorded in Party A’s system.

 

3.3.2 Procurement Price: procurement price shall not be higher than Party B’s costs (as defined in Clause 3.2.2).

 

3.3.3 PO: means the “Purchase Order” confirmed by the Parties with signature of the respective authorized representative and stamp of each Party affixed during the effective term of this Agreement.

 

3.3.4 Turnaround Period: means the period commencing from the date of Party B’s valid acceptance in a confirmative manner of the PO issued by Party A until the date of signing of the acknowledged receipt of goods by the recipient designated by Party A.

 

3.3.5 Initial Inspection: means the inspection of the quantity, packaging, packing and other conditions of the products conducted by the designated recipient without unpacking the products or the use of any inspection device, upon delivery of products under a PO by Party B to the designated location.

  

4. Performance of PO

 

4.1 A PO shall become valid upon Party B’s confirmation by signing on and affixing stamp to the PO issued by Party A which shall be returned to Party A within three days upon receipt. Should Party B fail to confirm or return the PO within the above-mentioned period, it shall be deemed that Party B has no objection to the information specified in the PO, and the PO shall constitute a valid PO. Party B shall fully comply with all the terms and conditions under the valid PO and inform Party A in writing on a regular basis of the delivery plan of the outstanding valid PO.

 

4.2 Party B shall pack the products to be shipped in an appropriate manner suitable for the nature and delivery time of the products. The shipping costs and liabilities shall be allocated as follows: the shipping costs shall be included in Party B’s Costs, and the logistic risks and relevant liabilities shall be borne by Party B.

 

4.3 Party B shall deliver products to the location specified in the valid PO. The recipient designated by Party A shall conduct Initial Inspection and sign the acknowledged receipt of goods for the acceptance of the products that pass the Initial Inspection. After the Initial Inspection, Party A shall have the right to conduct further inspection. Any product that fails to pass the further inspection shall be returned to or exchanged by Party B at the request of Party A.

 

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4.4 If Party B is unable to deliver products on time, Party B shall inform Party A in writing at least 15 working days prior to the agreed date of delivery under the relevant PO the revised date and quantity of delivery, and Party A shall confirm the revised date and quantity of delivery or otherwise agree with Party B separately on matters in relation to the delivery. Party B shall remain liable for any loss of Party A caused by the failure of Party B to deliver on the originally agreed delivery date. If Party B fails to deliver in accordance with the revised date and quantity of delivery, Party B shall pay the liquidated damages to Party A at an amount equivalent to 0.3% of the total value of the PO for each day of delay in delivery. If the delivery is delayed for more than ten days, Party A shall be entitled to cancel the PO, and Party B shall compensate Party A any actual loss suffered by it therefrom except for those as a result of force majeure.

 

5. Settlement and Payment 

 

5.1 The profit from the XCP sold by the sales channel of Party A is the selling price less the cost and expenses. The XCP product shall be confirmed by both Parties before the XCP launch pursuant to the Appendix IV “Xiaomi Customized Product Project Agreement” or quotation.

 

Unit XCP profit = Selling price – Cost of Party A – Cost of Party B

 

* Refer to Clause 3.2 for Cost of Party A and Party B.

  

* Selling Price is the average XCP selling price of Party A.

 

The Parties agree to adopt Article 5.2 or Article 5.3 to settle the payment.

 

5.2 Profit share model

 

Party B’s share of profit = Number of XCP sold by Party A * Gross profit per XCP * Profit sharing ratio of Party B

 

5.2.1 The purchase price: shall be settled in accordance with PO.

 

5.2.2 Party B’s share of profit: Party A shall prepare a statement of profit share on the 5th working day of each month for the total number of XCP sold in the preceding month which shall be sent to Party B for confirmation. Party B shall, upon confirmation, issue to Party A the VAT invoices of equivalent amount for each of the corresponding products specified in such statement. Party A shall pay to Party B to the account designated by Party B within 10 working days upon receipt of the accurate invoice issued by Party B.

 

5.2.3 The calculation of profit share shall be based on actual sales volume of XCP for the period of settlement.

 

5.3 Procurement and sales model

 

5.3.1 Payments: Party A shall prepare a statement of inventory on the 5th working day of each month for the total number of stock-in XCP in the preceding month which shall be sent to Party B for confirmation. Party B shall, upon confirmation, issue to Party A the VAT invoices of equivalent amount for each of the corresponding products specified in such statement. Party A shall pay to Party B to the account designated by Party B within 30 working days upon receipt of the accurate invoice issued by Party B.

 

5.3.2 The settlement of payment shall be based on the number of stock-in XCP and the statement of inventory.

 

5.4 The account designated by Party B:

 

Account Name:

 

Bank Name:

 

Account Number:

  

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6. Rights and Obligations of the Parties

 

6.1 Party B shall ensure that XCP shall not be treated with less favorable conditions and benefits than the other products under Party B’s own brands in the process of manufacture, processing or procurement.

 

6.2 In the event of any change to Party B’s BOM costs in relation to XCP, Party B shall, within 3 working days from the date of such change, provide an updated list of costs to Party A in accordance with the composition of costs as defined in Clause 3.2. Party A shall be entitled to request Party B to provide the cooperation agreement between Party B and its OEM manufacturer/supplier, invoices, receipts and other supporting documents. If there is any adjustment in the price of raw materials, OEM costs, shipping or other costs and expenses, Party B shall specify in BOM the prices before and after the change and the implementation date of such change, and make price adjustment accordingly in the latest PO after approved by Party A. In the meantime, Party B is obliged to ensure that Party A is empowered to contact suppliers directly for verification. The letter of authorization granted by Party B in favor of Party A “Letter of Authorization on Equal Rights to Information and Rights of Verification” shall be executed as Appendix II to this Agreement together with the execution of this Agreement.

 

6.3 In the event of any change in price of raw materials, OEM costs, shipping or other costs and expenses and Party B fails to inform Party A or make remarks or adjustments accordingly in BOM provided by it, Party A, upon discovery of such fact, shall be entitled to immediately terminate any PO which have been issued (for the avoidance of doubt, Party A shall be entitled to cancel the PO unilaterally regardless of whether Party B has confirmed such PO) and to impose a penalty on Party B for its negligence. The calculation of such penalty shall be as follows:

 

Amount of penalty = procurement price per XCP before price reduction * maximum price reduction ratio * the accumulated volume of sales * 10

 

Remark: Maximum price reduction ratio means the ratio of the single raw material with the highest price reduction in the BOM record.

 

6.4 Party A shall procure products from Party B in accordance with the agreed PO, which is binding on both Parties. A Party (“Defaulting Party”) shall compensate the other Party for any losses arising from the non-compliance of such Defaulting Party with the order plan, and the amount of compensation shall not be more than the actual loss of the other Party (“Non-defaulting Party”) which exclude any indirect or expected loss or any loss which is unpredictable in advance by the Defaulting Party. Notwithstanding the foregoing clause, Party A is entitled to choose to cancel the PO or change the PO if Party A notices a change of cost after the PO becomes valid.

 

6.5 Party B shall inform Party A in advance before it changes any product’s key-part or assembly supplier. The management of such change shall comply with provisions in Appendix V “Framework Agreement on Quality of Xiaomi Customized Product”.

 

6.6 Party B shall commit that it has the qualifications to provide goods and perform services with all the permits, approvals and certifications required by the PRC laws and regulations and the laws and regulations of the target country that Party A sells products (under the circumstance where Party B is responsible for the certification of Xiaomi Customized Products). Such permits, approvals and certifications shall remain fully effective during this Agreement.

 

6.7 Party B undertakes that the products’ performance and quality shall meet the requirements of Party A, and acknowledges and agrees to unconditionally accept and comply with the after-sale services, return and exchange and other relevant policies of Party A.

 

6.8 Party A shall inform and confirm with Party B before Party A is selling the XCP at zero profit or negative profit, the loss of the XCP will be taken by both parties by proportion or new method which is confirmed by another mutual written agreement.

 

6.9 Party B shall be liable for any and all costs and expenses as well as the legal responsibilities arising from any potential safety issue or any other issue in XCP due to Party B’s reason that would cause personal injury or damages to the property of end-users. For details please refer to Appendix V “Framework Agreement on Quality of Xiaomi 

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Customized Product”, and Appendix VI “Framework Agreement on After-sale Service of Xiaomi Customized Product” to be executed by the Parties.

 

6.10 Party B shall collect, use and transmit users’ data in accordance with Appendix III “Xiaomi’s Customized Product User Data Clause”.

 

6.11 If the Parties decide to cooperate in the direct delivery model, Party B or its designated third-party logistics carrier shall directly ship to Party A designated delivery address or recipient. The Parties shall separately sign the Appendix "Special Agreement on Direct Delivery Products" and related data protection attachment "Data Protection Appendix" (the name of such attachments may be adjusted).

 

7. Intellectual Property

 

7.1 Authorization of trademark and copyrights of Party B

 

7.1.1 Party B hereby authorizes Party A and its affiliates to globally use Party B’s trademark, logo and company name on Xiaomi Customized Product for the purpose including but not limited to manufacture, utilization, sale, offering for sale and import in an irrevocable, royalty-free, sub-licensable manner. 

 

7.1.2 In the event that Party B’s copyright is involved in the external promotion of Xiaomi Customized products (including but not limited to using product marketing picture of Party B’s copyright on the promotion materials), Party B shall grant Party A and its affiliates the right to use such copyright globally.

 

7.2 Without Party A’s prior written consent, Party B and its affiliates and agents shall not in any jurisdiction and in any way, apply and/or register a commercial logo containing Xiaomi Technology Co., Ltd. (hereinafter “Xiaomi Logo”, including any logo that can be associated, identified or associated with Xiaomi Group), or any domain name, wireless website, Internet search term or any trade name, service mark or other intellectual property rights that is similar to Xiaomi Logo, neither under their own name or consenting, prompting, or letting go of any third party. Party B and its affiliates and agents shall not use, imitate, print or copy any Xiaomi Logo or similar logo in any of their manufacture, sales, marketing, promotion materials or for other commercial purposes in any other way. Xiaomi Logo includes but are not limited to: “雷军”, “小米”, “米联”, “米吧”, “小米商城”, “小米网”, “红米”, “米兔”, “Xiaomi”, “MIUI”, “米家”, “Mijia” and affiliate logos and graphics of the aforementioned brands (including but not limited to ).

 

8. Confidentiality Clause

 

The Parties agree that the trade secret in relation to the cooperation between the Parties shall include, without limitation, all material, correspondence in the course of collaboration and any other non-public commercial or technical material or information provided by a Party to the other party. The receiving party shall keep the trade secret of the disclosing party confidential, and shall not disclose the same to any third party or use for any purposes other than for the cooperation between the Parties under this Agreement, regardless of whether such trade secret is obtained in oral, written, visual or other forms, unless a prior written authorization from the disclosing party is obtained by such third party for the disclosure of such trade secret. For details of confidentiality clause please refer to Appendix VII “Confidentiality Agreement”.

   

9. Liability for Breach and Termination of this Agreement

 

9.1 Any breach of this Agreement, Appendixes hereto and PO shall constitute the breach of this Agreement. If either Party breaches this Agreement, such Party (the “Breaching Party”) shall bear losses caused thereby to the other Party (the “Non-breaching Party”), including fees and expenses incurred due to the Non-breaching Party’s treatment of breach events, including legal costs for investigation, arbitration, action and attorney. In addition to compensating the Non-breaching Party for the above losses, the Breaching Party shall also pay the Non-breaching Party RMB 0.5 million (500,000) as the liquidated damages.

 

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9.2 If Party B breaches this Agreement and cause the following situation(s), Party A shall be entitled to by itself or demand Party B to take all measures to settle such problem for the purpose of maintaining Party A’s brand reputation, including but not limited to taking such measures as public relations, response to complaints, reconciliation with the third party and/or compensation in advance to the third party, and Party B shall bear all expenses arising from resolving such dispute or problem (including but not limited to the costs for Party A’s engagement of attorney and other third party, response to complaints and compensation to the third party). Party A is entitled to claim compensation from Party B in the case of advance compensation.

 

i. Incidents or disputes on consumers' personal and property losses caused by product quality;

 

ii. Intellectual property disputes on Xiaomi Customized Products caused by Party B (including, without limitation to dispute on intellectual property infringement);

 

iii. Any, but not limited to failure of normal sales, customer complaints, consumer disputes, administrative penalties, seizures or penalties by customs or market regulators or court injunctions caused by Party B’s failure to obtain the relevant certifications, permits, and qualifications required by the PRC laws and the target sales country as agreed, or the failure of Party B’s products to meet any product compliance requirements of China and the target sales country;

 

iv.  Disputes, complaints and other issues arising from the illegal or faulty after-sales service provided by Party B or Party B and its authorized channel partners;

 

v. Collection, processing, disclosure, storage, use, transmission of user data in the case that Party B violates the data privacy protection laws and regulations in product sales region or all other applicable regions; 

 

If a third party claims or files a lawsuit against Party A and its affiliates, distributors, agents ("the Damaged Party") due to the aforementioned reasons, Party B shall cooperate with Party A to defend and warrant the interest of Damaged Party shall not be damaged at the request of Party A, otherwise Party B shall make compensation to the Damaged Party (including but not limited to the costs for Party A’s engagement of attorney and other third party, response to complaints and compensation to the third party)

 

9.3 Party A shall be entitled to terminate this Agreement and the specific orders in advance by giving the written notice if:

 

9.3.1 Party B materially breaches the material obligation underlying this agreement and purchase order;

 

9.3.2 Except as prohibited by applicable bankruptcy laws, Party B declares bankruptcy, or if Party B is unable to repay due loans, or perform contracts, or if Party B’s assets are transferred to or taken by other creditors;

 

9.3.3 The products fail to meet Party A’s requirements, and Party A determines that there is no value to remedy or the products still fail the requirement after three times’ remedies;

 

9.3.4 Party B fails to deliver the products on time without reasonable cause and Party A’s prior written consent;

 

9.3.5 Party B fails to comply with Appendix III Xiaomi’s Customized Product User Data Clause attached to this Agreement, or to store the data in the cloud server designated by Xiaomi, involves in the disputes infringing the protection of user personal information, or discloses user data to the third party without Party A’s permission.

 

10. Export Control

 

Party B undertakes and commits that any technology, technical data, software code or other information, hardware, equipment or its components (hereinafter referred to as "Delivered Items") provided to Party A are not weapons or protective products as defined in the 22 Code of Federal Regulations § 120.6 “Defense Articles”, and Party B’s disclosure and export to Party A shall not violate any applicable export control laws and regulations (including but not limited to the United States, the European Union and Hong Kong). In addition, if any applicable law imposes any restrictions on the export and re-export of the aforementioned Delivered Items, Party B commits to notify Party 

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A of such restrictions in advance. Party B shall undertake and commit that it will provide accurate, up-to-date and complete export classification information and relevant documents (including but not limited to relevant export licensing, classification or commodity jurisdiction decisions) applicable to Delivered Items according to the request of Party A. If Party B violates the provisions of this clause, including not providing the requested information or documents within a reasonable period requested by Party A, Party A is entitled to stop performing this Agreement and any related contracts, and Party B shall bear all the losses and liabilities arising therefrom.

 

11. User Data

 

Party B shall ensure that its collection, processing, disclosure, storage, use, transmission of user data comply with any applicable data protection laws and regulations. If Party B violates any applicable data protection laws and regulations, it shall independently bear all legal responsibilities. Party B shall compensate any losses caused to Party A. If Party A suffers any adverse effects, Party B shall publicly clarify the relevant situation by itself or through cooperation with Party A. For details of relevant clause please refer to Appendix III “Xiaomi’s Customized Product User Data Clause”

 

12. Integrity Clause

 

12.1 Party B or the staff of Party B shall not directly or indirectly bribe or pay any other improper tangible or intangible benefits to Party A’s personnel and their relatives, or exert improper influence in any other way, including but not limited to:

 

i. Bribe or gift to Party A's personnel and their relatives (including but not limited to cash, gifts, securities, valuables and other properties, providing loans, dividends);

 

ii. Provide Party A’s personnel and their relatives banquets, vacations, traveling abroad, and activities to entertainment venues;

 

iii. Use agents or any third party to bribe Party A’s personnel and their relatives;

 

iv. Propose improper requests irrelevant to work to Party A’s personnel in any other ways;

 

vi. Implement other acts of bribery prohibited by law.

 

12.2 If Party B violates any one or more of these terms, Party A is entitled to choose one or more of the following measures:

 

i. Cancel Party B's qualification as supplier, and unilaterally terminate the contracts related to Party B without taking responsibility for breach of contract;

 

ii. Deduct all the deposit paid by Party B (if any);

 

iii. Party B shall pay Party A a one-time payment of ten percent (10%) of the amount of the relevant business contract or PO (the contract amount includes the actual payment + the amount that has not yet been paid) or RMB0.5 million (500,000), whichever is higher.

 

If the aforementioned remedies fails to compensate Party A’s losses, Party B shall recover Party A’s actual losses. In terms of the aforementioned liquidated damages or compensation, Party A is entitled to deduct directly from Party B's accounts receivable and Party A reserves the right to pursue legal liabilities in accordance with national laws and regulations.

 

12.3 If the relevant personnel of Party A violates any one or more of the provisions of this clause, Party B shall immediately report to the leader or supervision department of Party A. In addition, Party B should actively cooperate with Party A's investigation and actively provide relevant information that may affect Party A's interests or Party A needs. If Party B finds that other suppliers cooperating with Party A violate this clause, Party B undertakes to report to Party A and provide evidence.

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Complaint method:

Email: tousu@xiaomi.com

 

13. Force Majeure

 

13.1 If either Party encounters an event of force majeure, including but not limited to fire, flood, earthquake, typhoon, natural disasters and other unforeseen or unavoidable or uncontrolled circumstances, as a result of which such Party is unable to perform its obligations under this Agreement, then such Party shall not be liable therefor. The time for said performance by such Party specified in this Agreement shall be automatically extended by a period equal to the period of such Party’s inability to perform this Agreement directly or indirectly caused by such event of force majeure. The affected Party shall inform the other Party of such event of force majeure by telegraph or telex within the reasonable time, and submit the supporting documentation on the event of force majeure issued by the competent authority within 15 days subsequent to such event.

 

15.2 If performance of this Agreement cannot continue, Party A shall be entitled to unilaterally terminate this Agreement and the specific orders.

 

14.  Scope of Validity

 

14.1 This Agreement is executed by and between Party A and Party B in Haidian District, Beijing with a valid term of one year, i.e. from November 1, 2019 to October 31, 2020. If no Party puts forward the written objections upon expiration of this Agreement, this Agreement shall be automatically renewed for one-year term thereafter on the same conditions. If one Party is unwilling to renew its term, such Party shall put forward the objections before 30 days prior to expiration hereof.

  

14.2 Except for the circumstances as agreed in Clause 9.3 of this Agreement, if Party B fails to comply with any clause of this Agreement, Party A shall be entitled to require Party B to immediately stop such breach once found; if Party A finds thereafter that Party B still does not stop such breach, Party A shall be entitled to immediately terminate this Agreement.

 

14.3 Within the valid term of this Agreement, no Party shall change or terminate this Agreement at its will without the written consent of the other Party, unless one Party exercises its rights to unilaterally rescind or terminate this Agreement as agreed herein.

 

14.4 It is confirmed that Party A and Party B may terminate this Agreement through consultation if the occurrence of the force majeure and other circumstances renders the performance of this Agreement unnecessary or impossible.

 

14.5 Upon the expiration of this Agreement, the outstanding claims and debts between both Parties shall not be affected by this Agreement, and both Parties shall continue to complete the fulfillment of their own obligations.

 

14.6 If this Agreement and the specific orders are early rescinded or terminated for whatever reasons, the clauses of warranty, intellectual property, confidentiality, liability for breach and other clauses which shall survive in terms of their features shall remain in full force and effect.

 

15. Dispute Resolution

 

Both Parties shall settle all disputes arising from performance of this Agreement and in connection with the conduct of cooperation according to this Agreement through friendly consultation. If both Parties fail to reach an agreement through consultation, they shall file a lawsuit in respect of such disputes with the people’s court in the place where Party A is domiciled. In the process of handling such disputes, the rest of this Agreement shall continue to be performed, except for the provisions under the litigation.

 

16. Supplementary Provisions of this Agreement

 

16.1 Modifications to this Agreement: No modifications to this Agreement (including supplements and revisions hereof) shall be effective unless duly signed by both Parties.

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16.2 Appendixes attached to this Agreement, including “Xiaomi Customized Product Project Agreement”, “Letter of Authorization on Equal Rights to Information and Rights of Verification”, “Intellectual Property Terms”, “Xiaomi’s Customized Product User Data Clause”, “Framework Agreement on Quality of Xiaomi Customized Product”, “Framework Agreement on After-sale Service of Xiaomi Customized Product”, “Confidentiality Agreement” and PO executed by both Parties, shall form an integral part of this Agreement and have the equal legal force and effect with this Agreement.

 

16.3 If the matters are not covered in this Agreement, both Parties shall jointly negotiate and execute the written supplementary agreement which shall have the equal legal force and effect with this Agreement.

  

16.4 No express waiver of this Agreement or failure to timely exercise any of rights granted by this Agreement shall constitute a continuous waiver hereof or waiver of any rights under this Agreement.

 

16.5 If any provision or part of this Agreement is ruled illegal or unenforceable, such provision or part shall be separated from this Agreement, and shall not affect, damage or derogate from the validity of any other provisions or parts of this Agreement. The illegal or unenforceable provision above shall be replaced by a valid or legal provision that comes closest to expressing the meaning and contents of such illegal or unenforceable provision.

 

16.6 Notifications: All notifications should be in written form. The written notice sent by Party A to Party B by fax or similar means shall be deemed served on the day of sending; the letter shall be deemed served when it reaches the recipient of Party B; the air mail shall be deemed served on the fifth (5) day of delivery, and express delivery shall be deemed served when the recipient confirms and signs. E-mail or electronic data is deemed served on the day that the email or electronic data is delivered to Party B's electronic system. If the contact of Party B is changed, Party B shall notify Party A three (3) days in advance.

 

The contact of Party B:

 

16.7 The headings and descriptions of the clauses included in this Agreement are for reference only, and in no event shall the headings above limit, restrict, extend or describe the scope or the contents of any clause of this Agreement in any manner.

 

16.8 This Agreement is made in three (3) copies. It is effective from signature. Party A holds two (2) copies and Party B holds one (1) copy.

 

(The remainder of this page is signature page)

 

	
Xiaomi Communications Co., Ltd.
	
Foshan Yunmi Electric Appliances 
Technology Co., Ltd.

	
 
	
 

	
(Contract seal: /s/ Xiaomi 
Communications Co., Ltd.)
	
(Contract seal: /s/ Foshan Yunmi Electric 
Appliances Technology Co., Ltd.)

 

Appendix I: Intellectual Property Terms

Appendix II: Letter of Authorization on Equal Rights to Information and Rights of Verification

Appendix III: Xiaomi’s Customized Product User Data Clause

Appendix IV: Xiaomi Customized Product Project Agreement

Appendix V: Framework Agreement on Quality of Xiaomi Customized Product

Appendix VI: Framework Agreement on After-sale Service of Xiaomi Customized Product

Appendix VII: Confidentiality Agreement

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 Appendix I:

 

Intellectual Property Terms

 

1. Intellectual Property Ownership

 

1.1 The rights, interests and intellectual property rights contained in or related to the ID (industrial design) generated by the design, development, production and sales of Xiaomi’s customized products executed in accordance with this Agreement are owned by Party A (hereinafter referred to as “Party A’s Intellectual Property Rights”).

 

1.2 Other technical achievements and related intellectual property rights (excluding Party A’s Intellectual Property Rights) arising from the design, development, production and sales of Xiaomi’s customized products executed in accordance with this Agreement shall be jointly owned by Party A and Party B (hereinafter referred to as “Shared Intellectual Property Rights”).

 

1.3 Without the prior written consent of Party A, Party B shall not use the same or similar design on the non-Xiaomi customized products as the Xiaomi customized products or Xiaomi brand products. Party B is also prohibited to disclose the products, designs or other relevant information discussed in the process of determining Xiaomi customized products to third parties, especially other consumer electronics manufacturers that have a competitive relationship with Party A. Party B's violation of the above clause shall be deemed as a major breach of contract, and Party A is entitled to claim all losses arising therefrom and terminate the cooperation.

 

1.4 Without Party A’s prior written consent, Party B shall not use any product that is denied in the process of determining Xiaomi's customized products as Party B’s own brand product for manufacture, use or sale, nor may Party B instruct or assist a third party to manufacture, use or sell such products.

 

1.5 Without Party A’s prior written consent, Party B shall not apply, register or permit a third party to have the same or similar design as Xiaomi’s customized products or Xiaomi brand products.

 

2. Implementation and Management of Shared Intellectual Property Rights

 

2.1 Party A and Party B have the discretion to implement the use of the Shared Intellectual Property Rights without having to notify and share the proceeds with the other party.

 

2.2 Both parties agree that Party A shall be responsible for the application, registration, management and maintenance of the Shared Intellectual Property Rights. Party B shall promptly assist and cooperate with Party A to complete the above matters. Unless otherwise agreed, the cost of applying for, registering, managing and maintaining the Shared Intellectual Property Rights is shared equally between the parties. If one party waives the Shared Intellectual Property Rights, such Shared Intellectual Property Rights shall be transferred to the other party and owned by the transferee all by itself, and the party that waives the Shared Intellectual Property Rights shall assist in the completion of the ownership change procedure.

 

2.3 Both parties shall sign an effective job-related technological achievement agreement with the personnel involved in the design, development, production and sales of Xiaomi’s customized products to ensure that all parties can fully fulfill the agreement on the Party A’s Intellectual Property Rights and the Shared Intellectual Property Rights in this Agreement. At the same time, all parties should also ensure that any person who makes the job-related technological achievement can enjoy his/her legal rights in accordance with the relevant laws and regulations.

 

2.4 No party may assign or license the Shared Intellectual Property Rights to a third party without the prior consent of the other party. Each party has the right to initiate litigation, arbitration or other legal action against any third party that infringes the Shared Intellectual Property Rights, and such party should consult with the other party before initiating such legal action.

 

11

 

 

3. Third-party Intellectual Property Rights

 

In accordance with the legal provisions of the cooperation territory between Party A and Party B and the third-party intellectual property rights of the products and services provided by Party B at the time of signing this Agreement, the parties have agreed as follows:

 

3.1 Party B shall ensure that all intellectual property licenses necessary for the production of the product have been obtained. If any third party asserts that Xiaomi’s customized products produced by Party B are infringing the intellectual property rights of third parties, Party B shall be responsible for resolve the dispute on its own. If Party A incurs costs (including but not limited to litigation fees, arbitration fees and reasonable attorneys’ fees) or suffers adverse effects or losses (if any) due to claims from third parties, Party B shall make compensation therefor.

 

3.2 When both parties sign the Purchase Order, Party B shall inform Party A of the third-party intellectual property licenses of the products provided by it. If Party B fails to disclose the intellectual property licenses to Party A, which causes the disputes mentioned above in Article 3.1, Party A has, in addition to the right to deal with the said disputes in accordance with Article 3.1, it also has the right to request the immediate termination of the Agreement. The unfulfilled part hereof is no longer to be fulfilled, and Party A has the right to request Party B to bear the liability for breach of contract in accordance with the provisions of this Agreement.

  

4. Obligation to Inform Open Source Software

 

4.1 Party B shall not include or embed any open source software, libre software, free software, and third-party materials subject to the license terms of any open source software, libre software and free software ("Open Source Software") in the customized products delivered to Party A, unless 1) Party B provides a written list and clearly identifies the specific elements of the customized product containing Open Source Software, 2) Party B identifies the corresponding third-party license and any restrictions of use in the above list, and 3) under Party A’s written consent to allow use of such Open Source Software. If Party A agrees to adopt the Open Source Software, Party B promises and commits to have complied with and will continue to abide by the aforementioned license terms and conditions of Open Source Software included or embedded in the customized product. If Party A does not agree to use the Open Source Software, Party B should replace the Open Source Software and ensure that the quality and performance of the customized products are not affected. If Party B violates the above notification obligation or fails to meet any requirements of the Open Source Software license, Party B shall compensate Party A or its affiliates for all losses suffered arising therefrom.

 

5. Commitment and Licenses

 

5.1 Party B undertakes not to initiate any legal actions or to file any infringement claims against the directors, employees and suppliers, customers, distributors or partners of Party A and Party A’s affiliates based on the intellectual property rights owned or controlled by Party B, provided, however, that the scope of the above commitments is only limited to products or services related to Party A and Party A’s affiliates. Party B shall ensure that its affiliates, successors or assignees of intellectual property rights comply with or fulfil the same commitments.

 

5.2 Party B hereby grants Party A a non-exclusive, irrevocable, free and sublicensable license, allowing Party A or a licensee authorized by Party A to implement the intellectual property rights owned by Party B in connection with Xiaomi’s customized products. The above licenses shall only take effect when one of the following circumstances occurs: 1) Both parties agree that Party B cannot complete the agreed development, mass production or delivery target of Xiaomi’s customized products; or 2) Party B becomes bankrupt, liquidated or otherwise unable to continue to perform this Agreement.

 

	
Xiaomi Communications Co., Ltd.
	
Foshan Yunmi Electric Appliances 
Technology Co., Ltd.

	
 
	
 

	
(Contract seal: /s/ Xiaomi 
Communications Co., Ltd.)
	
(Contract seal: /s/ Foshan Yunmi Electric 
Appliances Technology Co., Ltd.)

 

12

 

 

Appendix II:

 

Letter of Authorization on Equal Rights to Information and Rights of Verification

 

Xiaomi Customized Product’s authorizing party, Foshan Yunmi Electric Technology Co., Ltd.  is located at (2F of No.1 Building and 4F of No.7 Building) No. 2, Xinxisi North Road, Xiashi Village Committee, Lunjiao Subdistrict Office, Shunde District, Foshan City

 

Xiaomi Customized Product’s authorized party, Xiaomi Communications Co., Ltd. is located at Level 9, Phase II, the Rainbow City of China Resources, No. 68 Qinghe Middle Road, Haidian, Beijing

 

Whereas:

 

The cooperation between the authorizing party and its suppliers, processing factories, logistics service providers, etc. with which it cooperates are bound by the confidentiality agreement, and the authorized party needs to have the same right to know the supply information because it has cooperation with the authorizing party regarding the customized product business. The following agreement is hereby reached:

 

1. The authorized party has the same right to know and review as the authorizing party, including but not limited to quality management information, logistics information and cost information.

 

2. The authorized party may, with this Power of Attorney, request the cooperation unit of Xiaomi’s customized products of the licensor to provide corresponding information.

 

3. Xiaomi’s customized products: subject to the “Agreement on Xiaomi Customized Product Project Agreement”.

 

4. The authorizing party shall notify the suppliers, the processing factories, the logistics service providers with which it cooperates of the licenses herein within 5 working days upon signing this Agreement. The written consent of the supplier, the processing factory and the logistics service provider with which it cooperates shall be obtained. If the licensor fails to obtain the above written consent, the licensee has the right to suspend the cooperation of Xiaomi’s customized products.

 

5. This Authorization Letter is an important part of the business cooperation agreement and has the same legal effect as the business cooperation agreement.

 

It is hereby certified that the authorizing party signed this letter of authorization on November 1, 2019.

 

	
Authorizing Party:

Foshan Yunmi Electric Appliances Technology Co., Ltd.

	
 

	
(Contract seal: /s/ Foshan Yunmi Electric Appliances Technology Co., Ltd.)

 

13

 

 

Appendix III:

 

Xiaomi’s Customized Product User Data Clause

 

1. Definition of User Data

 

User data refers to data generated by Xiaomi’s Customized Products in the process of providing services to users or data collected from users, including user personal information as well as non-personal information. User personal information refers to personal identification data such as the user’s personal name, date of birth, ID number, personal biometric information, address, telephone number, etc., recorded electronically or otherwise, and other personal data refers to various data that can be used individually or in combination with other data to identify the user. User non-personal information refers to information other than the user’s personal information recorded electronically or otherwise. The definition of user data is applicable to its according definitions of user personal information and non-personal information under applicable privacy laws of various countries and regions other than PRC.

 

2. Application Scope of User Data Clause

 

The collection, storage, transmission, use and disclosure of user data generated during the service provision of Xiaomi’s customized product shall be carried out in accordance with the terms of the User Data Clause. The Xiaomi’s customized product referred to herein contain customized product that have been co-operated or marketed, as well as those to be co-operated in the future.

 

3. Ownership of and Right to Use User Data

 

3.1 Party B agrees to use the Xiaomi account system separately on Xiaomi’s customized product, that is, users can register and log in to the Xiaomi account, and further use Xiaomi’s customized product and supporting applications.

 

3.2 In order to enhance the value of the data and enable users to successfully use customized services, Party B shall access and cooperate with Party A’s data platform in accordance with Party A’s requirements. Party A shall exercise the discretion on the basis of mutual benefit to provide Party B with data capabilities.

 

3.3 According to the requirements of Party A, user data shall be stored in Xiaomi Ecological Cloud or other cloud servers designated by Party A. Party B shall provide the secret key and other data formats to Party A on a regular basis. If Party B requires user data to be synchronized or transmitted from the server designated by Party A to other servers, Party B shall ensure the security of the transmission mechanism and bear its own responsibility for the legal storage, use and transmission of such user data.

 

3.4 Party B agrees to share all user data collected during the service of Xiaomi's customized products to Party A, and Party A is entitled to independently store, use and share the user data in accordance with the requirements of applicable laws.

 

3.5 Party B has the right to use the user data described herein within the scope of Party B’s business objectives, subject to compliance with applicable privacy laws of various countries and regions as well as the privacy policy of the respective Xiaomi customized products.

 

4. Principles of User Data Usage

 

4.1 Principle of informed and consent. Party B shall follow the principle of informed and consent for collecting, using and disclosing user data, and clearly inform the user of the purpose, application, scope, and withdrawal mechanism of the data collected, and be subject to the consent of the user.

 

4.2 Principle of necessity. Party B can only collect the personal data of the users necessary for the provision of Xiaomi’s customized product. If Party B needs to collect user data other than providing services for the purpose of enhancing the user experience, Party B shall develop a user experience improvement plan, clearly prompting the user and obtaining the user’s consent.

14

 

 

 

4.3 The principle of legitimacy. Party B agrees and undertakes the collection, processing, storage, use, transmission and sharing of user data subject to compliance with applicable privacy laws of various countries/regions. In terms of the user data shared by Party B with Party A, Party B shall ensure fully authorized by users so that in accordance with this article Party A is entitled to independently process, store, use, transmit and transfer the user data shared by Party B subject to compliance with applicable privacy laws. 

 

5. Rules for the Collection, Processing, Storage, Use, Transmission and Sharing of User Data

 

5.1 In terms of the user data collected, processed, stored, used, transmitted and shared by Party B during the service of Xiaomi’s customized product:

 

5.1.1 Party B shall formulate a complete user agreement, privacy policy and user experience improvement plan (if applicable), clearly inform the user of the purpose, application, scope, and withdrawal mechanism of the data collected, and obtain the consent of the user. 

 

5.1.2 Party B shall use a robust and safe system and formulate strict technical and management measures to protect user data, and ensure that the level of protection meets the requirements of applicable laws and in any case is not lower than the level required by Party A.

 

5.1.3 Party B shall formulate an emergency response plan for data security incidents. If any data security incident occurs, Party B should immediately notify Party A and work with Party A to determine the respond to the data security incident.

 

5.1.4 Party B shall adopt a sufficient and reasonable security mechanism to ensure the security of user data. Party B shall store data in accordance with applicable privacy laws for legal cross-border transmission.

 

5.1.5 Party B shall be subject to applicable privacy laws, respond to data subject related rights requests and complaints in a timely manner, and immediately notify Party A when receiving such claims. If Party A believes that such request or complaint may have an impact on Party A’s reputation, Party B is obliged to respond and cooperate in accordance with Party A’s request.

 

5.1.6 Notwithstanding the aforementioned clauses, Party B shall comply with the obligations of the data controller subject to applicable privacy laws. If Party A provides data storage and other processing activities for Xiaomi's customized products, and is identified as a data processor subject to applicable laws, Party A shall abide by the requirements of such laws for data processors and carry out such processing activities in accordance with Party B's instructions. If Party A fails to comply with the legal requirements due to Party B's fault (such as delaying notification to Party A resulting in Party A’s failure to fulfill the data subject's relevant claims), Party B shall compensate Party A for the losses caused thereby.

 

5.1.7 If the user data referred to herein is used in conjunction with the user data of Party B’s own product, Party B shall separately store the two types of data and shall still abide by the requirements of this clause.

 

5.1.8 After Party A’s prior written consent, Party B may disclose the user data applicable herein to third parties or authorize third parties to use the same. If the data storage capacity (or the number of structured data) of Party B reaches 25% or more of the data volume (or the number of structured data) of Party A and its affiliates, Party A shall, with the written consent of Party B, disclose the user data applicable herein to third parties or authorize third parties to use the same. The data storage capacity of Party B shall be calculated according to the storage capacity on the Xiaomi Ecological Cloud. The number of structured data of Party B shall be calculated according to the number of structured data accessed by Party A. Before Party B meets the above conditions, Party A has the right to disclose the user data applicable herein to third parties or authorize third parties to use the same. After the above conditions are met, the sharing of data by any party to third parties shall be in accordance with the law and Xiaomi’s Privacy Policy.

 

5.1.9 If Xiaomi's customized products can be used through Party B's own application or platform, Party B shall ensure that the collection and processing of user data by Party B's own application or platform comply with the 

15

 

 

applicable privacy laws and regulations, and shall bear the responsibility for all liabilities arising from compliance failure. Party B shall compensate for any losses to Party A.

 

5.1.10 Party A reserves the right to review Party B’s obligations under Article 5.1, and is entitled to request Party B to cooperate in rectification when Xiaomi’s customized products fails to pass Party A’s examination until it meets Party A’s requirements. For the avoidance of doubt, Party A’s examination does not mean that Party A endorses or guarantees that the above agreements and policies comply with the applicable privacy laws of each country/region, and Party A does not assume any responsibility for its examination.

 

5.2 If Party B provides services of Xiaomi’s customized product outside the mainland of China, it shall notify Party A three months in advance, so that Party A may assess the privacy data compliance of Xiaomi’s customized product in the country where the products are sold, as well as store, transmit and process the user data in accordance with Party A’s requirements.

 

5.2.1 Party B shall submit the review materials truthfully, completely and accurately in accordance with the requirements of Party A, including but not limited to questionnaires, test packages, privacy policies, user agreements and user experience improvement plans and other applicable documents. If Party B fails to submit such materials in accordance with the requirements of this clause, or after Party A’s verification Party B modifies Xiaomi’s customized products without authorization (such as the type or use purpose of user data collection in the customized products), Party B shall bear all the responsibilities arising therefrom.

 

5.2.2 Party B is obliged to cooperate with the rectification suggestions on the review materials from Party A. Party B shall not sell or provide services without Party A’s review and approval, otherwise Party A is entitled to claim Party B’s liability for breach of contract and compensation for all the losses. For the avoidance of doubt, the approval of Party A does not mean that Party A recognizes that the relevant Xiaomi’s customized products meet the requirements of the applicable laws and regulations of the target sales country. Party B shall bear all responsibilities arising from the failure of the relevant Xiaomi’s customized products to comply with such regulations caused by Party B.

 

5.3 Without prejudice to other terms and conditions, if Xiaomi's customized products fail to meet the requirements of the applicable country/region privacy laws, Party B shall compensate Party A, Party A's executives and employees in full and prevent them from any responsibility, liabilities and losses arising therefrom including, but not limited to any claims, damages, fines, penalties, reputation losses and relevant attorney fees.

 

6. Validity

 

6.1 The validity period of this Appendix is consistent with the Business Cooperation Agreement.

 

6.2 The expiry of validity period or the early termination of the Business Cooperation Agreement will not affect Party A’s independent use of the user data of Xiaomi’s customized products that Party B has already shared with Party A.

 

	
Xiaomi Communications Co., Ltd.
	
Foshan Yunmi Electric Appliances 
Technology Co., Ltd.

	
 
	
 

	
(Contract seal: /s/ Xiaomi 
Communications Co., Ltd.)
	
(Contract seal: /s/ Foshan Yunmi Electric 
Appliances Technology Co., Ltd.)

 

16Exhibit

Exhibit 10.1

	
		
	Paycheck Protection Program Term Note
	 

 
	
		
	$955,800.00
	 April 22, 2020

 
 
FOR VALUE RECEIVED, NOVAN, INC. (the “Borrower”), with an address at 4105 HOPSON ROAD, MORRISVILLE, NORTH CAROLINA 27560, promises to pay to the order of PNC BANK, NATIONAL ASSOCIATION (the “Bank”), in lawful money of the United States of America in immediately available funds at its offices located at 222 Delaware Avenue, Wilmington, Delaware 19801, Attn: Business Banking, or at such other location as the Bank may designate from time to time, the principal sum of $955,800.00 (the “Facility”), together with interest accruing on the outstanding principal balance from the date hereof, all as provided below. This Note is being issued pursuant to the Coronavirus Aid, Relief, and Economic Security Act’s (the “CARES Act”) (P.L. 116-136) Paycheck Protection Program (the “Program”).
 
1. Rate of Interest. Amounts outstanding under this Note will bear interest at a rate per annum (“Fixed Rate”) which is at all times equal to 1.00%. Interest will be calculated based on the actual number of days that principal is outstanding over a year of 360 days. In no event will the rate of interest hereunder exceed the maximum rate allowed by law.
 
2. Structure; Payment Terms. During the period (the “Deferral Period”) beginning on the date of this Note and ending on the 6 month anniversary of the date of this Note (the “Deferral Expiration Date”), interest on the outstanding principal balance will accrue at the Fixed Rate, but neither principal nor interest shall be due and payable during the Deferral Period. On the Deferral Expiration Date, the outstanding principal of the Facility that is not forgiven under the Program (the “Conversion Balance”) shall convert to an amortizing term loan payable as set forth below.
 
On the 15th day of the 7th month following the date of this Note (the “First Payment Date”), all accrued interest that is not forgiven under the Program shall be due and payable. Additionally, on the First Payment Date, and continuing on the 15th day of each month thereafter until the 2nd anniversary of the date of this Note (the “Maturity Date”), equal installments of principal shall be due and payable, each in an amount determined by dividing the Conversion Balance by 18 (the “Monthly Principal Amount”). Interest shall be payable at the same times as the Monthly Principal Amount. Any outstanding principal and accrued interest shall be due and payable in full on the Maturity Date.
 
If any payment under this Note shall become due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing interest in connection with such payment. “Business Day” shall mean any day other than a Saturday or Sunday or a legal holiday on which commercial banks are authorized or required by law to be closed for business in the State of Delaware. The Borrower hereby authorizes the Bank to charge the Borrower’s deposit account at the Bank for any payment when due. Payments received will be applied to charges, fees and expenses (including attorneys’ fees), accrued interest and principal in any order the Bank may choose, in its sole discretion.
 
3. Forgiveness of the Facility. All or a portion of this Facility may be forgiven in accordance with the Program requirements. The amount of forgiveness shall be calculated (and may be reduced) in accordance with the requirements of the Program, including the provisions of Section 1106 of the CARES Act. Not more than 25% of the amount forgiven can be attributable to non-payroll costs. 
 
4. Late Payments; Default Rate. If the Borrower fails to make any payment of principal, interest or other amount coming due pursuant to the provisions of this Note within fifteen (15) calendar days of the date due and payable, 

the Borrower also shall pay to the Bank a late charge equal to the lesser of five percent (5%) of the amount of such payment or $100.00 (the “Late Charge”). Such fifteen (15) day period shall not be construed in any way to extend the due date of any such payment. Upon maturity, whether by acceleration, demand or otherwise, and at the Bank’s option upon the occurrence of any Event of Default (as hereinafter defined) and during the continuance thereof, each advance outstanding under this Note shall bear interest at a rate per annum (based on the actual number of days that principal is outstanding over a year of 360 days) which shall be five percentage points (5.00%) in excess of the interest rate in effect from time to time under this Note but not more than the maximum rate allowed by law (the “Default Rate”). The Default Rate shall continue to apply whether or not judgment shall be entered on this Note. Both the Late Charge and the Default Rate are imposed as liquidated damages for the purpose of defraying the Bank’s expenses incident to the handling of delinquent payments, but are in addition to, and not in lieu of, the Bank’s exercise of any rights and remedies hereunder, under the other Loan Documents (as defined below) or under applicable law, and any fees and expenses of any agents or attorneys which the Bank may employ. In addition, the Default Rate reflects the increased credit risk to the Bank of carrying a loan that is in default. The Borrower agrees that the Late Charge and Default Rate are reasonable forecasts of just compensation for anticipated and actual harm incurred by the Bank, and that the actual harm incurred by the Bank cannot be estimated with certainty and without difficulty. As used in this Note, “Loan Documents” means, individually and collectively, this Note, together with all other agreements and documents executed and/or delivered in connection with this Note or referred to in this Note, as amended, modified or renewed from time to time.
 
5. Prepayment. The Borrower shall have the right to prepay any amounts outstanding under this Note at any time and from time to time, in whole or in part, without penalty.
 
6. Increased Costs; Yield Protection. On written demand, together with written evidence of the justification therefor, the Borrower agrees to pay the Bank all direct costs incurred, any losses suffered or payments made by the Bank as a result of any Change in Law (hereinafter defined), imposing any reserve, deposit, allocation of capital or similar requirement (including without limitation, Regulation D of the Board of Governors of the Federal Reserve System) on the Bank, its holding company or any of their respective assets relative to the Facility. “Change in Law” means the occurrence, after the date of this Note, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any governmental authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any governmental authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
 
7. Representations, Warranties and Covenants. 
 
(a) The Borrower hereby represents and warrants that, if not a natural person, the Borrower is duly organized, validly existing and in good standing under the laws of the state of its incorporation or organization and has the power and authority to own and operate its assets and to conduct its business as now or proposed to be carried on, and is duly qualified, licensed and in good standing to do business in all jurisdictions where its ownership of property or the nature of its business requires such qualification or licensing. The Borrower further hereby represents and warrants that it was duly organized, validly existing and in good standing as of February 15, 2020 and had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on a Form 1099-MISC.
 
(b) The Borrower certifies, acknowledges and agrees that the certifications contained in the Paycheck Protection Program Certification and the Program application delivered to the Bank are true and correct, which certifications are hereby incorporated herein by this reference as if set forth herein.
  
(c) The Borrower covenants and agrees that the Borrower will do all things necessary to (i) maintain, renew and keep in full force and effect its organizational existence and all rights, permits and 

franchises necessary to enable it to continue its business as currently conducted; (ii) continue in operation in substantially the same manner as at present, to the extent permitted by applicable law (including without limitation any statute, ordinance, rule or regulation relating to employment practices, pension benefits or environmental, occupational and health standards and controls); and (iii) comply with all laws applicable to the Borrower and to the operation of its business (including without limitation any statute, ordinance, rule or regulation relating to employment practices, pension benefits or environmental, occupational and health standards and controls).
  
(d) The Borrower represents and warrants that (i) the Borrower has full power and authority to enter into the transactions provided for in this Note and the other Loan Documents; (ii) all necessary action to authorize the execution and delivery of this Note and the other Loan Documents has been properly taken; (iii) this Note and the other Loan Documents, when executed and delivered by the Borrower, will constitute the legal, valid and binding obligations of the Borrower enforceable in accordance with their terms; (iv) the Borrower is and will continue to be duly authorized to perform all of the terms and provisions of this Note and the other Loan Documents; (v) there does not exist, either before or after giving effect to the terms of this Note, any default or violation by the Borrower of or under any of the terms, conditions or obligations of any of its governing documents; and (vi) the Borrower does not require the consent of any party with respect to this Note, the other Loan Documents or the Facility except for such consents that have been obtained.
  
(e) The Borrower covenants and agrees to take all such additional actions and promptly provide to the Bank all additional documents, statements and information as the Bank may require from time to time, in its discretion, in connection with the SBA’s requirements or requests under or in respect of the Program or the general standard operating procedures of the SBA.
  
(f) The Borrower authorizes and directs the Bank to disburse the proceeds of the Facility and to direct payments due under the Facility in accordance with the Disbursement and Payment Authorization Instructions attached to this Note as Exhibit A.
 
8. Other Loan Documents. Notwithstanding any provision to the contrary in any Loan Document or any other collateral security documents that may have been or may in the future be executed and delivered to the Bank, or an agent acting on behalf of the Bank, to secure any obligations of the Borrower to the Bank, this Note is not intended to be secured by real property, and the applicability of any lien on such real property to secure this Note is expressly disclaimed by the Bank. 
 
9. Events of Default. The occurrence of any of the following events will be deemed to be an “Event of Default” under this Note: (i) the nonpayment of any principal, interest or other indebtedness under this Note when due; (ii) the occurrence of any event of default or any default and the lapse of any notice or cure period, or the Borrower’s failure to observe or perform any covenant or other agreement, under or contained in any Loan Document; (iii) the filing by or against the Borrower of any proceeding in bankruptcy, receivership, insolvency, reorganization, liquidation, conservatorship or similar proceeding (and, in the case of any such proceeding instituted against the Borrower, such proceeding is not dismissed or stayed within 30 days of the commencement thereof, provided that the Bank shall not be obligated to advance additional funds hereunder during such period); (iv) any assignment by the Borrower for the benefit of creditors, or any levy, garnishment, attachment or similar proceeding is instituted against any property of the Borrower held by or deposited with the Bank; (v) the commencement of any foreclosure or forfeiture proceeding, execution or attachment against any collateral securing the obligations of the Borrower to the Bank; (vi) the entry of a final judgment against the Borrower and the failure of the Borrower to discharge the judgment within ten (10) days of the entry thereof; (vii) any change in the Borrower’s equity ownership (if not a public company), or any merger, consolidation, division or other reorganization of, with or by the Borrower, or the sale or other transfer of all or any substantial part of the Borrower’s property or assets, except as otherwise permitted by the Bank; (viii) any change in the Borrower’s business, assets, operations, financial condition or results of operations that has or could reasonably be expected to have any material adverse effect on the Borrower; (ix) the Borrower ceases doing business as a going concern; (x) any representation or warranty made by the Borrower to the Bank in any Loan Document or any other documents now or in the future evidencing or securing the obligations of the Borrower to the Bank, is false, erroneous or misleading in any material respect; (xi) the death, incarceration, indictment or legal incompetency of any individual 

Borrower or, if the Borrower is a partnership or limited liability company, the death, incarceration, indictment or legal incompetency of any individual general partner or member; or (xii) failure of the Borrower to notify the Bank within ten (10) days of any change of the Borrower’s address.
 
Upon the occurrence of an Event of Default: (a) the Bank shall be under no further obligation to make advances hereunder; (b) if an Event of Default specified in clause (iii) or (iv) above shall occur, the outstanding principal balance and accrued interest hereunder together with any additional amounts payable hereunder shall be immediately due and payable without demand or notice of any kind; (c) if any other Event of Default shall occur, the outstanding principal balance and accrued interest hereunder together with any additional amounts payable hereunder, at the Bank’s option and without demand or notice of any kind, may be accelerated and become immediately due and payable; (d) at the Bank’s option, this Note will bear interest at the Default Rate from the date of the occurrence of the Event of Default; and (e) the Bank may exercise from time to time any of the rights and remedies available under the Loan Documents or under applicable law. The Borrower acknowledges that upon the occurrence of an Event of Default, SBA, as defined below, may be required to pay the Lender under the SBA guarantee, and SBA may then seek recovery on the Facility (to the extent any balance remains after loan forgiveness).
 
10. Right of Setoff. In addition to all rights of setoff against the Borrower’s money, securities or other property given to the Bank by law, the Bank shall have, with respect to the Borrower’s obligations to the Bank under this Note and to the extent permitted by law, a contractual right of setoff against all of the Borrower’s deposits, moneys, securities and other property now or hereafter in the possession of or on deposit with, or in transit to, the Bank or any other direct or indirect subsidiary of The PNC Financial Services Group, Inc., whether held in a general or special account or deposit, whether held jointly with someone else, or whether held for safekeeping or otherwise, excluding, however, all IRA, Keogh, and trust accounts. Every such right of setoff may be exercised without demand upon or notice to the Borrower upon the occurrence of an Event of Default. Every such right of setoff shall be deemed to have been exercised immediately upon the occurrence of an Event of Default hereunder without any action of the Bank, although the Bank may enter such setoff on its books and records at a later time. 
 
11. Financial and Other Information. Within forty five (45) days after the Bank’s request, the Borrower agrees to deliver any financial and other business and ownership information concerning the Borrower that the Bank may request from time to time, such as annual and interim financial statements (all of which shall be prepared in accordance with generally accepted accounting principles), federal income tax returns. The Borrower also agrees to deliver to the Bank, promptly upon the Bank’s request, certification(s) of beneficial owners in the form requested by the Bank (as executed and delivered to the Bank on or prior to the date of this Note and updated from time to time, the “Certification of Beneficial Owners”). If the Borrower was required to execute and deliver to the Bank a Certification of Beneficial Owners, (a) the Borrower represents and warrants, as of the date of this Note and as of the date each updated Certification of Beneficial Owners is provided to the Bank, that the information in the Certification of Beneficial Owners is true, complete and correct, and (b) the Borrower agrees to provide confirmation of the accuracy of the information set forth in the Certification of Beneficial Owners, or deliver a new Certification of Beneficial Owners in form and substance acceptable to the Bank, as and when requested by the Bank and/or when any individual identified on the most recent Certification of Beneficial Owners provided to the Bank as a controlling party and/or a direct or indirect individual owner has changed. The Borrower further agrees to provide such other information and documentation as may reasonably be requested by the Bank from time to time for purposes of compliance by the Bank with applicable laws (including without limitation the USA PATRIOT Act and other “know your customer” and anti-money laundering rules and regulations), and any policy or procedure implemented by the Bank to comply therewith. Additionally, the Borrower will keep books and records in a manner satisfactory to the Bank and allow the Bank and SBA to inspect and audit books, records and papers relating to the Borrower’s financial or business condition.
 
12. Anti-Money Laundering/International Trade Law Compliance. The Borrower represents and warrants to the Bank, as of the date of this Note, the date of each advance of proceeds under the Facility, the date of any renewal, extension or modification of the Facility, and at all times until the Facility has been terminated and all amounts thereunder have been indefeasibly paid in full, that: (a) no Covered Entity (i) is a Sanctioned Person; (ii) has any of its assets in a Sanctioned Country or in the possession, custody or control of a Sanctioned Person; or (iii) does business in or with, or derives any of its operating income from investments in or transactions with, any Sanctioned Country or Sanctioned Person in violation of any law, regulation, order or directive enforced by any Compliance Authority; (b) the proceeds of the Facility will not be used to fund any operations in, finance any investments or activities in, or, make any payments 

to, a Sanctioned Country or Sanctioned Person in violation of any law, regulation, order or directive enforced by any Compliance Authority; (c) the funds used to repay the Facility are not derived from any unlawful activity; and (d) each Covered Entity is in compliance with, and no Covered Entity engages in any dealings or transactions prohibited by, any laws of the United States, including but not limited to any Anti-Terrorism Laws. Borrower covenants and agrees that it shall immediately notify the Bank in writing upon the occurrence of a Reportable Compliance Event.
 
As used herein: “Anti-Terrorism Laws” means any laws relating to terrorism, trade sanctions programs and embargoes, import/export licensing, money laundering, or bribery, all as amended, supplemented or replaced from time to time; “Compliance Authority” means each and all of the (a) U.S. Treasury Department/Office of Foreign Assets Control, (b) U.S. Treasury Department/Financial Crimes Enforcement Network, (c) U.S. State Department/Directorate of Defense Trade Controls, (d) U.S. Commerce Department/Bureau of Industry and Security, (e) U.S. Internal Revenue Service, (f) U.S. Justice Department, and (g) U.S. Securities and Exchange Commission; “Covered Entity” means the Borrower, its affiliates and subsidiaries, all guarantors, pledgors of collateral, all owners of the foregoing, and all brokers or other agents of the Borrower acting in any capacity in connection with the Facility; “Reportable Compliance Event” means that any Covered Entity becomes a Sanctioned Person, or is indicted, arraigned, investigated or custodially detained, or receives an inquiry from regulatory or law enforcement officials, in connection with any Anti-Terrorism Law or any predicate crime to any Anti-Terrorism Law, or self-discovers facts or circumstances implicating any aspect of its operations with the actual or possible violation of any Anti-Terrorism Law; “Sanctioned Country” means a country subject to a sanctions program maintained by any Compliance Authority; and “Sanctioned Person” means any individual person, group, regime, entity or thing listed or otherwise recognized as a specially designated, prohibited, sanctioned or debarred person or entity, or subject to any limitations or prohibitions (including but not limited to the blocking of property or rejection of transactions), under any order or directive of any Compliance Authority or otherwise subject to, or specially designated under, any sanctions program maintained by any Compliance Authority. 
 
13. Release and Indemnity. The Borrower agrees to indemnify each of the Bank, each legal entity, if any, who controls, is controlled by or is under common control with the Bank, and each of their respective directors, officers and employees (the “Indemnified Parties”), and to defend and hold each Indemnified Party harmless from and against any and all claims, damages, losses, liabilities and expenses (including all fees and charges of internal or external counsel with whom any Indemnified Party may consult and all expenses of litigation and preparation therefor) which any Indemnified Party may incur or which may be asserted against any Indemnified Party by any person, entity or governmental authority (including the Borrower or any person or entity claiming derivatively on behalf of the Borrower), in connection with or arising out of the Program or relating to the matters referred to in this Note or in the other Loan Documents or the use of any advance hereunder, whether (a) arising from or incurred in connection with any breach of a representation, warranty or covenant by the Borrower, or (b) arising out of or resulting from any suit, action, claim, proceeding or governmental investigation, pending or threatened, whether based on statute, regulation or order, or tort, or contract or otherwise, before any court or governmental authority; provided, however, that the foregoing indemnity shall not apply to any claims, damages, losses, liabilities and expenses solely attributable to an Indemnified Party’s gross negligence or willful misconduct. The release and indemnity agreements contained in this paragraph shall survive the termination of this Note, payment of any advance hereunder and the assignment of any rights hereunder. The Borrower may participate at its expense in the defense of any such action or claim.
 
14. Miscellaneous. All notices, demands, requests, consents, approvals and other communications required or permitted hereunder (“Notices”) must be in writing (except as may be agreed otherwise above with respect to borrowing requests or as otherwise provided in this Note) and will be effective upon receipt. Notices may be given in any manner to which the parties may agree. Without limiting the foregoing, first-class mail, postage prepaid, facsimile transmission and commercial courier service are hereby agreed to as acceptable methods for giving Notices. In addition, the parties agree that Notices may be sent electronically to any electronic address provided by a party from time to time. Notices may be sent to a party’s address as set forth above or to such other address as any party may give to the other for such purpose in accordance with this paragraph. No delay or omission on the Bank’s part to exercise any right or power arising hereunder will impair any such right or power or be considered a waiver of any such right or power, nor will the Bank’s action or inaction impair any such right or power. The Bank’s rights and remedies hereunder are cumulative and not exclusive of any other rights or remedies which the Bank may have under other agreements, at law or in equity. No modification, amendment or waiver of, or consent to any departure by the Borrower from, any provision of this Note will be effective unless made in a writing signed by the Bank, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Notwithstanding the foregoing, the Bank 

may modify this Note for the purposes of completing missing content or correcting erroneous content, without the need for a written amendment, provided that the Bank shall send a copy of any such modification to the Borrower (which notice may be given by electronic mail). The Borrower agrees to pay on demand, to the extent permitted by law, all costs and expenses incurred by the Bank in the enforcement of its rights in this Note and in any security therefor, including without limitation reasonable fees and expenses of the Bank’s counsel. If any provision of this Note is found to be invalid, illegal or unenforceable in any respect by a court, all the other provisions of this Note will remain in full force and effect. The Borrower and all other makers and indorsers of this Note hereby forever waive presentment, protest, notice of dishonor and notice of non-payment. The Borrower also waives all defenses based on suretyship or impairment of collateral. If this Note is executed by more than one Borrower, the obligations of such persons or entities hereunder will be joint and several. This Note shall bind the Borrower and its heirs, executors, administrators, successors and assigns, and the benefits hereof shall inure to the benefit of the Bank and its successors and assigns; provided, however, that the Borrower may not assign this Note in whole or in part without the Bank’s written consent and the Bank at any time may assign this Note in whole or in part.
 
This Note has been delivered to and accepted by the Bank and will be deemed to be made in the State of Delaware. THIS NOTE WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE BANK AND THE BORROWER DETERMINED IN ACCORDANCE WITH (I) FEDERAL REGULATIONS, AND (II) TO THE EXTENT NOT PREEMPTED BY FEDERAL LAWS OR REGULATIONS, THE LAWS OF THE STATE OF DELAWARE, EXCLUDING ITS CONFLICT OF LAWS RULES, INCLUDING WITHOUT LIMITATION THE ELECTRONIC TRANSACTIONS ACT (OR EQUIVALENT) IN EFFECT IN THE STATE OF DELAWARE (OR, TO THE EXTENT CONTROLLING, THE LAWS OF THE UNITED STATES OF AMERICA, INCLUDING WITHOUT LIMITATION THE ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT). The Borrower hereby irrevocably consents to the exclusive jurisdiction of any state or federal court in the State of Delaware; provided that nothing contained in this Note will prevent the Bank from bringing any action, enforcing any award or judgment or exercising any rights against the Borrower individually, against any security or against any property of the Borrower within any other county, state or other foreign or domestic jurisdiction. The Borrower acknowledges and agrees that the venue provided above is the most convenient forum for both the Bank and the Borrower. The Borrower waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Note.
 
15. Commercial Purpose. The Borrower represents that the indebtedness evidenced by this Note is being incurred by the Borrower solely for the purpose of acquiring or carrying on a business, professional or commercial activity, and not for personal, family or household purposes.
 
16. USA PATRIOT Act Notice. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each Borrower that opens an account. What this means: when the Borrower opens an account, the Bank will ask for the business name, business address, taxpayer identifying number and other information that will allow the Bank to identify the Borrower, such as organizational documents. For some businesses and organizations, the Bank may also need to ask for identifying information and documentation relating to certain individuals associated with the business or organization.

17. Authorization to Obtain Credit Reports. By signing below, each person, who is signing in his or her individual capacity, requests and provides written authorization to the Bank or its designee (and any assignee or potential assignee hereof) to obtain such individual’s personal credit profile from one or more national credit bureaus. This authorization extends to obtaining a credit profile in (i) considering an application for credit that is evidenced, guaranteed or secured by this document, (ii) assessing creditworthiness and (iii) considering extensions of credit, including on an ongoing basis, as necessary for the purposes of (a) update, renewal or extension of such credit or additional credit, (b) reviewing, administering or collecting the resulting account and (c) reporting on the repayment and satisfaction of such credit obligations. By signing below, such individual further ratifies and confirms his or her prior requests and authorizations with respect to the matters set forth herein. For the avoidance of doubt, this provision does not apply to persons signing below in their capacities as officers or other authorized representatives of entities, organizations or governmental bodies.
  

18. Electronic Signatures and Records. Notwithstanding any other provision herein, the Borrower agrees that this Note, the Loan Documents, any amendments thereto, and any other information, notice, signature card, agreement or authorization related thereto (each, a “Communication”) may, at the Bank’s option, be in the form of an electronic record. Any Communication may, at the Bank’s option, be signed or executed using electronic signatures. For the avoidance of doubt, the authorization under this paragraph may include, without limitation, use or acceptance by the Bank of a manually signed paper Communication which has been converted into electronic form (such as scanned into PDF format) for transmission, delivery and/or retention. 
 
19. Depository. Unless the Bank otherwise agrees, the Borrower will establish and maintain with the Bank the Borrower’s primary depository accounts.
 
20. Federal Law. When the U.S. Small Business Administration (“SBA”) is the holder, this Note will be interpreted and enforced under federal law, including SBA regulations. The Bank or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note, the Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA, or preempt federal law.
 
21. DISPUTE RESOLUTION. 
 
(a) WAIVER OF JURY TRIAL. FOR ANY DISPUTE THAT IS NOT ARBITRATED, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER AND THE BANK IRREVOCABLY WAIVES ANY AND ALL RIGHTS THE BORROWER OR THE BANK MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
 
 
(b) ARBITRATION OF DISPUTES. The Borrower or the Bank may elect to submit any and all disputes arising out of or relating to the Loan Documents or any breach thereof (a “Dispute”) to binding arbitration
  
(i) Arbitration. Any arbitration shall be conducted pursuant to and in accordance with the AAA Commercial Arbitration Rules and, where applicable, the Supplementary Rules for Large, Complex Commercial Disputes, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Such arbitration shall be conducted in a mutually acceptable location. Except as expressly set forth below, the procedures specified herein shall be the sole and exclusive procedures for the resolution of Disputes; provided, however, that the Borrower or the Bank may seek provisional or ancillary remedies, such as preliminary injunctive relief, from a court having jurisdiction, before, during or after the pendency of any arbitration proceeding. The institution and maintenance of any action for such judicial relief, or pursuit of provisional or ancillary remedies, shall not constitute a waiver of the right or obligation of any party to submit any claim or dispute to arbitration. Nothing herein shall in any way limit or modify any remedies available to the Bank under the Loan Documents or otherwise at law or in equity.
  
(ii) Motion Practice. In any arbitration hereunder, the arbitrator(s) shall decide any prehearing motions which are substantially similar to pre-hearing motions to dismiss for failure to state a claim or motions for summary adjudication.
  
(iii) Discovery. Discovery shall be limited to the pre-hearing exchange of all documents which the Borrower and the Bank intend to introduce at the hearing and any expert reports prepared by any expert who will testify at the hearing. 
  
(iv) Sequential Hearing Days. At the administrative conference conducted by the AAA, the Borrower and the Bank and the AAA shall determine how to ensure that the hearing is started and completed on sequential hearing days. Potential arbitrators shall be informed of the anticipated length of the hearing and 

they shall not be subject to appointment unless they agree to abide by the parties’ intent that, absent exigent circumstances, the hearing shall be conducted on sequential days.
  
(v) Award. The award of the arbitrator(s) shall be accompanied by a statement of the reasons upon which such award is based.
  
(vi) Fees and Expenses. The Borrower and the Bank shall each bear equally all fees and costs and expenses of the arbitration, and each shall bear its own legal fees and expenses and the costs of its experts and witnesses; provided, however, that if the arbitration panel shall award to a party substantially all relief sought by such party, then, notwithstanding any applicable governing law provisions, the other party shall pay all costs, fees and expenses incurred by the prevailing party and such costs, fees and expenses shall be included in such award.
  
(vii) Confidentiality of Disputes. The entire procedure shall be confidential and none of the parties nor arbitrator(s) may disclose the existence, content, or results of any arbitration hereunder without the written consent of all parties to the Dispute, except (i) to the extent disclosure is required to enforce any applicable arbitration award or may otherwise be required by law and (ii) that either party may make such disclosures to its regulators, auditors, accountants, attorneys and insurance representatives. No conduct, statements, promises, offers, views, or opinions of any party involved in an arbitration hereunder shall be discoverable or admissible for any purposes in litigation or other proceedings involving the parties to the Dispute and shall not be disclosed to anyone not an agent, employee, expert, witness, or representative for any of such parties.
  
(viii) CLASS ACTION WAIVER. THE BORROWER HEREBY WAIVES, WITH RESPECT TO ANY DISPUTE: (I) THE RIGHT TO PARTICIPATE IN A CLASS ACTION, PRIVATE ATTORNEY GENERAL ACTION OR OTHER REPRESENTATIVE ACTION IN COURT OR IN ARBITRATION, EITHER AS A CLASS REPRESENTATIVE OR CLASS MEMBER; AND (II) THE RIGHT TO JOIN OR CONSOLIDATE CLAIMS WITH CLAIMS OF ANY OTHER PERSON. The foregoing waiver is referred to herein as the “class action waiver”. The Bank and the Borrower agree that no arbitrator shall have authority to conduct any arbitration in violation of the class action waiver or to issue any relief that applies to any person or entity other than the Borrower and/or the Bank individually. The parties acknowledge that this class action waiver is material and essential to the arbitration of any claims and is non-severable from this Dispute Resolution section. If the class action waiver is voided, found unenforceable, or limited with respect to any claim for which the Borrower seeks class-wide relief, then this Dispute Resolution section (except for this sentence) shall be null and void with respect to such claim, subject to the right to appeal the limitation or invalidation of the class action waiver. However, this Dispute Resolution section shall remain valid with respect to all other claims and Disputes. The parties acknowledge and agree that under no circumstances will a class action be arbitrated.
  
(ix) Applicability of Federal Arbitration Act. This Note evidences transaction(s) in interstate commerce, and thus the Federal Arbitration Act governs the interpretation and enforcement of this Dispute Resolution section.
 
 
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
 
 

If the Borrower is a legal entity, the undersigned certifies to the Bank that the undersigned (individually and collectively if more than one, the “Authorized Representative”) is and was authorized and directed to (i) execute and deliver, including to electronically execute and deliver, in the name of and on behalf of the Borrower, this Note and any other documents executed in connection with this Note or the Facility, all in such form as may be requested by the Bank or required under the Program and any of which may contain a provision waiving the right to trial by jury; (ii) execute and deliver to or in favor of, including to electronically execute and deliver to or in favor of, the Bank any amendments, modifications, renewals or supplements of or to any of the foregoing agreements, documents or instruments; (iii) take any other action requested, required or deemed advisable by the Bank in order to effectuate the foregoing; and (iv) delegate the foregoing duties to other representatives of the Borrower. The undersigned further certifies that the Authorized Representative holds the office, title or status with the Borrower specified below the Authorized Representative’s signature.
 
The Borrower acknowledges that it has read and understands all the provisions of this Note, including the waiver of jury trial, arbitration and class action waiver, and has been advised by counsel as necessary or appropriate, or has elected not to seek the advice of counsel.
 
WITNESS the due execution hereof as a document under seal, as of the date first written above, with the intent to be legally bound hereby.
 
 
	
		
	 
	NOVAN, INC.

	 
	 

	 
	By: /s/ Paula Brown Stafford                  (SEAL)

	 
	Paula Brown Stafford, President & CEO

	 
	 

	 
	 

	 
	By: /s/ John Michael Gay                                (SEAL)

	 
	John Michael Gay, Vice President

 
 

 
 
 

 
EXHIBIT A
TO PAYCHECK PROTECTION PROGRAM TERM NOTE
 
DISBURSEMENT AND PAYMENT AUTHORIZATION INSTRUCTIONS
 
 
Loan Disbursement Authorization:
 
Borrower authorizes and directs the Bank to disburse the proceeds of the Facility as directed below. Each authorized representative of the Borrower is authorized to make this request, the Bank is entitled to rely conclusively on the below instructions to make disbursements in the amount and manner specified.
 
Disbursements
 
Disburse the proceeds of the Facility into the Borrower’s demand deposit account with PNC Bank, Account No. [Redacted]
 
Automatic Payment Authorization Under Facility:
 
The Borrower irrevocably authorizes and directs the Bank to charge any deposit account identified above and maintained at the Bank (or such other account at the Bank as the undersigned may designate to the Bank in writing from time to time) for all payments of principal and interest due or fees on the Facility, and to debit such account for the amount of such payments on the date each payment is due. The Borrower acknowledges and agrees that, to the extent there are insufficient funds in any such account to pay the required amounts when due, the Borrower shall immediately pay to the Bank all sums remaining unpaid. This authorization supplements, and does not limit, the Bank’s rights under the promissory note(s) and other documents evidencing or securing the Facility. The Bank is entitled to rely conclusively on this authorization until this authorization is terminated by the Bank or the Borrower, and the Bank has had a reasonable time to act thereon.
 
 

 

Paycheck Protection Program Certification
 
 
April 22, 2020
 
 
NOVAN, INC. (the “Borrower”) has applied to PNC Bank, National Association (the “Bank”) for a Small Business Association (“SBA”) 7(a) Paycheck Protection Program loan (the “PPP Loan”).
 
The below signer understands that the statements made in this certification are part of the agreement with the Bank and that the Bank will rely on these statements when deciding whether or not to make the PPP Loan.
 
I certify, acknowledge and agree that I am an authorized officer of the Borrower and am authorized on behalf of the Borrower to certify to the statements provided in this certification, and that the following are true and correct statements:
 
	
		
	1.
	The Borrower was in operation on February 15, 2020 and, if Borrower is not a self-employed worker or independent contractor, had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on a Form 1099-MISC.

 
	
		
	2.
	The uncertainty of current economic conditions makes necessary the PPP Loan request to support the ongoing operations of the Borrower.

 
	
		
	3.
	The proceeds of the PPP Loan will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments; and at least 75 percent of the proceeds of the PPP Loan will be used for payroll expenses. If the funds are knowingly used for unauthorized purposes, the federal government may hold the undersigned and the Borrower legally liable such as for charges of fraud.

 
	
		
	4.
	Documentation verifying the number of full-time equivalent employees on the Borrower’s payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight week period following the disbursement of the PPP Loan will be provided to the Bank.

 
	
		
	5.
	The Borrower understands and agrees that loan forgiveness may be provided if the Borrower uses all of the loan proceeds for documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. The actual amount forgiven will be determined in accordance with the requirements of the Program, including the provisions of Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (P.L. 116-136), and in no event may more than 25 percent of the forgiven amount be attributable to non-payroll costs.

 
	
		
	6.
	The Borrower does not have any other PPP Loan applications pending and will not apply for another PPP Loan. During the period beginning on February 15, 2020 and ending on December 31, 2020 Borrower has not received and will not receive another PPP Loan.

 

	
		
	7.
	The Borrower shall notify the Bank if the Borrower received an SBA Economic Injury Disaster Loan (“EIDL”) between January 31, 2020 and April 3, 2020 and the proceeds of such EIDL were or are used to retain workers and maintain payroll; in such circumstances the proceeds of the PPP Loan must be used to refinance any such EIDL.

 
	
		
	8.
	The information provided in the PPP Loan application and the information provided in all supporting documents and forms is true and accurate in all material respects. The Borrower and the undersigned understand that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law, including under 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a federally insured institution, under 18 USC 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.

 
	
		
	9.
	The Borrower acknowledges that the Bank will confirm the eligible PPP Loan amount using the Borrower’s tax information that it has submitted, including without limitation, tax returns and tax transcripts (collectively, the “Tax Information”). The Borrower affirms that the Tax Information is identical to that submitted to the Internal Revenue Service. The Borrower also understands, acknowledges, and agrees that the Bank can share the Borrower’s Tax Information with (i) the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, (ii) the Bank’s affiliates, and its and their respective directors, officers, employees, agents and advisors (the “Representatives”), and (iii) any actual or potential owners of a credit facility extended by the Bank or its Representatives to the Borrower, any acquirers of any beneficial or other interest in such credit facility, guarantor, servicers or service providers for such parties, and their successors and/or assigns (the “Other Loan Participants”) for the purpose of (w) compliance with SBA loan program requirements and all SBA reviews, (x) originating, maintaining, managing, monitoring, servicing, selling, insuring, and securitizing a credit facility; (y) enforcing any of its rights or remedies under the loan documents applicable to such credit facility (including, without limitation, in connection with any collection action related thereto) or (z) as otherwise permitted by applicable laws, including state and federal privacy and data security laws, or if required to do so by legal process, regulation or law, or in defense of any claims or causes of action against the Bank or any of its Representatives.

 
 
 
	
		
	 
	NOVAN, INC.

	 
	 

	 
	By: /s/ Paula Brown Stafford                  (SEAL)

	 
	Paula Brown Stafford, President & CEO

	 
	 

	 
	 

	 
	By: /s/ John Michael Gay                                (SEAL)

	 
	John Michael Gay, Vice President

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