Document:

Exhibit 10.16

 

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

Under 17 C.F.R. Sections 200.80(b)(4)

and 240.24b-2.

 

Final Draft

 

BACK-OUT, AMENDMENT AND RELEASE AGREEMENT

 

THIS BACK OUT, AMENDMENT AND RELEASE AGREEMENT (this “Amendment Agreement”) dated as of January 31, 2008  (the “Amendment Effective Date”) is made by and between ENVIVO PHARMACEUTICALS, INC. (“EVP”) and METHYLGENE INC. (“MethylGene”) pursuant to that certain Collaboration Agreement dated as of February 7, 2005 by and between EVP and MethylGene.  Except as expressly amended or modified hereby, the Collaboration Agreement shall survive and continue in accordance with its terms.

 

1.                                      Defined Terms.  All capitalized terms used herein but not defined herein shall have the meanings ascribed to them in the Collaboration Agreement, as modified hereby where applicable.

 

2.                                      MethylGene to Back-Out; EVP to Proceed Unilaterally as Pursuing Party.  Subject to the terms of the Collaboration Agreement, as amended hereby, the Parties agree that, effective as of the Amendment Effective Date:  (1) MethlyGene shall Back-Out of all further research, development and commercialization of all Compounds and resulting Collaboration Products allocated, or to be allocated in the future, to each and every Research and Development Program and Commercialization Program in the Field, and shall become the Back-Out Party with respect thereto, all in accordance with Section 9.1.1 but without the requirement of providing a Back-Out Notice, and (2) EVP shall proceed unilaterally with the research development and commercialization of all such Compounds and Collaboration products in the Field, and shall become the Pursuing Party with respect thereto, all in accordance with Section 9.1.2 but without the requirement of providing an Election Notice.

 

3.                                      Continuation of Collaboration.  Except to the extent amended or otherwise provided for herein the Collaboration shall continue in accordance with those Sections and Articles that survive pursuant to Section 9.1.5(a) of the Collaboration Agreement, and all other Sections and Articles of the Collaboration Agreement shall be deemed terminated and of no further force or effect for so long as EVP continues to be a Pursuing Party.

 

4.                                      Termination of Certain Additional Sections and Articles.  Notwithstanding Section 3 hereof, the following Sections and Articles of the Collaboration Agreement shall be deemed terminated and of no further force or effect from and after the Amendment Effective Date and for so long as EVP continues to be a Pursuing Party:

 

(1)                                 Sections.  6.2.5, Allocation of Selected Compounds and Protected Compounds; 6.3.9, Adverse Reaction Reporting; and 6.3.10, Clinical and Regulatory Audits.

 

(2)                                 Articles.  Article XV, Term and Termination (which shall be superseded by Section 16 of Appendix A of the Collaboration Agreement).

 

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5.                                      Amendments of Certain Definitions, Sections and Articles.  The following Definitions, Sections and Articles of the Collaboration Agreement shall be amended or clarified hereby as set forth below:

 

(1)                                 The definitions “AD R&D Program”, “HD R&D Program” and “PD R&D Program” shall each be amended by adding the following to the end of the respective definition:  “or by or on behalf of the Pursuing Party or the Second Pursuing Party, as the case may be.”

 

(2)                                 For so long as EVP continues to be a Pursuing Party with respect to all Research and Development Programs, the definition “Applicable Field” shall mean the entire Field.

 

(3)                                 The definition “Commercialization Program” shall be amended by adding the following to the end of the definition:  “or as conducted by or on behalf of the Pursuing Party or the Second Pursuing Party, as the case may be”.

 

(4)                                 The definition “Compounds” shall be amended by (i) deleting from such definition the words “(3) possess certain basic drug characteristics and range of chemotypes with pan and sub-type selective HDAC inhibition characteristics, as mutually agreed to by the Parties from time to time,” (ii) adding the words “or the Pursuing Party or Second Pursuing Party as the case may be” after “the JSC” in the third to last sentence of such definition, and (iii) deleting the last sentence of such definition and replacing it with the following sentence:

 

“For clarity, MethylGene shall not grant any Third Party access to Compounds developed pursuant to the Collaboration of such Compounds are not also HDAC Inhibitors.”

 

(5)                                 For so long as EVP continues to be a Pursuing Party, or MethylGene becomes a Second Pursuing Party, the definition “Term” shall have the meaning set forth in Section 16.1, Term of Appendix A.

 

(6)                                 The term “Territory” as used in Subsection (1) of Section 2.3, EVP’s Restrictive Covenant; Limitations, and in Section 4.4.2, shall mean, for purposes of these Sections only and in respect of any fields other than the therapeutic or prophylactic treatment of cancer in humans using a Compound or any other HDAC Inhibitor (which field shall be referred to as the “Cancer Field” and in respect of which the Territory shall continue to mean the world), the following territory (which territory shall be referred to as the “Non-ND/Non-Cancer Territory”):

 

“The United States of America, Canada, member states of the European Union as of January 30th, 2006 (i.e. Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, the Netherlands, the United Kingdom).  Norway, Switzerland, Bulgaria, Romania, Singapore, Malaysia, Philippines, Indonesia, South Africa, countries of the 

 

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Middle East (i.e. Bahrain, Cyprus, Dubai, Egypt, Turkey, Iran (Persia), Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates, Yemen, the West Bank and the Gaza Strip), Australia, New Zealand and Thailand and specifically excludes the territory under the Taiho Agreement.”

 

(7)                                 Subsection (2) of Section 2.3 shall be amended and restated to read as follows:

 

“(2) research, develop or commercialize any Non-ND Partner Selected Compounds or any MethylGene Non-ND Selected Compounds in the Territory for any purpose, either inside or outside the Field (other than internal research in the Field).

 

(8)                                 The terms “Collaboration Patent Rights” and “Collaboration Technology” as used in Section 5.6.1(a) shall be, for the purposes of that Section and Section 3 of Appendix A only, limited to Technology made, conceived, invented, created, developed, written or otherwise reduced to practice or tangible medium by or on behalf of MethylGene and EVP jointly under the Collaboration.  Additionally, the term “Non-ND Partner IP” set forth in Section 5.6.2 shall be amended and restated in its entirety to read as follows:

 

“Non-ND Partner IP” means Valid Claims within the MethylGene Licensed Patents, to the extent such Valid Claims consist of inventions made jointly by MethylGene and a Non-ND Partner solely in the course of performing research activities under a Non-ND Partner Research Plan pursuant to a Non-ND Partner Agreement.”

 

(9)                                 Paragraph (ii) of Subsection 6.2.3(f), shall be amended and restated in its entirety to read as follows:

 

“Bona Fide Internal Research and Development Program” shall mean a MethylGene internal research and development program directed solely to the discovery and/or characterization of HDAC inhibitors having therapeutic utility outside the Field in particular disease areas (but specifically excluding oncology) and with respect to which MethylGene is devoting internal resources or causing resources to be devoted but excluding Non-ND Partners.”

 

(10)                          The language “at least once every thirty (30) days” in the eighth line of Subsection (c) of Section 6.3.1 shall be amended to read “on the last day of the last month of each calendar quarter”, it being agreed that MethylGene shall deliver to EVP, within ten (10) days, following the Amendment Effective Date, an updated report of the MethylGene Compound Registry.

 

(11)                          Following the Amendment Effective Date and for so long as EVP continues to be a Pursuing Party, or MethylGene becomes a Second Pursuing Party, for purposes of Section 6.3.2 only, the term Data shall only include those items set forth on Part B of Schedule 1-1, and MethylGene shall have the right to use, for any purpose outside of the Field only, all such enumerated items of Data generated by 

 

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or on behalf of EVP.  The second sentence of Section 6.3.2 shall be amended and restated to read as follows:  “Without limiting the foregoing, the Providing Party shall provide to the Receiving Party copies of all Data in the Providing Party’s possession, and reasonable access to all originals of Data, whether or not in the Providing Party’s possession, on the last day of the last month of each calendar quarter.”  Notwithstanding the foregoing, (1) MethylGene shall provide to EVP all Data as defined in the Collaboration Agreement in accordance with Section 9.1.2 and (2) if MethylGene becomes a Second Pursuing Party, then EVP shall provide to MethylGene all Data as defined in the Collaboration Agreement in accordance with Section 9.1.3(a).

 

For the avoidance of doubt, notwithstanding Section 10 and 11 of this Amendment Agreement, the Parties shall continue to be bound by and comply with the terms and conditions set forth in Section 6.3.1(b).  In particular, but without limiting the foregoing, in the case of any Compound that EVP or its Affiliates identifies, synthesizes, discovers, designs or acquires after the Amendment Effective Date, EVP shall provide the chemical structure and a unique identifying number of each such Compound to MethylGene within thirty (30) days of such Compound being identified, synthesized, discovered, designed or acquired (as the case may be), as set forth in Subsection 6.3.1(b).

 

(12)                          Section 6.3.8, Reports and Information Exchange, shall be amended and restated in its entirety to read as follows:

 

“6.3.8  Reports and Information Exchange.  As between the parties hereto, the parties shall jointly own all clinical trial data accumulated in connection with any clinical trial for a Collaboration Product if such trial is conducted as part of a Research and Development Program, or is otherwise funded or partially funded by the Parties or a Party hereunder, and the Pursuing Party shall solely own all such clinical trial data if such trial is conducted after a Back-Out.  The Party performing or supervising a clinical trial of a Collaboration Product in accordance with the R&D Plan, or as a Pursuing Party, shall, in its own name, maintain the database of clinical trial data accumulated from all clinical trials of Collaboration Products and of adverse reaction information for all such Collaboration Products.

 

(13)                          In lieu of the adjustments set forth in the proviso in Section 9.1.3(a), Second Pursuing Party Proceeds Unilaterally, the royalty rate to be paid by the Second Pursuing Party to the Former Pursuing Party shall be recalculated in accordance with Exhibit A hereto based on the stage of development of the applicable Unilateral Product(s) at the time of such Second Election Notice.

 

(14)                          The word “clause (b)” in the last sentence of the first paragraph of Section 11.2, Confidential Information, shall be amended  to read “clause (c)” and the words “clause (a) or (b)” in the first sentence of the second  paragraph  of Section 11.2 shall be amended to read “clause (a), (b) or (c)”.

 

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(15)                          For so long as EVP continues to be the Pursuing Party, EVP shall be the Controlling Party throughout the Territory for purposes of Section 12.4, Defense of Third Party Infringement Claims.

 

(16)                          The last sentence of  Section 11.3 shall be amended and restated to read as follows:

 

“During such 30 day review period, the Parties may discuss the merits of making the particular publication or disclosure at such time.  If a Party requests reasonable modifications to avoid disclosure of its confidential information or regulatory issues, the other Party shall make the requested modifications to such publication or disclosure prior to submission of the publication or presentation.  After such 30 day review period, the Party requesting such publication or disclosure shall be free to publish or disclose, provided such modifications, if requested, have been made thereto.  In the case of a press release, each Party shall provide the other Party with the text of any proposed press release or other public dissemination of information regarding the Collaboration at least 2 Business Days in advance (except if such press release or other public dissemination is required pursuant to applicable securities laws) in order to enable the other Party to make any public disclosure required by it resulting therefrom.”

 

(17)                          The reference to “Section 15(1)(a) of Appendix A” in Section 12.5, Enforcement, shall be amended to read “Section 15(2) of Appendix A”.

 

(18)                          Section 17.8, Notices, shall be amended as follows:  (1) the reference to “Section 15.8” shall be amended to read “Section 17.8”, (2) the reference to “Jason P. Rhodes, Chief Business Officer” shall be amended to read “Kees Been, President and CEO” and (3) the reference to “Palmer & Dodge LLP” shall be amended to read “Edwards Angell Palmer & Dodge LLP”

 

(19)                          Section 17.13, Agreement not to Solicit Employees, shall be amended to read “for a period of [...***...] following the Amendment Effective Date” rather than “for a period of [...***...] following the termination of this Agreement”.

 

(20)                          Section 1 of Appendix A, Royalties, shall be amended and restated in its entirety to read as follows:

 

“1.                                Royalties.  The Pursuing Party shall pay the Back-Out Party royalties on the annual Net Sales by the Pursuing Party, its Affiliates and Third Party sublicensees of any Unilateral Products that are covered by at least one Valid Claim within the Licensed MethylGene Patent Rights, the Licensed EVP Patent Rights or the EVP HDAC Patent Rights (each, a “Royalty Bearing Product”) as set forth below and (where applicable) subject to the reductions provided for in Section 3 and Section 4:

 

***Confidential Treatment Requested

 

5

 

Annual Net Sales

 

	
US$[...***...] – US$[...***...]
    	
 
    	
[...***...]
    	
%
    
	
>US$[...***...] – US$[...***...]
    	
 
    	
[...***...]
    	
%
    
	
Greater than US$[...***...]
    	
 
    	
[...***...]
    	
%
    

 

Notwithstanding the foregoing, if any such royalties that result from the Net Sales of a Royalty Bearing Product by a Third Party sublicensee in a particular Calendar Quarter would exceed [...***...]% of Royalty Sublicense Income (as hereinafter defined in Section 18(3)(A)) on such Royalty Bearing Product for such Calendar Quarter, then, in lieu of paying such royalties, the Pursuing Party shall pay the Back-Out Party [...***...]% of Royalty Sublicensee Income on such Royalty Bearing Product for such Calendar Quarter within [...***...] days after the Pursuing Party receives the relevant payment from the sublicense.

 

Royalties on Net Sales of each Royalty-Bearing Product in any calendar year shall be paid at the rate applicable to the portion of Net Sales within each of the Net Sales during such calendar year.  For example, if Net Sales in a given calendar year for a Royalty-Bearing Product are US$[...***...], then (assuming that no adjustments or other reductions apply) the royalty rate for the first US$[...***...] of such Net Sales would be [...***...]% and the royalty rate for the portion of such Net Sales in excess of US$[...***...] would be [...***...]%.”

 

(21)                          Section 2 of Appendix A, Share of Sublicense Income, shall be amended and restated in its entirety to read as follows:

 

“2.                                Share of Other Sublicense Income.  The Pursuing Party shall pay the Back-Out Party [...***...]% of Other Sublicense Income (as hereinafter defined in Section 18(3)(B)) as set forth below, and subject to Section 4, within [...***...] days after the Pursuing Party receives the relevant payment from the sublicense.”

 

(22)                          In lieu of the adjustments provided for in Paragraph (a)(vi) of Section 16.3(a) of Appendix A, Consequences of Termination Upon Material Breach, the royalty rate to be paid by the non-breaching Party shall be recalculated in accordance with Exhibit A hereto based on the stage of development of the applicable Unilateral Product(s) as of the date of the non-breaching Party’s election to terminate the rights of the Pursuing Party pursuant to Section 16.2(a) of Appendix A.

 

(23)                          The references to Article XV in Section 16.4 of Appendix A, Survival of Rights and Duties, shall be deleted.

 

(24)                          For purposes of the definition Royalty Sublicense Income in Section 18(3)(A) of Appendix A, the term Net Sales may differ from the definition set forth in Section 18(1) of Appendix A to  the extent required by a sublicensee, provided that such differing  term is negotiated in good faith by the Pursuing Party and is commercially reasonable.

 

***Confidential Treatment Requested

 

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(25)                          Notwithstanding the terms of Section 2.3, Section 9 of Appendix A, or any other provision of the Collaboration Agreement, as amended hereby, EnVivo may grant licenses and sublicenses to its rights under the Collaboration Agreement to a Third Party in the Field in accordance with Section 4.5.1, and the restrictions set forth in Section 2.3 shall not be applicable to any such Third Party licensee or sublicense other than with respect to the Cancer Field, provided that each and every one of the following conditions (the “Sublicensing Conditions”) shall be satisfied.

 

(a)                                 The license or sublicense shall only be in respect of the Field;

 

(b)                                 The terms of the license or sublicense shall not be inconsistent with the terms of the Collaboration Agreement, as hereby amended;

 

(c)                                  The licensee or sublicensee shall expressly covenant that neither it nor any of its Affiliates shall (i) research, develop or commercialize, or authorize any Third Party to research, develop or commercialize, a Compound or any other HDAC Inhibitor (or a product containing the same) in the Cancer Field in the Territory (which for the purposes hereof shall continue to mean the world) for so long as EVP shall be bound to a similar restrictive covenant pursuant to Section 2.3, or (ii) research, develop or commercialize any Non-ND Partner Selected Compounds or any MethylGene Non-ND Selected Compounds in the Territory for any purpose, either inside or outside the Field (other than internal research purposes in the Field);

 

(d)                                 The licensee or sublicensee shall covenant that during the Term neither it nor any of its Affiliates shall, directly or indirectly, on its own or in collaboration with a Third Party, conduct research or development regarding, or engage in the manufacture, marketing, sale or distribution of, any products containing an HDAC Inhibitor for use within the Field, or grant any Third Parties the rights to do any of the foregoing, other than as part of the Collaboration or under such license or sublicense;

 

(e)                                  The licensee or sublicensee shall covenant that it and its Affiliates shall take all measures or steps required or advisable to ensure that all Information shall (i) remain at all times in confidence to the same extent set forth in Article 11 of the Collaboration Agreement, as amended hereby; and (ii) only be used for the purposes authorized under the Collaboration Agreement, as hereby amended, and, in particular, not in any manner whatsoever, either directly or indirectly, used at any time in connection with or in relation to any Unrelated HDAC Inhibitor Program.  For the purposes hereof, “Unrelated HDAC Inhibitor Program” shall mean the research, development and/or commercialization of any HDAC Inhibitor(s) (other than a Compound), or any product(s) containing same, in any particular disease area other than the Cancer Field and the Field, in respect of which such licensee or sublicensee, or any of its Affiliates, is, at 

 

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any time and from time to time, taking any part whatsoever, either directly or indirectly, provided that such HDAC Inhibitor(s) shall not exploit, infringe upon or misappropriate any of the Licensed MethylGene Patent Rights, Licensed MethylGene Technology, EVP Licensed Patent Rights or EVP Licensed Technology; and

 

(f)                                   The licensee or sublicensee shall covenant that any further licensee or sublicense granted by it to a Third Party shall be subject to each and every one of the Licensing Conditions.

 

For the avoidance of doubt, provided each and every one of the Sublicensing Conditions shall be satisfied, the Parties agree that any compound that such a licensee or sublicensee identifies, synthesizes, discovers, designs or acquires in connection with an Unrelated HDAC Inhibitor Program, shall not be deemed a Compound nor be included in the MethylGene Compound Registry.

 

Within ten (10) Business Day following execution thereof, EnVivo shall notify MethylGene of the existence of any agreement (or any material amendment thereto) governing the terms of any such license or sublicense, shall provide MethylGene with the name and address of each such licensee or sublicensee, and shall confirm in writing to MethylGene that each and every one of the Sublicensing Conditions are satisfied.  MethylGene shall treat such information as EVP’s Information.  Any license or sublicense granted or purported to be granted by EnVivo in violation of any the Sublicensing Conditions shall be deemed to be a breach by EnVivo of the Collaboration Agreement, as amended hereby.

 

(26)                          The Parties wish to clarify that EVP shall be permitted to, alone or in collaboration with a licensee or sublicensee or a Third Party, conduct, or take part or participate in, any research, development, manufacture, marketing, sale or distribution of any products containing an HDAC Inhibitor for use outside of the Field (but other than in the Cancer Field which shall remain subject to the restrictive covenant under Section 2.3) outside the Non-ND/Non-Cancer Territory, provided that (i) such activities shall not exploit, infringe upon or misappropriate any of the Licensed MethylGene Patent Rights, Licensed MethylGene Technology, EVP Licensed Patent Rights or EVP Licensed Technology; and (ii) all Information shall remain in confidence in accordance with Article 11 of the Collaboration Agreement, as amended hereby, and not be used, directly or indirectly, in connection with or for the purposes of such activities; in each case it being the obligation of EVP to take, or cause to take, all measures or steps required or advisable to ensure that the terms of this paragraph are at all times respected.  Any compound identified, synthesized, discovered, designed or acquired in connection with such activities shall not be treated as a Compound nor be included in the MethylGene Compound Registry, provided same shall not exploit, infringe upon or misappropriate any of the Licensed MethylGene Patent Rights, Licensed MethylGene Technology, EVP Licensed Patent Rights or EVP Licensed Technology.

 

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6.                                      Mutual Release of Obligations.  Each Party, on its own behalf and on behalf of its Affiliates (collectively, the “Releasor”), hereby releases and discharges the other Party and its Affiliates (collectively, the “Releasee”) and the Releasee’s present or former officers, directors, employees and attorneys (in their capacities as such) from any and all claims, causes of action, contracts, suits, demands, obligations, agreements, damages, liabilities, or every name and nature, whether known or unknown, whether in law or in equity, suspected or unsuspected, that the Releasor now has or ever had from the beginning of time to the Amendment Effective Date with respect to the following:  (1) any claim for payment(s) or program funding as described in Article V of the Collaboration Agreement and (2) any claim concerning the Releasee’s performance of its obligations under a Research and Development Program as defined in the Collaboration Agreement.

 

7.                                      CDHI Research Agreement.  In addition to the obligations of MethylGene with respect to the transition of the research, development and commercialization of Unilateral Products in accordance with Sections 9.1.1 and 9.1.2, MethylGene agrees to continue to perform its obligations pursuant to the Research Agreement dated as of November 3, 2006 (the “CHDI Research Agreement”) by and among CHDI, Inc. (“CHDI”) and each of the Parties subject to the terms and conditions of such CHDI Research Agreement, the letter dated November 3, 2006 from MethylGene to EVP, and the Collaboration Agreement as amended hereby; provided, however, that (1) MethylGene shall, forthwith following the execution of this Amendment Agreement, notify CHDI of its Back-Out hereunder and of its intent to assign its rights and obligations under the CHDI research Agreement to EVP and (2) as soon as reasonably possible following such notice, but in any event, no later than [...***...] days after such notice, MethylGene shall cease to perform its obligations and transfer and assign to EVP its rights and obligations under the CHDI Research Agreement and withdraw as a party thereunder, the whole subject to receipt of consent by CHDI, and MethylGene further agrees to cooperate with EVP in seeking and obtaining such consent and to assist in the reasonable transition of the activities thereunder from MethylGene personnel to personnel employed or engaged by EVP following such an assignment.  For so long as MethylGene continues to perform under the CHDI Research Agreement as set forth above, MethylGene shall provide to EVP copies of all Research Reports and any and all other embodiments of Research Project Results and Research Project Intellectual Property (as such terms are defined therein) as and when they become available.  For the avoidance of doubt, for so long as EnVivo is the Pursuing Party, MethylGene shall not extend the term or amend the terms of the CHDI Research Agreement or enter into any similar agreement with the CHDI with respect to the Field and, unless and until the assignment of MethylGene’s rights and obligations as contemplated hereunder, is effectuated, EVP shall not extend the term or amend the terms of the CHDI Research Agreement.

 

8.                                      Identity of Current Non-ND Partner Agreements.  MethylGene hereby represents and warrants to EnVivo that the only Non-ND Partner Agreements as of the Amendment Effective Date are (i) the Taiho Agreement and (ii) the Collaborative Research, Development and Commercialization Agreement entered into between MethylGene and Pharmion Corporation and Pharmion GmbH and dated as of January 30th, 2006 (the “Pharmion Agreement”).

 

***Confidential Treatment Requested

 

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9.                                      Pharmion Collaboration Agreement.  EnVivo hereby agrees in favour of MethylGene not to assert any claim, whether known or unknown as at the Effective Date, that the Pharmion Agreement is not in compliance with the provisions of the Collaboration Agreement, as hereby amended.  The foregoing agreement is based on a publicly available redacted copy of the Pharmion Agreement, and does not apply with respect to (1) any redacted provisions or (2) any subsequent amendments or modifications.

 

10.                               Confidentiality of Terms; Press Release.  This Amendment Agreement shall be subject to Section 11.1, Confidential Terms, of the Collaboration Agreement.  Notwithstanding the foregoing, the Parties will agree on a press release as soon as reasonably possible following the Amendment Effective Date that can be used to describe this transaction and the terms and conditions of this Agreement (but not the specific financial terms of this Amendment Agreement), and each Party acknowledges and agrees that the other Party may disclose information from the mutually agreed press release at any time and from time to time without the consent of the other Party.

 

11.                               Reserved Compounds. The Parties agree that, in accordance with Section 6.2.1(a) of the Collaboration Agreement, EVP has selected the [...***...] Compounds listed on the letter from EVP to MethylGene dated as of the Amendment Effective Date as Reserved Compounds.  This list supersedes any selection of Reserved Compounds by the JSC or EVP that occurred prior to the date of this notice and all Compounds that were so selected prior to the date of this notice that are not also included in this list are hereby removed and no longer constitute Reserved Compounds unless later reselected by EVP in accordance with Section 6.2.1.

 

12.                               Effects of Insolvency/Bankruptcy.  Each of the Parties hereby agrees that the rights and licenses it has granted and will grant under its intellectual property rights to the other Party pursuant to the Collaboration Agreement, as amended hereby, constitute the conveyance of proprietary and property rights in, to and under any such intellectual property.  Consequently, if a Back-Out Party or Second Back-Out Party becomes insolvent or it or its assets becomes the subject of any insolvency proceeding or administration, including, without limitation, as defined and described in Section 16.2(b) of Appendix A, but with respect to the Back-Out Party or Second Back-Out Party (a “Debtor Party”), the licenses granted by the Debtor Party to the other Party (the “Non-Debtor Party”) shall continue and survive in accordance with the terms of the Collaboration Agreement, as amended hereby.  Without limiting the generality of the foregoing, all licenses granted under the Collaboration Agreement, as amended hereby, are deemed to be, for purposes of Section 365(n) of title 11 of the United States Code (the “Bankruptcy Code”), licenses of rights to “intellectual property” as defined in Section 101 of the Bankruptcy Code.  The Parties agree that the Non-Debtor Party may fully exercise all of its rights and elections as a licensee under the Bankruptcy Code or other analogous applicable law, now or hereafter in effect.

 

13.                               Counterparts.  This Amendment Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

***Confidential Treatment Requested

 

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IN WITNESS WHEREOF, the Parties have executed this Amendment Agreement as of the date first written above.

 

	
METHYLGENE   INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Donald F. Corcoran
    	
 
    
	
 
    	
Donald   F. Corcoran
    	
 
    
	
 
    	
President   and Chief Executive Officer
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
ENVIVO   PHARMACEUTICALS, INC.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Kees Been
    	
 
    
	
 
    	
Kees   Been
    	
 
    
	
 
    	
President   and Chief Executive Officer
    	
 
    

 

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EXHIBIT A

 

Increase in Royalty Rates Upon Second Back-Out or Termination

 

A.                                    [...***...].

 

No adjustments.

 

B.                                    [...***...] and prior to [...***...].

 

Annual Net Sales

 

	
US$[...***...] – US$[...***...]
    	
 
    	
[...***...]
    	
%
    
	
>US$[...***...] – US$[...***...]
    	
 
    	
[...***...]
    	
%
    
	
Greater than US$[...***...]
    	
 
    	
[...***...]
    	
%
    

 

Notwithstanding the foregoing, if any such royalties that result from the Net Sales of a Royalty Bearing Product by a Third Party sublicensee in a particular Calendar Quarter would exceed [...***...]% of Royalty Sublicense Income on such Royalty Bearing Product for such Calendar Quarter, then, in lieu of paying such royalties, the Pursuing Party shall pay the Back-Out Party [...***...]% of Royalty Sublicense Income on such Royalty Bearing Product for such Calendar Quarter within [...***...] after the Pursuing Party receives the relevant payment from the sublicense.

 

C.                                    [...***...] and prior to [...***...]

 

Annual Net Sales

 

	
US$[...***...] – US$[...***...]
    	
 
    	
[...***...]
    	
%
    
	
>US$[...***...] – US$[...***...]
    	
 
    	
[...***...]
    	
%
    
	
Greater than US$[...***...]
    	
 
    	
[...***...]
    	
%
    

 

Notwithstanding the foregoing, if any such royalties that result from the Net Sales of a Royalty Bearing Product by a Third Party sublicensee in a particular Calendar Quarter would exceed [...***...]% of Royalty Sublicense Income on such Royalty Bearing Product for such Calendar Quarter, then, in lieu of paying such royalties, the Pursuing Party shall pay the Back-Out Party [...***...]% of Royalty Sublicense Income on such Royalty Bearing Product for such Calendar Quarter within [...***...] days after the Pursuing Party receives the relevant payment from the sublicense.

 

D.                                    [...***...] and prior to [...***...].

 

Annual Net Sales

 

	
US$[...***...] – US$[...***...]
    	
 
    	
[...***...]
    	
%
    
	
>US$[...***...] – US$[...***...]
    	
 
    	
[...***...]
    	
%
    
	
Greater than US$[...***...]
    	
 
    	
[...***...]
    	
%
    

 

***Confidential Treatment Requested

 

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Notwithstanding the foregoing, if any such royalties that result from the Net Sales of a Royalty Bearing Product by a Third Party sublicensee in a particular Calendar Quarter would exceed [...***...]% of Royalty Sublicense Income on such Royalty Bearing Product for such Calendar Quarter, then, in lieu of paying such royalties, the Pursuing Party shall pay the Back-Out Party [...***...]% of Royalty Sublicense Income on such Royalty Bearing Product for such Calendar Quarter within [...***...] days after the Pursuing Party receives the relevant payment from the sublicense.

 

E.                                    [...***...] and prior to [...***...].

 

Annual Net Sales

 

	
US$[...***...] – US$[...***...]
    	
 
    	
[...***...]
    	
%
    
	
>US$[...***...] – US$[...***...]
    	
 
    	
[...***...]
    	
%
    
	
Greater than US$[...***...]
    	
 
    	
[...***...]
    	
%
    

 

 

Notwithstanding the foregoing, if any such royalties that result from the Net Sales of a Royalty Bearing Product by a Third Party sublicensee in a particular Calendar Quarter would exceed [...***...]% of Royalty Sublicense Income on such Royalty Bearing Product for such Calendar Quarter, then, in lieu of paying such royalties, the Pursuing Party shall pay the Back-Out Party [...***...]% of Royalty Sublicense Income on such Royalty Bearing Product for such Calendar Quarter within [...***...] days after the Pursuing Party receives the relevant payment from the sublicense.

 

F.                                     [...***...].

 

Annual Net Sales

 

	
US$[...***...] – US$[...***...]
    	
 
    	
[...***...]
    	
%
    
	
>US$[...***...] – US$[...***...]
    	
 
    	
[...***...]
    	
%
    
	
>US$[...***...] – US$[...***...]
    	
 
    	
[...***...]
    	
%
    
	
Greater than US$[...***...]
    	
 
    	
[...***...]
    	
%
    

 

Notwithstanding the foregoing, if any such royalties that result from the Net Sales of a Royalty Bearing Product by a Third Party sublicensee in a particular Calendar Quarter would exceed [...***...]% of Royalty Sublicense Income on such Royalty Bearing Product for such Calendar Quarter, then, in lieu of paying such royalties, the Pursuing Party shall pay the Back-Out Party [...***...]% of Royalty Sublicense Income on such Royalty Bearing Product for such Calendar Quarter within [...***...] days after the Pursuing Party receives the relevant payment from the sublicense.

 

As used above, the phrase “[...***...]” means [...***...].

 

As used above, the phrase “[...***...]” with respect to a clinical trial means t[...***...].

 

***Confidential Treatment Requested

 

13

 

As used above, the phrase “[...***...]” with respect to clinical trials means [...***...].

 

14Exhibit 10.17

 

SENIOR EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS AGREEMENT made as of the 9th day of November, 2012,

 

B E T W E E N:

 

	
MethylGene Inc.
    	
 
    
	
 
    	
 
    
	
(the   “Corporation”)
    
	
 
    	
 
    
	
-and-
    	
 
    
	
 
    	
 
    
	
Dr. Charles M. Baum
    	
 
    
	
 
    	
 
    
	
(the “Executive”)
    

 

WHEREAS (the Corporation and the Executive entered into a consulting agreement on September 24, 2012 (the “Consulting Agreement”);

 

WHEREAS (the Corporation wishes to employ the Executive as President and Chief Executive Officer of the Corporation;

 

WHEREAS the Executive wishes to accept the offer of employment of the Corporation;

 

AND WHEREAS this Agreement is conditional upon the Executive obtaining any and all immigration documents allowing him to legally work and stay in Canada;

 

NOW THEREFORE in consideration of the mutual covenants and promises set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the Corporation and the Executive, the parties hereby covenant and agree as follows:

 

ARTICLE I - DEFINITIONS AND INTERPRETATION

 

1.1                               Definition.  For the purposes of this Agreement, the following words and phrases shall have the following meanings:

 

(a)                                 “Affiliate” has the same meaning as given to such word in the Canada Business Corporations Act, as amended or replaced from time to time.

 

(b)                                 “Agreement” means this agreement, including any schedules hereto as specified herein, as amended, supplemented, or modified in writing from time to time.

 

(c)                                  “Benefits” means those benefits, perquisites, allowances and entitlements as described in Section 4.2, but only to the extent that the Executive is participating in them as at the Date of Termination.

 

(d)                                 “Board” means the board of directors of the Corporation, as it may delegate.

 

 

(e)                                  “Business” means the business of the discovery, development and commercialization of the specific kinds of novel therapeutics for cancer being developed from time to time by the Corporation;

 

(f)                                   “Change of Control” means any of the following occurrences:

 

(i)                                     the acquisition, directly or indirectly and by any means whatsoever, by any one shareholder, or group of shareholders acting jointly or in concert, of more than 50% of the outstanding voting shares of the Corporation or any Affiliate thereof; or

 

(ii)                                  a sale (in one or more related transactions) of all or substantially all of the assets of the Corporation or any Affiliate thereof to an unrelated third party or to unrelated third parties acting jointly or in concert, or other liquidation or dissolution; or

 

(iii)                               a merger, consideration, arrangement or other reorganization (collectively, a “Reorganization”) of the Corporation or any Affiliate thereof which results in the Corporation’s or the Affiliate’s shareholders immediately prior to the Reorganization owning less than 50% of the voting shares of the resulting entity after the Reorganization.

 

(g)                                  “Commencement Date” means November 12, 2012 or as soon thereafter as any and all immigration documents allowing the Executive to legally work and stay in Canada are issued.

 

(h)                                 “Confidential Information” means all information howsoever received by the Executive from or through the Corporation, in whatever form (oral, written, machine readable or otherwise) pertaining to the Corporation, including, without limitation, all information (whether or not patentable and whether or not copyrightable) owned), possessed or used by the Corporation from the date of the Corporation’s incorporation until the last day of the Executive’s actual employment, including, without limitation, any invention, formula, formulation, chemical structure, vendor information, customer information, apparatus, equipment, trade secret, process, research, report, technical data, know-how, computer program, software, software documentation, hardware design, technology, designs, innovations, improvements, marketing or business plan, forecast, unpublished financial statement, budget, license, price, cost or employee list that is communicated to, learned of, developed or otherwise acquired by the Executive in the course of his employment by the Corporation; provided, however, that the phrase “Confidential Information” shall not include information that:

 

(i)                                     is or becomes generally available to the public other than as a result of the direct or indirect disclosure by the Executive in violation of this Agreement;

 

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(ii)           was within the possession of the Executive at the time of disclosure of the Confidential Information except as a result of a prior confidential disclosure to the Executive by or on behalf of the Corporation (as can be reasonably demonstrated from the written records of the Corporation); or

 

(iii)          is or becomes available on a non-confidential basis to the Executive from a person other than the Corporation,

 

provided that, in the cases of subsections (ii) and (iii) above, the source of such information was not known by the Executive (acting reasonably) to be prohibited from disclosing the information.

 

(i)                                     “Date of Termination” means the date of cessation of the Executive’s employment, regardless of the reason therefor and without regard to any notice of termination, pay in lieu of notice of termination, severance, or other damages paid or payable to the Executive, whether pursuant to this Agreement or at law.

 

(j)                                    “Good Reason” means a material change in the Executive’s employment condition, such as a material reduction in his authority, duties or responsibilities or a material change in his base salary or other compensation or benefits.

 

(k)                                 “Incapacity to Work” means any incapacity or inability by the Executive, including any physical or mental incapacity, disease or affliction of the Executive which has prevented the Executive from performing the essential duties of his position for a period of at least ninety (90) consecutive days or an aggregate of one hundred and eighty (180) days in any twelve (12)-month period and which, in the opinion of a qualified medical doctor, would continue to do so for the foreseeable future (taking into account reasonable accommodation by the Corporation).

 

(l)                                     “Just Cause” means:

 

(i)                                     a breach by the Executive in any material respect of any of the provisions of this Agreement which is not remedied within thirty (30) days after written notice of such breach is delivered to the Executive, if such breach is capable of being remedied;

 

(ii)                                  the Executive’s conviction for a criminal act or other indictable offence pursuant to the provisions of the Criminal Code (Canada) or any other criminal or penal statute of any jurisdiction which would have a material adverse effect upon the reputation or goodwill of the Corporation;

 

(iii)          theft, fraud, embezzlement from the Corporation or any other material act of dishonesty by the Executive;

 

(iv)                              the failure by the Executive to fully comply with and perform his fiduciary duties; or

 

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(v)                                 the Executive’s gross negligence which harms or could be reasonably expected to harm the reputation or business of the Corporation, including the Executive’s repeated failure or refusal to perform the duties and obligations set forth in this Agreement.

 

(m)                             “Stock Option Plan” means the amended and restated stock option plan of the Corporation, as such plan may be further amended or restated from time to time.

 

(n)                                 “Territory” means worldwide.

 

ARTICLE II - TERM

 

2.1                               Term.  This Agreement shall commence on and shall be deemed to be effective as of the Commencement Date, and the Executive’s employment with the Corporation and this Agreement shall continue for an indefinite term thereafter unless terminated in accordance with this Agreement.

 

ARTICLE III - EMPLOYMENT; POSITION AND DUTIES

 

3.1                               Position.  Subject to the terms and conditions set out in this Agreement, the Corporation hereby agrees to employ the Executive and the Executive hereby agrees to serve the Corporation, in the position of President and Chief Executive Officer of the Corporation.

 

3.2                               Full-Time.  The Executive’s position with the Corporation is intended to be full-time and exclusive.  Therefore, throughout the duration of his employment, the Executive shall devote his full working time and attention to the business and affairs of the Corporation, acting in the best interests of the Corporation at all times.  The executive shall not accept nor hold any position as an officer, director, employee, consultant, or any like position for or on behalf of any entity without the prior written approval of the Corporation, which approval may be withheld in its sole discretion.  Notwithstanding the foregoing, it is understood and agreed that the Executive may, after informing the Chairman of the Board of the Corporation in writing, engage in civic or charitable activities, including serving on boards or committees of civic or charitable organizations, provided that such activities do not interfere with the performance of the Executive’s duties hereunder.

 

3.3                               Duties; Reporting.  The Executive shall report to and be subject to the general direction of the Board.  The Executive shall perform all duties in accordance with the articles and by-laws of the Corporation, the instructions of the Board, and all of the Corporation’s policies and codes of conduct, rules and regulations in effect from time to time.  In addition to the duties and responsibilities associated with his position, the Executive shall perform such other duties and responsibilities consistent with the position as may be assigned to him by the Board from time to time.  The Board retains full authority to change the Executive’s duties and responsibilities and to assign new duties and responsibilities to the Executive, provided that such changes are consistent with the Executive’s position as President and Chief Executive Officer and do not result in a material diminution of the scope or dignity of, nor in a material adverse change to, the Executive’s overall duties and responsibilities or status.

 

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3.4                               Place of Employment.  The Executive will work in the Corporation’s head office, in Montréal, Québec, Canada, or at such other location as the Corporation and the Executive may mutually agree from time to time, but subject to reasonable travel requirements in the performance of his duties.  The Corporation recognizes that the Executive is a resident of, and will continue to keep his principal residence in, the United States of America and will travel between his home and the Corporation’s head office as required to fulfill his duties as president and Chief Executive Officer of the Corporation.

 

3.5                               Executive’s Covenant.  The executive represents and warrants to the Corporation that he is free to enter this Agreement and that he is not subject to any obligation or restriction (statutory, contractual, or at common law) which would prevent or interfere with the performance of all of his obligations hereunder.

 

ARTICLE IV - COMPENSATION AND BENEFITS

 

4.1                               Base Salary.  The Corporation shall pay the Executive a base salary of U.S.$500,000 annually, paid in such installments and at such times and otherwise in accordance with the Corporation’s payroll practices.  The Executive’s base salary will be reviewed annually by the Corporation for consideration of an increase, if appropriate, in its discretion.

 

4.2                               Benefits.  Subject to eligibility, the Executive shall be eligible to participate in all benefit and fringe benefit programs, including group benefit plans and policies provided by the Corporation to similarly situated executives of the Corporation (currently including medical (including the Global Medical Assistance program), prescription, dental, disability, life and AD&D insurance), as such programs, plans and policies may be amended from time to time.  The Corporation shall also reimburse an amount of up to a maximum of U.S.$800 per year on account of the costs incurred by the Executive in connection with his annual medical examination.

 

4.3                               Cash Bonus.  For each fiscal year of the Executive’s employment with the Corporation under this Agreement, the Executive shall be eligible for an annual bonus of up to 50% of the annual base salary paid to the Executive during such year.  The amount of such cash bonus shall depend upon the achievement by the Executive and/or the Corporation of reasonable management objectives to be established by the Board in consultation with the Executive at least thirty (30) days prior to the beginning of the relevant fiscal year.  Any cash bonus for a relevant fiscal year shall be payable in one lump sum upon approval of the Board, which shall be obtained by the Corporation on or about January 31 of the ensuing year, and paid at the next regular payroll period after Board approval, unless cash flow is an issue in which case the Board may elect to pay the bonus in equal monthly instalments over no more than four (4) months.

 

4.4                               Tax Equalization.  The Corporation and the Executive intend that the income taxes payable by the Executive that are attributable to amounts or other compensation payable under this Agreement shall not exceed the income taxes payable to the United States of America and the State of California (or such other State to which the Executive may owe income tax as a result of his residence or citizenship) that are or would be attributable to amounts or other compensation payable to the Executive pursuant to this Agreement.  As

 

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such, in the calendar year following each calendar year during which the Executive receives compensation from the Corporation pursuant to this Agreement (including amounts referred to in this Section 4.4), the Corporation shall pay to the Executive an amount representing the estimated Equalization Amount, if any, as estimated by the Corporation’s tax advisors (currently Ernst & Young LLP).  For the purposes of this Section 4.4, the “Equalization Amount” shall be an amount equal to the difference between (i) the aggregate income taxes due and payable by the Executive in respect of amounts or other compensation received by the Executive from the Corporation to the United States of America, the State of California (or such other State to which the Executive may owe income tax as a result of his residence or citizenship), Canada and any applicable province or other jurisdiction in Canada by the Executive for such year due to his employment with the Corporation and taking into account any foreign tax credit or deduction available to the Executive and (ii) the aggregate of such income taxes that would otherwise have been due and payable to the United States of America and the State of California (or such other State to which the Executive may owe income tax as a result of his residence or citizenship) by the Executive for such year had the Executive not been required to pay income taxes in Canada or any province or other jurisdiction in Canada computed without regard to any foreign tax credit or deduction available to the Executive.  After the end of each relevant calendar year, the Corporation’s tax advisors (currently Ernst & Young LLP) shall determine the actual Equalization Amount and the parties will make any appropriate adjustments.  In addition, the Corporation shall pay to the Executive an additional amount (commonly known as gross-up) such that the net amount retained by the Executive after payment of any and all income taxes (including the United States of America, the State of California, Canada and any applicable province or other jurisdiction in Canada or the United States of America) on the Equalization Amount shall not be less than the amount the Executive would have received if such income taxes had not been paid.  For greater certainty, any interest or penalty payable by the Executive by reason of the Executive failing to file appropriate tax returns on a timely or correct basis shall not be taken into account to compute the Equalization Amount and shall be at the sole expense of the Executive.

 

4.5                               Options.  Subject to the rules of the TSX, upon commencement of the Executive’s employment with the Corporation, the Corporation shall grant to the Executive options to purchase up to 9,538,000 common shares in the capital of the Corporation (representing approximately 3% of the currently issued and outstanding common shares in the capital of the Corporation).  Subject to the approval of the shareholders of the Corporation authorizing the increase of the number of common shares in the capital of the Corporation available for option grants under the Stock Option Plan (which approval shall be sought at the earlier of (i) a special meeting of shareholders called to approve a private placement; or (ii) the Corporation’s next Annual General Meeting), the Executive will be entitled to be granted options entitling him to purchase up to an additional 3,179,450 common shares in the capital of the Corporation (representing approximately 1% of the currently issued and outstanding common shares in the capital of the Corporation).  It is also the Corporation’s intention to maintain the Executive’s option entitlement at approximately 4% of the issued and outstanding common shares in the capital of the Corporation after the next round of financing, subject to appropriate shareholder approval.  Such option grants shall be in an exercise price equal to the Fair

 

6

 

Market Price (as such term is defined in the Stock Option Plan) per share at the time of the applicable grant, with 20% of such options vesting on the date of grant and tranches of 20% vesting on each anniversary thereof.  The Executive may be granted additional stock options on an annual basis or such other basis as may be determined from time to time by the Board, in its sole discretion.

 

4.6                               Vacation.  The Executive shall be entitled to vacation in accordance with the Corporation’s vacation policy for management, currently four (4) weeks’ paid vacation per calendar year, such vacation to extend for such periods and to be taken at such intervals as shall be appropriate and consistent with the proper performance of the Executive’s duties and is agreed upon between the Executive and the Corporation.  Accumulated vacation time or pay may not be carried forward except with the prior approval of the Corporation.  Such vacation shall be prorated for the period between the Commencement Date and December 31, 2012.

 

4.7                               Reimbursement of Expenses.  Upon presentation of proper receipts or other proof of expenditure and subject to such reasonable guidelines or limitations provided by the Corporation from time to time, the Corporation shall reimburse the Executive for all reasonable and necessary expenses actually incurred by the Executive directly in connection with the business affairs of the Corporation and the performance of his duties hereunder, including return trips (in economy class) to the USA for personal reasons.  The Executive shall comply with such reasonable limitations and reporting requirements with respect to such expenses as the Board may establish from time to time.

 

4.8                               Directors’ and Officers’ Liability Insurance.  During the term of his employment, the Executive shall be entitled to, and the Corporation shall maintain in effect and pay for, coverage under the Corporation’s directors’ and officers’ liability insurance policy, in an amount and to an extent not less than the level of coverage that the Corporation provides to its directors and other senior executive management.

 

4.9                               Compensation Review.  Notwithstanding any other provision of this Agreement, it is agreed that the Corporation will review and consider an upward adjustment of the total compensation of the Executive hereunder (including base salary, bonus and stock options) by no later than January 31, 2013, and on an annual basis thereafter by no later than January 31 of each subsequent year, in each case retroactive to January 1 of the relevant year.  In the event a survey is performed by the Corporation, the Executive shall have the opportunity to review and provide comments thereof.

 

ARTICLE V - TERMINATION OF EMPLOYMENT

 

5.1                               Early Termination.  Notwithstanding any other provision in this Agreement, the Executive’s employment is subject to termination at any time as follows:

 

(a)                                 Death.  This Agreement and the Executive’s employment shall automatically terminate upon the death of the Executive.

 

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(b)                                 Incapacity to Work.  The Corporation may terminate this Agreement and the Executive’s employment at any time as a result of Incapacity to Work upon providing thirty (30) days’ written notice to the Executive.

 

(c)                                  Just Cause.  The Corporation may terminate this Agreement and the Executive’s employment at any time for any Just Cause.

 

(d)                                 Without Just Cause.  The Corporation may terminate this Agreement and the Executive’s employment at any time without Just Cause by providing written notice to the Executive specifying the effective Date of Termination.  In such event, the Corporation shall provide and the Executive shall be entitled to receive the payments, benefits and entitlements as set out in Section 5.4 below.

 

(e)                                  Change of Control.  Either (i) the Executive may terminate this Agreement within three (3) months following a transaction involving a Change of Control or (ii) or the Corporation may terminate this Agreement within six (6) months following a transaction involving a Change of Control; in each such case by providing written notice to the other party specifying the effective Date of Termination.  In such event, the Corporation shall provide and the Executive shall be entitled to receive the payments, benefits and entitlements as set out in Section 5.5 below.

 

(f)                                   Resignation.  The Executive may terminate this Agreement and his employment at any time by providing written notice to the Board specifying the effective date of termination (such date being not less than one (1) month after the date of the Executive’s written notice).  The Corporation may elect to deem any date prior to the date specified in the notice as the Date of Termination, provided that the Corporation shall pay the Executive the remainder of any base salary, payments, Benefits and other entitlements, including bonus and stock options, if any, that the Executive would have received in accordance with the provisions of Sections 4.1 to 4.7 above had the Executive continued to work until the end of the resignation notice period.

 

5.2                               Termination by Reason of Death or Incapacity to Work.  If this Agreement and the Executive’s employment is terminated pursuant to subsections 5.1(a) or 5.1(b) above, then the Corporation shall pay to the Executive or his estate, as the case may be, an amount equal to the base salary and vacation pay earned by and payable to the Executive up to the Date of Termination (less applicable statutory deductions), and the Executive shall have no entitlement to any further notice of termination, payment in lieu of notice of termination, severance or any damages whatsoever.  The Executive’s entitlement to and participation in the benefits and in all other benefits, perquisites, allowances or other entitlements whatsoever terminate automatically and immediately upon the Date of Termination (except for any insurance benefits to which the Executive or his assigns may be entitled as a result of his death or disability, which insurance benefits shall be in accordance with the then applicable policies and plans).  Participation in all bonus or incentive plans terminates immediately upon the Date of Termination.  The Corporation shall pay to the Executive or his estate, as the case may be, his bonus (if any) calculated pro rata based on the Executive’s period of employment during the fiscal year in which

 

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the Date of Termination occurs for the period up to the Date of Termination (less applicable statutory deductions), such payment(s) being made immediately if the amount can be readily determined but, in any event, no later than January 31 of the ensuing fiscal year following that in which the Date of Termination occurs.

 

5.3                               Termination for Just Cause or Resignation.  If this Agreement and the Executive’s employment is terminated pursuant to subsections 5.1(c) or 5.1(f) above, then the Corporation shall pay to the Executive an amount equal to the base salary and vacation pay earned by and payable to the Executive up to the Date of Termination (less applicable statutory deductions), and the Executive shall have no entitlement to any further notice of termination, payment in lieu of notice of termination, severance or any damages whatsoever.  The Executive’s entitlement to and participation in the Benefits and in all other benefits, perquisites, allowances or other entitlements whatsoever terminate automatically and immediately upon the Date of Termination.  Participation in all bonus or incentive plans terminates immediately upon the Date of Termination and the Executive shall not be entitled to any additional bonus or incentive award, pro rata or otherwise, except as may have been owing to him for the Corporation’s fiscal year immediately preceding the Date of Termination.

 

5.4                               Termination Without Just Cause.  If this Agreement and the Executive’s employment is terminated by either (i) the Corporation without Just Cause pursuant to subsection 5.1(d) above or (ii) the Executive’s resignation due to Good Reason, then the following provisions shall apply:

 

(a)                                 The Corporation shall pay to the Executive an amount equal to the base salary and vacation pay earned by and payable to the Executive up to the Date of Termination, less applicable statutory deductions.

 

(b)                                 The Corporation shall pay to the Executive a minimum of 50% of his target bonus (based on the achievement by the Executive and/or the Corporation of objectives established as set out in Section 4.3 above) for the then current fiscal year calculated pro rata to the Date of Termination based on the achievement of the Executive’s target goals and objectives for the then current fiscal year, less applicable statutory deductions.  The Corporation shall also pay to the Executive any outstanding bonus and incentive payments owing to the Executive for the previous fiscal year, less applicable statutory deductions.

 

(c)                                  The Corporation shall pay to the Executive, as he may direct, a lump sum payments equal to twelve (12) months of the Executive’s base salary as of the Date of Termination, less applicable stator deductions.

 

(d)                                 The Corporation shall pay to the Executive, as he may direct, a lump sum payment equal to 50% of the Executive’s target bonus, less applicable statutory deductions.

 

(e)                                  Notwithstanding the terms of the Stock Option Plan, all options held by the Executive at the Date of Termination shall continue to vest throughout the period

 

9

 

of twelve (12) months following the Date of Termination and expire ninety (90) days thereafter (subject to their initial term).

 

(f)                                   Except for all short-term and long-term disability insurance and directors’ and officers’ liability insurance (which cease immediately effective the Date of Termination, subject to continued coverage, if any, under the Corporation’s directors’ and officers’ liability insurance policies with respect to any acts, omissions or circumstances occurring or existing on or before the date on which the Executive ceases to be a director and officer of the Corporation), to the extend that the Corporation may do so legally and in compliance with its plans and policies in existence from time to time, the Corporation shall continue the Benefits for twelve (12) months from the Date of Termination.  Notwithstanding the foregoing, if the Corporation cannot continue any particular Benefit pursuant to the terms of the relevant plan or policy (including, without limitation, all disability insurance), then the Corporation shall reimburse the Executive for the reasonable actual cost of replacing such Benefits with comparable benefits.

 

5.5                               Termination Following a Change of Control.  If this Agreement and the Executive’s employment is terminated, by either the corporation or the Executive within three (3) months (or within six (6) months, as applicable) following a transaction involving a Change of Control pursuant to subsection 5.1(e) above, then the following provisions shall apply:

 

(a)                                 The Corporation shall pay to the Executive an amount equal to the base salary and vacation pay earned by and payable to the Executive up to the Date of Termination, less applicable statutory deductions.

 

(b)                                 The Corporation shall pay to the Executive his target bonus for the then current fiscal year calculated pro rata to the Date of Termination based on the achievement of the Executive’s target goals and objectives for the then current fiscal year, less applicable stator deductions.  The Corporation shall also pay to the Executive any outstanding bonus and incentive payments owing to the Executive for the previous fiscal year, less applicable statutory deductions.

 

(c)                                  If the Executive resigns without good reason within three (3) months following a transaction involving a Change of Control, the Corporation shall pay to the Executive, as he may direct, a lump sum payment equal to twelve (12) months of the Executive’s base salary as of the Date of Termination, less applicable statutory deductions.  If the Executive resigns for Good Reason or if this Agreement and the executive’s employment is terminated by the Corporation within six (6) months following a transaction involving a change of control, the Corporation shall pay to the Executive, as he may direct, a lump sum payment equal to twenty-four (24) months of the Executive’s base salary as of the Date of Termination, less applicable statutory deductions.

 

(d)                                 The Corporation shall pay to the Executive, as he may direct, a lump sum payment equal to one (1) time(two (2) times should the applicable period be

 

10

 

twenty-four (24) months pursuant to subparagraph (c) above) the Executive’s target bonus, less applicable statutory deductions.

 

(e)                                  Notwithstanding the terms of the Stock Option Plan, all options held by the Executive at the Date of Termination shall automatically vest as at the Date of Termination and expire ninety (90) days thereafter (subject to their initial term).

 

(f)                                   Except for all short-term and long-term disability insurance and directors’ and officers’ liability insurance (which cease immediately effective the Date of Termination, subject to continued coverage, if any, under the Corporation’s directors’ and officers’ liability insurance policies with respect to any acts, omissions or circumstances occurring or existing on or before the date on which the Executive ceases to be a director and officer of the Corporation), to the extent that the Corporation may do so legally and in compliance with its plans and policies in existence from time to time, the Corporation shall continue the Benefits for twelve (12) months from the Date of Termination.  Notwithstanding the foregoing, if the Corporation cannot continue any particular Benefit pursuant to the terms of the relevant plan or policy (including, without limitation, all disability insurance), then the Corporation shall reimburse the Executive for the reasonable actual cost of replacing such Benefits with comparable benefits.

 

5.6                               Payments.  All amounts provided for at Sections 5.2, 5.3, 5.4 and 5.5 above will be paid to the Executive or his estate, as the case may be, within five (5) business days of the Date of Termination, except for (i) any portion of the bonus payments that cannot be determined within such five (5) business day period, in which case such portion of bonus shall be payable as soon as determinable, but in any event no later than January 31 of the ensuing fiscal year, and (ii) any reimbursement of insurance costs, as provided for in said Sections.

 

5.7                               No Mitigation.  The Executive shall not be required to mitigate damages by seeking other employment or otherwise, nor shall any amount provided for under this Agreement be reduced in any respect in the event that the Executive shall secure or not reasonably pursue alternative employment following the termination of the Executive’s employment with the Corporation nor by any amounts or revenues received by the Executive from any other source whatsoever, or otherwise, provided that, to the extent that the Executive substantially replaces any Benefit(s) following the Date of Termination, the Executive shall advise the Corporation forthwith and the Corporation shall no longer be required to continue any Benefit(s) which has(ve) been so replaced by the Executive.

 

5.8                               Release.  The parties agree that the provisions of this Article V are fair and reasonable and that the payments, benefits and entitlements referred to in Sections 5.4 and 5.5 hereof are reasonable estimates of the damages which will be suffered by the Executive in the event of the termination of this Agreement and of his employment with the corporation and shall not be construed as a penalty.  The Executive acknowledges and agrees that the payments pursuant to this Article V shall be in full satisfaction of all terms of termination of his employment, including indemnity in lieu of notice of termination, termination and severance pay pursuant to applicable law, the minimum provisions of which are deemed

 

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incorporated into this Agreement and which shall prevail to the extent greater. Except as otherwise provided in this Article V, the Executive shall not be entitled to any further indemnity in lieu of notice of termination, termination or severance pay, damages or any additional compensation whatsoever.  As a condition precedent to any payment pursuant to Sections 5.4 and 5.5 hereof (but provided that the Corporation has complied with its obligations under this Agreement), the Executive agrees to deliver a full and final release from all actions or claims in connection with the Executive’s termination of employment in favour of the Corporation, its Affiliates, and all of their respective officers, directors, trustees, shareholders, employees, attorneys, insurers and agents, such release to be in a form satisfactory to the Corporation.

 

5.9                               Resignation as Director and Officer.  The Executive covenants and agrees that, upon any termination of this Agreement and of his employment, howsoever caused, he shall forthwith tender his resignation from all offices, directorships and trusteeships then held by the Executive at the Corporation or any of the Affiliates, such resignation to be effective upon the Date of Termination, unless the Corporation affirmatively asks him to maintain a directorship or trusteeship.

 

5.10                        Return of Property.  All equipment, keys, pass cards, credit cards, software, material, written correspondence, memoranda, communication, reports, or other documents or property pertaining to the business of the Corporation used or produced by the Executive in connection with his employment, or in his possession or under his control, shall at all times remain the property of the Corporation.  The Executive shall return all property of the Corporation in his possession or under his control forthwith upon any request by the Corporation or upon any of the termination of this Agreement or of the Executive’s reemployment (regardless of the reason for such termination).

 

ARTICLE VI - CONFIDENTIALITY

 

6.1                               Protection of Confidential Information.  While employed by the Corporation and for a period of two (2) years following the termination of this Agreement and the Executive’s employment (regardless of the reason for any termination), the Executive shall not, directly or indirectly, in any way use or disclose to any person any Confidential Information except as provided for herein.  The Executive agrees and acknowledges that the Confidential Information of the Corporation is the exclusive property of the Corporation to be used exclusively by the Executive to perform the Executive’s duties and fulfil his obligations to the Corporation and not for any other reason or purpose.  Therefore, the Executive agrees to hold all such Confidential Information in trust for the Corporation and the Executive further confirms and acknowledges to use his best efforts to protect the Confidential Information, not to misuse such information, and to protect such Confidential Information from any misuse, misappropriation, harm or interference by others in any manner whatsoever.  The Executive agrees to protect the Confidential Information regardless of whether the information was disclosed in verbal, written, electronic, digital, visual or other form, and the Executive hereby agrees to give notice immediately to the Corporation of any unauthorized use or disclosure of Confidential

 

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Information of which he becomes aware.  The Executive further agrees to assist the Corporation in remedying any such unauthorized use or disclosure of Confidential Information.  In the event that the Executive is requested or required to disclose to third parties any Confidential Information or any memoranda, opinion, judgments or recommendations developed from the Confidential Information, the Executive will, prior to disclosing such Confidential Information, provide the Corporation with prompt notice of such request(s) or requirement(s) so that the Corporation may seek appropriate legal protection or waive compliance with the provisions of this Agreement.  The Executive will cooperate with the Corporation to obtain legal protection or other reliable assurance that confidential treatment will be accorded the Confidential Information.

 

6.2                               Non-Disparagement.  The parties agree that they will not at any time, during or after the cessation of the Executive’s employment with the Corporation (howsoever caused), make any statements or comments publicly (including to any current or former employee or business relation of the Corporation or any of its Affiliates or to or likely to come to the attention of any media) regarding the other party, which are of a negative nature or that could reasonably be considered to have an adverse impact on the business or reputation of the Executive or the Corporation or any of the Corporation’s Affiliates, their boards of directors, or any of their officers or employees.

 

6.3                               Corporate Opportunities.  Any business opportunities related in any way to the business and affairs of the Corporation or any of its Affiliates which become known to the Executive during his employment hereunder shall be fully disclosed and made available to the Corporation and shall not be appropriated by the Executive under any circumstance without the prior written consent of the Corporation.

 

ARTICLE VII - INTELLECTUAL PROPERTY

 

7.1                               The Executive acknowledges and agrees that he shall continue to remain bound by the covenants regarding the ownership and assignment of inventions and proprietary information set forth in Section 2 of the Invention, Non-Disclosure and Non-Compete Agreement dated September 24, 2012 (the “Invention Agreement”).

 

ARTICLE VIII - RESTRICTIVE COVENANTS

 

8.1                               Non-Competition.  The Executive covenants that he will not without prior written consent of the Corporation at any time during the Executive’s employment with the Corporation or during the twelve (12) month period following the Date of Termination; (regardless of who initiated the termination and whether with or without Just Cause), directly or indirectly, anywhere within the Territory, either individually or in partnership, jointly or in conjunction with any other person, firm, association, syndicate, company or corporation, whether as agent, shareholder, employee, consultant, or in any manner whatsoever, engage in, carry on or otherwise be concerned with, be employed by, associated with or in any other manner connected with, or have any interest in, manage, advise, lend money to, guarantee the debts or obligations of, render services or advice to, permit the Executive’s name, or any part thereof to be used or employed in connection with, in whole or in part, any business in competition with that of the Business.

 

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8.2                               Non-Solicitation.  The Executive covenants that he will not (without prior written consent of the Corporation) at any time during the Executive’s employment with the Corporation nor during the twelve (12) month period following the Date of Termination (regardless of who initiated the termination and whether with or without Just Cause), directly or indirectly, either individually or in partnership, jointly or in conjunction with any other person, firm, association, syndicate, company or corporation, whether as agent, shareholder, employee, consultant, or in any manner whatsoever:

 

(a)                                 solicit or endeavour to solicit from the Corporation, employ, or otherwise engage (as an employee, independent contractor or otherwise) any person who is employed or engaged by the Corporation as at the Date of Termination or who was so employed or engaged within the twelve (12) month period preceding such date; or

 

(b)                                 for any purpose; directly competitive with the Business, solicit or cause to be solicited any business from any person or entity who is or which is a customer, partner, supplier, licensee or business relation of the Corporation as at the Date of Termination or within the twelve (12) month period preceding such date; or

 

(c)                                  induce or attempt to induce any customer, partner, supplier, licensee or business relationship of the Corporation to cease doing business with the Corporation.

 

8.3                               Fiduciary Duty.  The covenants set out in Article VI, Article VII and Article VIII hereof shall not affect nor diminish the Executive’s fiduciary obligations to the Corporation.

 

8.4                               Passive Investments.  Nothing in this Agreement shall prohibit or restrict the Executive from holding or becoming beneficially interested in up to five percent (5%) of any class of securities in any corporation provided that such class of securities are listed on a recognized stock exchange.

 

ARTICLE IX - REMEDIES

 

9.1                               Immigration Matters.  Each of the Executive and the Corporation shall make all reasonable efforts to cause the Executive to:

 

(a)                                 satisfy all applicable Canadian legal requirements allowing the Executive to legally work and stay in Montreal, Québec, Canada;

 

(b)                                 obtain a Canadian work permit; and

 

(c)                                  obtain visas or all other documentation or approvals necessary for business travel for the Corporation.

 

9.2                               Remedy.  The Executive acknowledges and agrees that he is employed in a fiduciary capacity, with obligations of trust and loyalty owed by him to the Corporation.  Accordingly, the Executive agrees that the restrictions in Article VI, Article VII and Article VIII are reasonable in the circumstances of the Executive’s employment and that the business and affairs of the Corporation cannot be properly protected from the adverse

 

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consequences of the actions of the Executive other than by the restrictions set forth in this Agreement.

 

9.3                               Injunctions, Etc.  The Executive acknowledges and agrees that in the event of a breach of the covenants, provisions and restrictions in Article VI, Article VII or Article VIII by the Executive, the Corporation’s remedy in the form of monetary damages will be inadequate.  Therefore, the Corporation shall be and hereby is authorized and entitled, in addition to all other rights and remedies available to it, to apply to a court of competent jurisdiction for interim and permanent injunctive relief and an accounting of all profits and benefits arising out of such breach.

 

9.4                               Survival.  Each and every provision of Article I, Article VI, Article VII, Article VIII and Article IX, shall survive the termination of this Agreement and of the Executive’s employment regardless of the reason for such termination, and such provisions shall be reiterated by the Executive and restated in the full and final release to be delivered by the Executive pursuant to the provisions of Section 5.8.

 

9.5                               Arbitration.  Any dispute, controversy or claim arising out of or in connection with this Agreement, including any question regarding its existence, validity, breach or termination and including whether the Executive’s termination validly qualifies as termination for Just Cause, Good Reason or Change of Control, shall be referred to and finally resolved by private and confidential arbitration held in camera before a sole arbitrator who shall be chosen by the parties.  Should the parties fail to agree as to the arbitrator, a judge shall make that appointment in accordance with the provisions of the Code of Civil Procedure (Québec).  The place of arbitration shall be Montréal, Québec, Canada.

 

ARTICLE X - GENERAL CONTRACT TERMS

 

10.1                        Recitals.  The Corporation and the Executive represent and warrant to each other that the Recitals set out above are true.

 

10.2                        Currency.  All amounts payable pursuant to this Agreement are expressed U.S. dollars.

 

10.3                        Withholding.  All amounts paid or payable and all Benefits, perquisites, allowances or entitlements provided to the Executive under this Agreement are subject to applicable taxes and withholdings.  Accordingly, the Corporation shall be entitled to deduct and withhold from any amount payable to the Executive hereunder such sums that the Corporation is required to withhold pursuant to any federal, provincial, state, local or foreign withholding or other applicable taxes or levies.

 

10.4                        Rights and Waivers.  All rights and remedies of the parties are separate and cumulative, and none of them, whether exercised or not, shall be deemed to be to the exclusion of any other rights or remedies or shall be deemed to limit or prejudice any other legal or equitable rights or remedies which either of the parties may have.

 

10.5                        Waiver.  Any purported waiver of any default, breach or non-compliance under this Agreement is not effective unless in writing and signed by the party to be bound by the waiver.  No waiver shall be inferred from or implied by any failure to act or delay in

 

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acting by a party in respect of any default, breach or non-observance or by anything done or omitted to be done by the other party.  The waiver by a party of any default, breach or non-compliance under this Agreement shall not operate as a waiver of that party’s rights under this Agreement in respect of any continuing or subsequent default, breach or non-observance (whether of the same or any other nature).

 

10.6                        Severability.  Any provision of this Agreement that is prohibit6ed or unenforceable in the Province of Québec shall be ineffective to the extent of the prohibition or unenforceability and shall be severed from the balance of this Agreement, all without affecting the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

 

10.7                        Notices.  Any notice required or permitted to be given under this Agreement shall be in writing and shall be properly given if personally delivered, delivered by facsimile transmission (with confirmation of receipt) or mailed by prepaid registered mail addressed as follows:

 

to the Chairman of the Board of the Corporation at:

 

7150 Frederick-Banting

Suite 200

Montreal, Québec

H4S 2A1

Canada

 

Telecopier No.:  (514) 337-0550

 

To the Executive at:

 

6614 Senecio Place

San Diego, CA 92130

U.S.A.

 

Or the last address in the Corporation’s records

 

Or to such other address as the parties may from time to time specify by notice given in accordance herewith. Any notice so given shall be conclusively deemed to have been given or made on the day of delivery, if personally delivered, or if delivered by facsimile transmission or mailed as aforesaid, upon the date shown on the facsimile confirmation of receipt or on the postal return receipt as the date upon which the envelope containing such notice was actually received by the addressee.

 

10.8                        Time of Essence.  Time shall be of the essence of this Agreement in all respects.

 

10.9                        Successors and Assigns.  This Agreement shall inure to the benefit of, and be binding on, the parties and their respective heirs, administrators, executors, successors and permitted assigns.

 

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10.10                 Amendment.  No amendment of this Agreement will be effective unless made in writing and signed by the parties.

 

10.11                 Entire Agreement.  This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, including the Term Sheet between the parties dated September 22, 2012, the Consulting Agreement, and Section 5 of the Invention Agreement, it being understood that the remainder of the Invention Agreement shall remain in full force and effect between the parties.  There are no conditions, warranties, representations or other agreements between the parties in connection with the subject matter of this Agreement (whether oral or written, express or implied, statutory or otherwise), except as specifically set out in this Agreement.

 

10.12                 Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the Province of Québec and the laws of Canada applicable in that province and shall be treated, in all respects, as a Québec contract.

 

10.13                 Headings.  The division of this Agreement into Sections and the insertion of headings are for convenience or reference only and shall not affect the construction or interpretation of this Agreement.

 

10.14                 Independent Legal Advice.  The parties acknowledge that prior to executing this Agreement they have each had the opportunity to obtain independent legal advice and that they fully understand the nature of this Agreement and that they are entering into this Agreement voluntarily.

 

10.15                 French Language.  This Agreement And all documents related hereto are drawn up in English at the express wish of the parties hereto.  Il est de la volonté expresse des parties aux presents que la présente convention et tous documents s’y rapportant soient rédigés en anglais.

 

IN WITNESS WHEREOF this Agreement has been signed as of the 9th day of November, 2012,

 

	
 
    	
METHYLGENE   INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Per:
    	
/s/   Martin Godbout
    
	
 
    	
 
    	
Name:
    	
Martin   Godbout
    
	
 
    	
 
    	
Title:
    	
Chairman   of the Board
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
/s/   Dr. Charles M. Baum
    
	
 
    	
 
    	
Dr. CHARLES   M. BAUM
    

 

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