Document:

Exhibit 10.4

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

This Collaboration Agreement relating to the development, manufacture and commercialisation of zoliflodacin is entered into on the 4th day of July 2017 (the “Effective Date”) by and between:

 

(1)                                 Drugs for Neglected Diseases initiative (“DNDi”), a Swiss foundation with its registered office located at 15 Chemin Louis-Dunant, CH-1202 Geneva, Switzerland acting through the Global Antibiotic Research and Development Partnership (“GARDP”) which is currently hosted within DNDi;

 

and

 

(2)                                 Entasis Therapeutics Limited, a company registered in England and Wales under company number 09475809 and having its registered office at One Ashely Road, 3rd Floor, Altrincham, Cheshire WA14 2DT, United Kingdom (“Entasis”)

 

Each a “Party” and collectively as the “Parties”.

 

BACKGROUND:

 

WHEREAS, GARDP’s mission is to develop new antibiotic treatments addressing antimicrobial resistance and to promote their responsible use for optimal conservation, while ensuring equitable access for all in need;

 

WHEREAS, the API (as defined below) is a first-in-class drug that inhibits bacterial topoisomerase II and shows in vitro antibacterial activity against several sexually transmitted infection pathogens, including Neisseria gonorrhoeae, Chlamydia trachomatis and Mycoplasma genitalium;

 

WHEREAS, Entasis either owns or has been granted exclusive intellectual property rights in the API and related technology;

 

WHEREAS, Entasis filed an IND for the API with the United States Food and Drug Administration (“FDA”) in September 2013 and has completed in the field of urogenital gonorrhoea in the United States of America a phase I single-ascending dose study and a phase I absorption, distribution, metabolism and excretion trial (the “Phase I Clinical Trials”);

 

WHEREAS, Entasis, in collaboration with the United States National Institution of Allergies and Infectious Diseases (“NIAID”) under a separate IND, has conducted a phase II study involving people with confirmed uro-genital gonococcal infection (the “Phase II Clinical Trial”);

 

WHEREAS, the Parties wish to enter into a collaboration to further develop a drug product containing the API (“Drug Product”) for the treatment of gonorrhoea caused by Neisseria gonorrhoeae, Chlamydia trachomatis and/or Mycoplasma genitalium (the “Field”) including further chemistry, manufacturing and controls activities (“CMC”) to be performed by DNDi, non-clinical studies to be conducted by DNDi and Entasis respectively, clinical development through a QT (TQT) study in the United States of America to be performed by Entasis in collaboration by NIAID, an international phase III multi-centre clinical trial to be sponsored by DNDi, registration of the drug product by the Parties in their respective territories, and its manufacture in order to supply and distribute the drug product in those territories on a sustainable, equitable and affordable basis; and

 

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WHEREAS, Entasis wishes to grant to DNDi an exclusive licence to use the Entasis Background Technology (as defined below) to enable DNDi to develop the Drug Product and to register and commercialise it in certain territories, and each Party wishes to grant to the other Party certain exclusive licensing rights to use its respective Collaboration Technology (as defined below) to enable the other Party to register and commercialise the Drug Product in its territory.

 

NOW THEREFORE, in consideration of the mutual agreements and undertakings herein contained, the Parties agree as follows:

 

1.                                      DEFINITIONS

 

For purposes of this Agreement (including the recitals and the Schedules), the following capitalized terms shall have the following meanings (whether used in singular or plural form):

 

1.1                               “Affiliate” shall mean, with respect to either Party, any corporation or entity controlled by, controlling or under common control with such Party. The terms “controlling”, “controlled by” or “control” shall mean: (i) the direct or indirect ownership of more than fifty percent (50%) of the voting securities of any corporation or entity, or (ii) the power to direct or cause the direction of the management or policies of such corporation or entity through the ownership of securities or interests, by contract or otherwise;

 

1.2                               “Agreement” shall mean this Collaboration Agreement, including the recitals and the attached Schedules, as may be amended from time to time by the Parties in accordance with its terms;

 

1.3                               “Anti-Bribery Law” shall mean any applicable law, rule, regulation, or other legally binding measure of any jurisdiction that relates to bribery or corruption;

 

1.4                               “API” has the meaning set forth on Schedule 6;

 

1.5                               “Background Technology” means the IP and other rights in the DNDi Background Technology or the Entasis Background Technology respectively that were either: (i) Controlled by the relevant Party as of the Effective Date; or (ii) conceived and reduced to practice, made or developed and Controlled by a Party during the Term outside the scope of the Collaboration Programme;

 

1.6                               “Change of Control” means the occurrence of a tender offer, stock purchase, other stock acquisition, merger, consolidation, recapitalisation, reverse split, sale or transfer of assets or other transaction, as a result of which any natural or legal person gains control of an entity or a group;

 

1.7                               “Clinical Trial” shall mean any clinical study on the Drug Product where the Drug Product is administered to humans;

 

1.8                               “CMC” shall mean have the meaning set out in the recitals;

 

1.9                               “Collaboration Programme” shall mean the collaboration programme to: (i) develop a Drug Product in the Field and to register such Drug Product in the Field in the DNDi Territory and the Entasis Territory in accordance with the Development Plan and the Regulatory Plan; and (ii) organise the Manufacture of such Drug Product for Commercialisation in the Field in the DNDi Territory and the Entasis Territory in accordance with the Manufacturing and Supply Plan;

 

1.10                        “Collaboration Technology” shall mean any IP and other rights in the API, the Drug Product and the Regulatory Dossier developed or conceived and reduced to practice in the performance of the Collaboration Programme;

 

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[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

1.11                        “Commercialise” or “Commercialisation” shall mean any relevant activities directed to marketing, promoting, importing, distributing, offering for sale, having sold and/or selling a pharmaceutical product;

 

1.12                        “Confidential Information” means any non-public information that is: (i) disclosed to the other Party (whether directly or indirectly) pursuant to or in the course of this Agreement howsoever disclosed that contains or relates to its Background Technology or its plans to Commercialise the Drug Product; or (ii) is generated pursuant to this Agreement by a Party including, without limitation, the respective Collaboration Technology of each Party;

 

1.13                        “Contract Service Provider” or “CSP” shall mean any Third Party service provider contracted by either Party to perform certain aspects of the Collaboration Programme;

 

1.14                        “Control” or “Controlled” shall mean with respect to relevant Background Technology and Collaboration Technology possession of the right, whether directly or indirectly, and whether by ownership, licence or otherwise, to assign or grant a licence, sublicense or other rights under this Agreement without violating the terms of any agreement or other arrangement with any Third Party;

 

1.15                        “Data Room” shall have the meaning set out in Clause 7.11;

 

1.16                        “Development Plan” shall mean a development plan outlining the non-clinical and clinical development plans and CMC plans for the Drug Product to meet the criteria of the TPP, which Development Plan is attached as Schedule 1 hereto, as amended from time to time in accordance with the terms of this Agreement;

 

1.17                        “DNDi Background Technology” shall mean any Background Technology of DNDi that is necessary or useful for the performance of the Collaboration Programme;

 

1.18                        “DNDi Collaboration Technology” shall mean: (i) [*]; and; (ii) [*]; and (iii) all other Collaboration Technology that is developed or conceived by DNDi (or its employees, Sublicensees or agents, including CSPs) in the performance of the Collaboration Programme;

 

1.19                        “DNDi Indemnified Parties” shall have the meaning set out in Clause 11.1;

 

1.20                        “DNDi Territory” means all those countries and regions listed as being in DNDi’s Territory as described in Schedule 2;

 

1.21                        “Drug Product” shall have the meaning set out in the recitals;

 

1.22                        “Drug Regulatory Authority” shall mean any competent authority in any country of the Territory with authority over the Drug Product and/or a Clinical Trial including, without limitation, the FDA and the EMA;

 

1.23                        “Effective Date” shall mean the date set forth at the head of this Agreement;

 

1.24                        “EMA” shall mean the European Medicines Agency;

 

1.25                        “Enforcing Party” shall have the meaning set out in Clause 7.19;

 

1.26                        “Entasis Background Technology” shall mean any Background Technology of Entasis relating to the API that is necessary or useful for the performance of the Collaboration Programme; provided, however, that if any Third Party becomes an Affiliate of Entasis after the Effective Date, Entasis Background Technology shall exclude any IP controlled by such Third Party before such Third Party became Entasis’s Affiliate;

 

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[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

1.27                        “Entasis Collaboration Technology” shall mean any Collaboration Technology that is developed or conceived by Entasis (or its employees, Sublicensees or agents, including CSPs) in the performance of the Collaboration Programme;

 

1.28                        “Entasis Indemnified Parties” shall have the meaning set out in Clause 11.2;

 

1.29                        “Entasis Patents” shall mean Patent Rights included in the Entasis Background Technology as of the Effective Date as described in Schedule 3;

 

1.30                        “Entasis Territory” means all those all those countries listed as being in Entasis’ Territory as described in Schedule 2;

 

1.31                        “FDA” shall mean the meaning set out in the recitals;

 

1.32                        “Field” shall have the meaning set out in the recitals;

 

1.33                        “Filing Party” shall have the meaning set out in Clause 5.8;

 

1.34                        “Force Majeure” shall mean an event which is (i) unpredictable, (ii) unavoidable and (iii) outside of the reasonable control of a Party or its CSP that prevents or substantially interferes with the performance by such Party of any of its obligations under this Agreement;

 

1.35                        “Future Indications” shall mean any community-acquired indications outside of the Field;

 

1.36                        “Future Indications Technology” shall have the meaning set out in Clause 7.10;

 

1.37                        “Good Clinical Practice” shall mean the guideline of the ICH Harmonized Tripartite Guidelines: Guidelines for Good Clinical Practice E6 (R1) of 10 June 1996 (as amended from time to time), being an international ethical and scientific quality standard for designing, conducting, recording, and reporting Clinical Trials that involve the participation of human subjects;

 

1.38                        “Good Manufacturing Practices” or “GMP” shall mean regulations and published guidelines related to current good manufacturing practices that relate to the testing, manufacturing, processing, packaging, holding or distribution of drug or biologic drug substances and finished drugs or biologics as set forth in the EU GMP Guide on good manufacturing practices for medicinal products for human use laid down in Commission Directives 91/356/EEC, as amended by Directive 2003/94/EC, and 91/412/EEC respectively, as amended during the Term of this Agreement;

 

1.39                        “Granule Formulation” means a formulation of the API that has been developed by Entasis using granules containing amorphous drug substance in a water-dispensable sachet;

 

1.40                        “Holding Point” shall have the meaning set out in Clause 4.4;

 

1.41                        “ICH” shall mean the International Council on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use;

 

1.42                        “IND” shall mean an investigational new drug application, clinical trial authorization or equivalent application filed with the applicable Drug Regulatory Authority, which application is required to commence human clinical trials in the applicable country;

 

1.43                        “Indemnification Claim Notice”; “Indemnified Party”, and “Indemnifying Party” shall each have the meaning set out in Clause 11.3;

 

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[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

1.44                        “Know How” means technical and other information which is not in the public domain including information relating to: (i) non-clinical data including pharmacological, toxicological and metabolic data and results of any non-clinical studies relevant to the API and the Drug Product; (ii) clinical safety and efficacy data including data analyses, study reports and information contained in protocols, filings or other submissions to or responses from ethical committees and Drug Regulatory Authorities; (iii) pharmacovigilance data; (iv) production processes including any drug master file, specifications, techniques, manufacturing line procedures, CMC data, SOPs, quality analysis and quality control processes and techniques and other documentation retained to comply with GMP; and (v) any relevant information relating to product supply chain of the Drug Product including the API, fill, finish and primary and secondary items. Know How includes: (a) documents containing Know How; and (ii) any legal rights including trade secrets, copyright, database or design rights protecting such Know How;

 

1.45                        “Infringement Notice” shall have the meaning set out in Clause 7.19;

 

1.46                        “Intellectual Property” or “IP” shall mean Patent Rights, Know How, copyrights, any improvements, enhancements or modifications to any of the foregoing and any rights or property similar to any of the foregoing in any part of the world, whether registered or not;

 

1.47                        “Joint Steering Committee” or “JSC” shall mean the joint steering committee having the role specified in Clause 8.

 

1.48                        “Losses” shall mean any and all losses, damages, liabilities, costs and expenses (including without limitation reasonable legal fees and expenses) taking account of the duty on the Party suffering such Losses to mitigate such Losses;

 

1.49                        “Manufacturing” shall mean all activities relating to making/or having made the API and/or the Drug Product and all associated activities including labelling/or having labelled, and packaging or having packaged the Drug Product in accordance with GMP;

 

1.50                        “Manufacturing and Supply Plan” shall mean the plan for manufacture of the API and the Drug Product and its supply to the DNDi Territory and to the Entasis Territory to be developed and by the Parties in accordance with Clause 6;

 

1.51                        “Marketing Authorisation” shall mean all approval(s), registration(s) and authorisation(s) necessary to be obtained from an applicable Drug Regulatory Authority to lawfully import, promote, distribute and sell the Product in the Field in a country of the DNDi Territory or the Entasis Territory, as applicable;

 

1.52                        “NIAID” shall have the meaning set out in the recitals;

 

1.53                        “Non-Filing Party” shall have the meaning set out in Clause 5.8;

 

1.54                        “Patent Rights” shall mean any: (i) patents and patent applications (provisional and non-provisional); (ii) continuations, divisionals, continuations-in-part, continued prosecutions, re-examinations, reissues, utility models, petty and other patent applications claiming subject matter therein or claiming priority from any of the foregoing, and all patents that issue there from; (iii) counterparts, substitutions, restorations, extensions (including, without limitation, patent term extensions), supplementary protection certificates, registrations, confirmations, validations and renewals of any of the foregoing; and (iv) invention certificates and other government grants for the protection of inventions or industrial designs;

 

1.55                        “Pharmacovigilance Agreement” shall have the meaning set out in Clause 9.2;

 

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[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

1.56                        “Phase I Clinical Trials” shall have the meaning set out in the recitals;

 

1.57                        “Phase II Clinical Trial” shall have the meaning set out in the recitals;

 

1.58                        “Phase III MC Trial” shall mean an international phase III multi-centre Clinical Trial to be conducted consistent with the Development Plan with the objective of demonstrating the safety and efficacy of the Drug Product in people infected with Neisseiria gonorrhoeae.

 

1.59                        “Phase IV Clinical Trial” shall mean any Clinical Trial conducted after the first Marketing Authorisation for the Drug Product has been obtained;

 

1.60                        “Project Leader” shall have the meaning set out in Clause 8.2;

 

1.61                        “Promotional Materials” shall mean promotional, advertising, communication and educational materials relating to the Drug Product for use in connection with the marketing, promotion and sale of the Drug Product and includes promotional literature, product support materials and promotional giveaways;

 

1.62                        “QT (TQT) Study” shall mean a study aimed at investigating the API liability to prolong the QT interval (incorporating a bioavailability study) to be performed on the Granule Formulation by Entasis in collaboration with NIAID prior to commencement of the Phase III MC Trial;

 

1.63                        “Regulatory Dossier” means all regulatory documents and filings registered with a Drug Regulatory Authority for a Marketing Authorisation containing the administrative, safety, efficacy, quality, non-clinical and clinical data and CMC data for the Drug Product as it may change from time to time;

 

1.64                        “Regulatory Plan” shall mean a regulatory plan outlining the regulatory strategy for obtaining Marketing Authorisations for the Drug Product and split of regulatory responsibilities of the Parties with the aim of ensuring equitable and affordable access to the Product for people in the DNDi Territory and the Entasis Territory at the earliest possible date, as further described in Schedule 4 hereto and in Clause 5, as may be amended from time to time;

 

1.65                        “Standard Operating Procedure” or “SOP” shall mean detailed, written instructions to achieve uniformity of the performance of a specific function, adopted within the organisation of each of the Parties;

 

1.66                        “Sublicensee” shall mean a Third Party appointed by either Entasis or DNDi or an Affiliate of Entasis or DNDi (other than a CSP) to carry out Manufacturing and/or Commercialisation of the Drug Product in its Territory or a part thereof;

 

1.67                        “Target Product Profile” or “TPP” shall mean the set of potential characteristics and attributes for the Drug Product, described in Schedule 5 hereto, and revised from time to time by mutual consent through the JSC;

 

1.68                        “Term” shall mean the period commencing after the Effective Date and unless terminated earlier in accordance with the terms of this Agreement, expiring country by country of the DNDi Territory and the Entasis Territory until the longer of: (i) the expiry of any Patent Rights in such country; or (ii) ten years from the first Marketing Authorisation for such Drug Product for the Field in such country.

 

1.69                        “Territory” shall mean the DNDi Territory and/or the Entasis Territory as the context requires;

 

1.70                        “Third Party” shall mean any person, organization or entity other than the Parties and their Affiliates;

 

1.71                        “Third Party Claim” shall have the meaning set out in Clause 11.3.

 

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[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

2.                                      OBJECTIVE OF THIS AGREEMENT

 

2.1                               The objective of this Agreement is to set forth:

 

2.1.1                     the principles of the collaboration between DNDi and Entasis in the performance of the Collaboration Programme;

 

2.1.2                     the obligations and roles and responsibilities of the Parties with respect to performance of the Collaboration Programme;

 

2.1.3                     the conditions pursuant to which DNDi shall provide to Entasis the right to use the DNDi Background Technology and Entasis shall provide to DNDi the right to use the Entasis Background Technology; and

 

2.1.4                     licensing and rights to use the Collaboration Technology.

 

3.                                      COLLABORATION PROGRAMME

 

3.1                               Except to the extent otherwise specified in any specific clause of this Agreement, each Party shall use commercially reasonable endeavours to perform its roles and activities within the Collaboration Programme and in a timely manner.

 

3.2                               Each Party may enlist the services of any CSP to perform its duties under the Collaboration Programme. The Party engaging a CSP shall ensure that the CSP allocates sufficient time, effort, equipment and facilities to the Collaboration Programme and utilizes personnel with sufficient skills and experience as are required to satisfy the requirements of the Collaboration Programme.

 

3.3                               In the performance of its obligations in relation to the Collaboration Programme each Party shall comply with its own SOPs, all applicable laws and regulations (including but not limited to Good Clinical Practice, Good Manufacturing Practices and ICH guidelines and national regulatory requirements and codes of practice and ethics committee or similar approvals) and shall obtain all applicable approvals and licences that may be required in order for it to perform its activities.

 

3.4                               Except as otherwise expressly set out in this Agreement, each Party shall bear any and all costs that are incurred by it in connection with any activity for which such Party is responsible pursuant to this Agreement. Each Party shall have the right, in consultation with the other Party, to seek financing from funding agencies for any part of the Collaboration Programme, provided always that the Party obtaining such funding continues to comply with its obligations hereunder and that obtaining such funding does not lead to any conflict or restriction with respect thereto.

 

4.                                      DEVELOPMENT OF THE DRUG PRODUCT

 

4.1                               The Parties shall use commercially reasonable endeavours to develop the Drug Product in the Field in accordance with this Clause 4, the Development Plan and the Regulatory Plan.

 

4.2                               Each Party in the performance of its activities in relation to the Development Plan will reasonably consider the views of the other Party.

 

4.3                               The Party conducting a study (e.g., Entasis for the QT (TQT) Study and DNDi for the Phase III MC Trial as per below) or pharmaceutical development shall make appropriate updates to the investigator’s brochure as required by Drug Regulatory Authorities and/or ethics committees, and the other Party shall reasonably co-operate with the first Party.

 

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[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

4.4                               At each decision point specified set out in the Development Plan (a “Holding Point”), the Parties shall determine through the JSC whether development of the Drug Product should continue beyond the Holding Point and if so, whether changes to the Development Plan are required prior to commencement with the remainder of the activities set out in the Development Plan.

 

QT (TQT) Study

 

4.5                               The Development Plan envisages that clinical development activities will commence with a QT (TQT) Study on the Granule Formulation in the United States of America. Entasis shall use commercially reasonable endeavors perform and fund the QT (TQT) Study in collaboration with NIAID (including procuring samples of the Granule Formulation for the QT (TQT) Study).

 

4.6                               Entasis shall:

 

4.6.1                     regularly update DNDi of status of the QT (TQT) Study and in particular shall notify DNDi promptly of any serious adverse events and any communications with or inspections by the Drug Regulatory Authority; and

 

4.6.2                     promptly provide to DNDi once finalized and validated by Entasis with NIAD the results of the TQ (TQT) Study including without limitation clinical study reports.

 

Phase III MC Trial

 

4.7                               The Parties will collaborate in the design of the Phase III MC Trial to be approved by the JSC in accordance with Clause 8.11.

 

4.8                               DNDi shall use commercially reasonable endeavours to perform and fund the Phase III MC Trial including:

 

4.8.1                     select the centres at which the Phase III MC Trial will be conducted;

 

4.8.2                     submit an IND and the regulatory clinical trial application(s) for the Phase III MC Trial to the FDA, EMA, and other applicable Drug Regulatory Authorities;

 

4.8.3                     arrange with a CSP for the Drug Product manufacturing that is required for the Phase III MC Clinical Trial;

 

4.8.4                     regularly update Entasis through the JSC about the regulatory status of clinical trial applications and the status of the Phase III MC Trial; and

 

4.8.5                     promptly provide to Entasis once finalized and validated by DNDi the results of the Phase III MC Trial including without limitation clinical study reports.

 

4.9                               Entasis shall co-operate with DNDi in DNDi’s performance of the Phase III MC Trial including, without limitation, by:

 

4.9.1                     providing DNDi with all Know How relating to the API and the Drug Product that is necessary for DNDi to perform its obligations; and

 

4.9.2                     assisting DNDi to develop a robust protocol for the Phase III MC Trial and committing reasonably sufficient time and resources to do so.

 

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[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

Pharmaceutical Development

 

4.10                        Pharmaceutical development of the Drug Product will commence as set out in the Development Plan in order to explore alternative formulations of the Drug Product used in the Phase III MC Trial.

 

4.11                        DNDi shall use reasonable endeavours to perform and finance the CMC activities (as detailed in the Development Plan) in accordance with the Development Plan. Entasis shall provide all Know How relating to the API that DNDi requires including the Granule Formulation.

 

4.12                        DNDi shall be responsible for organising the manufacture and supply of the Drug Product for the Phase III MC Trial and selecting its CSP for this purpose.

 

4.13                        DNDi shall have title to all batches of the Drug Product produced in the course of the Development Plan and may use such Drug Product for the purpose of any Clinical Trial that it performs or for Commercialisation in the DNDi Territory. Should it be impracticable for DNDi to use such batches prior to expiration, the Parties will collaborate to identify different ways to use such batches, which options may include, if agreed by the Parties at such time, the purchase by Entasis of batches of the Drug Product for use in the Entasis Territory at fair market value.

 

Future Indications

 

4.14                        In order to preserve efficacy and responsible use of the Drug Product, each Party agrees that neither the API nor the Drug Product shall be developed by or on behalf of either Party for the Future Indications without the prior consent of the other Party, not to be unreasonably withheld.

 

Further Development Responsibilities

 

4.15                        If a Party desires to conduct a Clinical Trial in the Territory of the other Party, then such Party shall (i) provide the other Party with a copy of the proposed protocol of such Clinical Trial for review and comment by the other Party, which such comments shall be considered by the first Party in good faith, and (ii) obtain the consent of the other Party, such consent not to be unreasonably withheld.

 

4.16                        Each Party shall keep or cause to be kept written laboratory notebooks and other records and reports of the progress of the Development Plan and its activities in sufficient detail and in good scientific manner. Such notebooks and other records must properly reflect all work done in relation to the Development Plan and the results achieved.

 

4.17                        Should any animals be involved in any aspect of the Development Plan each Party will treat such animals with humane care and shall adhere to the following core animal welfare principles: (a) animals must be provided a physical environment that is consistent with their physiological and behavioral needs; (b) animals must be provided potable water and a diet that meets their nutritional requirements; (c) animals must be provided a basic standard of medical care for all health issues, including those related to research, which is consistent with current veterinary medical standards: (d) efforts should be made to avoid, or when this is not possible, to minimize each animal’s pain, discomfort and distress. Anesthetics and analgesics should be used wherever necessary and feasible; (e) attending veterinarians must be provided the necessary resources and have the authority to manage animal welfare issues and to minimize pain and distress; (f) individuals responsible for the care and use of laboratory animals must be adequately trained in current standards of care and ethical treatment of laboratory animals and competency in planned animal procedures should be assessed prior to working with the animals; (g) whenever possible, the 3Rs of refinement, reduction and replacement will be adopted if compatible with the objectives of the study design; (h) when necessary, animals must be provided a humane death using techniques that are consistent with current veterinary medical standards when predetermined endpoints have been achieved or when pain or distress cannot otherwise be alleviated.

 

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[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

5.                                      REGULATORY STRATEGY AND ACTIVITIES FOR OBTAINING MARKETING AUTHORIZATION

 

5.1                               The regulatory strategy (including timelines and milestones) and the regulatory responsibilities of the Parties are set out in detail in the Regulatory Plan. As of the Effective Date the regulatory strategy is based on the principles that:

 

5.1.1                     clinical development is intended to facilitate the process for registration of the Drug Product in the first instance with the FDA and the EMA;

 

5.1.2                     Entasis shall use its best efforts to file the application for the first Marketing Authorisation for the Drug Product in the Field with the FDA, provided that, in Entasis’ reasonable determination, the data generated by completion of the Phase III MC Trial will be acceptable by the FDA, and would not otherwise cause Entasis to violate applicable law; and

 

5.1.3                     Entasis is responsible for obtaining Marketing Authorisations for the Drug Product in the Entasis Territory if and as it elects, and DNDi is responsible for obtaining Marketing Authorisations for the Drug Product in such countries of the DNDi Territory as it elects.

 

First Marketing Authorisation with the FDA and the EMA

 

5.2                               Entasis shall:

 

5.2.1                     use its best efforts to file the application for the first Marketing Authorisation for the Drug Product in the Field with the FDA by no later than six (6) months from the completion of the Phase III MC Trial (which shall mean database lock for clean file for the Phase III MC Trial) provided that, in Entasis’s reasonable determination, the data generated by completion of the Phase III MC Trial will be acceptable by the FDA, and would not otherwise cause Entasis to violate applicable law;

 

5.2.2                     use commercially reasonable endeavors to maintain the Marketing Authorisation with the FDA when granted;

 

5.2.3                     use commercially reasonable endeavors to file the application for the first Marketing Authorisation for the Drug Product in the Field with the EMA;

 

5.2.4                     use commercially reasonable endeavors to reasonably support DNDi in its conduct of any additional activities conducted by DNDi pursuant to Clause 5.3.2;

 

5.2.5                     permit DNDi to review and make suggestions in relation to the Regulatory Dossier prior to submission to the FDA and EMA and reasonably consider such suggestions;

 

5.2.6                     inform DNDi regularly through the JSC of the progress of the regulatory activities for obtaining Marketing Authorization with the FDA and the EMA; and

 

5.2.7                     promptly provide to DNDi a copy of the Regulatory Dossier file submitted to the FDA and the EMA and any correspondence in relation thereto.

 

5.3                               DNDi shall:

 

5.3.1                     provide to Entasis relevant clinical and CMC data in its possession that is required for the purpose of registering the Drug Product with the FDA and the EMA, and, upon reasonable request by Entasis, DNDi shall reasonably assist Entasis in the preparation of regulatory

 

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[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

 

materials for the FDA and the EMA registration, including the applicable portion of the CMC section;

 

5.3.2                     use commercially reasonable endeavors to conduct any additional activities that may be required by the FDA or be agreed between the Parties in addition to those set forth in the Development Plan to obtain the FDA Marketing Authorization;

 

5.3.3                     be responsible for the full costs of the additional activities mentioned under clause 5.3.2 to obtain the FDA Marketing Authorization;

 

5.3.4                     review and make suggestions in relation to the Regulatory Dossier prior to submission by Entasis to the FDA and the EMA; and

 

5.3.5                     reimburse Entasis for [*] of costs incurred by Entasis in filing the Marketing Authorisation for the Drug Product in the Field with the EMA if DNDi uses or references such Marketing Authorisation in any filing for Marketing Authorisation in the DNDi Territory in accordance with Clause 5.7 within [*] of DNDi submitting any such Marketing Authorisation in the DNDi Territory.

 

Phase IV Clinical Trials

 

5.4                               Each Party shall be responsible for financing such additional Clinical Trials in its respective Territory as it elects to conduct in accordance with this Agreement.

 

Market Authorizations in countries other than the USA

 

5.5                               Each Party will, except as otherwise specified in this Agreement, be responsible at its own cost, for using commercially reasonable endeavours to take all other necessary steps for obtaining and, during the Term of this Agreement, maintaining Marketing Authorisations in its Territory on behalf of itself or its Sublicensee if appropriate.

 

5.6                               Each Party shall use commercially reasonable endeavours to assist the other Party (and where appropriate its Sublicensee), at the other Party’s cost, to register the Drug Product for use in the Field in its Territory accordance with the Regulatory Plan, and to answer questions from any Drug Regulatory Authority with respect to the API and the Drug Product.

 

Use of Regulatory Dossier and References

 

5.7                               Each Party (and where appropriate its Sublicensees) shall be entitled, without the approval or consent of the other Party, to have full access to the Regulatory Dossier submitted to the FDA and the EMA by Entasis, to use it with any Drug Regulatory Authority in its Territory and to exercise its licensing rights (including sublicensing rights in accordance with this Agreement.

 

5.8                               The Party submitting a filing to a Drug Regulatory Authority (the “Filing Party”) shall have discretion to decide the documents (or extracts thereof) which will be included in the particular Regulatory Dossier that it submits and to modify and translate such documents as required. Promptly after such submission, the Filing Party shall notify the other Party (the “Non-Filing Party”) that such regulatory filing has been made, and upon the request of the Non-Filing Party, provide it with a copy of each such submission. Each Party shall update the other Party as to the status of each Regulatory Dossier within the different countries where it is submitted in its Territory, and will provide the other Party through the JSC with a report on its exchanges with the applicable Drug Regulatory Authority.

 

5.9                               The Filing Party shall provide to the Non-Filing Party (and use commercially reasonable endeavours to procure that its Sublicensees provide) in writing letters of reference, granting the Non-Filing Party

 

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(and its Affiliates and/or Sublicensees) the right of reference for all purposes relating to the development, Manufacturing or Commercialization of the API and the Drug Product in the Non-Filing Party’s Territory, with respect to all filings with any Drug Regulatory Authority made by the Filing Party or on its (or its Affiliates or Sublicensees behalf) to the extent available to Filing Party, and to all applicable Marketing Authorisations for such products in the Filing Party’s Territory. Such rights of reference shall expressly be binding on any assignee or transferee of the Filing Party’s rights to such filings and such 

Marketing Authorisations.

 

5.10                        If any Drug Regulatory Authority in a Territory requires access to certain portions of any filing or Marketing Authorisation related to the API or the Drug Product for legal or regulatory purposes in connection with the Non-Filing Party (or its Affiliates’ or Sublicensees’) development, Manufacturing and/or Commercialization efforts, then the Filing Party shall reasonably cooperate with such Drug Regulatory Authority and seek to make such portions available to the Drug Regulatory Authority and, if legally required for the Non-Filing Party (or its Affiliates or Sublicensees) to submit or pursue an application for Marketing Authorisation, to the Non-Filing Party, solely for such purpose, and the Filing Party shall use reasonable efforts to obtain similar cooperation from its Sublicensees.

 

Parallel Imports

 

5.11                        To the extent not otherwise prohibited by applicable laws, each Party shall not, and shall cause its Affiliates and sublicensees not to, directly sell any Drug Product to persons in the Territory of the other Party or to sell any Drug Product to distributors or Third Parties in the Territory of the other Party or to any Third Party that a Party has reasonable grounds to believe are likely to import any Drug Product into the Territory of the other Party. If a Party becomes aware that a Third Party is exporting Drug Products acquired from such Party or its Affiliates or sublicensees to a country in the Territory of the other Party, then such first Party shall, within its legal rights and the remedies afforded by applicable laws, stop or deter such Third Party from continuing such exportation, including by ceasing or limiting the supply of Drug Products to such Third Party. All inquiries or orders received by a Party or its Affiliates or sublicensees for Drug Products to be delivered or distributed in the Territory of the other Party shall be referred to the other Party or its designee.

 

5.12                        The restrictions set out in Clause 5.11 shall not apply with respect to any individual that makes an unsolicited request for the Drug Product for treatment in the Field solely for individual therapeutic use. The Party receiving such unsolicited request will be entitled to respond provided that responding to such request is not in violation of applicable laws and the aggregate quantity of such sales are de minimus relative to such Party’s Territory. Upon the reasonable request of a Party, the other Party shall report a summary of such sales of which it is aware. This Section 5.12 does not permit a Party to establish any marketing or sales channel (such as remote ordering by the Internet or other means) directed to persons in the other Party’s Territory and requires a Party to take all reasonable actions to prevent sales originating from the other Party’s Territory.

 

6.                                      PRODUCT MANUFACTURE AND SUPPLY

 

6.1                               Within six (6) months of the Effective Date or such longer period as may otherwise be agreed in writing (including by email), the Parties shall agree a detailed Manufacturing and Supply Plan for the supply of the Drug Product through the JSC. The Manufacturing and Supply Plan shall be based on the following principles:

 

6.1.1                     the Parties shall develop a detailed forecasting, supply, access and implementation plan for the supply of the Drug Product and define related operational supply chain management processes to ensure availability and access of the Drug Product in the Field with the consultation, as appropriate, of one or more funding agencies or partners, e.g., the World Health Organisation;

 

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6.1.2                     the Parties will use commercially reasonable endeavours to optimize production costs and will seek opportunities to jointly appoint Manufacturing Sublicensee(s) where possible;

 

6.1.3                     the Parties will give due consideration to the need to ensure continued efficacy and responsible use of the Drug Product and will therefore seek to minimize the number of Sublicensees for Manufacturing;

 

6.1.4                     if the appointment of joint Manufacturing Sublicensee(s) is not possible, each Party will have the right to Manufacture the Drug Product anywhere in the world (and subject to Clauses 7.6 and 7.8 appoint a Sublicensee to do so) and to Commercialise the Drug Product in the countries in its respective Territory for which a Marketing Authorization has been obtained;

 

6.1.5                     each Party shall make reasonably available to nominated representatives of the other Party appropriate personnel to educate and train such representatives in relation to Know How that may be required to Manufacture the Drug Product;

 

6.1.6                     each Party will ensure that any Drug Product is supplied with appropriate instructions for use and neither Party will promote the Drug Product for any use or indication other than those specified in the Marketing Authorisation in the Territory or part thereof from time to time or make any medical or promotional claims regarding the Drug Product other than permitted by law;

 

6.1.7                     each Party will use commercially reasonable endeavours to ensure that the Drug Product is made available at price which is affordable and sustainable in its respective Territory and any part thereof;

 

6.1.8                     the Drug Product manufactured for Commercialisation in the Entasis Territory shall be reasonably distinguished from the Drug Product for Commercialisation in the DNDi Territory, as agreed by Parties;

 

6.1.9                     unless otherwise agreed each Party will be responsible for packaging and labelling of Drug Products in its Territory;

 

6.1.10              each Party shall be responsible for its own Promotional Materials for use in its Territory and for filing such Promotional Materials with the relevant Drug Regulatory Authority as required;

 

6.1.11              each Party (or its Sublicensee) shall use its own name and/or logo for Commercialisation in its Territory unless otherwise agreed.

 

6.2                               DNDi will promptly notify Entasis in accordance with the Development Plan if DNDi, either itself or through an Affiliate or a Third Party on its behalf, improves, modifies, or enhances the formulation of the Drug Product;

 

6.3                               It is acknowledged that Entasis has certain obligations to make milestone payments to Astra Zeneca AB (and/or its affiliates) in relation to the API (“Astra Zeneca”). The Parties agree that any such payments to Astra Zeneca will be paid in full by Entasis and that such costs shall not be transferred to DNDi (and/or any of its Sublicensee(s)) whether directly or indirectly or applied to the costs of any supply of Drug Product for Commercialisation in the DNDi Territory.

 

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7.                                      INTELLECTUAL PROPERTY

 

Ownership

 

7.1                               All rights in, title to and interest in the DNDi Background Technology and the DNDi Collaboration Technology shall be owned by DNDi. DNDi shall promptly notify Entasis upon the creation of DNDi Background Technology and DNDi Collaboration Technology. Notwithstanding the foregoing or Clause 7.17, DNDi shall solely own all rights, title, and interest in and to all IP developed or conceived and reduced to practice in DNDi’s performance of [*] as DNDi Collaboration Technology; provided, that if DNDi does not file for Patent Rights on DNDi Collaboration Technology that would be reasonably patentable in the DNDi Territory or Entasis Territory within six (6) months of making such invention, or thereafter does not use commercially reasonable endeavors to prosecute and maintain such Patent Rights, then DNDi shall and hereby does assign to Entasis all of DNDi’s right, title, and interest in and to such IP. DNDi shall take, and shall cause its employees, agents, sublicensees, and contractors to take, all further acts reasonable required to effectuate the transfer of such IP. Any IP transferred to Entasis pursuant to this Clause 7.1 shall thereafter be considered as Entasis Collaboration Technology.

 

7.2                               All rights in, title to and interest in the Entasis Background Technology and the Entasis Collaboration Technology shall be owned by Entasis. Entasis shall promptly notify DNDi upon the creation of Entasis Background Technology and Entasis Collaboration Technology.

 

7.3                               The Parties agree that each Party shall retain ownership of all rights, title and interest in any part of the Regulatory Dossier which it (or any Party acting on its behalf) has authored provided that each Party shall be entitled to use the Regulatory Dossier for the purposes set out in Clauses 5.7 to 5.9 inclusive without the approval of the other Party.

 

7.4                               Each Party shall procure that under the terms of any appointment of a CSP or Sublicensee that the CSP or Sublicensee does all such acts and things necessary to vest all right, title and interest in its Collaboration Technology in such Party.

 

Licensing

 

7.5                               Entasis hereby grants to DNDi, a worldwide, fully paid up, exclusive and royalty-free license with the right to sublicense to any Sublicensee (subject to Clause 7.6) through multiple tiers to use the Entasis Background Technology and the Entasis Collaboration Technology:

 

7.5.1                     in connection with all activities associated with the development of the Drug Product in the Field in accordance with the Development Plan and the Regulatory Plan;

 

7.5.2                     to Manufacture the API and the Drug Product for Commercialisation in the Field in the DNDi Territory; and

 

7.5.3                     to register and obtain and maintain Marketing Authorisation in the DNDi Territory and to Commercialise the Drug Product in the Field in the DNDi Territory.

 

For the avoidance of doubt, subject always to Clause 4.14, Entasis retains the right to use and grant licenses to the Entasis Background Technology and the Entasis Collaboration Technology (i) to perform its obligations under this Agreement and (ii) for any purposes not set out above.

 

7.6                               The appointment of distributors and other commercial Sublicensees (for clarity, excluding all CSPs) by DNDi will be subject to Entasis’ prior written consent, not to be unreasonably withheld or delayed, provided that the Sublicensee is required to comply with the restrictions set out in sub-clauses Clause 7.5.1 to 7.5.3 inclusive.

 

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7.7                               DNDi hereby grants to Entasis, a worldwide, fully paid up, exclusive and royalty-free license with the right to sublicense to any Sublicensee through multiple tiers to use the DNDi Background Technology and the DNDi Collaboration Technology:

 

7.7.1                     in connection with the development of the Drug Product in the Field in accordance with the Development Plan and the Regulatory Plan;

 

7.7.2                     to Manufacture the API and the Drug Product for Commercialisation in the Field in the Entasis Territory; and

 

7.7.3                     to register and obtain and maintain Marketing Authorisation in the Entasis Territory and to Commercialise the Drug Product in the Field in the Entasis Territory.

 

For the avoidance of doubt, subject always to Clause 4.14, DNDi retains the right to use and grant licenses to the DNDi Background Technology and the DNDi Collaboration Technology (i) to perform its obligations under this Agreement and (ii) to enable registration of the Drug Product in the DNDi Territory and for any purposes not set out above (including, without limitation, for academic and research purposes).

 

7.8                               The appointment of a Sublicensee (other than a CSP) by Entasis will not be subject to DNDi’s prior written consent.

 

Future Indications

 

7.9                               If the Parties agree to develop a Drug Product for Future Indications, each Party shall and hereby does grant to the other a worldwide, fully paid up, non-exclusive and royalty-free license to use its respective Background Technology and Collaboration Technology for development for Future Indications.

 

7.10                        If a Drug Product is developed by a Party for Future Indications in accordance with Clause 4.14, the Party that develops technology for such purpose (“Future Indications Technology”) shall: (a) provide to the other on a confidential basis, details of any Future Indications Technology arising from such development activities that is necessary for the performance of the other Party’s obligations under the Collaboration Programme; and (b) grant to the other Party a right to use such Future Indications Technology in the Field (including for Future Indications in accordance with Clause 4.14) on the same terms set out in Clauses respectively in Clauses 7.5 and 7.7 respectively, provided that such licence shall be non-exclusive.

 

Information exchange

 

7.11                        Within thirty (30) days of the Effective Date, the Parties shall establish an electronic data room in which of all documents that relate to the Collaboration Programme must be filed (the “Data Room”).

 

7.12                        Within thirty (30) days of the Effective Date, Entasis shall provide to DNDi all of the Entasis Background Technology in its possession on the Effective Date. Each Party shall deposit any relevant documents relating to its Background Technology that is not in its possession on the Effective Date in the Data Room within thirty (30) days of such Background Technology being included in the Development Plan.

 

7.13                        During the Term of this Agreement, each Party shall promptly communicate and make available to the other Party in a prompt manner and as it becomes available all of its Collaboration Technology and Regulatory Dossiers shall deposit all relevant documents in the Data Room as soon as reasonably practicable and in any event within thirty (30) days of creation of any relevant document.

 

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7.14                        Entasis shall be responsible for maintaining the Data Room for a period of one (1) year following expiry or termination of this Agreement and shall permit nominated representatives of DNDi or any DNDi CSP or Sublicensee to have access to the data room during that period.

 

Filing, prosecution and maintenance and infringement

 

7.15                        Entasis shall use its best efforts to file, prosecute, and maintain the Patent Rights claiming the Entasis Background Technology or the Entasis Collaboration Technology in all countries in the DNDi Territory listed on Schedule 3 as of the Effective Date and in any country in Schedule 3 in the DNDi Territory or the Entasis Territory in which Manufacturing is agreed to take place in accordance with the Manufacturing and Supply Plan.

 

7.16                        Entasis shall notify DNDi (i) within ten (10) business days for any material updates, and (ii) every six (6) months for non-material changes with regard to all filings made for Patent Rights in the DNDi Territory including sending DNDi a copy of any such filing and otherwise shall keep DNDi informed of all material developments in relation to such Patent Rights and shall promptly provide DNDi with copies of relevant documents related to the filing, prosecution and maintenance of such Patent Rights. Entasis shall consider in good faith any reasonable comments made by DNDi in relation to the prosecution of Patent Rights in the DNDi Territory when making any submission to a Patent Rights office and in the conduct of any proceedings in relation to such Patent Rights. DNDi shall reimburse Entasis for costs and expenses for the maintenance of such Patent Rights in the DNDi Territory.

 

7.17                        DNDi shall have the right but not the obligation to file, prosecute, and maintain the Patent Rights claiming the DNDi Background Technology and the DNDi Collaboration Technology on a world-wide basis (including for the avoidance of doubt in the Entasis Territory and the DNDi Territory).

 

7.18                        DNDi shall keep Entasis promptly informed of all filings made for Patent Rights in the Entasis Territory including sending Entasis a copy of any such filing and otherwise shall keep Entasis informed of all material developments in relation to such Patent Rights and shall promptly provide Entasis with copies of relevant documents related to the filing, prosecution and maintenance of such Patent Rights. DNDi shall consider in good faith any reasonable comments made by Entasis in relation to the prosecution of Patent Rights in the Entasis Territory when making any submission to a Patent Rights office and in the conduct of any proceedings in relation to such Patent Rights. In the event that DNDi declines to file prosecute, maintain or defend any pending Patent Rights in any country of the Entasis Territory or the DNDi Territory it shall notify Entasis in writing of such decision and within thirty (30) days and Entasis and/or its Sublicensee shall have the right (but not the obligation) to file, prosecute and maintain such Patent Rights in the Entasis Territory or the DNDi Territory at Entasis’ costs and expense. DNDi shall execute any documents to transfer control of such filing and maintenance to Entasis.

 

7.19                        If a Party becomes aware of any actual, threatened or suspected infringement or misuse by a Third Party of any Patent Rights belonging to the other, it shall promptly notify the other Party in writing of all available evidence and details available to it (the “Infringement Notice”). The Party in whose Territory the infringement is occurring (i.e., DNDi in the DNDi Territory and Entasis in the Entasis Territory) (the “Enforcing Party”) will discuss the matter with the other Party to solicit its views as to any action that may or not be taken in relation thereto. The Enforcing Party shall have the sole right, but not the obligation to bring, defend, or maintain and control any suit or action against any actual, threatened or suspected infringement. The Enforcing Party will bear the relevant expenses, but the other Party shall reasonably assist and cooperate with the Enforcing Party in any enforcement or defence at the Enforcing Party’s cost. If the other Party or its Sublicensee is required to join the Enforcing Party in such suit or action in order to enforce such Patent Rights, the other Party shall use commercially reasonable endeavors to execute all papers and perform all other acts as may be reasonably required at the cost of the Enforcing Party. If the Enforcing Party (or its

 

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Affiliate) lacks standing to bring any such action due to lack of ownership, it may ask the owning Party or its Sublicensee to do so at the Enforcing Party’s cost and in which case the owning Party or its Sublicensee will conduct such action in accordance with the Enforcing Party’s instructions. In any infringement proceedings, the Enforcing Party shall retain all costs and damages recovered, whether ordered or as part of a settlement.

 

7.20                        If DNDi is the Enforcing Party and fails to take proceedings for more than six (6) months after having been alerted to the infringement, Entasis may give notice to DNDi demanding that DNDi take such proceedings within thirty (30) days of the date of the notice and, if DNDi does not do so, Entasis shall be entitled to take over such proceedings at its own cost and expense in which case DNDi shall transfer to Entasis the conduct of any claim or proceedings, including any counterclaim for invalidity or unenforceability or any declaratory judgment action. DNDi shall provide all necessary assistance to Entasis in relation to such proceedings at Entasis’s cost. Entasis shall have the sole right to settle such proceedings including any counterclaim for invalidity or unenforceability. If Entasis succeeds in such proceedings, for any amounts attributable to lost sales of Drug Product in the DNDi Territory, such amounts will be distributed to DNDi and any other amounts will be retained by Entasis.

 

7.21                        In the event of any Third Party challenge to the validity of any Patent Rights, the Enforcing Party shall have the sole right to decide upon and to implement the course of action with respect to such challenge (including but not limited to, the decision to defend, not to defend or settle such challenge) at its own cost or expense and the other Party shall reasonably assist in any defence at the cost of the Enforcing Party (including, without limitation the provision of information and expertise relating to the relevant Patent Rights). Notwithstanding the foregoing, if DNDi is the Enforcing Party and fails to take action within six (6) months after having been alerted to the Third Party challenge to the validity of DNDi’s Patent Rights, Entasis may give notice to DNDi demanding that DNDi take such action within thirty (30) days of the date of the notice and, if DNDi does not do so, Entasis shall be entitled to take such actions at its own cost and expense in which case DNDi shall transfer to Entasis the conduct of any actions. DNDi shall provide all necessary assistance to Entasis in relation to such actions at Entasis’s cost. Entasis shall have the sole right to settle such actions. If Entasis succeeds in such proceedings, for any amounts attributable to lost sales of Drug Product in the DNDi Territory, such amounts will be distributed to DNDi and any other amounts will be retained by Entasis.

 

7.22                        If either Party receives a formal notice from a Third Party that the development, Manufacture or Commercialisation of the Drug Product in its Territory under this Agreement infringes or otherwise violates the intellectual property rights of such Third Party in its Territory or a part thereof, then such Party must promptly notify the other Party in writing of such allegation. As soon as reasonably practicable after the receipt of such notice, the Parties will meet and consider the course of appropriate action with respect to such allegation of infringement. In such instance, each Party will, have the right to defend any action naming it; however, at all times the Parties will cooperate, share all material notices and filings in a timely manner, provide all reasonable assistance to each other and use good faith efforts to mutually agree upon an appropriate course of action, including, as appropriate, the preparation of material court filings and any discussions concerning a potential defence and/or settlement of any such claim. The rights and obligations set out in this paragraph will apply even if only one Party defends any such claimed infringement action commenced by a Third Party. A non-owning Party will not enter into any settlement of such proceedings without the owning Party’s prior consent, not to be unreasonably withheld or delayed.

 

7.23                        The Parties agree to use commercially reasonable endeavors to cooperate in an effort to avoid loss of Patent Rights related to the Drug Product including by executing any documents as may be reasonably required.

 

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8.                                      GOVERNANCE AND PROJECT MANAGEMENT

 

8.1                               Within thirty (30) days from the Effective Date, the Parties shall establish and run a JSC to oversee the Collaboration Programme and which will be responsible for ensuring strategic coordination and exchange of information between the Parties.

 

8.2                               Each Party shall further appoint a project leader for the Collaboration Programme (each, a “Project Leader”). Each Party may replace its Project Leader from time to time by giving a written notice to the other Party (including by email) as soon as reasonably practicable following such change. Each Project Leader shall be the primary point of contact for the Collaboration Programme for that Party.

 

8.3                               The JSC shall be composed of six (6) representatives. Each Party shall be entitled to appoint three (3) representatives to the JSC (one of whom must be the Project Leader). JSC representatives must be appropriate for the primary function of the JSC in terms of their seniority, availability and function in their respective organisations, training and experience. The chairperson of the JSC will alternate between the Project Leader of DNDi and the Project Leader of Entasis at each JSC meeting.

 

8.4                               Each Party shall be entitled to change its JSC representatives and will notify the other of any change. Each Party shall use reasonable efforts to keep an appropriate level of continuity in representation. JSC representatives may be represented by another person designated in writing (which shall include email) by the absent JSC representative.

 

8.5                               The JSC shall hold meetings in person or by teleconference or videoconference as frequently as members of the JSC may agree shall be necessary, but no less frequently than (4) times per year. The chairperson shall be responsible for organising the JSC meeting, the first of which shall be held within thirty (30) days after the Effective Date at the premises of DNDi. Special meetings of the JSC may be called by any JSC member on written request to the then current chairperson of the JSC. Each Party shall provide the agenda items and written copies of associated materials that it wishes to be considered no later than seven (7) days prior to the relevant JSC meeting.

 

8.6                               The venue for meetings of the JSC will alternate between the premises of the Parties, unless held by teleconference or videoconference. Each Party will be responsible for its own expenses for attendance of JSC meetings including travel and subsistence expenses.

 

8.7                               The JSC shall have the power to invite guests to attend and address JSC meetings. Guests will not be representatives of the JSC and will not have voting rights. The Project Leaders will agree in advance on which Party will bear the costs of engaging a particular guest.

 

8.8                               The current JSC chairperson shall be responsible for promptly preparing the minutes of any JSC meeting, seeking unanimous approval of those minutes from the JSC representatives by signing and dating the approved minutes and promptly distributing a copy of the signed minutes to each Party. It is only such signed and dated minutes that shall constitute a decision of the JSC.

 

8.9                               The JSC shall have the purposes set out below but has no authority to amend, or to waive compliance with, any term or condition of this Agreement. The JSC shall:

 

8.9.1                     guide the overall strategy for the Collaboration Programme including without limitation, discussing the TPP of the Drug Product, development, Manufacturing and Commercialisation activities;

 

8.9.2                     consider and discuss various aspects of the Collaboration Programme, submitted to the JSC by the Project Leaders;

 

8.9.3                     review study protocols and any amendments thereto as part of the Collaboration Programme and any study that may form part of the Regulatory Dossier;

 

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8.9.4                     make the decision whether to proceed beyond a Holding Point specified in the Development Plan;

 

8.9.5                     make the decision whether to amend the Development Plan and the Regulatory Plan;

 

8.9.6                     review all on-going activities and progress relating to the Collaboration Programme; and

 

8.9.7                     agree a detailed Manufacturing and Supply Plan for the supply of the Drug Product.

 

8.10                        Each Party shall have one vote at the JSC. Conclusions and decisions of the JSC shall be made by agreement whenever possible and recorded in the minutes that are signed and dated by the JSC members. Both Parties will use reasonable endeavours to reach agreement. Any decision made by the JSC through this process shall be binding on the Parties.

 

8.11                        Any differences of opinion between the Parties with regard to the Collaboration Programme shall be discussed in good faith within the JSC. If the JSC is unable to reconcile the opinions within thirty (30) days or to make a decision within the scope of its responsibility, then the Parties shall submit the difference of opinion to each Party’s senior executive officer, which, in the case Entasis, shall be the chief executive officer and, in the case of DNDi, shall be the GARDP Executive Director, to enable a compromise between different views with respect to such issue. If such senior executives of the Parties cannot successfully reconcile the difference of opinion within a fifteen (15) day period after the moment of formal submission to them, then the Party that has responsibility for the performance of the activity in question in its Territory shall have the final decision making authority on such matter, provided, that:

 

8.11.1              Following the grant of the first Marketing Authorisation, DNDi may conduct Clinical Trials: (a) in DNDi’s Territory without any requirement of consent of Entasis provided that the design of any Clinical Trial with an intent to change the label shall require Entasis’s prior written consent, not to be withheld, conditioned, or delayed unless there are reasonable objections on scientific grounds to the conduct of such Clinical Trial, and (b) in Entasis’s Territory, solely with Entasis’s prior written consent, not to be unreasonably withheld, conditioned, or delayed. Notwithstanding the foregoing, following a Change of Control of Entasis, DNDi will not require the prior consent of any Third Party acquiror to the performance of any Clinical Trial; and

 

8.11.2              Neither party shall have final decision-making authority with respect to any decision that would restrict or limit the Manufacture or supply of the API or Drug Product in or for the other Party’s respective Territory.

 

9.                                      SAFETY REPORTING, RECALLS AND INFORMATION EXCHANGE

 

9.1                               Each Party will be responsible for ensuring that it complies with its regulatory obligations as either sponsor or as Marketing Authorisation holder, and for the management of clinical safety and pharmacovigilance with regard to the Drug Product in its respective Territory.

 

9.2                               Within ninety (90) days from the Effective Date or such other period as the Parties may agree before enrolment of the first trial subject in the QT (TQT) Study, the Parties will conclude a pharmacovigilance agreement to govern the investigation of and action to be taken with regard to Drug Product related adverse experience reports, to enable each Party to comply with its legal obligations (“Pharmacovigilance Agreement”).

 

9.3                               Each Party shall exchange with the other Party all relevant information that relates to the safety and efficacy of the Drug Product as set out in the Pharmacovigilance Agreement. Each Party will

 

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reasonably co-operate with the other Party to ensure that regulatory requirements concerning drug safety surveillance are complied with in all countries in which the Drug Product is developed, Manufactured or Commercialised both in the Field and for any Future Indications.

 

9.4                               Entasis will be responsible for setting up a worldwide Drug Product safety database, the details of which will be set out in the Pharmacovigilance Agreement.

 

10.                               REPRESENTATIONS AND WARRANTIES

 

10.1                        DNDi represents and warrants the following:

 

10.1.1              It is duly authorized and validly existing under the laws of Switzerland and has full power and authority to enter into this Agreement and to carry out its provisions;

 

10.1.2              it is duly authorized to execute and deliver this Agreement and perform its obligations hereunder;

 

10.1.3              the person(s) executing this Agreement on DNDi’s behalf has/have been duly authorized to do so by all requisite corporate action;

 

10.1.4              this Agreement is a legal and valid obligation binding upon DNDi and enforceable in accordance with its terms. The execution, delivery and performance of this Agreement by DNDi will not: (i) be prevented or impaired by any agreement, instrument or understanding, oral or written to which DNDi is a party or by which it is bound; or (ii) violate any legal requirement to which it is subject;

 

10.1.5              it shall perform its obligations under this Agreement in accordance with applicable laws and regulations;

 

10.1.6              as of the Effective Date: (a) it is the sole and exclusive owner or licensee of the entire right title and interest in the DNDi Background Technology; (b) it has not previously entered into any agreement, whether written or oral, with respect to, or otherwise assigned, licensed, transferred, conveyed or otherwise created an encumbrance on its right title and interest in the DNDi Background Technology that would prevent DNDi from granting Entasis rights hereunder, (c) to DNDi’s knowledge, the conception, development and reduction to practice of Patent Rights and Know How relating to the DNDi Background Technology existing as of the Effective Date have not constituted or involved the misappropriation of trade secrets or other rights of property of any person; and (d) DNDi has the right, power and authority to grant all of the rights granted to Entasis hereunder;

 

10.1.7              DNDi has not received any notice or threat from any Third Party asserting or alleging, nor does DNDi have any knowledge of any basis for any assertion or allegation, that use of the DNDi Background Technology would infringe the intellectual property rights of a Third Party;

 

10.1.8              during the Term of this Agreement, it will not grant any right to any Third Party any right relating to any portion of the Collaboration Programme any right that would conflict with, limit or adversely affect the rights granted to Entasis hereunder;

 

10.2                        Entasis represents and warrants the following:

 

10.2.1              It is duly authorized and validly existing under the laws of England and Wales and has full power and authority to enter into this Agreement and to carry out its provisions;

 

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10.2.2              it is duly authorized to execute and deliver this Agreement and perform its obligations hereunder;

 

10.2.3              the person(s) executing this Agreement on Entasis’s behalf has/have been duly authorized to do so by all requisite corporate action;

 

10.2.4              this Agreement is a legal and valid obligation binding upon Entasis and enforceable in accordance with its terms. The execution, delivery and performance of this Agreement by Entasis will not: (a) be prevented or impaired by any agreement, instrument or understanding, oral or written to which Entasis or its Affiliates is a party or by which it or they are bound; or (b) violate any legal requirement to which it is or they are subject;

 

10.2.5              it shall perform its obligations under this Agreement in accordance with applicable laws and regulations;

 

10.2.6              as of the Effective Date, (a) it is the sole and exclusive owner or licensee of the entire right title and interest in the Entasis Background Technology, (b) it has not previously entered into any agreement, whether written or oral, with respect to, or otherwise assigned, licensed, transferred, conveyed or otherwise created an encumbrance on its right title and interest in the Entasis Background Technology that would prevent Entasis from granting DNDi rights hereunder, (c) to Entasis’s knowledge, the conception, development and reduction to practice of Patent Rights and Know How relating to the Entasis Background Technology existing as of the Effective Date have not constituted or involved the misappropriation of trade secrets or other rights of property of any person; and (d) Entasis has the right, power and authority to grant all of the rights granted to DNDi hereunder;

 

10.2.7              the Entasis Patent Rights listed in Schedule 3 represent all Patent Rights within Entasis’s Control relating to the Drug Product which as of the Effective Date are necessary for DNDi to perform its obligations hereunder and enjoy the benefit of the licences and rights granted to it hereunder;

 

10.2.8              Entasis has not received any notice from any Third Party asserting or alleging, nor does Entasis have any knowledge of any basis for any assertion or allegation, that use of the Entasis Background Technology would infringe the intellectual property rights of a Third Party;

 

10.2.9              the Patent Rights set out in Schedule 3 that have been granted have been properly and correctly maintained in accordance with all applicable laws and all applicable fees have been paid on or before the due date for payment; and

 

10.2.10       during the Term of this Agreement, it will not grant any right to any Third Party any right relating to any portion of the Collaboration Programme any right that would conflict with, limit or adversely affect the rights granted to DNDi hereunder.

 

10.3                        Each Party represents and warrants to the other Party that:

 

10.3.1              it will not utilise in connection with the Commercialization of the Drug Product any person or entities that are debarred by any applicable Drug Regulatory Authority;

 

10.3.2              neither that Party nor its Affiliates nor any director, officer, employee, agent or shareholder of any such person has taken any action that would violate any applicable Anti-Bribery Law nor in the last five (5) years has received any allegation of such violation or has been subjected to any investigation or inquiry by a competent authority relating to any Anti-

 

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Bribery Law and to the best of its knowledge, no such investigation or inquiry is pending or threatened;

 

10.3.3              that it has instituted and maintains policies designed to ensure compliance with applicable Anti-Bribery Laws;

 

10.3.4              the representations and warranties set out in this Clause 10.3 shall remain true and correct at all times;

 

10.3.5              it will provide written notice to the other Party as soon as practicable and in any event within seven (7) days should such warranty fail to be true or correct.

 

10.4                        A breach of the representations and warranties set out in Clause 10.3 shall be considered a material breach that gives rise to an immediate termination right for the other Party on written notice.

 

10.5                        Each Party shall inform the other Party as soon as reasonably practicable, but in any event within fourteen (14) days, after the occurrence of any of the following events:

 

10.5.1              cessation of conducting its business or trading;

 

10.5.2              a Change of Control of it or any of its Affiliates;

 

10.5.3              sale of all or any material portion of its assets or business to which this Agreement relates;

 

10.5.4              entry of any declaratory, injunctive or other remedy or court order that would materially impair its ability to conduct its business or perform its obligations under this Agreement;

 

10.5.5              any attachment or seizure (including prejudgment attachment or seizure) of material assets;

 

10.5.6              any entry into any restructuring agreement or workout agreement, or similar agreement, relating to any material indebtedness; and

 

10.5.7              loss of any permits, licences or governmental authorisations that are necessary for it to engage in its current business.

 

10.6                        EXCEPT AS EXPRESSLY SET OUT IN THIS AGREEMENT, EACH PARTY EXPRESSLY DISCLAIMS AND EXCLUDES ANY AND ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR PURPOSE OR ANY WARRANTY THAT THE PHASE III MC TRIAL OR THE PERFORMANCE OF THE COLLABORATION PROGRAMME WILL PRODUCE ANY PARTICULAR RESULT.

 

11.                               INDEMNIFICATION AND LIABILITY

 

Entasis Indemnities

 

11.1                        Entasis shall defend, indemnify and hold harmless DNDi, its Affiliates and their respective directors, officers, employees and agents (the “DNDi Indemnified Parties”) from and against all Losses arising from or occurring as a result of a Third Party’s claim, action, suit, judgment or settlement to the extent such Losses arise out of:

 

11.1.1              the negligent conduct of the QT (TQT) Study;

 

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11.1.2              the negligent conduct any Clinical Trial conducted by or on behalf of Entasis or its Affiliates in the context of the Collaboration Programme;

 

11.1.3              any research and development activities performed by Entasis or its Affiliates outside of the Field;

 

11.1.4              the Manufacture or Commercialization of the Drug Product by or on behalf of Entasis;

 

11.1.5              any defects in any Drug Product either supplied by Entasis for the purpose of a Clinical Trial or supplied to DNDi or its Sublicensee by Entasis or its Sublicensee pursuant to any agreed Manufacturing and Supply Plan; and

 

11.1.6              the negligence, intentional or wrongful acts or omissions or violations of law or regulation by Entasis, its Affiliates or its or their respective directors, officers or employees; and

 

11.1.7              the breach by Entasis, its Affiliates or its or their respective directors, officers or employees of or the material inaccuracy of, any representation or warranty made by it in Clause 10 of this Agreement.

 

The foregoing indemnity obligations shall not apply to the extent that any Losses arise from or is based on any activity for which DNDi is obligated to indemnify the Entasis Indemnified Parties under Section 11.2.

 

DNDi Indemnities

 

11.2                        DNDi shall defend, indemnify and hold harmless Entasis, its Affiliates and its and their respective directors, officers, employees and agents (the “Entasis Indemnified Parties”) from and against all Losses arising from or occurring as a result of a Third Party’s claim, action, suit, judgment or settlement to the extent such Losses arise out of:

 

11.2.1              any research and development activities performed by DNDi outside of the Field;

 

11.2.2              the negligent conduct by a DNDi Indemnified Party of the Phase III MC Trial;

 

11.2.3              the negligent conduct of any other Clinical Trial conducted by or on behalf of DNDi in the context of the Collaboration Programme;

 

11.2.4              the Manufacture or Commercialization of the Drug Product by or on behalf of DNDi;

 

11.2.5              the negligence, intentional or wrongful acts or omissions or violations of law or regulation by DNDi, its Affiliates or its or their respective directors, officers or employees; and

 

11.2.6              the breach by DNDi, its Affiliates or its or their respective directors, officers or employees of or the material inaccuracy of, any representation or warranty made by it in Clause 10 this Agreement.

 

The foregoing indemnity obligations shall not apply to the extent that any Losses arise from or is based on any activity for which Entasis is obligated to indemnify the DNDi Indemnified Parties under Section 11.1.

 

11.3                        A person entitled to indemnification under Clause 11.1 or 11.2 (an “Indemnified Party”) shall give prompt written notice (the “Indemnification Claim Notice”) through a Party to this Agreement or

 

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                                                its insurers to the person from whom indemnification is sought (including where relevant its insurers) (the “Indemnifying Party”) of the threat or commencement of any action, suit or proceeding relating to a Third Party claim for which indemnification may be sought (a “Third Party Claim”). Each Indemnification Claim Notice shall contain a description of the claim and the amount of any Losses claimed. The Indemnified Party shall promptly provide to the Indemnifying Party copies of all correspondence, communications and official documents (including court documents) received in respect of any such Losses.

 

11.4                        If required, the Indemnifying Party shall notify the insurers of the Third Party Claim and shall permit them to exercise their rights of subrogation.

 

11.5                        Within thirty (30) days after receipt of an Indemnification Claim Notice, the Indemnifying Party shall notify the Indemnified Party in writing whether it intends to control the defence of the Third Party Claim using its legal representatives in which case shall have sole control and responsibility for dealing with the Third Party Claim, including the right to settle the claim provided that:

 

11.5.1              the Indemnified Party shall be consulted and may retain its own legal representatives for proceedings at its own cost and expense; and

 

11.5.2              for Losses which are not solely monetary and for which the Indemnified Party has acknowledged in writing an obligation to indemnify or if the Indemnified Party will be subject to injunctive relief, prior written consent of the Indemnified party will be required to settlement (such consent not to be unreasonably withheld).

 

11.6                        If the Indemnifying Party does not assume control of such defence, the Indemnified Party may control such defence provided that the Indemnified Party shall not admit any liability with respect to, or settle, compromise of discharge any such Third Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld). The Indemnifying Party shall not be liable for any settlement or other disposition of Losses by an Indemnified Party with respect to any Third Party Claim that is entered into without such consent.

 

11.7                        If the Indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party that is a Party to this Agreement shall, and shall cause each Indemnified Party to reasonably cooperate in the defence or prosecution thereof and shall provide all records, information and testimony, witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith. Such cooperation shall include access during normal business hours by the Indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party Claim, and making the Indemnified Party, its Affiliates and its and their respective directors, officers, employees and agents available on a mutually convenient basis to provide additional information and explanation of any records or information provided, and the Indemnifying Party shall reimburse the Indemnified Party for all of its related reasonable out-of-pocket expenses.

 

11.8                        The Party controlling the defence shall keep the other Party advised of the status of such action, suit, proceeding or claim and the defence thereof and shall consider in good faith reasonable recommendations made by the other Party with respect thereto.

 

Insurance

 

11.9                        Each Party shall maintain at its own cost sufficient insurance to cover its liabilities set out in this Clause 11. Subject to applicable law, the foregoing requirement may be met by way of self-insurance. Upon request from the other Party, each Party shall communicate to the other any

 

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                                                insurance policies covering its responsibilities under this Agreement and copies of relevant insurance certificates.

 

Limitation of Liability

 

11.10                 EXCEPT WITH RESPECT TO THIRD PARTY CLAIMS FOR WHICH A PARTY IS REQUIRED TO INDEMNIFY THE OTHER PARTY PURSUANT TO CLAUSE 11.1 OR 11.2, IN NO EVENT SHALL EITHER PARTY OR ITS AFFILIATES BE LIABLE TO THE OTHER PARTY, WHETHER IN CONTRACT, TORT, NEGLIGENCE, BREACH OF STATUTORY DUTY OR OTHERWISE FOR ANY LOSSES SUFFERED OR INCURRED BY THE OTHER PARTY OR ITS AFFILIATES FOR ANY DIRECT OR INDIRECT LOSS OF PROFITS, BUSINESS, REVENUE OR GOODWILL OR ANY OTHER LOSSES OF A SPECIAL, NON-COMPENSATORY, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE NATURE INCLUDING, WITHOUT LIMITATION, INDIRECT OR CONSEQUENTIAL ECONOMIC LOSS OR LOSS OF BUSINESS VALUE.

 

11.11                 Nothing in this Agreement shall be taken to exclude or limit either Party’s liability to the extent that such liability cannot be excluded or limited in law including for fraud or fraudulent misrepresentations.

 

12.                               TERM AND TERMINATION

 

12.1                        This Agreement shall be effective from the Effective Date and, subject to earlier termination in accordance with its terms, it shall remain in force and effect for the duration of the Term. For the avoidance of doubt, at the expiry of the Term in each country of the DNDi Territory and the Entasis Territory, the licences granted by each Party to the other shall become perpetual.

 

12.2                        Each Party shall have the right to terminate this Agreement, without prejudice to any other rights it may have, on ninety (90) days’ written notice if the other Party is in material breach any of its representations, warranties or obligations hereunder and such breach is either not capable of being remedied, or if capable of being remedied, is not remedied if within thirty (30) days following receipt of the written notice notifying the breaching Party of such breach. If the breach relates to only one country or a group of countries in the Territory of the non-breaching Party, the terminating Party may apply such termination right in relation to the relevant country or countries or to this Agreement as a whole if such breach relates to three or more countries or is unrelated to any specific countries. If the other Party in good faith disputes such material breach or disputes the failure to rectify material breach and provides written notice of that dispute to the other Party within the foregoing timeframe, the matter will be referred for dispute resolution pursuant to Clause 17.2, and the Party wishing to terminate may not do so until it has been determined under Clause 17.2 that the other Party is in material breach of this Agreement and further fails to cure such breach within thirty (30) days after conclusion of that dispute resolution procedure.

 

12.3                        This Agreement may be terminated by either Party upon written notice to the other Party, with immediate effect, in the that any of the following events occurs in relation to the other Party:

 

12.3.1              a notice has been issued to convene any meeting for the purpose of passing a resolution or seeking a petition to wind up or liquidate that Party, or to seek bankruptcy or official administration, or such a resolution having been passed or such a petition having been issued (except in relation to a solvent reconstruction or reorganisation of that Party);

 

12.3.2              an involuntary petition in an insolvency proceeding is filed against a Party and is not dismissed or stayed within ninety (90) days of filing thereof; or

 

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12.3.3              a trustee in bankruptcy, receiver, administrative receiver, receiver and manager, court appointed receiver, interim receiver, custodian, sequestrator or similar officer is appointed in respect of that Party or over any part of that Party’s assets or any third party takes steps to appoint such an officer in respect of that Party; or

 

12.3.4              a Party takes any step, (including starting negotiations), with a view to readjustment, rescheduling or deferral of any part of that Party’s indebtedness including a moratorium with creditors, or proposes or makes and general assignment, composition or arrangement with or for the benefit of all or some of that Party’s creditors or makes or suspends or threatens to suspend making payments to all or some of that Party’s creditors or the Party submits to any type of voluntary arrangement with creditors.

 

12.4                        This Agreement may be terminated by the Parties upon mutual written agreement.

 

12.5                        Either Party may terminate this Agreement at any time after completion or earlier termination of the Phase III MC Trial with twelve (12) months’ prior notice.

 

12.6                        Entasis may terminate this Agreement if DNDi has not achieved the first dosing of the first patient in the Phase III MC Trial within eighteen (18) months after the Effective Date. The foregoing termination right shall not apply if there is a delay in the first dosing of the first patient in the Phase III MC Trial due to:

 

12.6.1              any act or omission of Entasis or Entasis’s Affiliates or Entasis’s CSPs;

 

12.6.2              the outcome of any development activities that are required to be conducted prior to the Phase III MC Trial;

 

12.6.3              delays caused by Drug Regulatory Authorities; or

 

12.6.4              any Force Majeure event beyond the reasonable control of DNDi.

 

Consequences of Termination

 

12.7                        In the event of termination by Entasis pursuant to Clause 12.2 (following a final determination by an arbitrator of material breach) or 12.6:

 

12.7.1              the licenses granted by Entasis to DNDi under Clauses 7.3, 7.5, 7.9 and 7.10, as applicable, shall automatically terminate in so far as they relate to the terminated countries and revert to Entasis and any sublicenses granted thereunder shall automatically terminate and revert to Entasis;

 

12.7.2              if the entire Agreement is terminated, DNDi shall return to Entasis, or at its request destroy, all Confidential Information and materials received from Entasis pursuant to this Agreement (including in the possession of a Sublicensee);

 

12.7.3              DNDi shall transfer, or have transferred, to Entasis copies of all relevant Marketing Authorisations in so far as they relate to the terminated countries and, if the entire Agreement is terminated, other documents held by DNDi in relation to the Drug Product within thirty (30) days of termination and shall do all things and execute all documents necessary to give effect to such transfers. If such transfer does not comply with legal requirements for the given country, DNDi shall use reasonable efforts to ensure that Entasis has the benefit of the Marketing Authorisations and consent to any Drug Regulatory Authority to the cross-referencing in the relevant countries to the data and information on

 

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                                                file with such Drug Regulatory Authority as may be necessary to facilitate the granting of a second Marketing Authorisation for the Drug Product in the relevant countries. In such circumstances DNDi will, in so far as legally permissible cancel the first Marketing Authorisation for the Drug Product in a country, on the granting of the second Marketing Authorisation. DNDi will further, at its sole cost and expense, complete whatever procedures are necessary or desirable and do all such other acts and things necessary or desirable to enable Entasis (either itself or in conjunction with a Third Party) to develop, Manufacture, and Commercialise the Drug Product in the relevant countries.

 

12.7.4              the licenses granted by DNDi to Entasis pursuant to Clauses 7.3, 7.7, 7.9, and 7.10 shall survive and become perpetual, worldwide, fully paid up, exclusive, and irrevocable; and

 

12.7.5              DNDi shall provide the necessary training to any Third Party appointed by Entasis to implement the development of the Drug Product, regulatory activities, Manufacture and Commercialisation or to ensure continuity in the supplies of the Drug Product.

 

12.8                        In the event of termination by DNDi pursuant to Clause 12.2 (following a final determination by an arbitrator of material breach):

 

12.8.1              the licenses granted by Entasis to DNDi under Clauses 7.3, 7.5, 7.9 and 7.10, as applicable in so far as they relate to the terminated countries, shall become perpetual and irrevocable;

 

12.8.2              the licenses granted by DNDi to Entasis under Clauses 7.3, 7.7 and 7.9 and 17.10, as applicable in so far as they relate to the terminated countries, shall continue;

 

12.8.3              to the extent Entasis has not obtained or is not in the process of obtaining Marketing Authorisations in the Field with the FDA, DNDi may file for the first Marketing Authorisation for the Drug Product in the Field with the FDA; provided, that DNDi gives Entasis sixty (60) days’ notice that DNDi plans to file such Marketing Authorisation application. To the extent DNDi obtains Marketing Authorisation from either the FDA, DNDi shall and hereby does grant Entasis an exclusive, royalty-bearing license and right of reference, with the right to grant sublicenses and further rights of reference through multiple tiers, under such Marketing Authorisation with the FDA to Commercialise the Drug Product in the Field in the Entasis Territory. If DNDi obtains a Marketing Authorisation with the FDA and Entasis elects to Commercialize the Drug Product in the United States, then Entasis will pay DNDi a three percent (3%) royalty on net sales (to be defined by the parties at the time of such termination) of Drug Product in the Field in the United States until such time as DNDi recoups one hundred percent (100%) of its out-of-pocket development and regulatory filing costs incurred by DNDi for the Marketing Authorization with the FDA as of the effective date of termination; and

 

12.8.4              Clause 7.6 shall cease to apply.

 

12.9                        In the event of termination by either Party pursuant to Clause 12.3:

 

12.9.1              the licenses granted by the insolvent Party to the solvent Party under this Agreement shall become perpetual and irrevocable;

 

12.9.2              the Parties will negotiate in good faith to address concerns relating to sublicensees in the insolvent Party’s territory; and

 

12.9.3              if DNDi terminates pursuant to Clause 12.3, to the extent Entasis has not obtained or is not in the process of obtaining Marketing Authorisations in the Field with the FDA, DNDi may

 

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                                                file for the first Marketing Authorisation for the Drug Product in the Field with the FDA; provided, that DNDi gives Entasis sixty (60) days’ notice that DNDi plans to file such Marketing Authorisation; provided, further, that DNDi shall and hereby does grant Entasis an exclusive, perpetual, sublicenseable (through multiple tiers), royalty free license to use data contained in and reference any Marketing Authorisations from the FDA obtained by DNDi; and

 

12.9.4              if Entasis is the insolvent Party Clause 7.6 shall cease to apply.

 

12.10                 In the event of termination by the Parties pursuant to Clause 12.4, all rights and licenses granted under this Agreement will terminate and each Party shall return to the other, or at the other’s request destroy, all Confidential Information and materials received from the other Party pursuant to this Agreement (including in the possession of a Sublicensee).

 

12.11                 In the event of termination by either Party pursuant to Clause 12.5, the licenses granted to the terminating Party shall terminate and revert to the non-termination Party, and the licenses granted by the terminating Party to the non-terminating Party under this Agreement shall become perpetual and irrevocable. If Entasis is the terminating Party, at DNDi’s request, Entasis will give DNDI an exclusive first right for a period of ninety (90) days to discuss an opportunity for DNDi to commercialize the Drug Product in one or more countries in the Entasis Territory on mutually acceptable terms. Further, to the extent Entasis has not obtained or is not in the process of obtaining Marketing Authorisations in the Field with the FDA by the end of such ninety (90) day period (or such longer period as the parties may agree), DNDi may file for the first Marketing Authorisation for the Drug Product in the Field with the FDA; provided, that DNDi gives Entasis sixty (60) days’ notice that DNDi plans to file such Marketing Authorisation application. To the extent DNDi obtains Marketing Authorisation from the FDA, unless it is agreed that DNDi will commercialize the Drug Product in the United States, DNDi shall and hereby does grant Entasis an exclusive (except with respect to DNDi as agreed by the Parties after termination), royalty-bearing license and right of reference, with the right to grant sublicenses and further rights of reference through multiple tiers, under such Marketing Authorisation with the FDA to Commercialise the Drug Product in the Field in the Entasis Territory. If DNDi obtains a Marketing Authorisation with the FDA and Entasis elects to Commercialize the Drug Product in the United States, then Entasis will pay DNDi a three percent (3%) royalty on net sales (to be defined by the parties at the time of such termination) of Drug Product in the Field in the United States until such time as DNDi recoups fifty percent (50%) of its out-of-pocket regulatory filing costs incurred by DNDi for the Marketing Authorization with the FDA as of the effective date of termination.

 

Survival

 

12.12                 Notwithstanding the expiration or termination of this Agreement, and except as provided expressly herein, the provisions of Clauses 1 (to the extent defined terms are contained in the following surviving Clauses), 6.3, 7.1, 7.2, 7.3, each of 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, and 7.14 solely to the extent required under clauses 12.7—12.11, 11.1 (with respect to any matter, fact, or circumstance arising or existing prior to the termination or expiration of this Agreement), 11.2 (with respect to any matter, fact, or circumstance arising or existing prior to the termination or expiration of this Agreement), 11.3, 11.4, 11.5, 11.6 (except as otherwise specified in Clause 12.8 and 12.9) , 11.7, 11.8, 11.9 (for a reasonable period of time following expiration or termination), 11.10, 11.11, 12.1 (as applicable), 12.7 (as applicable), 12.8 (as applicable), 12.9 (as applicable), 12.10 (as applicable), 12.11 (as applicable), this Clause 12.12, 13, 15.1, 16.1, 16.3, 16.7, 16.9, 16.11 (to the extent required under Clauses 12.7—12.11), 16.12, 16.13, and 17 shall remain in full force effect.

 

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13.                               CONFIDENTIALITY AND RESTRICTED USE

 

13.1                        Except as specifically set forth elsewhere in this Agreement, each Party shall use only for purposes of this Agreement, and, except as permitted in this Agreement, shall keep confidential and not communicate to any Third Party, all of the Confidential Information received or otherwise learned pursuant to this Agreement including without limitation Confidential Information exchanged prior to the Effective Date relating to the subject matter of this Agreement.

 

13.2                        Each Party shall communicate the Confidential Information of the other Party only to its employees and Third Parties (including, but not limited to actual and potential funding partners, consultants, CSPs and Sublicensees) who need to know such Confidential Information in order to perform this Agreement and who have agreed to abide by confidentiality and restricted use obligations at least as stringent as those set forth herein (the “Permitted Recipients”). Each Party shall be responsible to the other Party for any breach by its Permitted Recipients of such obligations.

 

13.3                        The confidentiality and restricted use obligations set forth herein shall not apply to Confidential Information with respect to which the receiving Party can reasonably prove:

 

13.3.1              was already lawfully in such Party’s possession at the time of its disclosure hereunder, and not subject to any obligation of confidentiality or restricted use;

 

13.3.2              is in the public domain at the time of disclosure or becomes in the public domain after disclosure to the receiving Party through no action, fault or omission of the receiving Party;

 

13.3.3              is lawfully received by the receiving Party from a Third Party, provided that such Third Party is not subject to any obligation of confidentiality or restricted use with respect thereto;

 

13.3.4              is independently developed by the receiving Party without using any of the Confidential Information received hereunder;

 

13.3.5              that the receiving Party is required to disclose pursuant to applicable law, regulation or decision or order of any competent court, tribunal, governmental authorities or Drug Regulatory Authority, provided that the receiving Party has promptly disclosed such obligation to the disclosing Party and cooperates with the disclosing Party in efforts to (i) limit the extent of such disclosure to what is required to comply with the applicable law, regulatory, or decision, and (ii) obtain confidential treatment of the Confidential Information required to be disclosed.

 

13.4                        The obligations of confidentiality and restricted use in this Clause 13 shall remain in force for the Term of this Agreement and for seven (7) years following disclosure of the relevant Confidential Information.

 

14.                               SCIENTIFIC PUBLICATIONS

 

14.1                        Notwithstanding Clause 13, and in accordance with DNDi’s mission statement on providing access to the public of its research, DNDi and Entasis will encourage publications in scientific journals, abstracts or conferences of the scientific data and/or results of the Collaboration Programme pursuant to this Clause 14.

 

14.2                        Each Party shall submit to the other Party prior to publication any draft publication relating to the Collaboration Programme for review at least twenty-eight (28) days prior to the intended date of publication, and permit it to submit comments which the publishing Party shall reasonably take into account, or object to such publication on the grounds that it discloses patentable inventions or discloses confidential technology of a Party. Should Patent Rights be sought by a Party upon any data in the draft publication, publication can be delayed by a maximum period of ninety (90) days

 

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                                                to allow for drafting of the Patent Rights application. Each Party will, on the reasonable request from the other Party, remove from any proposed manuscript or presentation any Confidential Information of the other Party provided that neither Party will be prevented from publishing Confidential Information of the other Party (and in particular clinical data) to the extent that publication of such Confidential Information is required for any Regulatory Dossier or in order to obtain a Marketing Authorisation.

 

14.3                        Both Parties will ensure that all written communications, including those that originate from one of their respective partners, indicate that the Drug Product was jointly developed through collaboration between DNDi and Entasis.

 

15.                               PUBLICITY

 

15.1                        Except as required by applicable law or the rules of any stock exchange, neither Party shall make any public disclosure concerning this Agreement or the subject matter hereof without the prior written consent of the other Party, which shall not be withheld unreasonably.

 

15.2                        Notwithstanding Clause 15.1, either Party may disclose the information set forth on Schedule 7 (the “Disclosable Information”) without the prior written consent of the other Party, provided that the disclosing Party gives the other Party a copy of or reference (e.g., link to internet site) to such disclosure at the time of disclosure. For the avoidance of doubt, any press release shall require the prior written consent of the non-disclosing Party, even if such press release is limited to the Disclosable Information.

 

16.                               MISCELLANEOUS

 

16.1                        Notifications and Communications. All notifications and other communications contemplated by this Agreement shall be sent in writing to the Parties at the following addresses:

 

For DNDi:

 

15 Chemin Louis-Dunant
 CH-1202 Geneva, Switzerland
 Attention: Jean-Pierre Paccaud

With copy to: the GARDP R&D Director

 

For Entasis:

 

35 Gatehouse Drive
 Waltham, MA 02451
 United States of America 
 Attn: Michael Gutch

 

or to such other address as the recipient may notify to the other Party in accordance with this Clause 16.1. Unless otherwise set forth herein, all such notifications and communications must be sent by registered letter with return receipt, and shall be deemed delivered on the date on the return receipt (if delivered by registered mail with return receipt requested).

 

16.2                        Entire Agreement; Modification. This Agreement, including the recitals and the Schedules, is the entire agreement, and supersedes all prior agreements, written or oral, between the Parties with respect to the subject matter hereof. No modification of this Agreement shall be effective unless set forth in a writing signed by both Parties.

 

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[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

16.3                        Invalidity. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any applicable present or future law, the illegality, invalidity or unenforceability of such provision shall not affect the validity of this Agreement as a whole, unless such provision is of such essential importance for this Agreement that it is to be reasonably assumed that the Parties would not have entered into this Agreement without such provision. Where possible, the Parties shall negotiate in good faith a provision to replace such illegal, invalid or unenforceable provision that is as close to the intent of the original provision as legally possible. All other provisions of this Agreement shall remain valid and in force.

 

16.4                        Assignment. Neither Party may transfer or assign to a Third Party any of its rights or obligations under this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld. It is understood, however, that either Party may freely transfer or assign or subcontract any of its rights and obligations under this Agreement to any of its Affiliates. Furthermore, it is understood, that subject to Clause 12.7 either Party may freely transfer or assign or subcontract any of its rights and obligations under this Agreement to any direct or indirect successor to all or substantially all of its business by means of merger, divestment, acquisition, contribution of assets or any other restructuring operation. DNDi may further transfer any of its rights and obligations pursuant to this Agreement to any legal entity that may be set up for the purpose of the business of GARDP (a “GARDP Entity”). DNDi and the GARDP Entity shall provide notice to Entasis of such transfer or assignment to which Entasis shall be deemed to agree by executing this Agreement. Entasis shall, on request and at the cost of DNDi and/or the GARDP Entity enter into any additional documentation that may be required to give effect to or implement any such assignment or transfer.

 

16.5                        Force Majeure. Neither Party shall be liable for any default or delay in performing its obligations hereunder if such default or delay is caused by an event of Force Majeure. The Party claiming Force Majeure must promptly inform the other Party of such event and, in accordance with the other Party, must take commercially reasonable endeavours to limit the consequences of such Force Majeure event. If a Party is unable to fulfil any relevant obligation under this Agreement due to any such cause, and this situation continues for a period of six (6) consecutive months, then the other Party may, with immediate effect, terminate this Agreement immediately. In such circumstances the terms set out in Clause 12.7 or 12.8 (as appropriate) shall apply to the Party being terminated.

 

16.6                        Regulatory Advantages. The Parties acknowledge that both Parties are actively contributing to the Collaboration Programme hereunder. Consequently, in the event that any advantage may be received from any Drug Regulatory Authority resulting from obtaining any Marketing Authorisation hereunder and arising from the classification of the Drug Product on the WHO essential medicines list the Parties shall discuss in good faith to find a way to share the repercussions of such advantage in an equitable manner.

 

16.7                        Audit. Each Party agrees to permit any auditor or an independent public accountant designated by any funding entity of the Collaboration Programme and reasonably acceptable to the Parties to have access, during the Term of this Agreement and for a period of six (6) years from expiry or earlier termination, during regular business hours and upon at least (10) days’ written notice, to its records and books to the extent necessary to determine compliance with the requirements of this Agreement and the Collaboration Programme. The Parties will further agree to appropriate audit rights for the purpose of the Manufacturing and Supply Plan.

 

16.8                        Amendment. No amendment, modification or supplement of any provision of this Agreement shall be valid or effective unless made in writing and signed by a duly authorized representative of each Party.

 

31 | Page

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

16.9                        Waiver. No provision of this Agreement shall be waived by any act, omission or knowledge of any Party or its agents or employees except in writing expressly waiving such provision and signed by a duly authorised officer or director of the waiving Party.

 

16.10                 Counterparts. This Agreement may be executed in any number of counterparts, each of which need not contain signature on behalf of more than one Party but all such counterparts will, taken together, constitute one and the same agreement. A signed agreement received by a Party hereto and received by way of a pdf submitted electronically will be deemed an original, and binding upon the Party signing it.

 

16.11                 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

 

16.12                 Independent Contractors. The relationship between Entasis and DNDi created by this Agreement is one of independent contractors and neither Party shall have the power or authority to bind or obligate the other. There is no employer-employee relationship, principal-agent relationship, or partnership relationship between Entasis and DNDi or any of their representatives.

 

16.13                 No Strict Construction; Headings. This Agreement has been prepared jointly and shall not be construed against either Party. Ambiguities, if any, in this Agreement shall not be construed against any Party, regardless of which Party may be deemed to have authored the ambiguous provision. The headings of each Clause in this Agreement have been inserted for reference only and are not intended to limit or expand the meaning or language in the particular Clause.

 

17.                               GOVERNING LAW AND JURISDICTION

 

17.1                        This Agreement and any dispute or claim (including non-contractual disputes or claims) arising out of or in connection with it or its subject matter of formation shall be governed by, subject to and construed and enforced in accordance with the laws of [*], without giving effect to any conflicts or choice of law rules.

 

17.2                        Subject to Clause 8.11, the Parties shall use reasonable endeavours to resolve amicably any dispute between the Parties arising out of or in connection with this Agreement by referral to the Executive Director of GARDP for DNDi and the Chief Executive Officer for Entasis who shall use reasonable efforts to meet in person within thirty (30) days from written notice of dispute received by one Party from the other. Should such matter remain unresolved at the end of that period, such dispute shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with such rules. The place of arbitration shall be Geneva, Switzerland and the language of the proceedings shall be English.

 

17.3                        Notwithstanding the dispute resolution procedures set forth in Clause 17.2, in the event of an actual or threatened breach of this Agreement, the aggrieved Party may seek provisional equitable relief (including restraining orders, specific performance or other injunctive relief), without first submitting to any dispute resolution procedures hereunder.

 

17.4                        Notwithstanding Clauses 17.1 and 17.2, any dispute concerning the ownership or inventorship of any Patent Rights arising hereunder in any given jurisdiction shall be determined by the courts of the jurisdiction in question.

 

{SIGNATURE PAGE FOLLOWS}

 

32 | Page

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives.

 

	
Entasis   Therapeutics Limited  
    	
Drugs   for Neglected Diseases initiative    
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:   
    	
/s/   Manos Perros
    	
 
    	
By:   
    	
/s/   Manica Balasegaram
    
	
Name:   
    	
Manos   Perros
    	
 
    	
Name:   
    	
Dr. Manica   Balasegaram
    
	
Title:   
    	
Chief   Executive Officer
    	
 
    	
Title:   
    	
DIRECTOR,   GARDP
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:   
    	
/s/   Jean-Pierre Paccaud
    
	
 
    	
 
    	
Name:   
    	
Dr. Jean-Pierre   Paccaud
    
	
 
    	
 
    	
Title:   
    	
BD   and CORPORATE STRATEGY DIRECTOR
    

 

33 | Page

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

Schedule 1: Development Plan

 

[*]

 

34 | Page

 

[*] = Twelve pages of certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

Schedule 2: Territories

 

Entasis Territory

 

The following countries constitute the Entasis Territory:

 

[*]

 

DNDi Territory

 

All countries in the world (other than each Additional Country as defined below) that are not specified as being in the Entasis Territory.

 

Additional Countries

 

Additional Countries shall be [*] (each an “Additional Country”).

 

Each Additional Country shall be considered as falling within DNDi’s Territory if, at the time of [*], such Additional Country has either (i) provided investment into development of the API or the Drug Product in the Field by way of funds or contributions in kind with a value of at least EUR [*] or (ii) entered into a binding written commitment (to provide such funds or contributions in kind with a value of at least EUR [*] during the time the Parties are conducting activities under the Development Plan. Each Additional Country shall be considered as falling within Entasis’s Territory should such foregoing funding condition not be met for such Additional Country.

 

If an Additional Country is included in DNDi’s Territory at the time of [*], then DNDi shall use commercially reasonable endeavours to obtain a Marketing Authorisation in the Field in such Additional Country. If DNDi has not obtained Marketing Authorization in the Field in such Additional Country within [*], then Entasis will be entitled to transfer that such Additional Country to the Entasis Territory.

 

If an Additional Country is included in Entasis’s Territory at the time of [*], then Entasis may seek a Marketing Authorisation in the Field in such Additional Country. If Entasis has taken no action to seek Marketing Authorization in the Field in such Additional Country within [*], then DNDi will be entitled to request that such Additional Country be transferred to the DNDi Territory.

 

35 | Page

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

Schedule 3: Entasis Patent Rights

 

[*]

 

36 | Page

 

[*] = Seven pages of certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

Schedule 4: Regulatory Plan

 

[*]

 

37 | Page

 

[*] = Three pages of certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

Schedule 5: TPP

 

[*]

 

38 | Page

 

[*] = One page of certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

Schedule 6: API

 

[*]

 

39 | Page

 

[*] = One page of certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

Schedule 7: Disclosable Information

 

The Agreement covers and relates to:

 

·                  treatment of gonorrhoea caused by Neisseria gonorrhoeae, Chlamydia trachomatis and/or Mycoplasma genitalium

 

·                  with drug products containing zoliflodacin

 

·                  commercialization by Entasis in certain high-income countries; and commercialization by DNDi in all other countries worldwide

 

·                  joint drug development including formulation and clinical and non-clinical studies and subsequent registration

 

·                  each party’s commitment to ensure access to the Product.

 

40 | Page

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.Exhibit
4.1

 

 

SUBSCRIPTION
AGREEMENT

 

SUBSCRIPTION
AGREEMENT (this “Agreement”) made as of the last date set forth on the signature page hereof between Ipsidy Inc.,
a Delaware corporation (the “Company”), and the undersigned (the “Subscriber”).

 

W
I T N E S S E T H:

 

WHEREAS,
the Company is conducting a private offering (the “Offering”) consisting of up to 33,333,333 shares (the “Shares”)
of common stock, $0.0001 par value per share (“Common Stock”), pursuant to Section 4(a)(2) of the Securities Act of
1933, as amended (the “Securities Act”) and Rule 506 promulgated thereunder;

 

WHEREAS,
the Company, in its sole discretion, may increase the Offering to consist of up to 66,666,667 Shares; and

 

WHEREAS,
the Subscriber desires to purchase that number of Shares set forth on the signature page hereof on the terms and conditions hereinafter
set forth.

 

NOW,
THEREFORE, in consideration of the premises and the mutual representations and covenants hereinafter set forth, the parties hereto
do hereby agree as follows:

 

I.       SUBSCRIPTION
FOR SHARES AND REPRESENTATIONS BY SUBSCRIBER

 

1.1       Subject
to the terms and conditions hereinafter set forth, the Subscriber hereby irrevocably subscribes for and agrees to purchase from
the Company such number of Shares, and the Company agrees to sell to the Subscriber as is set forth on the signature page hereof,
at a per share price equal to $0.15 per Share. The purchase price is payable by wire transfer of immediately available funds or
check payable to the Company to the Company pursuant to the wire instructions set forth on Schedule 1.1.

 

1.2       The
Subscriber recognizes that the purchase of the Shares involves a high degree of risk including, but not limited to, the
following: (a) the Company has limited operating history and requires substantial funds in addition to the proceeds of the
Offering; (b) an investment in the Company is highly speculative, and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Shares; (c) the Subscriber may not be able to liquidate its
investment; (d) transferability of the Shares is extremely limited and no sales of restricted stock may be made until the
Company is current in its filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); (e)
in the event of a disposition, the Subscriber could sustain the loss of its entire investment; (f) the Company has not paid
any dividends since its inception and does not anticipate paying any dividends; and (g) the Company may issue additional
securities in the future which have rights and preferences that are senior to those of the Common Stock. Without limiting the
generality of the representations set forth in Section 1.5 below, the Subscriber represents that the Subscriber has carefully
reviewed the risk factors described in the Company’s filings made under the Exchange Act and the risk factors, which have
been separately delivered to the Subscriber by the Company and are attached hereto as Exhibit A.

 

     

     

    

 

1.3       The
Subscriber represents that the Subscriber is an “accredited investor” as such term is defined in Rule 501 of Regulation
D (“Regulation D”) promulgated under the Securities Act, as indicated by the Subscriber’s responses to the questions
contained in Article VI hereof, and that the Subscriber is able to bear the economic risk of an investment in the Shares.

 

1.4       The
Subscriber hereby acknowledges and represents that (a) the Subscriber has knowledge and experience in business and financial matters,
prior investment experience, including investment in securities that are non-listed, unregistered and/or not traded on a national
securities exchange nor on the NASDAQ, or the Subscriber has employed the services of a “purchaser representative”
(as defined in Rule 501 of Regulation D), attorney and/or accountant to read all of the documents furnished or made available
by the Company both to the Subscriber and to all other prospective investors in the Shares to evaluate the merits and risks of
such an investment on the Subscriber’s behalf; (b) the Subscriber recognizes the highly speculative nature of this investment;
and (c) the Subscriber is able to bear the economic risk that the Subscriber hereby assumes.

 

1.5       The
Subscriber hereby acknowledges receipt and careful review of this Agreement, including all exhibits thereto, and any documents
which may have been made available upon request as reflected therein (collectively referred to as the “Offering Materials”)
and hereby represents that the Subscriber has been furnished by the Company during the course of the Offering with all information
regarding the Company, the terms and conditions of the Offering and any additional information that the Subscriber has requested
or desired to know, and has been afforded the opportunity to ask questions of and receive answers from duly authorized officers
or other representatives of the Company concerning the Company and the terms and conditions of the Offering.

 

1.6       (a)   In making the decision to invest in the Shares the Subscriber has relied solely upon the information provided by the Company in
the Offering Materials. To the extent necessary, the Subscriber has retained, at its own expense, and relied upon appropriate
professional advice regarding the investment, tax and legal merits and consequences of this Agreement and the purchase of the
Shares hereunder. The Subscriber disclaims reliance on any statements made or information provided by any person or entity in
the course of Subscriber’s consideration of an investment in the Shares other than the Offering Materials.

 

(b)       The
Subscriber represents that (i) the Subscriber was contacted regarding the sale of the Shares by the Company (or an
authorized agent or representative thereof) with whom the Subscriber had a prior substantial pre-existing relationship and
(ii) no Shares were offered or sold to it by means of any form of general solicitation or general advertising, and in
connection therewith, the Subscriber did not (A) receive or review any advertisement, article, notice or other communication
published in a newspaper or magazine or similar media or broadcast over television or radio, whether closed circuit, or
generally available; or (B) attend any seminar meeting or industry investor conference whose attendees were invited by any
general solicitation or general advertising.

 

     2

    

    

 

1.7       The
Subscriber hereby represents that the Subscriber, either by reason of the Subscriber’s business or financial experience
or the business or financial experience of the Subscriber’s professional advisors (who are unaffiliated with and not compensated
by the Company or any affiliate or selling agent of the Company, directly or indirectly), has the capacity to protect the Subscriber’s
own interests in connection with the transaction contemplated hereby.

 

1.8       The
Subscriber hereby acknowledges that the Offering has not been reviewed by the United States Securities and Exchange Commission
(the “SEC”) nor any state regulatory authority since the Offering is intended to be exempt from the registration requirements
of Section 5 of the Securities Act, pursuant to Regulation D. The Subscriber understands that the Shares have not been registered
under the Securities Act or under any state securities or “blue sky” laws and agrees not to sell, pledge, assign or
otherwise transfer or dispose of the Shares unless they are registered under the Securities Act and under any applicable state
securities or “blue sky” laws or unless an exemption from such registration is available.

 

1.9       The
Subscriber understands that the Shares have not been registered under the Securities Act by reason of a claimed exemption under
the provisions of the Securities Act that depends, in part, upon the Subscriber’s investment intention. In this connection,
the Subscriber hereby represents that the Subscriber is purchasing the Shares for the Subscriber’s own account for investment
and not with a view toward the resale or distribution to others. The Subscriber, if an entity, further represents that it was
not formed for the purpose of purchasing the Shares.

 

1.10       The
Subscriber understands that the Common Stock is quoted on the OTC Markets and that there is a limited market for the Common
Stock. The Subscriber understands that even if a public market develops for the Common Stock, Rule 144 (“Rule
144”) promulgated under the Securities Act requires for non-affiliates, among other conditions, a holding period prior
to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration
requirements under the Securities Act. The Subscriber understands and hereby acknowledges that the Company is under no
obligation to register any of the Shares under the Securities Act or any state securities or “blue sky” laws. The
Subscriber understands that the Company must be current under the Exchange Act for the Subscriber to take advantage of Rule
144. The Subscriber acknowledges that the Company is not current with its required filing requirements under the Exchange
Act.

 

1.11       The
Subscriber consents to the placement of a legend on any certificate or other document evidencing the Shares that such
securities have not been registered under the Securities Act or any state securities or “blue sky” laws and
setting forth or referring to the restrictions on transferability and sale thereof contained in this Agreement. The
Subscriber is aware that the Company will make a notation in its appropriate records with respect to the restrictions on the
transferability of such Shares. The legend to be placed on each certificate shall be in form substantially similar to the
following:

 

     3

    

    

 

“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”)
OR ANY STATE SECURITIES OR “BLUE SKY LAWS,” AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED.”

 

1.12       The
Subscriber understands that the Company will review this Agreement and is hereby given authority by the Subscriber to call Subscriber’s
bank or place of employment or otherwise review the financial standing of the Subscriber; and it is further agreed that the Company,
at its sole discretion, reserves the unrestricted right, without further documentation or agreement on the part of the Subscriber,
to reject or limit any subscription, to accept subscriptions for fractional Shares and to close the Offering to the Subscriber
at any time and that the Company will issue stop transfer instructions to its transfer agent with respect to such Shares.

 

1.13       The
Subscriber hereby represents that the address of the Subscriber furnished by Subscriber on the signature page hereof is the Subscriber’s
principal residence if Subscriber is an individual or its principal business address if it is a corporation or other entity.

 

1.14       The
Subscriber represents that the Subscriber has full power and authority (corporate, statutory and otherwise) to execute and deliver
this Agreement and to purchase the Shares. This Agreement constitutes the legal, valid and binding obligation of the Subscriber,
enforceable against the Subscriber in accordance with its terms.

 

1.15       If
the Subscriber is a corporation, partnership, limited liability company, trust, employee benefit plan, individual retirement account,
Keogh Plan, or other tax-exempt entity, it is authorized and qualified to invest in the Company and the person signing this Agreement
on behalf of such entity has been duly authorized by such entity to do so.

 

1.16       The
Subscriber acknowledges that he, she or it is not a member firm of Financial Industry Regulatory
Authority, Inc. (“FINRA”) or a registered representative of a FINRA member firm.

 

1.17       The
Subscriber acknowledges that at such time, if ever, as the Shares are registered, sales of the Shares will be subject to state
securities laws. The Subscriber acknowledges that the Company has no obligation to register the Shares for re-sale under the Securities
Act.

 

1.18       (a)   
The Subscriber agrees not to issue any public statement with respect to the Subscriber’s investment or proposed investment
in the Company or the terms of any agreement or covenant between them and the Company without the Company’s prior written
consent, except such disclosures as may be required under applicable law or under any applicable order, rule or regulation.

 

     4

    

    

 

(b)       The
Company agrees not to disclose the names, addresses or any other information about the Subscribers, except as required by law;
provided, that the Company may use the name of the Subscriber for any offering or in any registration statement filed.

 

1.19       The
Subscriber acknowledges that the Company has engaged Network 1 Financial Securities, Inc., a broker dealer registered with FINRA
(“Network”), as a finder in connection with the sale of the Common Stock and Network shall be entitled to a cash fee
equal to eight (8%) percent of the gross proceeds and a common stock purchase warrant (the “Network Warrant”) equal
to five (5%) percent of the gross proceeds (the “Warrant Fee”). The number of shares of Common Stock to be issuable
under the Network Warrant shall be determined by dividing the Warrant Fee by the per share Purchase Price. The exercise price
of the Network Warrant shall be equal to 110% of the per share Purchase Price.

 

1.20       The
Subscriber agrees to hold the Company and its directors, officers, employees, affiliates, controlling persons and agents and their
respective heirs, representatives, successors and assigns harmless and to indemnify them against all liabilities, costs and expenses
incurred by them as a result of (a) any sale or distribution of the Shares by the Subscriber in violation of the Securities Act
or any applicable state securities or “blue sky” laws; or (b) any false representation or warranty or any breach or
failure by the Subscriber to comply with any covenant made by the Subscriber in this Agreement (including the Confidential Investor
Questionnaire contained in Article VI herein) or any other document furnished by the Subscriber to any of the foregoing in connection
with this transaction.

 

II.       REPRESENTATIONS
BY AND COVENANTS OF THE COMPANY

 

The Company hereby represents and warrants to the Subscriber that:

 

2.1       Organization
and Qualification. The Company and each of its Subsidiaries, if any, is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and
other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated
and conducted. “Subsidiary” shall mean any corporation or other entity of which at least a majority of the
securities or other ownership interests having ordinary voting power (absolutely or contingently) for the election of directors
or other persons performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other
Subsidiaries.

 

2.2       Capitalization.
The capitalization of the Company is as set forth on Schedule 2.2 attached hereto. The authorized, issued and outstanding
capital stock of the Company is as set forth in the reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the Exchange Act, including material filed pursuant to Section 13(a)
or 15(d) of the Exchange Act (all of the foregoing including filings incorporated by reference therein being referred to herein
as the “Commission Documents”).

 

2.3      Authorization;
Enforcement. The Company has all requisite corporate power and authority to enter into and perform this Agreement.

 

     5

    

    

 

2.4       Acknowledgment
of Dilution. The Company understands and acknowledges the dilutive effect to the Common Stock upon the issuance of the Shares.

 

2.5       Bad
Actor Representation. None of the Company, any of its predecessors, any affiliated issuer, any director, executive officer,
other officer of the Company participating in the Offering, any beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under
the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”
and, together, “Issuer Covered Persons”) is subject to any of the “Bad Actor” disqualifications described
in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification
Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person
is subject to a Disqualification Event.

 

2.6       Shell
Company Status. During the previous twelve (12) months, the Company has not been a shell as such term is defined in Rule 144(i)
under the Securities Act.

 

2.7       Commission
Documents. The Company has filed all required Commission Documents.

 

2.8       No
Material Adverse Effect. Since March 31, 2018, neither the Company, nor any Subsidiary has experienced or suffered any Material
Adverse Effect which has not been disclosed in the Commission Documents. For the purposes of this Agreement, “Material
Adverse Effect” means any of (i) a material and adverse effect on the legality, validity or enforceability of this Agreement
or the other Offering Materials, (ii) a material adverse effect on the business, operations, properties, or financial condition
of the Company, its Subsidiaries, individually, or in the aggregate and/or any condition, circumstance, or situation that would
prohibit or otherwise materially interfere with the ability of the Company to perform any of its obligations under this Agreement
or the other Offering Materials in any material respect or (iii) an adverse impairment to the Company’s ability to perform
on a timely basis its obligations under this Agreement or the other Transaction Document.

 

2.9       No
Undisclosed Liabilities. Other than as disclosed in the Commission Documents, to the knowledge of the Company, neither the
Company, nor any Subsidiary has any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) other than those incurred in the ordinary course of the Company’s
and any Subsidiary’s respective businesses since March 31, 2018 and those which, individually or in the aggregate, do not
have a Material Adverse Effect on the Company and any Subsidiary.

 

2.10       No
Undisclosed Events or Circumstances. To the Company’s knowledge, no event or circumstance has occurred or exists with
respect to the Company or any Subsidiary or their respective businesses, properties, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed.

 

     6

    

    

 

2.11       Indebtedness.
The Commission Documents set forth all outstanding secured and unsecured Indebtedness of the Company, or for which the Company,
or any Subsidiary have commitments as of the date of each applicable Commission Document or any subsequent period that would require
disclosure. For the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or
amounts owed (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements
and other contingent obligations in respect of Indebtedness of others, whether or not the same should be reflected in the Company’s
consolidated balance sheet (or the Securities thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments due
under leases required to be capitalized in accordance with GAAP. Neither the Company, nor any Subsidiary is in default with respect
to any Indebtedness which, individually or in the aggregate, would have a Material Adverse Effect.

 

2.12       Actions
Pending. Except as disclosed in the Commission Documents, there is no action, suit, claim, investigation, arbitration, alternate
dispute resolution proceeding or any other proceeding pending or, to the knowledge of the Company, threatened against or involving
the Company, any Subsidiary (i) which questions the validity of this Agreement or any of the other Offering Materials or the transactions
contemplated hereby or thereby or any action taken or to be taken pursuant hereto or thereto or (ii) involving any of their respective
properties or assets. To the knowledge of the Company, there are no outstanding orders, judgments, injunctions, awards or decrees
of any court, arbitrator or governmental or regulatory body against the Company or any Subsidiary or any of their respective executive
officers or directors in their capacities as such.

 

2.13      Compliance
with Law. The Company and its Subsidiaries have all material franchises, permits, licenses, consents and other governmental
or regulatory authorizations and approvals necessary for the conduct of their respective business as now being conducted by it
unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations
and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

2.14       Compliance.
The Company: (i) is not in default under or in violation of (and no event has occurred that has not been waived that, with notice
or lapse of time or both, would result in a default by the Company), nor has the Company received notice of a claim that it is
in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or
has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation
all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product
quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result
in a Material Adverse Effect.

 

     7

    

    

 

2.15       No
Violation. The business of the Company and any Subsidiary is not being conducted in violation of any federal, state, local
or foreign governmental laws, or rules, regulations and ordinances of any governmental entity, except for possible violations
which singularly or in the aggregate could not reasonably be expected to have a Material Adverse Effect. The Company is not required
under federal, state, local or foreign law, rule or regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under
the Offering Materials, or issue and sell the Common Stock in accordance with the terms hereof or thereof (other than (x) any
consent, authorization or order that has been obtained as of the date hereof, (y) any filing or registration that has been made
as of the date hereof or (z) any filings which may be required to be made by the Company with the SEC or state securities administrators
subsequent to each closing).

 

2.16       No
Conflicts. The execution, delivery and performance of this Agreement and the Offering Materials by the Company and the consummation
by the Company of the transactions contemplated herein and therein do not and will not (i) violate any provision of the Articles
or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company or any Subsidiary
is a party or by which it or its properties or assets are bound, (iii) create or impose a lien, mortgage, security interest, pledge,
charge or encumbrance (collectively, “Lien”) of any nature on any property of the Company or any Subsidiary under
any agreement or any commitment to which the Company or any Subsidiary is a party or by which the Company, or any Subsidiary is
bound or by which any of its respective properties or assets are bound, or (iv) result in a violation of any federal, state, local
or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations)
applicable to the Company or any Subsidiary or by which any property or asset of the Company, or any Subsidiary are bound or affected,
provided, however, that, excluded from the foregoing in all cases are such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect.

 

2.17       Taxes.
Each of the Company and any Subsidiary, to the extent its applicable, has accurately prepared and filed all federal, state and
other tax returns required by law to be filed by it, has paid or made provisions for the payment of all taxes shown to be due
other than payment being contested and all additional assessments, and adequate provisions have been and are reflected in the
consolidated financial statements of the Company for all current taxes and other charges to which the Company, or any Subsidiary,
if any, is subject and which are not currently due and payable. None of the federal income tax returns of the Company have been
audited by the Internal Revenue Service. The Company has no knowledge of any additional assessments, adjustments or contingent
tax liability (whether federal, state or foreign) of any nature whatsoever, whether pending or threatened against the Company
or any Subsidiary for any period, nor of any basis for any such assessment, adjustment or contingency.

 

2.18       Licenses.
Except as otherwise set forth in the Commission Documents, the Company has sufficient licenses, permits and other governmental
authorizations currently required for the conduct of its business or ownership of properties and is in all material respects in
compliance therewith.

 

     8

    

    

 

2.19       Litigation.
Except as set forth in the Commission Documents, there is no material action, suit, proceeding, or investigation (including without
limitation any suit, proceeding, or investigation involving the prior employment of any of the Company’s employees, their
use in connection with the Company’s business of any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers) pending or, to the best of the Company’s knowledge,
currently threatened before any court, administrative agency, or other governmental body. The Company is not a party or subject
to, and none of its assets is bound by, the provisions of any order, writ, injunction, judgment, or decree of any court or government
agency or instrumentality. There is no action, suit, or proceeding by the Company currently pending or that the Company intends
to initiate.

 

2.20       Disclosure.
The Company has fully provided each Subscriber with all the information that such Subscriber has requested for deciding whether
to purchase the Common Stock and all material information that the Company believes is reasonably necessary to enable a reasonable
Subscriber to make such decision. Neither this Agreement, nor any other agreements, statements or certificates made or delivered
to Subscriber in connection herewith or therewith contains any untrue statement of a material fact or, when taken together, omits
to state a material fact necessary to make the statements herein or therein, in light of the circumstances under which they were
made, not misleading.

 

2.21       Books
and Records Internal Accounting Controls. Except as may have otherwise been disclosed in the Commission Documents, the books
and records of the Company, and any Subsidiary accurately reflect in all material respects the information relating to the business
of the Company and any Subsidiary, the location and collection of their assets, and the nature of all transactions giving rise
to the obligations or accounts receivable of the Company, or any Subsidiary. Except as may have otherwise been disclosed in the
Commission Documents, the Company and any Subsidiary maintain a system of internal accounting controls sufficient, in the judgment
of the Company, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general
or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity
with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate actions are taken with respect to any differences.

 

2.22       Material
Agreements. Any and all written or oral contracts, instruments, agreements, commitments, obligations, plans or arrangements,
the Company and any Subsidiary is a party to, that a copy of which would be required to be filed with the SEC as an exhibit to
a registration statement (collectively, the “Material Agreements”) if the Company or any Subsidiary were registering
securities under the Securities Act has previously been publicly filed with the SEC in the Commission Documents. Each of the Company
and any Subsidiary has in all material respects performed all the obligations required to be performed by them to date under the
foregoing agreements, have received no notice of default and are not in default under any Material Agreement now in effect the
result of which would cause a Material Adverse Effect.

 

2.23       Transactions
with Affiliates. Except as set forth in the Commission Documents, there are no loans, leases, or royalty agreements between
(a) the Company, or any Subsidiary on the one hand, and (b) on the other hand, any officer, employee, consultant or director of
the Company or any Subsidiary, or any person owning more than 10% capital stock of the Company, or any Subsidiary, or any member
of the immediate family of such officer, employee, consultant, director or stockholder or any corporation or other entity controlled
by such officer, employee, consultant, director or stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder.

 

     9

    

    

 

2.24       Private
Placement and Solicitation. Assuming the accuracy of the Subscribers’ representations and warranties set forth in Section
1, no registration under the Securities Act is required for the offer and sale of the Common Stock by the Company to the Subscribers
as contemplated hereby. Based in part on the accuracy of the representations of the Subscribers in Section 1, and subject to timely
applicable Form D filings pursuant to Regulation D of the Securities Act with the SEC and pursuant to applicable state securities
laws, the offer, sale and issuance of the Common Stock to be issued pursuant to and in conformity with the terms of this Agreement,
will be issued in compliance with all applicable federal and state securities laws. Neither the Company nor any of its affiliates,
nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of the Common Stock.

 

2.25       Governmental
Approvals. Except for the filing of any notice prior or subsequent to each closing that may be required under applicable state
and/or federal securities laws (which if required, shall be filed on a timely basis), including the filing of a Form D, no authorization,
consent, approval, license, exemption of, filing or registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the execution or delivery
of the Common Stock, or for the performance by the Company of its obligations under this Agreement and the Offering Materials.

 

2.26       Employees.
The Company does not have a collective bargaining arrangements covering any of its employees. A description of the employment
contracts with executive officers are set forth in the Commission Documents. Except as disclosed in the Commission Documents,
since September 30, 2017, no officer, consultant or key employee of the Company or any Subsidiary whose termination, either individually
or in the aggregate, would have a Material Adverse Effect, has terminated or, to the knowledge of the Company, has any present
intention of terminating his or her employment or engagement with the Company or any Subsidiary.

 

2.27       Investment
Company. The Company is not an “investment company” within the meaning of such term under the Investment Company
Act of 1940, as amended, and the rules and regulations of the SEC thereunder.

 

2.28       Intellectual
Property. Each of the Company and any Subsidiary, owns or has the lawful right to use all patents, trademarks, domain
names (whether or not registered) and any patentable improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names, copyrights, licenses and authorizations, if any,
and all rights with respect to the foregoing, if any, which are necessary for the conduct of their respective business as now
conducted without any conflict with the rights of others, except where the failure to so own or possess would not have a
Material Adverse Effect

 

     10

    

    

 

2.29       Title
to Assets. Except as set forth in the Commission Documents, the Company has good and marketable title in fee simple to all
real property owned by it and good and marketable title in all personal property owned by it that is material to the business
of the Company, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of such property by the Company and (ii) Liens for the
payment of federal, state or other taxes, for which appropriate reserves have been made therefore in accordance with GAAP and,
the payment of which is neither delinquent nor subject to penalties (liens referenced in subsection (i) and (ii) above are collectively
referred to as “Permitted Liens”). Any real property and facilities held under lease by the Company are held by it under
valid, subsisting and enforceable leases with which the Company is in compliance.

 

2.30       Blue
Sky Laws. The Company shall take such action as the Company shall reasonably determine is necessary to qualify the Common
Stock for sale to the Subscribers at the applicable closing pursuant to this Agreement under applicable securities or “blue
sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence
of any such action so taken to each Subscriber.

 

2.31       Use
of Proceeds. The Company shall use the proceeds from the sale of the Common Stock in this Offering for working capital purposes,
operations and further development of its identity transaction platform and shall not, directly or indirectly, use such proceeds
for any distribution or dividend to any shareholder of the Company. The use of proceeds may change as management deems fit. As
is the case with any business, particularly one without a proven business model, it should be expected that certain expenses unforeseeable
to management at this juncture will arise in the future. There can be no assurance that management’s use of proceeds generated
through this Offering will prove optimal or translate into revenue or profitability for the Company.

 

2.32       Securities
Compliance. The Company shall notify the SEC in accordance with its rules and regulations, of the transactions contemplated
by this Agreement and the Offering Materials, including filing a Form D with respect to the Common Stock, as required under Regulation
D and applicable “blue sky” laws if such Common Stock is offered pursuant to Rule 506 of Regulation D and shall take
all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal
and valid issuance of the Common Stock to the Subscribers.

 

2.33       Liquidation.
Subject to the terms of the Offering Materials, the Company covenants that it will take such further action as the Subscribers
may reasonably request, all to the extent required from time to time to enable the Subscribers to sell the Common Stock without
registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities
Act, as amended.

 

2.34       Keeping
of Records and Books of Account. The Company shall keep and cause each Subsidiary to keep adequate records and books of
account, in which complete entries will be reported in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company and its Subsidiaries, and in which, for each fiscal year, all proper reserves for depreciation,
depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be
made.

 

     11

    

    

 

2.35       Reporting
Status. So long as a Subscriber beneficially owns any of the Common Stock, the Company shall timely file all reports required
to be filed with the SEC pursuant to the Exchange Act, and the Company shall not terminate its status as an issuer required to
file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination.

 

2.36       Disclosure
of Transaction. The Company shall file with the SEC, a Current Report on Form 8-K describing the material terms of the transactions
contemplated hereby and all material non-public information disclosed to the Subscribers prior to the filing as soon as practicable
after each closing but in no event later than 5:30 P.M. (EDT) on the fourth Business Day following each closing. “Business
Day” means any day during which the NASDAQ (or other principal exchange) shall be open for trading.

 

2.37       Sarbanes-Oxley
Act. The Company shall be in compliance with the applicable provisions of the Sarbanes-Oxley Act of 2002, and the rules and regulations
promulgated thereunder, as required under such Act.

 

2.38       No
Integrated Offerings. The Company shall not make any offers or sales of any security (other than the securities being offered
or sold hereunder) under circumstances that would require registration of the securities being offered or sold hereunder under
the Securities Act.

 

III.       TERMS
OF SUBSCRIPTION

 

3.1       All
funds shall be submitted directly to the Company’s account identified in Schedule 1.1 hereof.

 

3.2       Certificates
representing the Common Stock purchased by the Subscriber pursuant to this Agreement will be prepared for delivery to the Subscriber
within 15 business days following the closing, the timing of which is at the Company’s sole discretion, at which such purchase
takes place. The Subscriber hereby authorizes and directs the Company to deliver the certificates representing the Common Stock
purchased by the Subscriber pursuant to this Agreement directly to the Subscriber’s residential or business address indicated
on the signature page hereto.

 

     12

    

    

 

IV.       CONDITIONS
TO OBLIGATIONS OF THE SUBSCRIBERS

 

4.1       The
Subscriber’s obligation to purchase the Shares at the closing at which such purchase is to be consummated is subject to
the fulfillment on or prior to such closing of the following conditions, which conditions may be waived at the option of each
Subscriber to the extent permitted by law:

 

    (a)       Covenants.
All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the date of
such closing shall have been performed or complied with in all material respects.

 

    (b)       No
Legal Order Pending. There shall not then be in effect any legal or other order enjoining or restraining the transactions
contemplated by this Agreement.

 

    (c)       No
Law Prohibiting or Restricting Such Sale. There shall not be in effect any law, rule or regulation prohibiting or restricting
such sale or requiring any consent or approval of any person, which shall not have been obtained, to issue the Shares (except
as otherwise provided in this Agreement).

 

V.       MISCELLANEOUS

 

5.1       Any
notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail,
return receipt requested, or delivered by hand against written receipt therefor, addressed as follows:

 

	 	if
to the Company, to it at:
	 	 
	 	Ipsidy
    Inc.
	 	780
    Long Beach Blvd.
	 	Long
    Beach, NY 11561
	 	Attention:
                                         Stuart P. Stoller, CFO

        

        Email:
        stuartstoller@ipsidy.com

        

	 	Facsimile:
    516-274-0573
	 	 
	 	with
    a copy to:
	 	 
	 	Stephen
    M. Fleming, Esq.
	 	Fleming
    PLLC
	 	30
    Wall Street, 8th Floor
	 	New
    York, NY 10005
	 	Facsimile:
    516-977-1209
	 	 
	 	if
    to the Subscriber, to the Subscriber’s address indicated on the signature page of this Agreement.

 

Notices
shall be deemed to have been given or delivered on the date of mailing, except notices of change of address, which shall be deemed
to have been given or delivered when received.

 

     13

    

    

 

5.2       Except
as otherwise provided herein, this Agreement shall not be changed, modified or amended except by a writing signed by the parties
to be charged, and this Agreement may not be discharged except by performance in accordance with its terms or by a writing signed
by the party to be charged.

 

5.3       Subject
to the provisions of Section 5.10, this Agreement shall be binding upon and inure to the benefit of the parties hereto and to
their respective heirs, legal representatives, successors and assigns. This Agreement sets forth the entire agreement and understanding
between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.

 

5.4       Upon
the execution and delivery of this Agreement by the Subscriber, this Agreement shall become a binding obligation of the Subscriber
with respect to the purchase of Shares as herein provided, subject, however, to the right hereby reserved by the Company to enter
into the same agreements with other subscribers and to add and/or delete other persons as subscribers.

 

5.5       NOTWITHSTANDING
THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO SUCH
STATE’S PRINCIPLES OF CONFLICTS OF LAW. IN THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR RESOLVING
DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE COURTS STATE OF NEW YORK IN AND FOR THE COUNTY OF NASSAU OR THE EASTERN
DISTRICT OF NEW YORK, AND ALL RELATED APPELLATE COURTS, THE PARTIES HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS
AND AGREE TO SAID VENUE.

 

5.6       In
order to discourage frivolous claims the parties agree that unless a claimant in any proceeding arising out of this Agreement
succeeds in establishing his claim and recovering a judgment against another party (regardless of whether such claimant succeeds
against one of the other parties to the action), then the other party shall be entitled to recover from such claimant all of its/their
reasonable legal costs and expenses relating to such proceeding and/or incurred in preparation therefor.

 

5.7       The
holding of any provision of this Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Agreement, which shall remain in full force and effect. If any provision of this Agreement shall be
declared by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part, such
provision shall be interpreted so as to remain enforceable to the maximum extent permissible consistent with applicable law and
the remaining conditions and provisions or portions thereof shall nevertheless remain in full force and effect and enforceable
to the extent they are valid, legal and enforceable, and no provisions shall be deemed dependent upon any other covenant or provision
unless so expressed herein.

 

     14

    

    

5.8       It
is agreed that a waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed, as
a waiver of any subsequent breach by that same party.

 

5.9       The
parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action
as may be necessary or appropriate to carry out the purposes and intent of this Agreement.

 

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

 

5.11       Nothing
in this Agreement shall create or be deemed to create any rights in any person or entity not a party to this Agreement.

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

 

     15

    

    

 

		VI.	CONFIDENTIAL
INVESTOR QUESTIONNAIRE

 

6.1       The
Subscriber represents and warrants that he, she or it comes within one category marked below, and that for any category marked,
he, she or it has truthfully set forth, where applicable, the factual basis or reason the Subscriber comes within that category.
ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish any additional
information which the Company deems necessary in order to verify the answers set forth below.

 

	Category A__	The undersigned is an individual (not a partnership, corporation, etc.) whose
    individual net worth, or joint net worth with his or her spouse, presently exceeds $1,000,000.
	 	 
	 	Explanation. In calculating net worth you may include equity in personal property and real estate (excluding your principal residence), cash, short-term investments, stock and securities. Equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.
	 	 
	Category B__	The undersigned is an individual (not a partnership, corporation, etc.) who had an income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years (in each case including foreign income, tax exempt income and full amount of capital gains and losses but excluding any income of other family members and any unrealized capital appreciation) and has a reasonable expectation of reaching the same income level in the current year.
	 	 
	Category C__	The undersigned is a director or executive officer of the Company which is issuing and selling the Shares.
	 	 
	Category D__	The undersigned is a bank; a savings and loan association; insurance company; registered investment company; registered business development company; licensed small business investment company (“SBIC”); or employee benefit plan within the meaning of Title 1 of ERISA and (a) the investment decision is made by a plan fiduciary which is either a bank, savings and loan association, insurance company or registered investment advisor, or (b) the plan has total assets in excess of $5,000,000 or (c) is a self directed plan with investment decisions made solely by persons that are accredited investors. (describe entity)
	 	 
	 	 
	 	 
	Category E__	The undersigned is a private business development company as defined in section 202(a) (22) of the Investment Advisors Act of 1940. (describe entity)
	 	 
	 	 

 

     16

    

    

 

	Category F__	The undersigned is either a corporation, partnership, Massachusetts business trust, or non-profit organization within the meaning of Section 501(c) (3) of the Internal Revenue Code, in each case not formed for the specific purpose of acquiring the Shares and with total assets in excess of $5,000,000. (describe entity)
	 	 
	 	 
	 	 
	Category G__	The undersigned is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Shares, where the purchase is directed by a “sophisticated investor” as defined in Regulation 506(b)(2)(ii) under the Act.
	 	 
	Category H__	The undersigned is an entity (other than a trust) in which all of the equity owners are “accredited investors” within one or more of the above categories. If relying upon this Category alone, each equity owner must complete a separate copy of this Agreement. (describe entity)
	 	 
	 	 
	 	 
	Category I__	The undersigned is not within any of the categories above and is therefore not an accredited investor.
	 	 
	 	The undersigned agrees that the undersigned will notify the Company at any time on or prior to the closing in the event that the representations and warranties in this Agreement shall cease to be true, accurate and complete.

  

6.2       SUITABILITY
(please answer each question)

 

(a)       For
an individual Subscriber, please describe your current employment, including the company by which you are employed and its principal
business:

	 	 
	 	 
	 	 
	 	 

 

(b)       For
an individual Subscriber, please describe any college or graduate degrees held by you:

	 	 
	 	 
	 	 
	 	 

 

(c)       For
all Subscribers, please list types of prior investments:

	 	 
	 	 
	 	 
	 	 

 

     17

    

    

 

(d)       For
all Subscribers, please state whether you have participated in other private placements before:

 

YES____
                                NO____ 

 

(e)       If
your answer to question (d) above was “YES”, please indicate frequency of such prior participation in private
placements of:

 

	 
	Public

Companies	 	Private

Companies
	 	Public
    or Private Companies with no, or insignificant, 

assets and operations
	 	 	 	 	 	 
	Frequently
    	________________ 	 	_______	 	________________ 
	Occasionally
    	________________ 	 	_______	 	________________ 
	Never
    	________________ 	 	_______	 	________________ 

 

(f)       For
individual Subscribers, do you expect your current level of income to significantly decrease in the foreseeable future:

 

YES____
                                NO____ 

 

(g)       For
trust, corporate, partnership and other institutional Subscribers, do you expect your total assets to significantly decrease in
the foreseeable future:

 

YES____
                                NO____ 

 

(h)       For
all Subscribers, do you have any other investments or contingent liabilities which you reasonably anticipate could cause you to
need sudden cash requirements in excess of cash readily available to you:

 

YES____
                                NO____ 

 

(i)       For
all Subscribers, are you familiar with the risk aspects and the non-liquidity of investments such as the securities for which
you seek to subscribe?

 

YES____
                                NO____ 

 

(j)       For
all Subscribers, do you understand that there is no guarantee of financial return on this investment and that you run the risk
of losing your entire investment?

 

YES____
                                NO____ 

 

6.3       MANNER
IN WHICH TITLE IS TO BE HELD. (circle one)

 

		(a)	Individual
Ownership

		(b)	Community
Property

		(c)	Joint
Tenant with Right of Survivorship (both parties must sign)

		(d)	Partnership*

		(e)	Tenants
in Common

 

     18

    

    

 

		(f)	Company*

		(g)	Trust*

		(h)	Other*

 

*If
Securities are being subscribed for by an entity, the attached Certificate of Signatory must also be completed.

 

6.4       The
undersigned is informed of the significance to the Company of the foregoing representations and answers contained in the Confidential
Investor Questionnaire contained in this Article VI and such answers have been provided under the assumption that the Company
will rely on them.

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

 

     19

    

    

 

NUMBER
OF SHARES__________X $0.15 = $__________(the “Purchase Price”)

	 	 	 
	Signature	 	Signature (if purchasing jointly)
	 	 	 
	 	 	 
	Name Typed or Printed	 	Name Typed or Printed
	 	 	 
	 	 	 
	Title (if Subscriber is an Entity)	 	Title (if Subscriber is an Entity)
	 	 	 
	 	 	 
	Entity Name (if applicable)	 	Entity Name (if applicable
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	Address	 	Address
	 	 	 
	 	 	 
	City, State and Zip Code	 	City, State and Zip Code
	 	 	 
	 	 	 
	Telephone-Business	 	Telephone-Business
	 	 	 
	 	 	 
	Telephone-Residence	 	Telephone-Residence
	 	 	 
	 	 	 
	Facsimile-Business	 	Facsimile-Business
	 	 	 
	 	 	 
	Facsimile-Residence	 	Facsimile-Residence
	 	 	 
	 	 	 
	Tax ID # or Social Security #	 	Tax ID # or Social Security #
	 	 	 
	Name in which securities should be issued:	 	 

 

Dated:
         _____________, 2018

 

This
Subscription Agreement is agreed to and accepted as of __________________, 2018.

 

	 	IPSIDY INC.
	 	 	 
	 	By:	 	 
	 	Name:
	 	Title:

 

     20

    

    

 

CERTIFICATE
OF SIGNATORY

 

(To
be completed if Securities are 

being subscribed for by an entity)

 

I,
________________________, am the ________________________of

 

_________________________________(the
“Entity”).

 

I
certify that I am empowered and duly authorized by the Entity to execute and carry out the terms of the Subscription Agreement
and to purchase and hold the shares of Common Stock, and certify further that the Subscription Agreement has been duly and validly
executed on behalf of the Entity and constitutes a legal and binding obligation of the Entity.

 

IN
WITNESS WHEREOF, I have set my hand this __________ day of _________________, 2018

 

 

	 	(Signature)

 

     21

    

    

 

SCHEDULES
TO SECURITIES PURCHASE AGREEMENT

 

Schedule
1.1

 

	Account Name:	Ipsidy Inc.
	Account #:	4830 4364 4231
	ABA #:	026009593 (wire)
	Bank:	Bank of America
	Address:	PO Box 25118, Tampa, Florida 33622-5118

 

Schedule
2.2 Capitalization

 

Capitalization Table – June 30, 2018

 

	Common Shares Outstanding	 	 	412,344,956	 
	 	 	 	 	 
	Stock Options	 	 	105,950,000	 
	 	 	 	 	 
	Warrants	 	 	43,731,210	 
	 	 	 	 	 
	 	 	 	562,026,166	 

 

     22

    

    

 

Exhibit
A 

 

 

In
connection with that certain Subscription Agreement to be entered between Ipsidy Inc. and yourself pertaining to the private offering
consisting of up to 33,333,333 shares of common stock, $0.0001 par value per share, which may be increased up to 66,666,667 pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder, below are the Risk Factors
applicable to the business, the securities of the Company and this Offering in addition to the Risk Factors set forth in the Commission
Documents. All terms not defined herein shall have the meaning as set forth in the Subscription Agreement.

 

Risks
Relating to Our Business

 

We
have a history of losses and we may not be able to achieve profitability going forward.

 

We
have incurred an operating net loss (unaudited and subject to audit) amounting to approximately $2.5 million for the three months
ended March 31, 2018. The Company had a net loss of approximately $17.5 million for the year ended December 31, 2017 and approximately
$9.9 million for the year ended December 31, 2016. We have had operating losses in each quarter since our inception. We expect
that we will continue to incur operating losses for the near term. We may incur additional losses in the future for a number of
reasons, including the other risks described in this report, and we may encounter unforeseen expenses, difficulties, complications,
delays and other unknown events. Accordingly, we may not be able to achieve or maintain profitability. Our management is developing
plans to alleviate the negative trends and conditions described above, however there is no guarantee that such plans will be successfully
implemented. Our ability to curtail our operating losses or generate a profit has been further exacerbated by the fact that our
business plan is still unproven. There is no assurance that even if we successfully implement our business plan, that we will
be able to curtail our losses. If we incur additional significant operating losses, our stock price may decline.

 

We
have yet to achieve positive cash flow and, given our projected funding needs, our ability to generate positive cash flow is uncertain.

 

We
have had negative cash flow from operating activities of approximately $6.5 million and approximately $3.8 million for the years
ended December 31, 2017 and 2016, respectively and approximately $1.8 million for the three months ended March 31, 2018. We anticipate
that we will continue to have negative cash flows from operating and investing activities for the foreseeable future as we expect
to incur research and development, sales and marketing, and general and administrative expenses. Our business also will at times
require significant amounts of working capital to support our growth, particularly as we seek to introduce our new offered products.
An inability to generate positive cash flow for the near term may adversely affect our ability to raise needed capital for our
business on reasonable terms, if at all, diminish supplier or customer willingness to enter into transactions with us, and have
other adverse effects that may decrease our long-term viability. There can be no assurance we will achieve positive cash flow
in the foreseeable future.

 

     23

    

    

 

We
need access to additional financing, which may not be available to us on acceptable terms or at all. If we cannot access additional
financing when we need it and on acceptable terms, our business, prospects, financial condition, operating results and ability
to continue as a going concern will be adversely affected.

 

Our growth-oriented business
plan to deliver innovative identity and payment services to our customers will require continued capital investment. Our research
and development activities will require continued investment. We raised $12.0 million in 2017. In order to implement and grow
our operations through December 31, 2019 to achieve an expected annual revenue stream as contemplated in our current business
plan, we may need to raise additional capital subsequent to the current raise. In the event we do not generate sufficient cash
flow from operations, we will need to raise capital to repay, or refinance current outstanding indebtedness plus interest which
is due April 30, 2020. There is no guarantee that our current business plan will not change and, as a result of such change, that
we will need additional capital to implement such business plan, and/or any other opportunities that may arise. Further, assuming
we achieve our expected growth plan, of which there is no guarantee, we will need additional capital to implement growth beyond
our current business plan. The Company shall use the proceeds from the sale of the Common Stock in this Offering for working capital
purposes, operations and further development of its identity transaction platform and shall not, directly or indirectly, use such
proceeds for any distribution or dividend to any shareholder of the Company. The use of proceeds may change as management deems
fit. As is the case with any business, particularly one without a proven business model, it should be expected that certain expenses
unforeseeable to management at this juncture will arise in the future. There can be no assurance that management’s use of
proceeds generated through this Offering will prove optimal or translate into revenue or profitability for the Company.

 

Our
limited operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those
estimates of our future performance.

 

We
have been a development stage company since commencing operations. We have a limited operating history and have generated modest
revenue. As we look to further expand our existing products it is difficult, if not impossible, to forecast our future results
based upon our historical data. Because of the uncertainties related to our lack of historical operations, we may be hindered
in our ability to anticipate and timely adapt to increases or decreases in revenues or expenses. If we make poor budgetary decisions
as a result of unreliable historical data, we could be less profitable or incur losses, which may result in a decline in our stock
price.

 

There
can be no assurance that we will successfully commercialize our identity management or payment processing products that are in
development or that our existing products will sustain market acceptance.

 

There
is no assurance that we will ever successfully commercialize our platform and related solutions or that we will experience increased
market reception. Although our acquisitions have generated revenue, there is no guarantee that we will be able to successfully
implement our new products utilizing the acquired technology, products, and customer base. There is no assurance that our existing
products or solutions will continue to meet with market acceptance or that our new products or solutions will meet with market
acceptance. Further, there can be no guarantee that we will not lose business to our existing or potential new competitors.

 

     24

    

    

 

We
depend upon key personnel and need additional personnel.

 

Our
success depends on the continuing services of Philip D. Beck, CEO and President, Stuart P. Stoller, CFO, and Thomas Szoke, CTO.
In January 2017, we entered into retention agreements with each of the executives. The loss of these individuals could have a
material and adverse effect on our business operations. Additionally, the success of our operations will largely depend upon our
ability to successfully attract and maintain competent and qualified key management personnel. As with any company with limited
resources, there can be no guarantee that we will be able to attract such individuals or that the presence of such individuals
will necessarily translate into profitability for our company. If we are successful in attracting and retaining such individuals,
it is likely that our payroll costs and related expenses will increase significantly and that there may be additional dilution
to stockholders as a result of equity incentives that may need to be issued to such management personnel. Our inability to attract
and retain key personnel may materially and adversely affect our business operations. Any failure by our management to effectively
anticipate, implement, and manage the changes required to sustain our growth would have a material adverse effect on our business,
financial condition, and results of operations.

 

Acquisitions
present many risks that could have a material adverse effect on our business and results of operations.

 

Since
2013, we have closed various acquisitions including Innovations in Motion Inc. in August 2013, Multipay S.A. in April 2015 and
FIN Holdings Inc. in February 2016. We may also pursue select acquisitions in the future. The success of our future growth strategy
will depend on our ability to integrate our existing operations together with the operations of our acquisitions that we have
closed to date as well as any future acquisition of which none are planned at this date. Integrating the operations of our existing
operations with our past or future acquisitions, including anticipated cost savings and additional revenue opportunities, involves
a number of challenges. The failure to meet these integration challenges could seriously harm our results of operations and the
market price of our shares may decline as a result. Realizing the benefits of our past or future acquisition will depend in part
on the integration of intellectual property, products, operations, personnel and sales force and the completion of assignments
of current and past contracts and rights. These integration activities are complex and time-consuming, and we may encounter
unexpected difficulties or incur unexpected costs. We may not successfully integrate the operations of our existing operations,
and may not realize the anticipated benefits and synergies of the acquisition to the extent, or in the timeframe, anticipated.
In addition to the integration risks, we could face numerous other risks, including, but not limited to, the following:

 

		●	diversion
of our management’s attention from normal daily operations of our business;

 

		●	our
inability to maintain the key business relationships and the reputations of the businesses we acquire;

 

		●	increased
costs related to acquired operations and continuing support and development of acquired products;

 

		●	our
responsibility for the liabilities of the businesses we acquire;

 

		●	changes
in how we are required to account for our acquisitions under accounting principles generally accepted in U.S.;

 

		●	our
inability to apply and maintain our internal standards, controls, procedures and policies to acquired businesses; and

 

		●	potential
loss of key employees of the companies we acquire.

 

     25

    

    

 

The
occurrence of any of these risks could have a material adverse effect on our business, results of operations, financial condition
or cash flows, particularly in the case of a larger acquisition or concurrent acquisitions.

 

The
market for our products is characterized by changing technology, requirements, standards and products, and we may be adversely
affected if we do not respond promptly and effectively to these changes.

 

The
market for our payment processing and identity management products is characterized by evolving technologies, changing industry
standards, changing regulatory environments, frequent new product introductions and rapid changes in customer requirements. The
introduction of products embodying new technologies and the emergence of new industry standards and practices can render existing
products obsolete and unmarketable. Our future success will depend on our ability to enhance our existing products and to develop
and introduce, on a timely and cost effective basis, new products and product features that keep pace with technological developments
and emerging industry standards and address the increasingly sophisticated needs of our customers. In the future:

 

		●	we
may not be successful in developing and marketing new products or product features that respond to technological change or evolving
industry standards;

 

		●	we
may experience difficulties that could delay or prevent the successful development, introduction and marketing of these new products
and features; or

 

		●	our
new products and product features may not adequately meet the requirements of the marketplace and achieve market acceptance.

 

If
we are unable to respond promptly and effectively to changing technologies and market requirements, we will be unable to compete
effectively in the future.

 

There
can be no assurance that we will successfully identify new product opportunities and develop and bring new products to market
in a timely manner, or that the products and technologies developed by others will not render our products or technologies obsolete
or noncompetitive. The failure of our new product development efforts could have a material adverse effect on our business, results
of operations and future growth.

 

If
our technology and solutions cease to be adopted and used by government and public and private organizations, we may lose some
of our existing customers and our operations will be negatively affected.

 

Our
ability to grow depends significantly on whether governmental and public and private organizations adopt our technology and solutions
as part of their new standards and whether we will be able to leverage our expertise in governmental solutions into commercial
solutions. If these organizations do not adopt our technology, we may not be able to penetrate some of the new markets we are
targeting, or we may lose some of our existing customer base.

 

In
order for us to achieve our growth objectives, our identity management technologies and solutions must be adapted to and adopted
in a variety of areas including, among others, biometric fingerprint matching and facial recognition identity authentication solutions
and identity card issuance and verification. Further, our payment processing technologies and solutions will need to be adopted
by financial institutions, merchants and consumers.

 

     26

    

    

 

We
cannot accurately predict the future growth rate, if any, or the ultimate size of these markets. The growth of the sales of our
products and services depends on a number of factors such as the cost, performance and reliability of our products and services
compared to the products and services of our competitors, customer perception of the benefits of our products and solutions, public
perception of the intrusiveness of these solutions and the manner in which organizations use the information collected, customer
satisfaction with our products and services and marketing efforts and publicity for our products and services. Even if our products
and solutions are successfully launched, they may not adequately address market requirements and may not gain wide market acceptance.
If our solutions or our products and services do not gain wide market acceptance, our business and our financial results will
suffer.

 

We
have in the past entered into contracts and will seek in the future to enter into contracts with governments, as well as state
and local governmental agencies and municipalities, which subjects us to certain risks associated with such types of contracts.

 

Most
contracts with governments or with state or local agencies or municipalities, or Governmental Contracts, are awarded through a
competitive bidding process, and some of the business that we expect to seek in the future will likely be subject to a competitive
bidding process. Competitive bidding presents a number of risks, including:

 

		●	the
frequent need to compete against companies or teams of companies with more financial and marketing resources and more experience
than we have in bidding on and performing major contracts;

 

		●	the
need to compete against companies or teams of companies that may be long-term, entrenched incumbents for a particular contract
we are competing for and which have, as a result, greater domain expertise and established customer relations;

 

		●	the
substantial cost and managerial time and effort necessary to prepare bids and proposals for contracts that may not be awarded
to us;

 

		●	the
need to accurately estimate the resources and cost structure that will be required to service any fixed-price contract that we
are awarded; and

 

		●	the
expense and delay that may arise if our competitors protest or challenge new contract awards made to us pursuant to competitive
bidding or subsequent contract modifications, and the risk that any of these protests or challenges could result in the resubmission
of bids on modified specifications, or in termination, reduction or modification of the awarded contract.

 

We
may not be afforded the opportunity in the future to bid on contracts that are held by other companies and are scheduled to expire,
if the governments, or the applicable state or local agency or municipality determines to extend the existing contract. If we
are unable to win particular contracts that are awarded through the competitive bidding process, we may not be able to operate
in the market for the products and services that are provided under those contracts for a number of years. If we are unable to
win new contract awards or retain those contracts, if any, that we are awarded over any extended period, our business, prospects,
financial condition and results of operations will be adversely affected.

 

     27

    

    

 

In
addition, Governmental Contracts subject us to risks associated with public budgetary restrictions and uncertainties, actual contracts
that are less than awarded contract amounts, the requirement for posting a performance bond and the related cost and cancellation
at any time at the option of the governmental agency. Any failure to comply with the terms of any Governmental Contracts could
result in substantial civil and criminal fines and penalties, as well as suspension from future contracts for a significant period
of time, any of which could adversely affect our business by requiring us to pay significant fines and penalties or prevent us
from earning revenues from Governmental Contracts during the suspension period. Cancellation of any one of our major Governmental
Contracts could have a material adverse effect on our financial condition.

 

Governments
may be in a position to obtain greater rights with respect to our intellectual property than we would grant to other entities.
Governmental agencies also have the power, based on financial difficulties or investigations of their contractors, to deem contractors
unsuitable for new contract awards. Because we will engage in the government contracting business, we will be subject to additional
regulatory and legal compliance requirements, as well as audits, and may be subject to investigation, by governmental entities.
Compliance with such additional regulatory requirements are likely to result in additional operational costs in performing such
Governmental Contracts which may impact our profitability. Failure to comply with the terms of any Governmental Contract could
result in substantial civil and criminal fines and penalties, as well as suspension from future contracts for a significant period
of time, any of which could adversely affect our business by requiring us to pay the fines and penalties and prohibiting us from
earning revenues from Governmental Contracts during the suspension period.

 

Furthermore,
governmental programs can experience delays or cancellation of funding, which can be unpredictable; this may make it difficult
to forecast our revenues on a quarter-by quarter basis.

 

Our
efforts to expand our international operations are subject to a number of risks, any of which could adversely reduce our future
international sales and increase our losses.

 

Most
of our revenues to date are attributable to sales and business operations in jurisdictions other than the United States. Our international
operations are subject to a number of risks, any of which could adversely affect our future international sales and operating
results, including:

 

		●	increased
                                         collection risks;

		●	trade
                                         restrictions;

		●	export
                                         duties and tariffs;

		●	adverse
                                         political, regulatory and economic developments;

		●	labor
                                         and social unrest;

		●	inability
                                         to protect our intellectual property rights;

		●	highly
                                         aggressive competitors;

		●	currency
                                         issues, including currency exchange risk;

		●	difficulties
                                         in staffing, managing and supporting foreign operations;

		●	longer
                                         payment cycles; and

		●	difficulties
                                         in collecting accounts receivable.

 

     28

    

    

 

Negative
developments in any of these areas in one or more countries could result in a reduction in demand for our products, the cancellation
or delay of orders already placed, difficulty in collecting receivables, and a higher cost of doing business, any of which could
adversely affect our business, results of operations or financial condition.

 

We
are exposed to risks in operating in foreign markets, which may make operating in those markets difficult and thereby force us
to curtail our business operations.

 

In
conducting our business in foreign countries, we are subject to political, economic, legal, operational and other risks that are
inherent in operating in other countries. Risks inherent to operating in other countries range from difficulties in settling transactions
in emerging markets to possible nationalization, expropriation, price controls and other restrictive governmental actions. We
also face the risk that exchange controls or similar restrictions imposed by foreign governmental authorities may restrict our
ability to convert local currency received or held by us in their countries into U.S. dollars or other currencies, or to take
those dollars or other currencies out of those countries.

 

Additionally,
we are subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, and other laws in the United States and elsewhere that
prohibit improper payments or offers of payments to foreign governments and their officials and political parties for the purpose
of obtaining or retaining business. We have operations in and deal with governments and officials in foreign countries. Our activities
in these countries create the risk of unauthorized payments or offers of payments by one of our employees, contractors or customers
that could be in violation of various laws, including the FCPA, even though these parties are not always subject to our control.
We have implemented safeguards to discourage these practices by our employees, consultants and customers. However, our existing
safeguards and any future improvements may prove to be less than effective, and our employees, contractors or customers may engage
in conduct for which we might be held responsible. Violations of the FCPA or similar laws may result in severe criminal or civil
sanctions and we may be subject to other liabilities, which could adversely affect our business, financial condition and results
of operations.

 

Breaches
of network or information technology security, natural disasters or terrorist attacks could have an adverse effect on our business.

 

Cyber-attacks
or other breaches of network or information technology (IT) security, natural disasters, terrorist acts or acts of war may cause
equipment failures or disrupt our systems and operations. We may be subject to attempts to breach the security of our networks
and IT infrastructure through cyber-attack, malware, computer viruses and other means of unauthorized access. While we maintain
insurance coverage for some of these events, the potential liabilities associated with these events could exceed the insurance
coverage we maintain. A failure to protect the privacy of customer, employee and third party consumer confidential data against
breaches of network or IT security could result in significant costs of compliance and penalties under applicable state and foreign
data breach notification and data privacy laws and regulations, as well as substantial damage to our reputation. To date, we have
not been subject to cyber-attacks or other cyber incidents that we are aware of which, individually or in the aggregate, resulted
in a material impact to our operations or financial condition.

 

For
us to further penetrate the marketplace, the marketplace must be confident that we provide effective security protection for national
and other secured identification documents and cards, as well as other personally identifiable information. Although we are not
aware that we have experienced any misuse or unauthorized access by a third party of our systems, databases, software or technology
to date, if an actual or perceived breach of security occurs in our internal systems or those of our customers, regardless of
whether we caused the breach, in addition to the actual costs and penalties referenced above, it could adversely affect the market’s
perception of our products and services and thereby our business could be severely harmed. This could cause us to lose customers,
resellers, alliance partners or other business partners, thereby causing our revenues to decline.

 

     29

    

    

 

Interruptions
or delays in service from our systems could impair the delivery of our services and harm our business.

 

We
depend on the efficient and uninterrupted operation of our computer network systems, software, telecommunications networks, and
processing centers, as well as the systems and services of third parties, in order to provide services to our customers. Our systems
and data centers are vulnerable to damage or interruption from, among other things, fire, natural disaster, power loss, telecommunications
failure, terrorist acts, war, unauthorized entry, human error, and computer viruses or other defects. They may also be subject
to break-ins, sabotage, intentional acts of vandalism and similar misconduct. We have security, backup and recovery systems in
place, and we are in the process of implementing business continuity plans that will be designed to ensure our systems will not
be inoperable. However, there is still a risk that a system outage or data loss may occur which would not only damage our reputation
but could also require the payment of penalties or damages to our clients if our systems do not meet certain operating standards.
Despite precautions taken at these facilities, the occurrence of a natural disaster or an act of sabotage or terrorism, a decision
to close the facilities without adequate notice or other unanticipated problems at these facilities could result in lengthy interruptions
in our service. Our property and business interruption insurance may not be applicable or adequate to compensate us for all losses
or failures that may occur.

 

Any
damage to, failure of, or defects in our systems or those of third parties, errors or delays in the processing of payment or other
transactions, telecommunications failures or other difficulties could result in loss of revenue, loss of customers, loss of customer
and consumer data, harm to our business or reputation, exposure to fraud losses or other liabilities, negative publicity, additional
operating and development costs, and diversion of technical and other resources.

 

Third
parties could obtain access to our proprietary information or could independently develop similar technologies.

 

Despite
the precautions we take, third parties may copy or obtain and use our technologies, ideas, know-how and other proprietary information
without authorization or may independently develop technologies similar or superior to our technologies. In addition, the confidentiality
and non-competition agreements between us and most of our employees, consultants, contractors, distributors and clients and our
client’s respective technology providers, employees, consultants, and contractors may not provide meaningful protection
of our proprietary technologies or other intellectual property in the event of unauthorized use or disclosure. If we are not able
to successfully defend our industrial or intellectual property rights, we may lose rights to technologies that we need to develop
our business, which may cause us to lose potential revenues, or we may be required to pay significant license fees for the use
of such technologies. To date, we have relied primarily on a combination of patents, trade secret and copyright laws, as well
as nondisclosure and other contractual restrictions on copying, reverse engineering and distribution to protect our proprietary
technology.

 

Our
current patents and any patents that we may register in the future may provide only limited protection for our technology and
may not be sufficient to provide competitive advantages to us. For example, competitors could be successful in challenging any
issued patents or, alternatively, could develop similar or more advantageous technologies on their own or design around our patents.
Any inability to protect intellectual property rights in our technology could enable third parties to compete more effectively
with us.

 

     30

    

    

 

In
addition, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as do the
laws of the United States. Our means of protecting our intellectual property rights in the United States or any other country
in which we operate may not be adequate to fully protect our intellectual property rights.

 

Third
parties may assert that we are infringing their intellectual property rights; IP litigation could require us to incur substantial
costs even when our efforts are successful.

 

We
may face intellectual property litigation, which could be costly, harm our reputation, limit our ability to sell our products,
force us to modify our products or obtain appropriate licenses, and divert the attention of management and technical personnel.
Our products employ technology that may infringe on the proprietary rights of others, and, as a result, we could become liable
for significant damages and suffer other harm to our business.

 

We
have not been subject to material intellectual property litigation to date. Litigation may be necessary in the future to enforce
any patents we have or may obtain and/or any other intellectual property rights, to protect our trade secrets, to determine the
validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity, and we may
not prevail in any such future litigation. Litigation, whether or not determined in our favor or settled, could be costly, could
harm our reputation and could divert the efforts and attention of our management and technical personnel from normal business
operations. In addition, adverse determinations in litigation could result in the loss of our proprietary rights, subject us to
significant liabilities, require us to seek licenses from third parties, prevent us from licensing our technology or selling or
manufacturing our products, or require us to expend significant resources to modify our products or attempt to develop non-infringing
technology, any of which could seriously harm our business.

 

Our
products may contain technology provided to us by third parties. Because we did not develop such technology ourselves, we may
have little or no ability to determine in advance whether such technology infringes the intellectual property rights of any other
party. Our suppliers and licensors may not be required to indemnify us in the event that a claim of infringement is asserted against
us, or they may be required to indemnify us only with respect to intellectual property infringement claims in certain jurisdictions,
and/or only up to a maximum amount, above which we would be responsible for any further costs or damages. In addition, we have
indemnification obligations to certain parties with respect to any infringement of third-party patents and intellectual property
rights by our products. If litigation were to be filed against these parties in connection with our technology, we would be required
to defend and indemnify such parties.

 

Our
officers and directors beneficially own a significant portion of our common stock and, as a result, can exercise control over
stockholder and corporate actions. 

 

Our
officers and directors of the Company currently beneficially own approximately 14.8% of our outstanding common stock, and 35.2%
on a fully diluted basis assuming the exercise of both vested and unvested options. As such, they have a significant influence
over most matters requiring approval by stockholders, including the election of directors and approval of significant corporate
transactions. This concentration of ownership may also have the effect of delaying or preventing a change in control, which in
turn could have a material adverse effect on the market price of the Company’s common stock or prevent stockholders from
realizing a premium over the market price for their Shares.

 

     31

    

    

 

We
face competition. Some of our competitors have greater financial or other resources, longer operating histories and greater name
recognition than we do and one or more of these competitors could use their greater resources and/or name recognition to gain
market share at our expense or could make it very difficult for us to establish market share.

 

The
identity and payment processing industries are characterized by rapid change and new entrants. The Company will need to consistently
develop and improve products to remain competitive in the technology industry.

 

Several
competitors exist for the Company’s current and planned products and platform services relating to the authentication and
identification services and electronic payment transaction markets. The competitive landscape includes several companies that
address one or the other area, with some addressing both areas independently.

 

To
further analyze the competitive landscape, the authentication and identification services market must be segmented into out-of
band authentication and biometric identification & verification solution providers. Major competitors offering solutions in
both areas include, IDEMIA (formerly Morpho and Oberthur, Gemalto, HID Global and SuperCom. Major competitors offering only out-of
band authentication, include Twillio/Authy, Google, Datacard, Symantec, Duo, RSA and ID.ME. Companies offering only biometric
identification & verification include NEC, Imageware, Aware, Veridium and Daon. There are new entrants into each of these
markets continually arising. Each competitor may have a different offering or approach to solve similar problems, which overlap
with those of the Company. Some competitors also include manufacturers who provide systems or platform solutions to third party
operators and, therefore do not directly compete with the Company, which operates its own systems, such as SuperCom.

 

The
Ipsidy identity transaction platform is being developed based on a patent-pending methodology, which integrates digital signature
authentication and vetted biometric identity authentication delivered through an out-of-band transaction. The Company anticipates
that when completed this could provide functionality for users to have real-time control over their electronic transactions through
a mobile application, with a detailed audit trail created for each transaction, containing the digitally signed transaction details
and biometric identity. This patent-pending approach of combining transaction details and identity into a single, digitally signed
message could allow the Ipsidy platform to be a complimentary solution to a many of its competitors and hence differentiate itself
in the market. More specifically, the Ipsidy identity transaction platform is designed to be able to leverage third party biometric
identification and verification solutions, thereby creating the opportunity to partner with companies already offering those capabilities.

 

The
Cards Plus business faces competition both locally in South Africa and internationally. China has become a source of imports of
card products at highly competitive pricing and some local suppliers are reliant on Chinese card manufacturers Local competitors
include Card Technology Services, Easy Card and Open Gate, Cardz Group and XH Smart Technology (Africa). That said we believe
that we are the only significant manufacturer in South Africa using digital print technology.

 

The
payment processing industry has many competitors who provide gateway services, closed loop end-to-end solutions, payment processing,
peer-to-peer payments and bill payments. As these types of services are usually supplied by regional or country specific companies,
the following is a breakdown of this competitive landscape specifically in those countries or regions Ipsidy is actively pursuing
business in today. In Colombia, major competitors include PayU, Nequi, Daviplata and QPagos.

 

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The
resources available to our competitors to develop new products and introduce them into the marketplace exceed the resources currently
available to us. As a result, our competitors may be able to compete more aggressively and sustain that competition over a longer
period of time that we can. This intense competitive environment may require us to make changes in our products, pricing, licensing,
services, distribution, or marketing to develop a market position. Each of these competitors has the potential to capture market
share in our target markets which could have an adverse effect on our position in our industry and on our business and operating
results.

 

Risks
Related to Our Securities  1

 

Government
regulation could negatively impact the business.

 

We
do not need or require any approval from government authorities or agencies to operate our regular business and operations. To
the extent that our business is based on Governmental Contracts, the relevant government authorities will need to approve us as
a supplier and the terms of those contracts. However, it is possible that any proposed expansion to our business and operations
in the future would require government approvals. Due to the security applications and biometric technology associated with our
products and platforms the activities and operations of our company is subject to license restrictions and other regulations,
such as (without limitation) export controls and other security regulation by government agencies. Expansion of our activities
in payment processing may in due course require government licensing in different jurisdictions and may subject it to additional
regulation and oversight. Aspects of payment processing and related financial services are already subject to legislation and
regulations in various jurisdictions. If our existing and proposed products become subject to licensing, export control and other
regulations, we may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties
for any failure to comply. Our operations could be adversely affected, directly or indirectly, by existing or future laws and
regulations (and amendments thereto) relating to our business or industry.

 

There
is limited liquidity on the OTCQX market, which may result in stock price volatility and inaccurate quote information.

 

We
trade under the symbol of IDTY and trade on the OTCQX, which has limited volume. When fewer shares of a security are being traded
on the OTCQX, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information.
Due to lower trading volumes in shares of our common stock, there may be a lower likelihood of one’s orders for shares of
our common stock being executed, and current prices may differ significantly from the price one was quoted at the time of one’s
order entry.

 

Our
common stock is thinly traded, so you may be unable to sell at or near asking prices or at all if you need to sell your shares
to raise money or otherwise desire to liquidate your shares.

 

Currently,
our common stock is quoted on the OTCQX and future trading volume may be limited by the fact that many major institutional investment
funds, including mutual funds, as well as individual investors follow a policy of not investing in OTCQX stocks and certain major
brokerage firms restrict their brokers from recommending OTCQX stocks because they are considered speculative, volatile and thinly
traded. The OTCQX market is an inter-dealer market less regulated than the major exchanges and our common stock is subject to
abuses, volatility and shorting. Thus, there is currently no broadly followed and established trading market for our common stock.
An established trading market may never develop or, if developed, be maintained. Active trading markets generally result in lower
price volatility and more efficient execution of buy and sell orders. Absence of an active trading market reduces the liquidity
of the shares traded there.

 

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Our
stock may be considered a penny stock and any investment in our stock will be considered a high-risk investment and subject to
restrictions on marketability.

 

The
trading price of our common stock is below $5.00 per share. If the price of the common stock is below such level, trading in our
common stock would be subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, as amended.
These rules require additional disclosure by broker-dealers in connection with any trades generally involving any non-NASDAQ equity
security that has a market price of less than $5.00 per share, subject to certain exceptions. Such rules require the delivery,
before any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith,
and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers
and accredited investors (generally institutions). For these types of transactions, the broker-dealer must determine the suitability
of the penny stock for the purchaser and receive the purchaser’s written consent to the transactions before sale. The additional
burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our common
stock, which could impact the liquidity of our common stock.

 

We
have not voluntarily implemented various corporate governance measures, in the absence of which, shareholders may have more limited
protections against interested director transactions, conflict of interest and similar matters.

 

Recent
Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures
designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted
in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities
exchanges, such as the NYSE or the NASDAQ, on which their securities are listed. Prospective investors should bear in mind our
current lack of Sarbanes Oxley measures in formulating their investment decisions.

 

If
we are not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner or with adequate
compliance, we may be subject to sanctions by regulatory authorities. 

 

Section
404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and determine the effectiveness of our internal controls over
financial reporting and provide a management report on the internal control over financial reporting. In connection with management’s
assessment of our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act of 2002, we
identified weaknesses in our internal control over financial reporting as disclosed in our Annual Report on Form 10-K for the
year ended December 31, 2017. As we indicated in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, the Company
believes it has improved its internal controls over financial reporting and adequate to ensure accurate and timely financial reporting
in accordance with applicable standards. We continue to evaluate our internal controls systems to allow management to continue
to improve our processes. Moreover, if we are not able to comply with the requirements of Section 404 or if we or our independent
registered public accounting firm identifies deficiencies in our internal controls that are deemed to be material weaknesses,
we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would entail expenditure
of additional financial and management resources and could materially adversely affect our stock price.

 

     34

    

    

 

If
the Company fails to maintain an effective system of internal controls, it may not be able to accurately report its financial
results or detect fraud. Consequently, investors could lose confidence in the Company’s financial reporting and this may
decrease the trading price of its stock.

 

The
Company must maintain effective internal controls to provide reliable financial reports and detect fraud. The Company has assessed
certain areas that need improvement. The Company has implemented certain process changes to its internal controls, but will continue
to implement and modify procedures. Failure to implement these changes to the Company’s internal controls or any others
that it identifies as necessary to maintain an effective system of internal controls could harm its operating results and cause
investors to lose confidence in the Company’s reported financial information. Any such loss of confidence would have a negative
effect on the trading price of the Company’s stock.

 

Risks
Relating to our Securities

 

We
may not be able to attract the attention of brokerage firms because we became a public company by means of a reverse acquisition.

 

Because
we became public through a “reverse acquisition,” securities analysts of brokerage firms may not provide coverage
of us since there is little incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given
that brokerage firms will want to conduct any secondary offerings on behalf of the Company in the future.

 

Our
certificate of incorporation allows for our board to create new series of preferred stock without further approval by our stockholders,
which could adversely affect the rights of the holders of our Common Stock.

 

Our
Board of Directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our Board of
Directors have the authority to issue up to 10,000,000 shares of our preferred stock terms of which may be determined by the Board
without further stockholder approval. As a result, our Board of Directors could authorize the issuance of a series of preferred
stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before
dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium,
prior to the redemption of our common stock. In addition, our Board of Directors could authorize the issuance of a series of preferred
stock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the
relative voting power of our common stock or result in dilution to our existing stockholders. Although we have no present intention
to issue any additional shares of preferred stock or to create any additional series of preferred stock, we may issue such shares
in the future.

 

     35

    

    

 

You
may experience dilution of your ownership interests because of the future issuance of additional common shares.

 

In
the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of the ownership
interests of our shareholders. We may also issue additional shares of our securities that are convertible into or exercisable
for ordinary shares, as the case may be, in connection with hiring or retaining employees, future acquisitions, future sales of
its securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares
may create downward pressure on the value of our securities. There can be no assurance that we will not be required to issue additional
shares, warrants or other convertible securities in the future in conjunction with any capital raising efforts, including at a
price (or exercise prices) below the price at which our shares may be valued or are trading in a public market.

 

We
have not paid dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited
to the value of our common stock

 

We
have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The
payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors
affecting it at such time as the board of directors may consider relevant. If we do not pay dividends, our common stock may be
less valuable because a return on your investment will only occur if its stock price appreciates.

 

Risks
Related to this Offering

 

The
offering price for the Common Stock has been determined by the Company. 

 

The
price at which the Common Stock is being offered has been determined by us based on current sales, sales forecasts and standard
corporate valuation estimation methods. There is no direct relationship between the offering price and our assets, book value,
net worth, or any other economic or recognized criteria of value.

 

An
investment in the Shares is speculative and there can be no assurance of any return on any such investment. 

 

An
investment in the Shares is speculative and there is no assurance that investors will obtain any return on their investment. Investors
will be subject to substantial risks involved in an investment in the Company, including the risk of losing their entire investment.

 

We
have significant discretion over use of the net proceeds. 

 

The
maximum gross proceeds to us from the sale of the Shares will be $5,000,000; provided, however, we may increase the maximum offering
to $10,000,000 in our sole discretion. The Company shall use the proceeds from the sale of the Common Stock in this Offering for
working capital purposes, operations and further development of its identity transaction platform and shall not, directly or indirectly,
use such proceeds for any distribution or dividend to any shareholder of the Company. The use of proceeds may change as management
deems fit. As is the case with any business, particularly one without a proven business model, it should be expected that certain
expenses unforeseeable to management at this juncture will arise in the future. There can be no assurance that management’s
use of proceeds generated through this Offering will prove optimal or translate into revenue or profitability for the Company.
Investors are urged to consult with their attorneys, accountants and personal investment advisors prior to making any decision
to invest in the Company.

 

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The
Offering will be offered by on a “Best Efforts” basis, and we may not raise the Maximum offering. 

 

We
are offering the shares with respect to the Offering on a “Best Efforts” basis. In a “Best Efforts” offering,
there is no assurance that we will sell the maximum Offering. Accordingly, we may close upon amounts less than the maximum Offering
which may not provide us with sufficient funds to fully implement our business plan.

 

     37

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