|
Delaware
(State or Other Jurisdiction of
Incorporation or Organization) |
| |
2834
(Primary Standard Industrial
Classification Code Number) |
| |
47-1879539
(I.R.S. Employer
Identification Number) |
|
|
Mark F. McElreath, Esq.
Alston & Bird LLP 90 Park Avenue New York, NY 10016 (212) 210-9400 |
| |
Stephen E. Older, Esq.
Rakesh Gopalan, Esq. McGuireWoods LLP 1251 Avenue of the Americas, 20th Floor New York, New York 10020 (212) 548-2100 |
|
|
Large accelerated filer ☐
|
| |
Accelerated filer ☐
|
| |
Non-accelerated filer ☒
|
| |
Smaller reporting company ☒
Emerging growth company ☒ |
|
| | |
Per Share
|
| |
Total
|
| ||||||
Initial public offering price
|
| | | $ | | | | | $ | | | ||
Underwriting discounts and commissions(1)
|
| | | $ | | | | | $ | | | ||
Proceeds, before expenses, to us
|
| | | $ | | | | | $ | | | |
| | | | | ii | | | |
| | | | | 1 | | | |
| | | | | 3 | | | |
| | | | | 7 | | | |
| | | | | 8 | | | |
| | | | | 9 | | | |
| | | | | 11 | | | |
| | | | | 49 | | | |
| | | | | 50 | | | |
| | | | | 51 | | | |
| | | | | 54 | | | |
| | | | | 56 | | | |
| | | | | 70 | | | |
| | | | | 89 | | | |
| | | | | 97 | | | |
| | | | | 104 | | | |
| | | | | 105 | | | |
| | | | | 107 | | | |
| | | | | 112 | | | |
| | | | | 114 | | | |
| | | | | 117 | | | |
| | | | | 121 | | | |
| | | | | 121 | | | |
| | | | | 121 | | | |
| | | | | F-1 | | |
| | | | |
Years Ended December 31
|
| |||||||||||||||||||
| | |
2021
|
| |
2020
|
| |
2020
|
| |
2019
|
| ||||||||||||
Product revenue, net
|
| | | $ | 26,007 | | | | | $ | 21,361 | | | | | $ | 44,531 | | | | | $ | 34,921 | | |
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of goods sold – product revenue
|
| | | | 11,392 | | | | | | 6,934 | | | | | | 14,594 | | | | | | 10,532 | | |
Research and development
|
| | | | 29 | | | | | | — | | | | | | — | | | | | | — | | |
Research and development – licenses acquired
|
| | | | 13,743 | | | | | | — | | | | | | — | | | | | | — | | |
Selling, general and administrative
|
| | | | 14,021 | | | | | | 10,441 | | | | | | 22,086 | | | | | | 19,130 | | |
Total operating expenses
|
| | | | 39,185 | | | | | | 17,375 | | | | | | 36,680 | | | | | | 29,662 | | |
Income (loss) from operations
|
| | | | (13,178) | | | | | | 3,986 | | | | | | 7,851 | | | | | | 5,259 | | |
Other expense
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense
|
| | | | 1,563 | | | | | | 305 | | | | | | 698 | | | | | | 255 | | |
Change in fair value of derivative liability
|
| | | | 182 | | | | | | — | | | | | | — | | | | | | — | | |
Total other expense
|
| | | | 1,745 | | | | | | 305 | | | | | | 698 | | | | | | 255 | | |
Income (loss) before income taxes
|
| | | | (14,923) | | | | | | 3,681 | | | | | | 7,153 | | | | | | 5,004 | | |
Income tax (benefit) expense
|
| | | | (3,326) | | | | | | 929 | | | | | | 1,870 | | | | | | 1,379 | | |
Net (loss) income
|
| | | $ | (11,597) | | | | | $ | 2,752 | | | | | $ | 5,283 | | | | | $ | 3,625 | | |
Net (loss) income per common share – basic
|
| | | $ | (1.27) | | | | | $ | 0.30 | | | | | $ | 0.58 | | | | | $ | 0.40 | | |
Net (loss) income per common share – diluted
|
| | | $ | (1.27) | | | | | $ | 0.25 | | | | | $ | 0.49 | | | | | $ | 0.36 | | |
Weighted average common shares outstanding – basic
|
| | | | 9,159,841 | | | | | | 9,133,333 | | | | | | 9,135,985 | | | | | | 9,133,333 | | |
Weighted average common shares outstanding – diluted
|
| | | | 9,159,841 | | | | | | 10,826,279 | | | | | | 10,836,122 | | | | | | 10,075,804 | | |
| | |
(Unaudited)
As of June 30, 2021 |
| |
December 31,
2020 |
| |||||||||
| | |
Actual
|
| |
As Adjusted(1)
|
| |||||||||
Balance Sheet Data | | | | | | | | | | | | | | | | |
Cash
|
| | | $ | 12,176 | | | | | | | | $ | 8,246 | | |
Working capital
|
| | | | 9,064 | | | | | | | | | 7,182 | | |
Total assets
|
| | | | 72,725 | | | | | | | | | 51,906 | | |
Total liabilities
|
| | | | 73,517 | | | | | | | | | 41,614 | | |
Common stock and class A common stock
|
| | | | 1 | | | | | | | | | 1 | | |
(Accumulated Deficit) retained earnings
|
| | | | (6,477) | | | | | | | | | 5,171 | | |
Total stockholders (deficit)equity
|
| | | | (792) | | | | | | | | | 10,292 | | |
|
Assumed initial public offering price per share
|
| | | | | | | | | $ | | | |
|
Historical net tangible book value (deficit) per share at June 30, 2021
|
| | | $ | | | | | | | | | |
|
Increase in net tangible book value per share attributable to investors participating in this offering
|
| | | | | | | | | | | | |
|
As adjusted net tangible book value per share after this offering
|
| | | | | | | | | | | | |
|
Dilution per share to new investors participating in this offering
|
| | | | | | | | | $ | | | |
| | |
Shares
Purchased |
| |
Total Consideration
|
| |
Weighted-
Average Price Per Share |
| ||||||||||||||||||
| | |
Number
|
| |
Percent
|
| |
Amount
|
| |
Percent
|
| |||||||||||||||
Existing stockholders
|
| |
|
| | | | % | | | | | $ | | | | | | % | | | | | $ | | | ||
Investors participating in this offering
|
| | | | | | | | | | | | | | | | | | | | | | | | $ | | | |
Total
|
| | | | | | | 100.0% | | | | | $ | | | | | | 100.0% | | | | | | | | |
| | |
As of June 30, 2021
|
| |||||||||||||||
| | |
Actual
|
| |
Adjustments
|
| |
As Adjusted(1)
|
| |||||||||
Cash
|
| | | $ | 12,176 | | | | |
$
|
|
| | | |
$
|
|
| |
Accrued expenses, related party
|
| | | | 237 | | | | | | | | | | | | | | |
Contingently issuable shares, related party
|
| | | | 263 | | | | | | | | | | | | | | |
Installment payments – licenses, short-term (net of debt discount of
$639) |
| | | | 3,861 | | | | | | | | | | | | | | |
Note payable, related party(2)
|
| | | | 5,245 | | | | | | | | | | | | | | |
Installment payments – licenses, long-term (net of debt discount of $565)
|
| | | | 6,435 | | | | | | | | | | | | | | |
Convertible preferred shares settled note(3) (net of debt discount of $1,824)
|
| | | | 12,508 | | | | | | | | | | | | | | |
Derivative warrant liability
|
| | | | 4,287 | | | | | | | | | | | | | | |
Stockholders’ (deficit)/equity
|
| | | | | | | | | | | | | | | | | | |
Common stock, $.0001 par value, 50,000,000 shares authorized, 3,161,333 shares issued and outstanding
|
| | | | — | | | | | | | | | | | | | | |
Common stock – Class A, $.0001 par value, 50,000,000 shares authorized, 6,000,000 shares issued and outstanding
|
| | | | 1 | | | | | | | | | | | | | | |
Additional paid-in capital
|
| | | | 5,684 | | | | | | | | | | | | | | |
Retained earnings (accumulated deficit)
|
| | | | (5,893) | | | | | | | | | | | | | | |
Total stockholders’ (deficit) equity
|
| | | | (209) | | | | | | | | | | | | | | |
Total capitalization
|
| | | $ | 32,627 | | | | |
$
|
|
| | | |
$
|
|
| |
($ in thousands)
|
| |
Year Ended December 31,
|
| |
Change
|
| ||||||||||||||||||
|
2020
|
| |
2019
|
| |
$
|
| |
%
|
| ||||||||||||||
Product revenue, net . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . .
|
| | | $ | 44,531 | | | | | $ | 34,921 | | | | | $ | 9,610 | | | | | | 28% | | |
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of goods sold – product revenue . . . . . . . . . . . . . . . . . . .
|
| | | | 14,594 | | | | | | 10,532 | | | | | | 4,062 | | | | | | 39% | | |
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . .
|
| | | | 22,086 | | | | | | 19,130 | | | | | | 2,956 | | | | | | 15% | | |
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
| | | | 36,680 | | | | | | 29,662 | | | | | | 7,018 | | | | | | 24% | | |
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
| | | | 7,851 | | | | | | 5,259 | | | | | | 2,592 | | | | | | 49% | | |
Other expense | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
| | | | 698 | | | | | | 255 | | | | | | 443 | | | | | | 174% | | |
Total other expense
|
| | | | 698 | | | | | | 255 | | | | | | 443 | | | | | | 174% | | |
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
| | | | 7,153 | | | | | | 5,004 | | | | | | 2,149 | | | | | | 43% | | |
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
| | | | 1,870 | | | | | | 1,379 | | | | | | 491 | | | | | | 36% | | |
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
| | | $ | 5,283 | | | | | $ | 3,625 | | | | | $ | 1,659 | | | | | | 46% | | |
Net income per common share – basic . . . . . . . . . . . . . . . . . . . . .
|
| | | $ | 0.58 | | | | | $ | 0.40 | | | | | $ | 0.18 | | | | | | 46% | | |
Net income per common share – diluted . . . . . . . . . . . . . . . . . . . .
|
| | | $ | 0.49 | | | | | $ | 0.36 | | | | | $ | 0.13 | | | | | | 36% | | |
($ in thousands)
|
| |
Year Ended December 31
|
| |
Change
|
| ||||||||||||||||||
|
2020
|
| |
2019
|
| |
$
|
| |
%
|
| ||||||||||||||
Targadox® . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
| | | $ | 30,708 | | | | | $ | 28,068 | | | | | $ | 2,640 | | | | | | 9% | | |
Ximino® . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
| | | | 9,518 | | | | | | 3,642 | | | | | | 5,876 | | | | | | 161% | | |
Exelderm® . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
| | | | 4,453 | | | | | | 2,867 | | | | | | 1,586 | | | | | | 55% | | |
Other product revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
| | | | (148) | | | | | | 344 | | | | | | (492) | | | | | | NM | | |
Total product revenue, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
| | | $ | 44,531 | | | | | $ | 34,921 | | | | | $ | 9,610 | | | | | | 28% | | |
| | |
Returns
|
| |
Coupons
|
| |
Managed
Care/Gov’t Rebates |
| |
Total
|
| ||||||||||||
Balance at December 31, 2018
|
| | | $ | 3,065 | | | | | $ | 1,599 | | | | | $ | — | | | | | $ | 4,664 | | |
Current Provision Related to Sales Made in the Current Period
|
| | | | 2,925 | | | | | | 42,374 | | | | | | 1,985 | | | | | | 47,284 | | |
Checks/Credits Issued to Third Parties
|
| | | | (574) | | | | | | (37,567) | | | | | | — | | | | | | (38,141) | | |
Reclassed Between Liability Accounts
|
| | | | (900) | | | | | | 900 | | | | | | — | | | | | | — | | |
Balance at December 31, 2019
|
| | | $ | 4,516 | | | | | $ | 7,306 | | | | | $ | 1,985 | | | | | $ | 13,807 | | |
Current Provision (Adjustment) Related to Sales Made in the Current Period
|
| | | | 1,294 | | | | | | 100,168 | | | | | | (537) | | | | | | 100,925 | | |
Checks/Credits Issued to Third Parties
|
| | | | (2,130) | | | | | | (95,805) | | | | | | (1,348) | | | | | | (99,283) | | |
Reclassed Between Liability Accounts
|
| | | | (1,100) | | | | | | 1,100 | | | | | | — | | | | | | — | | |
Balance at December 31, 2020
|
| | | $ | 2,580 | | | | | $ | 12,769 | | | | | $ | 100 | | | | | $ | 15,449 | | |
($ in thousands, except per share data)
|
| | | |
Change
|
| |||||||||||||||||||
|
2021
|
| |
2020
|
| |
$
|
| |
%
|
| ||||||||||||||
Product revenue, net
|
| | | $ | 26,007 | | | | | $ | 21,361 | | | | | $ | 4,646 | | | | | | 22% | | |
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of goods sold – product revenue
|
| | | | 11,392 | | | | | | 6,934 | | | | | | 4,458 | | | | | | 64% | | |
Research and development
|
| | | | 29 | | | | | | — | | | | | | 29 | | | | | | 100% | | |
Research and development – licenses acquired
|
| | | | 13,743 | | | | | | — | | | | | | 13,743 | | | | | | 100% | | |
Selling, general and administrative
|
| | | | 14,021 | | | | | | 10,441 | | | | | | 3,580 | | | | | | 34% | | |
Total operating expenses
|
| | | | 39,185 | | | | | | 17,375 | | | | | | 21,810 | | | | | | 126% | | |
Income (loss) from operations
|
| | | | (13,178) | | | | | | 3,986 | | | | | | (17,164) | | | | | | -431% | | |
Other expense | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense
|
| | | | 1,563 | | | | | | 305 | | | | | | 1,258 | | | | | | 412% | | |
Change in fair value of derivative liability
|
| | | | 182 | | | | | | — | | | | | | 182 | | | | | | 100% | | |
Total other expense
|
| | | | 1,745 | | | | | | 305 | | | | | | 1,440 | | | | | | 472% | | |
Income (loss) before income taxes
|
| | | | (14,923) | | | | | | 3,681 | | | | | | (18,604) | | | | | | -505% | | |
Income tax (benefit) expense
|
| | | | (3,326) | | | | | | 929 | | | | | | (4,255) | | | | | | -458% | | |
Net (loss) income
|
| | | $ | (11,597) | | | | | $ | 2,752 | | | | | $ | (14,349) | | | | | | -521% | | |
Net (loss) income per common share – basic
|
| | | $ | (1.27) | | | | | $ | 0.30 | | | | | $ | (1.57) | | | | | | -520% | | |
Net (loss) income per common share – diluted
|
| | | $ | (1.27) | | | | | $ | 0.25 | | | | | $ | (1.52) | | | | | | -598% | | |
($ in thousands)
|
| | | |
Change
|
| |||||||||||||||||||
|
2021
|
| |
2020
|
| |
$
|
| |
%
|
| ||||||||||||||
Targadox® | | | | $ | 12,926 | | | | | $ | 14,981 | | | | | $ | (2,055) | | | | | | -14% | | |
Ximino® | | | | | 3,413 | | | | | | 4,823 | | | | | | (1,410) | | | | | | -29% | | |
Exelderm® | | | | | 2,953 | | | | | | 1,687 | | | | | | 1,266 | | | | | | 75% | | |
Accutane® | | | | | 2,141 | | | | | | — | | | | | | 2,141 | | | | | | 100% | | |
Qbrexza® | | | | | 4,568 | | | | | | — | | | | | | 4,568 | | | | | | 100% | | |
Other branded revenue
|
| | | | 6 | | | | | | (130) | | | | | | 136 | | | | | | -105% | | |
Total product revenues
|
| | | $ | 26,007 | | | | | $ | 21,361 | | | | | $ | 4,646 | | | | | | 22% | | |
| | |
Returns
|
| |
Coupons
|
| |
Managed
Care/Gov’t Rebates |
| |
Total
|
| ||||||||||||
Balance at December 31, 2020
|
| | | $ | 2,580 | | | | | $ | 12,769 | | | | | $ | 100 | | | | | $ | 15,449 | | |
Current Provision Related to Sales Made in the Current Period
|
| | | | 1,428 | | | | | | 68,591 | | | | | | 2,275 | | | | | | 72,294 | | |
Checks/Credits Issued to Third Parties
|
| | | | (1,594) | | | | | | (64,148) | | | | | | (1,293) | | | | | | (67,035) | | |
Reclassed Between Liability Accounts
|
| | | | (315) | | | | | | 315 | | | | | | — | | | | | | — | | |
Balance at June 30, 2021
|
| | | $ | 2,099 | | | | | $ | 17,527 | | | | | $ | 1,082 | | | | | $ | 20,708 | | |
($ in thousands)
|
| |
Year Ended December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Total cash (used in)/provided by: | | | | | | | | | | | | | |
Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
| | | $ | 5,132 | | | | | $ | 9,018 | | |
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
| | | | (1,200) | | | | | | (2,400) | | |
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
| | | | (487) | | | | | | (3,551) | | |
Net increase in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
| | | $ | 3,445 | | | | | $ | 3,067 | | |
($ in thousands)
|
| |
(Unaudited)
Six Months Ended June 30, |
| | ||||||||||||||
|
2021
|
| |
2020
|
| |
Change
|
| |||||||||||
Net cash (used in) provided by operating activities
|
| | | $ | (6,077) | | | | | $ | 1,149 | | | | | $ | (7,226) | | |
Net cash provided by financing activities
|
| | | | 10,007 | | | | | | — | | | | | | 10,007 | | |
Net increase in cash
|
| | | $ | 3,930 | | | | | $ | 1,149 | | | | | $ | 2,781 | | |
| | |
6 Months Ended
|
| |
Years Ended December 31,
|
| ||||||||||||||||||
($ in thousands)
|
| |
June 30, 2021
|
| |
June 30, 2020
|
| |
2020
|
| |
2019
|
| ||||||||||||
Net (loss) income
|
| | | $ | (11,597) | | | | | $ | 2,752 | | | | | $ | 5,283 | | | | | $ | 3,625 | | |
Income tax (benefit) expense
|
| | | | (3,326) | | | | | | 929 | | | | | | 1,870 | | | | | | 1,379 | | |
Non-cash interest
|
| | | | 1,025 | | | | | | 305 | | | | | | 698 | | | | | | 255 | | |
Amortization of licenses
|
| | | | 1,325 | | | | | | 710 | | | | | | 1,420 | | | | | | 1,174 | | |
Debt discount amortization
|
| | | | 270 | | | | | | — | | | | | | — | | | | | | — | | |
Depreciation
|
| | | | — | | | | | | 3 | | | | | | 5 | | | | | | 5 | | |
Non-GAAP EBITDA
|
| | | $ | (12,303) | | | | | $ | 4,699 | | | | | $ | 9,276 | | | | | $ | 6,438 | | |
Stock-based compensation
|
| | | | 33 | | | | | | 99 | | | | | | 153 | | | | | | 240 | | |
Change in fair value of placement agent warrant
|
| | | | 182 | | | | | | — | | | | | | — | | | | | | — | | |
R&D license non-cash contingent payment
|
| | | | 3,743 | | | | | | — | | | | | | — | | | | | | — | | |
Qbrexza inventory step-up
|
| | | | 1,238 | | | | | | — | | | | | | — | | | | | | — | | |
Severance
|
| | | | 260 | | | | | | — | | | | | | — | | | | | | — | | |
COVID-19 sales force savings
|
| | | | — | | | | | | (1,427)(2) | | | | | | (1,427)(2) | | | | | | — | | |
Non-GAAP Adjusted EBITDA
|
| | | $ | (6,837)(1) | | | | | $ | 3,371 | | | | | $ | 8,002 | | | | | $ | 6,678 | | |
|
Net sales milestones for product acquisition
|
| | | $ | 303,000 | | |
|
Development milestones
|
| | | | 38,500 | | |
|
Contingent payments
|
| | | | 5,000 | | |
|
Accrued research and development license acquired
|
| | | | 8,000 | | |
| | |
Future Lease
Liability |
| |||
Six Months Ended December 31, 2021
|
| | | $ | 48 | | |
Year Ended December 31, 2022
|
| | | | 100 | | |
Total
|
| | | | 148 | | |
Less: present value discount
|
| | | | (5) | | |
Operating lease liabilities
|
| | | $ | 143 | | |
Name
|
| |
Age
|
| |
Position
|
| |||
Claude Maraoui
|
| | | | 55 | | | |
President, Chief Executive Officer and Director
|
|
Ernie De Paolantonio
|
| | | | 68 | | | | Chief Financial Officer | |
Name
|
| |
Age
|
| |
Position
|
| |||
Robert Nevin
|
| | | | 53 | | | | Chief Commercial Officer | |
Ramsey Alloush
|
| | | | 36 | | | | General Counsel | |
Andrew Zwible
|
| | | | 41 | | | | Vice President, Operations | |
Ernest Galvan
|
| | | | 59 | | | |
Vice President, Marketing and Strategy
|
|
Name
|
| |
Age
|
| |
Position
|
| |||
Lindsay A. Rosenwald, M.D.
|
| | | | 66 | | | | Executive Chairman of the Board | |
Claude Maraoui
|
| | | | 55 | | | |
President & Chief Executive Officer, Director
|
|
Neil Herskowitz
|
| | | | 64 | | | | Director | |
Jeff Paley, M.D.
|
| | | | 53 | | | | Director | |
Justin Smith
|
| | | | 47 | | | | Director | |
Miranda Toledano
|
| | | | 44 | | | | Director | |
Name and principal position
|
| |
Year
|
| |
Salary
($) |
| |
Bonus
($) |
| |
Stock
Awards(1) ($) |
| |
All Other
($) |
| |
($)
|
| ||||||||||||||||||
Claude Maraoui. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Chief Executive Officer
|
| | | | 2020 | | | | | $ | 450,000 | | | | | $ | 450,000 | | | | | $ | 1,193,061 | | | | | $ | 827 | | | | | $ | 2,093,888 | | |
Nirav Jhaveri(2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Chief Financial Officer
|
| | | | 2020 | | | | | | 281,194 | | | | | | — | | | | | | 219,050 | | | | | | — | | | | | | 500,924 | | |
| | |
Option Awards(1)
|
| |
Stock Awards(2)
|
| ||||||||||||||||||||||||||||||||||||
Name
|
| |
Grant
Date |
| |
Number of
Securities Underlying Unexercised Options Exercisable |
| |
Number of
Securities Underlying Unexercised Options Unexercisable |
| |
Option
Exercise Price(3) |
| |
Option
Expiration Date |
| |
Number of
Shares of Stock that Have Not Vested |
| |
Market
Value of Shares that Have Not Vested |
| |||||||||||||||||||||
Claude Maraoui
|
| | | | 10/19/2015 | | | | | | 1,250,000 | | | | | | — | | | | | $ | 0.065 | | | | | | 10/19/2025 | | | | | | — | | | | | | — | | |
| | | | | 09/24/2020 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 354,024 | | | | | $ | 1,196,061 | | |
Nirav Jhaveri
|
| | | | 06/17/2019 | | | | | | 13,333 | | | | | | 6,667 | | | | | $ | 1.390 | | | | | | | | | | | | | | | | | | | | |
| | | | | 09/24/2020 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 65,000 | | | | | $ | 219,050 | | |
| | |
Number of
Shares Beneficially Owned Prior to Offering |
| |
Percentage of
Shares Beneficially Owned |
| ||||||
Name of Beneficial Owner
|
| |
Prior to
this Offering |
| |
After
this Offering |
| ||||||
5% and Greater Stockholders: | | | | | | | | | | | | | |
Fortress Biotech, Inc.(1)
|
| | | | 8,500,000 | | | | | | | | |
Named Executive Officers and Directors: | | | | | | | | | | | | | |
Lindsay A. Rosenwald, M.D.(2)
|
| | | | 500,000 | | | | | | | | |
Claude Maraoui(3)
|
| | | | 1,450,000 | | | | | | | | |
Neil Herskowitz
|
| | | | — | | | | | | | | |
Jeff Paley M.D.
|
| | | | — | | | | | | | ||
Justin Smith
|
| | | | — | | | | | | | | |
Miranda Toledano
|
| | | | — | | | | | | | | |
All executive officers and directors as a group
|
| | | | 1,950,000 | | | | | | | | |
Underwriter
|
| |
Number of Shares
|
|
B. Riley Securities, Inc.
|
| |
|
|
Roth Capital Partners, LLC
|
| | | |
Total
|
| | | |
| | |
Per Share
|
| |
Total Without
Exercise of Over- Allotment |
| |
Total With
Exercise of Over- Allotment |
| |||||||||
Public offering price
|
| | | $ | | | | | $ | | | | | $ | | | |||
Underwriting discounts and commissions
|
| | | $ | | | | | $ | | | | | $ | | | |||
Proceeds, before expenses to us
|
| | | $ | | | | | $ | | | | | $ | | | |
| | | | | F-2 | | | |
| | | | | F-3 | | | |
| | | | | F-4 | | | |
| | | | | F-6 | | | |
| | | | | F-7 | | |
| | | | | F-26 | | | |
| | | | | F-27 | | | |
| | | | | F-28 | | | |
| | | | | F-29 | | | |
| | | | | F-30 | | | |
| | | | | F-31 | | |
| | |
June 30,
2021 |
| |
December 31,
2020 |
| ||||||
| | |
(Unaudited)
|
| | | | | | | |||
ASSETS | | | | | | | | | | | | | |
Current assets | | | | | | | | | | | | | |
Cash
|
| | | $ | 12,176 | | | | | $ | 8,246 | | |
Accounts receivable, net of reserves
|
| | | | 26,193 | | | | | | 23,928 | | |
Inventory
|
| | | | 14,315 | | | | | | 1,404 | | |
Prepaid expenses and other current assets
|
| | | | 789 | | | | | | 1,664 | | |
Total current assets
|
| | | | 53,473 | | | | | | 35,242 | | |
Long-term assets | | | | | | | | | | | | | |
Intangible assets, net
|
| | | | 13,701 | | | | | | 15,029 | | |
Operating lease right-of-use asset, net
|
| | | | 133 | | | | | | 175 | | |
Deferred tax assets
|
| | | | 5,269 | | | | | | 1,454 | | |
Other assets
|
| | | | 149 | | | | | | 6 | | |
Total long-term assets
|
| | | | 19,252 | | | | | | 16,664 | | |
Total assets
|
| | | $ | 72,725 | | | | | $ | 51,906 | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | | |
Accounts payable
|
| | | $ | 4,245 | | | | | $ | 1,839 | | |
Accounts payable, related party
|
| | | | 345 | | | | | | 117 | | |
Accrued expenses
|
| | | | 35,364 | | | | | | 21,498 | | |
Accrued expenses, related party
|
| | | | 500 | | | | | | — | | |
Installment payments – licenses, short-term (net of debt discount of $639 and $778 as
of June 30, 2021 and December 31, 2020, respectively) |
| | | | 3,861 | | | | | | 4,522 | | |
Operating lease liabilities, short-term
|
| | | | 94 | | | | | | 85 | | |
Total current liabilities
|
| | | | 44,409 | | | | | | 28,061 | | |
Income tax payable
|
| | | | — | | | | | | 99 | | |
Note payable, related party
|
| | | | 5,245 | | | | | | 5,220 | | |
Installment payments – licenses, long-term (net of debt discount of $565 and $863 as of June 30, 2021 and December 31, 2020, respectively)
|
| | | | 6,435 | | | | | | 8,137 | | |
Convertible class A preferred stock settled note (net of debt discount of $1,824 as of June 30, 2021)
|
| | | | 13,092 | | | | | | — | | |
Derivative warrant liability
|
| | | | 4,287 | | | | | | — | | |
Operating lease liabilities, long-term
|
| | | | 49 | | | | | | 97 | | |
Total liabilities
|
| | | | 73,517 | | | | | | 41,614 | | |
Commitments and contingencies | | | | | | | | | | | | | |
Stockholders’ equity (deficit) | | | | | | | | | | | | | |
Common stock, $.0001 par value, 50,000,000 shares authorized, 3,161,333 and 3,151,333 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
|
| | | | — | | | | | | — | | |
Common stock – Class A, $.0001 par value, 50,000,000 shares authorized, 6,000,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020
|
| | | | 1 | | | | | | 1 | | |
Additional paid-in capital
|
| | | | 5,684 | | | | | | 5,171 | | |
Retained earnings (accumulated deficit)
|
| | | | (6,477) | | | | | | 5,120 | | |
Total stockholders’ equity (deficit)
|
| | | | (792) | | | | | | 10,292 | | |
Total liabilities and stockholders’ equity (deficit)
|
| | | $ | 72,725 | | | | | $ | 51,906 | | |
| | |
Three Months Ended June 30,
|
| |
Six Months Ended June 30,
|
| ||||||||||||||||||
| | |
2021
|
| |
2020
|
| |
2021
|
| |
2020
|
| ||||||||||||
Product revenue, net
|
| | | $ | 15,288 | | | | | $ | 9,415 | | | | | $ | 26,007 | | | | | $ | 21,361 | | |
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of goods sold – product revenue
|
| | | | 7,484 | | | | | | 3,124 | | | | | | 11,392 | | | | | | 6,934 | | |
Research and development
|
| | | | 29 | | | | | | — | | | | | | 29 | | | | | | — | | |
Research and development – licenses
acquired |
| | | | 13,743 | | | | | | — | | | | | | 13,743 | | | | | | — | | |
Selling, general and administrative
|
| | | | 7,795 | | | | | | 4,752 | | | | | | 14,021 | | | | | | 10,441 | | |
Total operating expenses
|
| | | | 29,051 | | | | | | 7,876 | | | | | | 39,185 | | | | | | 17,375 | | |
Income (loss) from operations
|
| | | | (13,763) | | | | | | 1,539 | | | | | | (13,178) | | | | | | 3,986 | | |
Other expense | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense
|
| | | | 1,342 | | | | | | 155 | | | | | | 1,563 | | | | | | 305 | | |
Change in fair value of derivative liability
|
| | | | 182 | | | | | | — | | | | | | 182 | | | | | | — | | |
Total other expense
|
| | | | 1,524 | | | | | | 155 | | | | | | 1,745 | | | | | | 305 | | |
Income (loss) before income taxes
|
| | | | (15,287) | | | | | | 1,384 | | | | | | (14,923) | | | | | | 3,681 | | |
Income tax (benefit) expense
|
| | | | (3,422) | | | | | | 929 | | | | | | (3,326) | | | | | | 929 | | |
Net (loss) income
|
| | | $ | (11,865) | | | | | $ | 455 | | | | | $ | (11,597) | | | | | $ | 2,752 | | |
Net (loss) income per common share – basic
|
| | | $ | (1.30) | | | | | $ | 0.05 | | | | | $ | (1.27) | | | | | $ | 0.30 | | |
Net (loss) income per common share – diluted
|
| | | $ | (1.30) | | | | | $ | 0.04 | | | | | $ | (1.27) | | | | | $ | 0.25 | | |
Weighted average common shares outstanding – basic
|
| | | | 9,161,333 | | | | | | 9,133,333 | | | | | | 9,159,841 | | | | | | 9,133,333 | | |
Weighted average common shares outstanding – diluted
|
| | | | 9,161,333 | | | | | | 10,832,990 | | | | | | 9,159,841 | | | | | | 10,826,279 | | |
| | |
Common Stock
|
| |
Common Stock A
|
| |
Additional
Paid-in Capital |
| |
Retained
Earnings (Accumulated Deficit) |
| |
Total
Shareholders’ Equity / (Deficit) |
| |||||||||||||||||||||||||||
|
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||||||||||
Balance as of December 31, 2020
|
| | | | 3,151,333 | | | | | $ | — | | | | | | 6,000,000 | | | | | $ | 1 | | | | | $ | 5,171 | | | | | $ | 5,120 | | | | | $ | 10,292 | | |
Stock-based compensation
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 33 | | | | | | — | | | | | | 33 | | |
Exercise of options for cash
|
| | | | 10,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | 7 | | | | | | — | | | | | | 7 | | |
Contribution of capital – extinguishment of related party payable
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 473 | | | | | | — | | | | | | 473 | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (11,597) | | | | | | (11,597) | | |
Balance as of June 30, 2021 (Unaudited)
|
| | | | 3,161,333 | | | | | $ | — | | | | | | 6,000,000 | | | | | $ | 1 | | | | | $ | 5,684 | | | | | $ | (6,477) | | | | | $ | (792) | | |
| | |
Common Stock
|
| |
Common Stock A
|
| |
Additional
Paid-in Capital |
| |
Retained
Earnings (Accumulated Deficit) |
| |
Total
Shareholders’ Equity / (Deficit) |
| |||||||||||||||||||||||||||
|
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||||||||||
Balance as of March 31, 2021 (Unaudited)
|
| | | | 3,161,333 | | | | | $ | — | | | | | | 6,000,000 | | | | | $ | 1 | | | | | $ | 5,378 | | | | | $ | 5,388 | | | | | $ | 10,767 | | |
Stock-based compensation
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 11 | | | | | | — | | | | | | 11 | | |
Contribution of capital – extinguishment of related party payable
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 295 | | | | | | — | | | | | | 295 | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (11,865) | | | | | | (11,865) | | |
Balance as of June 30, 2021 (Unaudited)
|
| | | | 3,161,333 | | | | | $ | — | | | | | | 6,000,000 | | | | | $ | 1 | | | | | $ | 5,684 | | | | | $ | (6,477) | | | | | $ | (792) | | |
| | |
Common Stock
|
| |
Common Stock A
|
| |
Additional
Paid-in Capital |
| |
Retained
Earnings (Accumulated Deficit) |
| |
Total
Shareholders’ Equity |
| |||||||||||||||||||||||||||
|
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||||||||||
Balance as of December 31, 2019
|
| | | | 3,133,333 | | | | | $ | — | | | | | | 6,000,000 | | | | | $ | 1 | | | | | $ | 2,914 | | | | | $ | (163) | | | | | $ | 2,752 | | |
Stock-based compensation
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 99 | | | | | | — | | | | | | 99 | | |
Contribution of capital – extinguishment of related party payable
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 854 | | | | | | — | | | | | | 854 | | |
Net income
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,752 | | | | | | 2,752 | | |
Balance as of June 30, 2020 (Unaudited)
|
| | | | 3,133,333 | | | | | $ | — | | | | | | 6,000,000 | | | | | $ | 1 | | | | | $ | 3,867 | | | | | $ | 2,589 | | | | | $ | 6,457 | | |
| | |
Common Stock
|
| |
Common Stock A
|
| |
Additional
Paid-in Capital |
| |
Retained
Earnings |
| |
Total
Shareholders’ Equity |
| |||||||||||||||||||||||||||
|
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||||||||||
Balance as of March 31, 2020 (Unaudited)
|
| | | | 3,133,333 | | | | | $ | — | | | | | | 6,000,000 | | | | | $ | 1 | | | | | $ | 2,973 | | | | | $ | 2,134 | | | | | $ | 5,108 | | |
Stock-based compensation
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 40 | | | | | | — | | | | | | 40 | | |
Contribution of capital – extinguishment of related party payable
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 854 | | | | | | — | | | | | | 854 | | |
Net income
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 455 | | | | | | 455 | | |
Balance as of June 30, 2020 (Unaudited)
|
| | | | 3,133,333 | | | | | $ | — | | | | | | 6,000,000 | | | | | $ | 1 | | | | | $ | 3,867 | | | | | $ | 2,589 | | | | | $ | 6,457 | | |
| | |
Six Months Ended June 30,
|
| |||||||||
|
2021
|
| |
2020
|
| ||||||||
Cash flows from operating activities | | | | | | | | | | | | | |
Net (loss) income
|
| | | $ | (11,597) | | | | | $ | 2,752 | | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | | | | | |
Depreciation expenses
|
| | | | — | | | | | | 3 | | |
Bad debt (reserve) expense
|
| | | | (57) | | | | | | 76 | | |
Non-cash interest expense
|
| | | | 1,025 | | | | | | 305 | | |
Amortization of debt discount
|
| | | | 270 | | | | | | — | | |
Amortization of license fee
|
| | | | 1,325 | | | | | | 710 | | |
Amortization of operating lease right-of-use assets
|
| | | | 42 | | | | | | 45 | | |
Stock-based compensation
|
| | | | 33 | | | | | | 99 | | |
Deferred taxes (benefit) provision
|
| | | | (3,414) | | | | | | 44 | | |
Extinguishment of related party income tax payable
|
| | | | 72 | | | | | | 885 | | |
Change in fair value of derivative liability
|
| | | | 182 | | | | | | — | | |
Research and development-licenses acquired, expense
|
| | | | 3,743 | | | | | | — | | |
Changes in operating assets and liabilities:
|
| | | | | | | | | | | | |
Accounts receivable
|
| | | | (2,208) | | | | | | 1,692 | | |
Inventory
|
| | | | (12,911) | | | | | | (351) | | |
Prepaid expenses and other current assets
|
| | | | 950 | | | | | | 100 | | |
Other assets
|
| | | | (143) | | | | | | (200) | | |
Accounts payable
|
| | | | 2,131 | | | | | | (607) | | |
Accounts payable, related party
|
| | | | 252 | | | | | | 27 | | |
Accrued expenses
|
| | | | 13,866 | | | | | | (4,372) | | |
Accrued expenses, related party
|
| | | | 500 | | | | | | — | | |
Income tax payable
|
| | | | (99) | | | | | | (14) | | |
Lease liabilities
|
| | | | (39) | | | | | | (45) | | |
Net cash (used in) provided by operating activities
|
| | | | (6,077) | | | | | | 1,149 | | |
Cash flows from financing activities | | | | | | | | | | | | | |
Proceeds from the exercise of options
|
| | | | 7 | | | | | | — | | |
Payment of license note payable
|
| | | | (2,800) | | | | | | — | | |
Proceeds from convertible preferred shares
|
| | | | 14,332 | | | | | | — | | |
Payment of debt issuance costs associated with convertible preferred shares
|
| | | | (1,532) | | | | | | — | | |
Net cash provided by financing activities
|
| | | | 10,007 | | | | | | — | | |
Net increase in cash
|
| | | | 3,930 | | | | | | 1,149 | | |
Cash at the beginning of the period
|
| | | | 8,246 | | | | | | 4,801 | | |
Cash at the end of the period
|
| | | $ | 12,176 | | | | | $ | 5,950 | | |
Supplemental disclosure of cash flow information: | | | | | | | | | | | | | |
Cash paid for income taxes
|
| | | $ | 157 | | | | | $ | 61 | | |
Supplemental disclosure of non-cash financing and investing activities: | | | | | | | | | | | | | |
Unpaid debt offering cost
|
| | | $ | 200 | | | | | $ | — | | |
Unpaid deferred offering cost
|
| | | $ | 75 | | | | | $ | — | | |
Derivative warrant liability associated with convertible preferred shares
|
| | | $ | 362 | | | | | $ | — | | |
Extinguishment of related party payable relates to deferred tax assets
|
| | | $ | 401 | | | | | $ | (31) | | |
| | |
June 30,
2021 |
| |
December 31,
2020 |
| ||||||
| | |
(Unaudited)
|
| | ||||||||
Raw materials
|
| | | $ | 4,907 | | | | | $ | — | | |
Finished goods
|
| | | | 9,408 | | | | | | 1,404 | | |
Total Inventory
|
| | | $ | 14,315 | | | | | $ | 1,404 | | |
| | |
Useful Life
(Years) |
| |
June 30,
2021 |
| |
December 31,
2020 |
| ||||||
| | | | | |
(Unaudited)
|
| | ||||||||
Leasehold improvements
|
| |
2
|
| | | $ | 11 | | | | | $ | 11 | | |
Total property and equipment
|
| | | | | | | 11 | | | | | | 11 | | |
Less: Accumulated depreciation
|
| | | | | | | (11) | | | | | | (11) | | |
Property and equipment, net
|
| | | | | | $ | — | | | | | $ | — | | |
| | |
Estimated Useful
Life (Years) |
| |
June 30,
2021 |
| |
December 31,
2020 |
| ||||||
| | | | | |
(Unaudited)
|
| | ||||||||
Ceracade® | | |
3
|
| | | $ | 300 | | | | | $ | 300 | | |
Luxamend® | | |
3
|
| | | | 50 | | | | | | 50 | | |
Targadox® | | |
3
|
| | | | 1,250 | | | | | | 1,250 | | |
Ximino® | | |
7
|
| | | | 7,134 | | | | | | 7,134 | | |
Exelderm® | | |
3
|
| | | | 1,600 | | | | | | 1,600 | | |
Accutane
|
| |
5
|
| | | | 4,727 | | | | | | 4,727 | | |
Anti-itch product(1)
|
| |
3
|
| | | | 3,942 | | | | | | 3,945 | | |
Total
|
| | | | | | | 19,003 | | | | | | 19,006 | | |
Accumulated amortization
|
| | | | | | | (5,302) | | | | | | (3,977) | | |
Net intangible assets
|
| | | | | | $ | 13,701 | | | | | $ | 15,029 | | |
| | |
Ximino®
|
| |
Exelderm®
|
| |
Accutane®
|
| |
Total
Amortization |
| ||||||||||||
Six Months Ended December 31, 2021
|
| | | $ | 509 | | | | | $ | 167 | | | | | $ | 473 | | | | | $ | 1,149 | | |
December 31, 2022
|
| | | | 1,019 | | | | | | — | | | | | | 946 | | | | | | 1,965 | | |
December 31, 2023
|
| | | | 1,019 | | | | | | — | | | | | | 945 | | | | | | 1,964 | | |
December 31, 2024
|
| | | | 1,019 | | | | | | — | | | | | | 946 | | | | | | 1,965 | | |
December 31, 2025
|
| | | | 1,019 | | | | | | — | | | | | | 945 | | | | | | 1,964 | | |
Thereafter
|
| | | | 595 | | | | | | — | | | | | | 157 | | | | | | 752 | | |
Sub-total
|
| | | $ | 5,180 | | | | | $ | 167 | | | | | $ | 4,412 | | | | | $ | 9,759 | | |
Asset not yet placed in service
|
| | | | | | | | | | | | | | | | | | | | | | 3,942 | | |
Total
|
| | | $ | 5,180 | | | | | $ | 167 | | | | | $ | 4,412 | | | | | $ | 13,701 | | |
| | |
June 30, 2021
|
| |||
Risk-free interest rate
|
| | | | 0.87% | | |
Expected dividend yield
|
| | | | — | | |
Expected term in years
|
| | | | 1.3 | | |
Expected volatility
|
| | | | 50% | | |
| | |
June 30, 2021
|
|
Discount rate
|
| |
30%
|
|
Expected dividend yield
|
| |
—
|
|
Expected term
|
| |
3 months to 5 years
|
|
| | |
Fair Value Measurement as of June 30, 2021
|
| |||||||||||||||||||||
|
Level 1
|
| |
Level 2
|
| |
Level 3
|
| |
Total
|
| ||||||||||||||
Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative warrant liability
|
| | | $ | — | | | | | | | | | | | $ | 4,287 | | | | | $ | 4,287 | | |
Total
|
| | | $ | — | | | | | $ | — | | | | | $ | 4,287 | | | | | $ | 4,287 | | |
| | |
Warrant
Liability |
| |||
Balance at December 31, 2020
|
| | | $ | — | | |
Additions: | | | | | | | |
Contingent payment warrant
|
| | | | 3,743 | | |
Placement agent warrant
|
| | | | 362 | | |
Change in fair value of warrant liability
|
| | | | 182 | | |
Balance at June 30, 2021 (Unaudited)
|
| | | $ | 4,287 | | |
| | |
June 30,
2021 |
| |
December 31,
2020 |
| ||||||
| | |
(Unaudited)
|
| | ||||||||
Accrued expenses: | | | | | | | | | | | | | |
Accrued employee compensation
|
| | | $ | 1,948 | | | | | $ | 2,041 | | |
Research and development – license fees
|
| | | | 8,000 | | | | | | — | | |
Accrued royalties payable
|
| | | | 3,340 | | | | | | 2,682 | | |
Accrued coupons and rebates
|
| | | | 18,609 | | | | | | 12,869 | | |
Return reserve
|
| | | | 2,099 | | | | | | 2,580 | | |
Other
|
| | | | 1,368 | | | | | | 1,326 | | |
Total accrued expenses
|
| | | $ | 35,364 | | | | | $ | 21,498 | | |
| | |
June 30, 2021
|
| |||||||||||||||||||||
| | |
Ximino(1)
|
| |
Accutane(2)
|
| |
Anti-Itch
Product(3) |
| |
Total
|
| ||||||||||||
Installment payments – licenses, short-term
|
| | | $ | 2,000 | | | | | $ | 1,000 | | | | | $ | 1,500 | | | | | $ | 4,500 | | |
Less: imputed interest
|
| | | | (517) | | | | | | (101) | | | | | | (21) | | | | | | (639) | | |
Sub-total installment payments – licenses, short-term
|
| | | | 1,483 | | | | | | 899 | | | | | | 1,479 | | | | | | 3,861 | | |
Installment payments – licenses, long-term
|
| | | | 5,000 | | | | | | 2,000 | | | | | | — | | | | | | 7,000 | | |
Less: imputed interest
|
| | | | (519) | | | | | | (46) | | | | | | — | | | | | | (565) | | |
Sub-total installment payments – licenses, long-term
|
| | | | 4,481 | | | | | | 1,954 | | | | | | — | | | | | | 6,435 | | |
Total installment payments – licenses
|
| | | $ | 5,964 | | | | | $ | 2,853 | | | | | $ | 1,479 | | | | | $ | 10,296 | | |
| | |
December 31, 2020
|
| |||||||||||||||||||||
| | |
Ximino(1)
|
| |
Accutane(2)
|
| |
Anti-Itch
Product(3) |
| |
Total
|
| ||||||||||||
Installment payments – licenses, short-term
|
| | | $ | 2,000 | | | | | $ | 500 | | | | | $ | 2,800 | | | | | $ | 5,300 | | |
Less: imputed interest
|
| | | | (602) | | | | | | (122) | | | | | | (54) | | | | | | (778) | | |
Sub-total installment payments – licenses, short-term
|
| | | | 1,398 | | | | | | 378 | | | | | | 2,746 | | | | | | 4,522 | | |
Installment payments – licenses, long-term
|
| | | | 5,000 | | | | | | 3,000 | | | | | | 1,000 | | | | | | 9,000 | | |
Less: imputed interest
|
| | | | (775) | | | | | | (88) | | | | | | — | | | | | | (863) | | |
Sub-total installment payments – licenses, long-term
|
| | | | 4,225 | | | | | | 2,912 | | | | | | 1,000 | | | | | | 8,137 | | |
Total installment payments – licenses
|
| | | $ | 5,623 | | | | | $ | 3,290 | | | | | $ | 3,746 | | | | | $ | 12,659 | | |
| | |
Principal
|
| |
Imputed
Interest |
| |
Total Notes
Payable |
| |||||||||
Six Months Ended December 31, 2021
|
| | | $ | 2,500 | | | | | $ | (341) | | | | | $ | 2,159 | | |
December 31, 2022
|
| | | | 5,000 | | | | | | (490) | | | | | | 4,510 | | |
December 31, 2023
|
| | | | 2,500 | | | | | | (276) | | | | | | 2,224 | | |
December 31, 2024
|
| | | | 1,500 | | | | | | (97) | | | | | | 1,403 | | |
Total
|
| | | $ | 11,500 | | | | | $ | (1,204) | | | | | $ | 10,296 | | |
| | |
Three Months Ended
June 30, |
| |
Six Months Ended
June 30, |
| ||||||||||||||||||
| | |
2021
|
| |
2020
|
| |
2021
|
| |
2020
|
| ||||||||||||
Lease cost | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating lease cost
|
| | | $ | 21 | | | | | $ | 24 | | | | | $ | 44 | | | | | $ | 47 | | |
Variable lease cost
|
| | | | 1 | | | | | | — | | | | | | 2 | | | | | | — | | |
Total lease cost
|
| | | $ | 22 | | | | | $ | 24 | | | | | $ | 46 | | | | | $ | 47 | | |
| | |
Six Months Ended
June 30, |
| |||||||||
|
2021
|
| |
2020
|
| ||||||||
Operating cash flows from operating leases
|
| | | $ | 44 | | | | | $ | 47 | | |
Weighted-average remaining lease term – operating leases
|
| | | | 1.2 | | | | | | 0.5 | | |
Weighted-average discount rate – operating leases
|
| | | | 4.0% | | | | | | 6.0% | | |
| | |
Future Lease
Liability |
| |||
Six Months Ended December 31, 2021
|
| | | $ | 48 | | |
Year Ended December 31, 2022
|
| | | | 100 | | |
Total
|
| | | | 148 | | |
Less: present value discount
|
| | | | (5) | | |
Operating lease liabilities
|
| | | $ | 143 | | |
($ in thousands)
|
| |
Three Months Ended June 30,
|
| |||||||||||||||||||||||||||||||||
|
2021
|
| |
2020
|
| ||||||||||||||||||||||||||||||||
|
Interest
|
| |
Fees
|
| |
Total
|
| |
Interest
|
| |
Fees
|
| |
Total
|
| ||||||||||||||||||||
Convertible preferred shares
|
| | | | — | | | | | | 270 | | | | | | 270 | | | | | | — | | | | | | — | | | | | | — | | |
Conversion premium
|
| | | | 584 | | | | | | — | | | | | | 584 | | | | | | — | | | | | | — | | | | | | — | | |
Interest payable on convertible preferred shares
|
| | | | 263 | | | | | | — | | | | | | 263 | | | | | | — | | | | | | — | | | | | | — | | |
Installment payments – licenses
|
| | | | 220 | | | | | | — | | | | | | 220 | | | | | | 155 | | | | | | — | | | | | | 155 | | |
EWB Fees
|
| | | | 5 | | | | | | — | | | | | | 5 | | | | | | — | | | | | | — | | | | | | — | | |
Total Interest Expense and Financing Fee
|
| | | $ | 1,072 | | | | | $ | 270 | | | | | $ | 1,342 | | | | | $ | 155 | | | | | $ | — | | | | | $ | 155 | | |
| | |
Number of
shares |
| |
Weighted
average exercise price |
| |
Total weighted
average intrinsic value |
| |
Weighted
average remaining contractual life (years) |
| ||||||||||||
Outstanding options at December 31, 2020
|
| | | | 2,142,000 | | | | | $ | 0.80 | | | | | $ | 7,934,320 | | | | | | 5.72 | | |
Exercised
|
| | | | (10,000) | | | | | | 0.68 | | | | | | | | | | | | | | |
Forfeited
|
| | | | (17,666) | | | | | | 1.36 | | | | | | | | | | | | | | |
Outstanding options at June 30, 2021
|
| | | | 2,114,334 | | | | | $ | 0.79 | | | | | $ | 7,840,679 | | | | | | 5.20 | | |
Options vested and exercisable
|
| | | | 1,978,416 | | | | | $ | 0.75 | | | | | $ | 7,415,011 | | | | | | 5.02 | | |
| | |
Number of
units |
| |
Weighted
average exercise price |
| ||||||
Unvested balance at December 31, 2020
|
| | | | 815,524 | | | | | $ | 3.37 | | |
Forfeited
|
| | | | (95,000) | | | | | | 3.37 | | |
Unvested balance at June 30, 2021
|
| | | | 720,524 | | | | | $ | 3.37 | | |
| | |
Three Months Ended
June 30, |
| |
Six Months Ended
June 30, |
| ||||||||||||||||||
|
2021
|
| |
2020
|
| |
2021
|
| |
2020
|
| ||||||||||||||
Targadox® | | | | $ | 5,727 | | | | | $ | 6,514 | | | | | $ | 12,926 | | | | | $ | 14,981 | | |
Ximino® | | | | | 1,312 | | | | | | 2,074 | | | | | | 3,413 | | | | | | 4,823 | | |
Exelderm® | | | | | 1,736 | | | | | | 864 | | | | | | 2,953 | | | | | | 1,687 | | |
Accutane® | | | | | 1,945 | | | | | | — | | | | | | 2,141 | | | | | | — | | |
Qbrexza® | | | | | 4,568 | | | | | | — | | | | | | 4,568 | | | | | | — | | |
Other branded revenue
|
| | | | — | | | | | | (37) | | | | | | 6 | | | | | | (130) | | |
Total product revenues
|
| | | $ | 15,288 | | | | | $ | 9,415 | | | | | $ | 26,007 | | | | | $ | 21,361 | | |
| | |
For the Three and
Six Months Ended June 30, 2021 |
| |||
Unvested restricted stock units/awards
|
| | | | 720,524 | | |
Unvested Options
|
| | | | 2,114,334 | | |
Total potential dilutive effect
|
| | | | 2,834,858 | | |
| | |
Three Months
|
| |
Six Months
|
| ||||||
|
Ended June 30, 2020
|
| |||||||||||
Net income
|
| | | $ | 455 | | | | | $ | 2,752 | | |
Weighted average shares outstanding – basic
|
| | | | 9,133,333 | | | | | | 9,133,333 | | |
Stock options
|
| | | | 1,699,657 | | | | | | 1,692,946 | | |
Weighted average shares outstanding – diluted
|
| | | | 10,832,990 | | | | | | 10,826,279 | | |
Per share data: | | | | | | | | | | | | | |
Basic
|
| | | $ | 0.05 | | | | | $ | 0.30 | | |
Diluted
|
| | | $ | 0.04 | | | | | $ | 0.25 | | |
| | |
December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
ASSETS | | | | | | | | | | | | | |
Current assets | | | | | | | | | | | | | |
Cash
|
| | | $ | 8,246 | | | | | $ | 4,801 | | |
Accounts receivable, net of reserves
|
| | | | 23,928 | | | | | | 18,955 | | |
Inventory
|
| | | | 1,404 | | | | | | 857 | | |
Prepaid expenses and other current assets
|
| | | | 1,664 | | | | | | 655 | | |
Total current assets
|
| | | | 35,242 | | | | | | 25,268 | | |
Long-term assets | | | | | | | | | | | | | |
Property and equipment, net
|
| | | | — | | | | | | 5 | | |
Intangible assets, net
|
| | | | 15,029 | | | | | | 7,377 | | |
Operating lease right-of-use asset, net
|
| | | | 175 | | | | | | 84 | | |
Deferred tax assets
|
| | | | 1,454 | | | | | | 1,119 | | |
Other assets
|
| | | | 6 | | | | | | 6 | | |
Total long-term assets
|
| | | | 16,664 | | | | | | 8,591 | | |
Total assets
|
| | | $ | 51,906 | | | | | $ | 33,859 | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
| | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | | |
Accounts payable
|
| | | $ | 1,839 | | | | | $ | 2,043 | | |
Accounts payable, related party
|
| | | | 117 | | | | | | 65 | | |
Accrued expenses
|
| | | | 21,498 | | | | | | 18,706 | | |
Installment payments – licenses, short-term (net of debt discount of $778 and nil as
of December 31, 2020 and December 31, 2019, respectively) |
| | | | 4,522 | | | | | | — | | |
Operating lease liabilities, short-term
|
| | | | 85 | | | | | | 83 | | |
Total current liabilities
|
| | | | 28,061 | | | | | | 20,897 | | |
Income tax payable | | | | | 99 | | | | | | — | | |
Note payable, related party
|
| | | | 5,220 | | | | | | 5,220 | | |
Installment payments – licenses, long-term (net of debt discount of $863 and $2,010 as
of December 31, 2020 and December 31, 2019, respectively) |
| | | | 8,137 | | | | | | 4,990 | | |
Operating lease liabilities, long-term
|
| | | | 97 | | | | | | — | | |
Total liabilities
|
| | | | 41,614 | | | | | | 31,107 | | |
Commitments and contingencies (Note 10) | | | | | | | | | | | | | |
Stockholders’ equity | | | | | | | | | | | | | |
Common stock, $.0001 par value, 50,000,000 shares authorized
|
| | | | | | | | | | | | |
Common stock, 3,151,333 and 3,133,333 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively
|
| | | | — | | | | | | — | | |
Common stock – Class A, 6,000,000 shares issued and outstanding as of December 31, 2020 and December 31, 2019
|
| | | | 1 | | | | | | 1 | | |
Additional paid-in capital
|
| | | | 5,171 | | | | | | 2,914 | | |
Retained earnings (accumulated deficit)
|
| | | | 5,120 | | | | | | (163) | | |
Total stockholders’ equity
|
| | | | 10,292 | | | | | | 2,752 | | |
Total liabilities and stockholders’ equity
|
| | | $ | 51,906 | | | | | $ | 33,859 | | |
| | |
For the Years Ended December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Product revenue, net
|
| | | $ | 44,531 | | | | | $ | 34,921 | | |
Operating expenses | | | | | | | | | | | | | |
Cost of goods sold – product revenue
|
| | | | 14,594 | | | | | | 10,532 | | |
Selling, general and administrative
|
| | | | 22,086 | | | | | | 19,130 | | |
Total operating expenses
|
| | | | 36,680 | | | | | | 29,662 | | |
Income from operations
|
| | | | 7,851 | | | | | | 5,259 | | |
Other expense | | | | | | | | | | | | | |
Interest expense
|
| | | | 698 | | | | | | 255 | | |
Total other expense
|
| | | | 698 | | | | | | 255 | | |
Income before income taxes
|
| | | | 7,153 | | | | | | 5,004 | | |
Income tax expense
|
| | | | 1,870 | | | | | | 1,379 | | |
Net income
|
| | | $ | 5,283 | | | | | $ | 3,625 | | |
Net income per common share – basic
|
| | | $ | 0.58 | | | | | $ | 0.40 | | |
Net income per common share – diluted
|
| | | $ | 0.49 | | | | | $ | 0.36 | | |
Weighted average shares outstanding – basic
|
| | | | 9,135,985 | | | | | | 9,133,333 | | |
Weighted average shares outstanding – diluted
|
| | | | 10,836,122 | | | | | | 10,075,804 | | |
| | |
Common Stock
|
| |
Common Stock A
|
| |
Additional
Paid-in Capital |
| |
Retained
Earnings (Accumulated Deficit) |
| |
Total
Shareholders’ Equity (Deficit) |
| |||||||||||||||||||||||||||
|
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||||||||||
Balance as of January 1, 2019
|
| | | | 3,133,333 | | | | | $ | — | | | | | | 6,000,000 | | | | | $ | 1 | | | | | $ | 1,491 | | | | | $ | (3,788) | | | | | $ | (2,296) | | |
Stock-based compensation
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 240 | | | | | | — | | | | | | 240 | | |
Contribution of capital – extinguishment of related party payable
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,183 | | | | | | — | | | | | | 1,183 | | |
Net income
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 3,625 | | | | | | 3,625 | | |
Balance as of December 31, 2019
|
| | | | 3,133,333 | | | | | $ | — | | | | | | 6,000,000 | | | | | $ | 1 | | | | | $ | 2,914 | | | | | $ | (163) | | | | | $ | 2,752 | | |
Stock-based compensation
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 153 | | | | | | — | | | | | | 153 | | |
Exercise of options for cash
|
| | | | 18,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | 13 | | | | | | — | | | | | | 13 | | |
Contribution of capital – extinguishment of related party payable
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,091 | | | | | | — | | | | | | 2,091 | | |
Net income
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 5,283 | | | | | | 5,283 | | |
Balance as of December 31, 2020
|
| | | | 3,151,333 | | | | | $ | — | | | | | | 6,000,000 | | | | | $ | 1 | | | | | $ | 5,171 | | | | | $ | 5,120 | | | | | $ | 10,292 | | |
| | |
For the Years Ended
December 31, |
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Cash flows from operating activities | | | | | | | | | | | | | |
Net income
|
| | | $ | 5,283 | | | | | $ | 3,625 | | |
Adjustments to reconcile net loss to net income provided by operating activities: | | | | | | | | | | | | | |
Depreciation expense
|
| | | | 5 | | | | | | 5 | | |
Bad debt expense
|
| | | | 49 | | | | | | 100 | | |
Non-cash interest expense
|
| | | | 698 | | | | | | 255 | | |
Amortization of license fee
|
| | | | 1,420 | | | | | | 1,174 | | |
Amortization of operating lease right-of-use assets
|
| | | | 91 | | | | | | 85 | | |
Stock-based compensation
|
| | | | 153 | | | | | | 240 | | |
Deferred income taxes
|
| | | | (335) | | | | | | 69 | | |
Changes in operating assets and liabilities:
|
| | | | | | | | | | | | |
Accounts receivable
|
| | | | (5,022) | | | | | | (10,492) | | |
Inventory
|
| | | | (547) | | | | | | (179) | | |
Prepaid expenses and other current assets
|
| | | | (1,009) | | | | | | 404 | | |
Accounts payable
|
| | | | (204) | | | | | | 1,083 | | |
Accounts payable, related party
|
| | | | 52 | | | | | | 65 | | |
Accrued expenses
|
| | | | 2,390 | | | | | | 11,651 | | |
Income tax payable
|
| | | | 2,191 | | | | | | 1,019 | | |
Lease liabilities
|
| | | | (83) | | | | | | (86) | | |
Net cash provided by operating activities
|
| | | | 5,132 | | | | | | 9,018 | | |
Cash flows from investing activities | | | | | | | | | | | | | |
Purchase of intangible assets
|
| | | | (1,200) | | | | | | (2,400) | | |
Net cash used in investing activities
|
| | | | (1,200) | | | | | | (2,400) | | |
Cash flows from financing activities | | | | | | | | | | | | | |
Proceeds from the exercise of options
|
| | | | 13 | | | | | | — | | |
Payment of license note payable
|
| | | | (500) | | | | | | — | | |
Payment of Fortress Note
|
| | | | — | | | | | | (4,000) | | |
Proceeds from Fortress Note
|
| | | | — | | | | | | 449 | | |
Net cash used in financing activities
|
| | | | (487) | | | | | | (3,551) | | |
Net increase in cash
|
| | | | 3,445 | | | | | | 3,067 | | |
Cash at the beginning of the period
|
| | | | 4,801 | | | | | | 1,734 | | |
Cash at the end of the period
|
| | | $ | 8,246 | | | | | $ | 4,801 | | |
Supplemental disclosure of cash flow information: | | | | | | | | | | | | | |
Cash paid for income taxes
|
| | | $ | 110 | | | | | $ | 192 | | |
Supplemental disclosure of non-cash financing and investing activities: | | | | | | | | | | | | | |
Note payable for intangible asset acquisition
|
| | | $ | 7,872 | | | | | $ | 4,734 | | |
Contribution capital – extinguishment of related party payable
|
| | | $ | 2,091 | | | | | $ | 1,183 | | |
| | |
As of December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Finished Goods
|
| | | $ | 1,404 | | | | | $ | 857 | | |
Total Inventory
|
| | | $ | 1,404 | | | | | $ | 857 | | |
| | |
Useful Life
(Years) |
| |
As of December 31,
|
| ||||||||||||
|
2020
|
| |
2019
|
| ||||||||||||||
Leasehold improvements
|
| | | | 2 | | | | | $ | 11 | | | | | $ | 11 | | |
Less: accumulated depreciation
|
| | | | | | | | | | (11) | | | | | | (6) | | |
Property and equipment, net
|
| | | | | | | | | $ | — | | | | | $ | 5 | | |
| | |
Estimated Useful
|
| |
As of December 31,
|
| ||||||||||||
|
Life (Years)
|
| |
2020
|
| |
2019
|
| |||||||||||
Ceracade® | | | | | 3 | | | | | $ | 300 | | | | | $ | 300 | | |
Luxamend® | | | | | 3 | | | | | | 50 | | | | | | 50 | | |
Targadox® | | | | | 3 | | | | | | 1,250 | | | | | | 1,250 | | |
Ximino®(1) | | | | | 7 | | | | | | 7,134 | | | | | | 7,134 | | |
Exelderm® | | | | | 3 | | | | | | 1,600 | | | | | | 1,200 | | |
Accutane®(2) | | | | | 5 | | | | | | 4,727 | | | | | | — | | |
Anti-itch product(3)
|
| | | | 3 | | | | | | 3,945 | | | | | | — | | |
Total
|
| | | | | | | | | | 19,006 | | | | | | 9,934 | | |
Less: accumulated amortization
|
| | | | | | | | | | (3,977) | | | | | | (2,557) | | |
Intangible assets, net
|
| | | | | | | | | $ | 15,029 | | | | | $ | 7,377 | | |
| | |
Ximino®
|
| |
Exelderm®
|
| |
Accutane®
|
| |
Total
Amortization |
| ||||||||||||
December 31, 2021
|
| | | $ | 1,019 | | | | | $ | 667 | | | | | $ | 788 | | | | | $ | 2,074 | | |
December 31, 2022
|
| | | | 1,019 | | | | | | — | | | | | | 945 | | | | | | 1,964 | | |
December 31, 2023
|
| | | | 1,019 | | | | | | — | | | | | | 945 | | | | | | 1,964 | | |
December 31, 2024
|
| | | | 1,019 | | | | | | — | | | | | | 945 | | | | | | 1,964 | | |
December 31, 2025
|
| | | | 1,019 | | | | | | — | | | | | | 945 | | | | | | 1,964 | | |
Thereafter
|
| | | | 595 | | | | | | — | | | | | | 159 | | | | | | 754 | | |
Sub-total
|
| | | $ | 5,690 | | | | | $ | 667 | | | | | $ | 4,727 | | | | | $ | 11,084 | | |
Assets not yet placed in service
|
| | | | — | | | | | | — | | | | | | — | | | | | | 3,945 | | |
Total
|
| | | $ | 5,690 | | | | | $ | 667 | | | | | $ | 4,727 | | | | | $ | 15,029 | | |
| | |
As of December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Accrued expenses: | | | | | | | | | | | | | |
Accrued employee compensation
|
| | | $ | 2,041 | | | | | $ | 1,762 | | |
Accrued royalties payable
|
| | | | 2,682 | | | | | | 2,320 | | |
Accrued coupon and rebates
|
| | | | 12,869 | | | | | | 9,291 | | |
Accrued returns reserve
|
| | | | 2,580 | | | | | | 4,516 | | |
Other
|
| | | | 1,326 | | | | | | 817 | | |
Total accrued expenses
|
| | | $ | 21,498 | | | | | $ | 18,706 | | |
| | |
Principal
|
| |
Imputed Interest
Discount |
| |
Total Notes
Payable |
| |||||||||
December 31, 2021
|
| | | $ | 5,300 | | | | | $ | (778) | | | | | $ | 4,522 | | |
December 31, 2022
|
| | | | 5,000 | | | | | | (490) | | | | | | 4,510 | | |
December 31, 2023
|
| | | | 2,500 | | | | | | (276) | | | | | | 2,224 | | |
December 31, 2024
|
| | | | 1,500 | | | | | | (97) | | | | | | 1,403 | | |
Total
|
| | | $ | 14,300 | | | | | $ | (1,641) | | | | | $ | 12,659 | | |
| | |
For the Years Ended December 31,
|
| |||
| | |
2020
|
| |
2019
|
|
Lease cost | | | | | | | |
| | |
For the Years Ended
December 31, |
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Operating lease cost
|
| | | $ | 94 | | | | | $ | 94 | | |
Variable lease cost
|
| | | | 6 | | | | | | 4 | | |
Total lease cost
|
| | | $ | 100 | | | | | $ | 98 | | |
|
| | |
For the Years Ended December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Operating cash flows from operating leases
|
| | | $ | 86 | | | | | $ | 94 | | |
Right-of-use assets exchanged for new operating lease liabilities
|
| | | | 182 | | | | | | — | | |
Weighted-average remaining lease term – operating leases
|
| | | | 1.5 | | | | | | 1.0 | | |
Weighted-average discount rate – operating leases
|
| | | | 5.0% | | | | | | 6.0% | | |
| | |
Future Lease Liability
|
| |||
Year Ended December 31, 2021
|
| | | $ | 91 | | |
Year Ended December 31, 2022
|
| | | | 100 | | |
Total
|
| | | | 191 | | |
Less: present value discount
|
| | | | (9) | | |
Operating lease liabilities
|
| | | $ | 182 | | |
|
Risk-free interest rate
|
| |
1.85% – 2.09%
|
|
|
Expected dividend yield
|
| |
—
|
|
|
Expected term in years
|
| |
5.0 – 10.0
|
|
|
Expected volatility
|
| |
111.43% – 112.03%
|
|
|
Risk-free interest rate
|
| | | | 2.49% | | |
|
Expected dividend yield
|
| | | | — | | |
|
Expected term in years
|
| | | | 4.0 | | |
|
Expected volatility
|
| | | | 75% | | |
| | |
Number of
Shares |
| |
Weighted
Average Exercise Price |
| |
Total
Weighted Average Intrinsic Value |
| |
Weighted
Average Remaining Contractual Life (Years) |
| ||||||||||||
Outstanding options as of December 31, 2018
|
| | | | 2,050,000 | | | | | $ | 0.72 | | | | | $ | 1,382,450 | | | | | | 7.39 | | |
Granted
|
| | | | 285,000 | | | | | | 1.39 | | | | | | — | | | | | | — | | |
Forfeited
|
| | | | (41,000) | | | | | | 1.20 | | | | | | 52,156 | | | | | | — | | |
Outstanding options as of December 31, 2019
|
| | | | 2,294,000 | | | | | | 0.79 | | | | | $ | 5,916,970 | | | | | | 6.73 | | |
Exercised
|
| | | | (18,000) | | | | | | 0.69 | | | | | | 29,428 | | | | | | — | | |
Forfeited
|
| | | | (134,000) | | | | | | 0.72 | | | | | | 325,359 | | | | | | — | | |
Outstanding options as of December 31, 2020
|
| | | | 2,142,000 | | | | | $ | 0.80 | | | | | $ | 7,934,320 | | | | | | 5.72 | | |
Options vested and exercisable as of December 31, 2020
|
| | | | 1,865,083 | | | | | $ | 0.72 | | | | | $ | 7,046,658 | | | | | | 5.38 | | |
| | |
Number of Units
|
| |
Weighted
Average Exercise Price |
| ||||||
Unvested balance at December 31, 2019
|
| | | | — | | | | | $ | — | | |
Granted
|
| | | | 845,524 | | | | | | 3.37 | | |
Forfeited
|
| | | | (30,000) | | | | | | 3.37 | | |
Unvested balance at December 31, 2020
|
| | | | 815,524 | | | | | $ | 3.37 | | |
| | |
December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Targadox® | | | | $ | 30,708 | | | | | $ | 28,068 | | |
Ximino® | | | | | 9,518 | | | | | | 3,642 | | |
Exelderm® | | | | | 4,453 | | | | | | 2,867 | | |
Other branded revenue
|
| | | | (148) | | | | | | 344 | | |
Total product revenue, net
|
| | | $ | 44,531 | | | | | $ | 34,921 | | |
| | |
For the Years Ended December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Current: | | | | | | | | | | | | | |
Federal
|
| | | $ | 1,669 | | | | | $ | 1,110 | | |
State
|
| | | | 536 | | | | | | 200 | | |
Total current
|
| | | | 2,205 | | | | | | 1,310 | | |
Deferred: | | | | | | | | | | | | | |
Federal
|
| | | | (234) | | | | | | (28) | | |
State
|
| | | | (101) | | | | | | 97 | | |
Total deferred
|
| | | | (335) | | | | | | 69 | | |
| | |
For the Years Ended
December 31, |
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Total income tax expense
|
| | | $ | 1,870 | | | | | $ | 1,379 | | |
|
| | |
As of December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Deferred tax assets: | | | | | | | | | | | | | |
Net operating loss carryforwards
|
| | | $ | 5 | | | | | $ | 46 | | |
Amortization of license fees
|
| | | | 1,086 | | | | | | 905 | | |
Stock compensation
|
| | | | 113 | | | | | | 128 | | |
Lease liability
|
| | | | 48 | | | | | | 21 | | |
Reserve on sales return, discount and bad debt
|
| | | | 765 | | | | | | 1,119 | | |
Accruals and reserves
|
| | | | 248 | | | | | | 40 | | |
Total deferred tax assets
|
| | | | 2,265 | | | | | | 2,259 | | |
Deferred tax liability: | | | | | | | | | | | | | |
Section 481(a) adjustment on reserve on sales return, discount and bad debt
|
| | | | (765) | | | | | | (1,119) | | |
Right-of-use asset
|
| | | | (46) | | | | | | (21) | | |
Deferred tax assets, net
|
| | | $ | 1,454 | | | | | $ | 1,119 | | |
| | |
For the Years Ended December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Percentage of pre-tax income: | | | | | | | | | | | | | |
U.S. federal statutory income tax rate
|
| | | | 21% | | | | | | 21% | | |
State taxes, net of federal benefit
|
| | | | 6% | | | | | | 3% | | |
Non-deductible items
|
| | | | 0% | | | | | | 1% | | |
Provision to return
|
| | | | 0% | | | | | | 1% | | |
Change in state rate
|
| | | | -1% | | | | | | 0% | | |
Other
|
| | | | 0% | | | | | | 2% | | |
Effective income tax rate
|
| | | | 26% | | | | | | 28% | | |
| | |
For the Years Ended December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Net income
|
| | | $ | 5,283 | | | | | $ | 3,625 | | |
Weighted average shares outstanding – basic
|
| | | | 9,135,985 | | | | | | 9,133,333 | | |
Stock options
|
| | | | 1,700,137 | | | | | | 942,471 | | |
Weighted average shares outstanding – diluted
|
| | | | 10,836,122 | | | | | | 10,075,804 | | |
Per share data: | | | | | | | | | | | | | |
Basic
|
| | | $ | 0.58 | | | | | $ | 0.40 | | |
Diluted
|
| | | $ | 0.49 | | | | | $ | 0.36 | | |
| | |
Amount to
Be Paid |
| |||
SEC Registration fee
|
| | | $ | 3,708 | | |
Legal fees and expenses
|
| | | $ | * | | |
FINRA filing fee
|
| | | $ | 6,500 | | |
Nasdaq listing fee
|
| | | $ | * | | |
Accounting fees and expenses
|
| | | $ | * | | |
Printing expenses
|
| | | $ | * | | |
Transfer agent fees and expenses
|
| | | $ | * | | |
Miscellaneous
|
| | | $ | * | | |
Total
|
| | | $ | * | | |
|
Exhibit
Number |
| |
Description
|
|
| 1.1 | | | Form of Underwriting Agreement. ♦ | |
| 3.1 | | | Form of Second Amended and Restated Certificate of Incorporation of Journey Medical Corporation. | |
| 3.2 | | | | |
| 4.1 | | | | |
| 5.1 | | | Opinion of Alston & Bird LLP. ♦ | |
| 10.1 | | | | |
| 10.2 | | | | |
| 10.3 | | | | |
| 10.4 | | | | |
| 10.5 | | | | |
| 10.6 | | | Asset Purchase Agreement for Qbrexza, entered into by and between Journey Medical Corporation and Dermira, Inc., a subsidiary of Eli Lilly and Company, dated as of March 31, 2021. * | |
| 10.7 | | | License and Supply Agreement for Accutane, entered into by and between Journey Medical Corporation and Dr. Reddy’s Laboratories Ltd., dated as of July 29, 2020. * | |
| 10.8 | | | |
|
Exhibit
Number |
| |
Description
|
|
| 10.9 | | | | |
| 10.10 | | | | |
| 10.11 | | | Amendment 1 to the Asset Purchase Agreement for Exelderm, entered into by and between Journey Medical Corporation and Sun Pharmaceutical Industries, Inc., dated as of September 5, 2018. * | |
| 10.12 | | | | |
| 10.13 | | | | |
| 10.14 | | | License, Collaboration, and Assignment Agreement for DFD-29, entered into by and between Journey Medical Corporation and Dr. Reddy’s Laboratories Ltd., dated as of June 29, 2021. * | |
| 10.15 | | | | |
| 10.16 | | | | |
| 10.17 | | | | |
| 23.1 | | | Consent of KPMG LLP. | |
| 23.2 | | | Consent of Alston & Bird LLP (included in Exhibit 5.1). ♦ | |
| 24.1 | | | |
|
Signature
|
| |
Title
|
| |
Date
|
|
|
/s/ Claude Maraoui
Claude Maraoui
|
| |
Chief Executive Officer, President and Director
(Principal Executive Officer) |
| |
October 22, 2021
|
|
|
/s/ Lindsay A. Rosenwald, M.D.
Lindsay A. Rosenwald, M.D.
|
| |
Executive Chairman
|
| |
October 22, 2021
|
|
|
/s/ Ernie De Paolantonio
Ernie De Paolantonio
|
| |
Chief Financial Officer
(Principal Financial and Accounting Officer) |
| |
October 22, 2021
|
|
|
/s/ Neil Herskowitz
Neil Herskowitz
|
| |
Director
|
| |
October 22, 2021
|
|
|
/s/ Jeff Paley, M.D.
Jeff Paley, M.D.
|
| |
Director
|
| |
October 22, 2021
|
|
|
/s/ Justin Smith
Justin Smith
|
| |
Director
|
| |
October 22, 2021
|
|
|
/s/ Miranda Toledano
Miranda Toledano
|
| |
Director
|
| |
October 22, 2021
|
|
Exhibit 3.1
SECOND
AMENDED
AND RESTATED
OF
JOURNEY MEDICAL CORPORATION
This Amended and Restated Certificate of Incorporation amends and restates the corporation’s original certificate of incorporation under the name Coronado Dermatology, Inc. originally filed July 18, 2014, as amended by the certificate of amendment filed on September 24, 2014, and has been duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law by the Corporation’s directors and stockholders.
ARTICLE I
The name of the corporation is Journey Medical Corporation (the “Corporation”).
ARTICLE II
The address of the Corporation’s registered office in the State of Delaware is 3500 South DuPont Highway, in the City of Dover, Kent County, Delaware 19901. The name of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation law (the “DGCL”), and to possess and exercise all of the powers and privileges granted by such law and any other law of the State of Delaware.
ARTICLE IV
1. Stock. The Corporation is authorized to issue two classes of stock to be designated “Common Stock” and “Preferred Stock.” The total number of shares of capital stock that the Corporation shall have authority to issue is fifty million (50,000,000) shares of Common Stock, with $0.0001 par value, of which 6,000,000 shares are designated as “Class A Common Stock” (the “Class A Common Stock”), and [ ] of which shall be Preferred Stock, with $.0001 par value. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares of Common Stock then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote (voting together as a single class on an as-if-converted basis). The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of the stock of the corporation entitled to vote thereon, without a separate vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any certificate of designation filed with respect to any series of Preferred Stock.
2. Blank-Check Preferred Stock. The Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation (the “Board”) is hereby expressly authorized to provide for the issue of all of any of the remaining shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board providing for the issuance of such shares and as may be permitted by the DGCL. The Board is also expressly authorized to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.
3. Rights. The powers, preferences and relative participating, optional and other special rights of the respective classes of the Corporation’s capital stock or the holders thereof and the qualifications, limitations and restrictions thereof are as follows:
3.1 Dividends. The Corporation shall declare, pay and set aside dividends among the holders of the shares of Common Stock and the Class A Common Stock, pro rata based on the number of shares of Common Stock held by each such holder, treating for this purpose all such shares of Class A Common Stock as if they had been converted to Common Stock pursuant to the terms of the Certificate of Incorporation immediately prior to such declaration, payment or setting aside of dividends.
3.2 Voting.
3.2.1 General.
(a) Subject to Subsection IV.3.2.1, the holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). There shall be no cumulative voting. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the DGCL.
(b) [Reserved].
(c) Subject to Subsection IV.3.2.1, on any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outs Finding shares of Class A Common Stock shall be entitled to cast for each share of Class A Common stock held by such holder as of the record date for determining stockholders entitled to vote on such matter, the number of votes that is equal to one and one-tenth (1.1) times a fraction, the numerator of which is the suni of the shares of outstanding Common Stock and the denominator of which is number of shares of outstanding Class A Common Stock.
(d) Except as provided by law or by the other provisions of the Certificate of Incorporation, holders of Class A Common Stock shall vote together with the holders of Common Stock as a single class.
3.3 Election of Directors.
3.3.1 Notwithstanding any provision of the Bylaws of this Corporation, for a period of ten (10) years from the date of the first issuance of shares of Class A Common Stock (the “Class A Director Period”), the holders of record of the shares of Class A Common Stock (or other capital stock or securities issued upon conversion of or in exchange for the Class A Common Stock), exclusively and as a separate class, shall be entitled to appoint or elect the majority of the directors of the Corporation (the “Class A Directors”).
3.3.2 The holders of record of the shares of Common Stock (including Class A Common Stock) and of any other class or series of voting stock, exclusively and voting together as a single class, shall be entitled to elect the balance of the total number of directors of the Corporation, if any.
3.3.3 Any director may be removed without cause by, and only by, the affirmative vote of the holders of the shares of the class(es) of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director. A vacancy in any directorship filled by the holders of any class or series shall be filled only by vote or written consent in lieu of a meeting of the holders of such class or series or by any remaining director or directors elected by the holders of such class or series pursuant to this Subsection IV.3.2.
4. Conversion.
The holders of the Class A Common Stock shall have conversion rights as follows (the “Conversion Rights”):
4.1 Right to Convert Conversion Ratio. Each share of Class A Common Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into one (1) fully paid and nonassessable share of Common Stock (the “Conversion Ratio”), subject to adjustment as provided below.
4.2 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Class A Common Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Class A Common Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.
4.3 Mechanics of Conversion.
4.3.1 Notice of Conversion. In order for a holder of Class A Common Stock to voluntarily convert shares of Class A Common Stock into shares of Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Common Stock), such holder shall surrender the certificate or certificates for such shares of Class A Common Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Class A Common Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Class A Common Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent. Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Common Stock) to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Common Stock) issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time, issue and deliver to such holder of Class A Common Stock , or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Common Stock) issuable upon such conversion in accordance with the provisions hereof, a certificate for the number (if any) of the shares of Class A Common Stock represented by the surrendered certificate that were not converted into Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Common Stock), and cash as provided in Subsection IV.4.2 in lieu of any fraction of a share of Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Common Stock) otherwise issuable upon such conversion and payment of any declared but unpaid dividends on the shares of Class A Common Stock.
4.3.2 Reservation of Shares. The Corporation shall at all times when Class A Common Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Class A Common Stock, such number of its duly authorized shares of Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Common Stock) as shall from time to time be sufficient to effect the conversion of all outstanding Class A Common Stock; and if at any time the number of authorized but unissued shares of Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Common Stock) shall not be sufficient to effect the conversion of all then outstanding shares of the Class A Common Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Common Stock) to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation.
4.3.3 Effect of Conversion. All shares of Class A Common Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Common Stock) in exchange therefor and to receive payment of any dividends declared but unpaid thereon. Any shares of Class A Common Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Class A Common Stock accordingly.
4.3.4 Taxes and Liens. The Corporation shall pay any and all costs incurred by the Corporation to effect the conversion and shall pay any issue and other similar taxes that may be payable in respect of any issuance or delivery of any securities upon conversion of shares of Class A Common Stock pursuant to this Subsection IV.4. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of securities in a name other than that in which the shares of Class A Common Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. Upon conversion of each share of Class A Common Stock, the Corporation shall take all such actions as are necessary in order to ensure that the securities issuable with respect to such conversion shall be validly issued, fully paid and nonassessable, free and clear of all taxes, liens, charges and encumbrances with respect to the issuance thereof (other than restrictions on transfer under applicable federal and state securities law and liens, charges and encumbrances arising through the holder thereof).
4.4 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the effective date of this Certificate of Incorporation (the “Effective Date”) effect a subdivision of the outstanding Common Stock (or other capital stock or securities at the lime issuable upon conversion of the Class A Common Stock) (by any stock split, stock dividend, recapitalization or otherwise), the applicable Conversion Ratio in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock (or other capital stock or securities at the lime issuable upon conversion of the Class A Common Stock) issuable on conversion of each share of Class A Common Stock shall be increased in proportion to such increase in the aggregate number of shares of Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Common Stock) outstanding. If the Corporation shall at any time or from time to time after the Effective Date combine the outstanding shares of Common Stock, the applicable Conversion Ratio in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Common Stock) issuable on conversion of each share of Class A Common Stock shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Common Stock) outstanding. Any adjustment under this Subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.
4.5 [Reserved].
4.6 Adjustment for Merger or Reorganization, etc. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Class A Common Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsection IV.4.4), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Class A Common Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of the applicable Class A Common Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in Subsection IV.4 with respect to the rights and interests thereafter of the holders of the Class A Common Stock, to the end that the provisions set forth in Subsection IV.4 (including provisions with respect to changes in and other adjustments of the applicable Conversion Ratio) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Class A Common Stock.
4.7 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the applicable Conversion Ratio pursuant to Subsection IV.4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 10 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of the applicable series of Class A Common Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the applicable shares of Class A Common Stock are convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Class A Common Stock (but in any event not later than 10 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the applicable Conversion Ratio then in effect, and (ii) the number of shares of Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Common Stock) and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Class A Common Stock.
4.8 Notice of Record Date. In the event, (a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Common Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or (b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, then the Corporation will send or cause to be sent to the holders of the Class A Common Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, liquidation, dissolution or winding up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Class A Common Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, liquidation, dissolution or winding up, and the amount per share and character of such exchange applicable to the Class A Common Stock and the Common Stock. Such notice shall be sent at least 15 days prior to the record date or effective date for the event specified in such notice.
5. Waiver. Any of the rights, powers and other terms of the Class A Common Stock set forth herein may be waived on behalf of all holders of Class A Common Stock by the affirmative written consent or vote of the holders of at least seventy-five percent (75%) of the shares of Class A Common Stock then outstanding.
6. Notices. Any notice required or permitted by the provisions of this Article IV to be given to a holder of shares of Class A Common Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the DGCL, and shall be deemed sent upon such mailing or electronic transmission.
ARTICLE V
The number of directors of the Corporation shall be fixed from time to time as provided in the Bylaws.
ARTICLE VI
Unless and except that the Bylaws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot.
ARTICLE VII
In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors of the Corporation is expressly authorized to make, alter and repeal the Bylaws of the Corporation, subject to the power of the stockholders of the Corporation to alter or repeal any bylaw whether adopted by them or otherwise.
ARTICLE VIII
To the fullest extent permitted by the DGCL as the same exists or as may hereafter be amended, no present or former director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Neither any amendment nor repeal of this Article, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article, shall eliminate or reduce the effect of this Article in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.
ARTICLE IX
The Corporation will indemnify any person who was or is a party or is threatened to be made a party to, or testifies in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative in nature, by reason of the fact such person is or was a director, officer or employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding to the full extent permitted by the DGCL, and the Corporation may adopt Bylaws or enter into agreements with any such person for the purpose of providing for such indemnification.
ARTICLE X
Subject to the provisions of this Certificate of Incorporation, the Corporation reserves the right at any time, and from time to time, to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and other provisions authorized by the DGCL and the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this article.
ARTICLE XI
The Corporation is to have perpetual existence.
ARTICLE XII
Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of this Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.
ARTICLE XIII
The Corporation elects not to be governed by Section 203 of the DGCL. To the fullest extent permitted by section 122(17) of the DGCL, the Corporation, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Corporation and its subsidiaries in any Excluded Opportunity, or in being offered an opportunity to receive notice of or participate in any Excluded Opportunity, even if the opportunity is one that the Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so and no such individual, corporation, limited liability company, partnership, firm, joint venture, association, joint-stock company, trust, estate, unincorporated organization, governmental or regulatory body or other entity (“Person”) shall be liable to the Corporation or any of its subsidiaries for breach of any fiduciary or other duty, as a director or officer or otherwise, by reason of the fact that such Person pursues or acquires such Excluded Opportunity, directs such Excluded Opportunity to another Person or fails to present such Excluded Opportunity, or information regarding such Excluded Opportunity, to the Corporation or its subsidiaries. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of, (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Class A Common Stock or any affiliate, partner, member, director, stockholder, employee, agent or other related person of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation. Any Person purchasing or otherwise acquiring any interest in any shares of stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article XIII. Neither the alteration, amendment or repeal of this Article XIII nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article XIII shall eliminate or reduce the effect of this Article XIII in respect of any business opportunity first identified or any other matter occurring, or any cause of action, suit or claim that, but for this Article XIII, would accrue or arise, prior to such alteration, amendment, repeal or adoption.
ARTICLE XIV
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware, shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation; (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or to the Corporation’s stockholders; (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or the Corporation’s Certificate of Incorporation or its Bylaws (as either may be amended from time to time); or (iv) any action asserting a claim governed by the internal affairs doctrine. If any action the subject matter of which is within the scope of the preceding sentence is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any of the Corporation’s stockholders, such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the preceding sentence and (ii) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. Furthermore, unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, and/or the Securities Exchange Act of 1934, as amended.
* * *
The undersigned hereby acknowledges that the foregoing Amended and Restated Certificate of Incorporation is his act and deed.
Dated: August [ ], 2021 | |
Claude Maraoui | |
President |
Exhibit 3.2
Amended and Restated
BYLAWS
OF
Journey Medical Corporation
I. CORPORATE OFFICES
1.1 Registered Office
The registered office of the corporation shall be in the City of Dover County of Kent, State of Delaware. The name of the registered agent of the corporation at such location is Incorporating Services, Ltd.
1.2 Other Offices
The board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business.
II. MEETINGS OF STOCKHOLDERS
2.1 Place of Meetings
Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the board of directors. The board of directors may, in its sole discretion, determine that a meeting shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211 of the General Corporation Law of Delaware.
If authorized by the board of directors in its sole discretion, and subject to such guidelines and procedures, as the board of directors may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication, participate in a meeting of stockholders, be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation.
2.2 Annual Meeting
The annual meeting of stockholders shall be held each year on a date and at a time designated by the board of directors, In the absence of such designation, the annual meeting of stockholders shall be held on the third Monday in April in each year at 1:00 p.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day. At the meeting, directors shall be elected and any other proper business may be transacted.
2.3 Special Meeting
Special meetings of the stockholders may be called, at any time for any purpose or purposes, by the board of directors or by such person or persons as may be authorized by the certificate of incorporation or these bylaws, or by such person or persons duly designated by the board of directors whose powers and authority, as expressly provided in a resolution of the board of directors, include the power to call such meetings, but such special meetings may not be called by any other person or persons.
2.4 Notice of Stockholders’ Meetings
(a) Except to the extent otherwise required by law, all notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, if any, date, and hour of the meeting, the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.
(b) Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the corporation shall also be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation, Any such consent shall be deemed revoked if (i) the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent, and (ii) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, that the inadvertent failure to recognize such revocation shall not invalidate any meeting or other action.
(c) Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the corporation shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any stockholder who fails to object in writing to the corporation, within sixty (60) days of having been given written notice by the corporation of its intention to send the single notice permitted under this subsection 2.4(e), shall be deemed to have consented to receiving such single written notice.
(d) Sections 2.4(b) and (c) shall not apply to any notice given to stockholders under Sections 164 (notice of sale of shares of stockholder who failed to pay an installment or call on stock not fully paid), 296 (notice of disputed claims relating to insolvent corporations), 311 (notice of meeting of stockholders to revoke dissolution of corporation), 312 (notice of meeting of stockholders of corporation whose certificate of incorporation has been renewed or revived) and 324 (notice when stock has been attached as required for sale upon execution process) of the General Corporation Law of Delaware.
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2.5 Manner of Giving Notice; Affidavit of Notice
(a) Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his, her or its address as it appears on the records of the corporation. An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
(b) Notice given pursuant to this Section 2.5(b) shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of such posting and the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the stockholder. An affidavit of the secretary, an assistant secretary or the transfer agent or other agent of the corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
2.6 Quorum
The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.
2.7 Adjourned Meeting; Notice
When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
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2.8 Voting
The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements).
Except as otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder.
2.9 Waiver of Notice
Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver or any waiver by electronic transmission of notice unless so required by the certificate of incorporation or these bylaws.
2.10 Stockholder Action by Written Consent Without a Meeting
Unless otherwise provided in the certificate of incorporation, any action required by the General Corporation Law of Delaware to be taken at any annual or special meeting of stockholders of a corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder, proxyholder or other person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this Section 2,10, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the corporation can determine (a) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder, proxyholder or other authorized person or persons, and (b) the date on which such stockholder, proxyholder or other authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form shall have been delivered to the corporation by delivery to its registered office in this State, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by telegram, cablegram or other electronic transmission may be otherwise delivered to the principal place of business of the corporation or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded, to the extent and in the manner provided by resolution of the board of directors of the corporation. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.
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Prompt notice of the taking of the corporate action without a meeting by written consent shall be given to those stockholders who have not consented in writing. If the action that is consented to is such as would have required the filing of a certificate under any section of the General Corporation Law of Delaware if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware.
2.11 Record Date for Stockholder Notice; Voting; Giving Consents
In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date that shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(a) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held;
(b) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the board of directors is necessary, shall be the day on which the first written consent is expressed; and
(c) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.
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A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.
2.12 Proxies
Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by a written proxy, signed by the stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder’s name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder’s attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the General Corporation Law of Delaware.
2.13 List of Stockholders Entitled to Vote
The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.
2.14 Stockholder Proposals
Effective upon the corporation’s initial public offering of stock under the Securities Act of 1933, as amended, any stockholder wishing to bring any other business before a meeting of stockholders, including, but not limited to, the nomination of persons for election as directors, must provide notice to the corporation not more than ninety (90) and not less than fifty (50) days before the meeting in writing by registered mail, return receipt requested, of the business to be presented by the stockholders at the stockholders’ meeting, Any such notice shall set forth the following as to each matter the stockholder proposes to bring before the meeting: (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting and, if such business includes a proposal to amend the bylaws of the corporation, the language of the proposed amendment; (b) the name and address, as they appear on the corporation’s books, of the stockholder proposing such business; (c) the class and number of shares of the corporation that are beneficially owned by such stockholder; (d) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business; and (e) any material interest of the stockholder in such business. Notwithstanding the foregoing provisions of this Section 2.14, a stockholder shall also comply with all applicable requirements of all applicable laws, rules and regulations, including, but not limited to, the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, with respect to the matters set forth in this Section 2.14. In the absence of such notice to the corporation meeting the above requirements, a stockholder shall not be entitled to present any business at any meeting of stockholders.
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III. DIRECTORS
3.1 Powers
Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.
3.2 Number of Directors
The number of directors constituting the board of directors shall be not more than nine (9) but not less than one (1), and may be fixed or changed, within this minimum and maximum, by the stockholders or the board of directors. The number of directors constituting the initial board of directors shall be fixed at one (1).
No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.
3.3 Election, Qualification and Term of Office of Directors
Except as provided in Sections 3.4 and 3.18 of these bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Each director shall be a natural person.
Elections of directors need not be by written ballot.
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3.4 Resignation and Vacancies
Any director may resign at any time upon notice given in writing or electronic transmission to the corporation. When one or more directors so resigns and the resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this Section 3.4 in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these bylaws:
(a) vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director; and
(b) whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent (10%)of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable.
3.5 Place of Meetings; Meetings by Telephone
The board of directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
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3.6 First Meetings
The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors.
3.7 Regular Meetings
Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board of directors.
3.8 Special Meetings; Notice
Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board of directors, the president, any vice president, the secretary or any director.
Notice of the time and place of special meetings shall be delivered either personally or by mail, telex, facsimile, telephone or electronic transmission to each director, addressed to each director at such director’s address and/or phone number and/or electronic transmission address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telex, facsimile, telephone or electronic transmission, it shall be delivered by telephone or transmitted at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation. Notice may be delivered by any person entitled to call a special meeting or by an agent of such person.
3.9 Quorum
At all meetings of the board of directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as otherwise specifically provided by statute or by the certificate of incorporation, If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
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3.10 Waiver Of Notice
Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice, Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or meeting of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws.
3.11 Adjourned Meeting; Notice
If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
3.12 Board Action by Written Consent Without a Meeting
Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board of directors or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the board of directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
3.13 Fees and Compensation of Directors
Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors.
3.14 Removal of Directors
Unless otherwise restricted by statute, by the certificate of incorporation or by these bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; provided, that, whenever the holders of any class or classes of stock, or series thereof, are entitled to elect one or more directors by the provisions of the certificate of incorporation, removal of any directors elected by such class or classes of stock, or series thereof, shall be by the holders of a majority of the shares of such class or classes of stock, or series of stock, then entitled to vote at an election of directors.
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No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.
3.15 Chairman of the Board of Directors
The corporation may also have, at the discretion of the board of directors, a chairman of the board of directors. The chairman of the board of directors shall, if such a person is elected, preside at the meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him or her by the board of directors, or as may be prescribed by these bylaws.
IV. COMMITTEES
4.1 Committees of Directors
The board of directors may, by resolution passed by a majority of the whole board of directors, designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter expressly required by the General Corporation Law of Delaware to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaws of the corporation.
4.2 Committee Minutes
Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.
4.3 Meetings and Action of Committees
Meetings and actions of committees shall be governed by, and be held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.7 (regular meetings), Section 3.8 (special meetings and notice), Section 3,9 (quorum), Section 3.10 (waiver of notice), Section 3.11 (adjourned meeting and notice), and Section 3.12 (board action by written consent without a meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may also be called by resolution of the board of directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.
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V. OFFICERS
5.1 Officers
The officers of the corporation shall be a chief executive officer, a president, one or more vice presidents, a secretary and a treasurer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more assistant vice presidents, assistant secretaries, assistant treasurers and any such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person.
5.2 Election of Officers
The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 of these bylaws, shall be chosen by the board of directors, subject to the rights, if any, of an officer under any contract of employment.
5.3 Subordinate Officers
The board of directors may appoint, or empower the president to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.
5.4 Removal and Resignation of Officers
Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board of directors or by any officer upon whom such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.
5.5 Vacancies in Offices
Any vacancy occurring in any office of the corporation shall be filled by the board of directors.
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5.6 Chairman of the Board
The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these bylaws. If there is no chief executive officer, then the chairman of the board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.7 of these bylaws. The chairman of the board shall be chosen by the board of directors.
5.7 Chief Executive Officer
Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, the chief executive officer of the corporation shall, subject to the control of the board of directors, have general supervision, direction and control of the business and the officers of the corporation. The chief executive officer shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors at which he or she is present. The chief executive officer shall have the general powers and duties of management usually vested in the office of chief executive officer of a corporation and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws.
5.8 President
Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board or the chief executive officer, if there be such officers, the president shall, subject to the control of the board of directors, have general supervision, direction and control of the business and the officers of the corporation. In the absence or nonexistence of the chief executive officer, he or she shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board and chief executive officer, at all meetings of the board of directors at which he or she is present. He or she shall have the general powers and duties of management usually vested in the office of president of a corporation and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws. The board of directors may provide in their discretion that the offices of president and chief executive officer may be held by the same person.
5.9 Vice Presidents
In the absence or disability of the chief executive officer and president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them by the board of directors, these bylaws, the president or the chairman of the board.
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5.10 Secretary
The secretary or an agent of the corporation shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at stockholders’ meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation’s transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these bylaws. The secretary shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws.
5.11 Treasurer
The treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The books of account shall at all reasonable times be open to inspection by any director.
The treasurer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors. The treasurer shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his or her transactions as treasurer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these bylaws.
5.12 Assistant Secretary
The assistant secretary, or, if there is more than one, the assistant secretaries in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors or the stockholders may from time to time prescribe.
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5.13 Representation of Shares of Other Corporations
The chairman of the board, the chief executive officer, the president, any vice president, the treasurer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the chief executive officer, president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
5.14 Authority and Duties of Officers
In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors or the stockholders.
VI. INDEMNITY
6.1 Indemnification of Directors and Officers
The corporation shall, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, indemnify each of its directors and Officers against expenses (including attorneys’ fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.1, a director or Officer of the corporation includes any person (a) who is or was a director or Officer of the corporation, (b) who is or was serving at the request of the corporation as a director, Officer manager, member, partner, trustee, or other agent of another corporation, limited liability company, partnership, joint venture, trust or other enterprise, or (c) who was a director or Officer of a corporation that was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. Such indemnification shall be a contract right and shall include the right to receive payment of any expenses incurred by the indemnitee in connection with any proceeding in advance of its final disposition, consistent with the provisions of applicable law as then in effect. The right of indemnification provided in this Section 6.1 shall not be exclusive of any other rights to which those seeking indemnification may otherwise be entitled, and the provisions of this Section 6.1 shall inure to the benefit of the heirs and legal representatives of any person entitled to indemnity under this Section 6.1 and shall be applicable to proceedings commenced or continuing after the adoption of this Section 6.1, whether arising from acts or omissions occurring before or after such adoption. In furtherance, but not in limitation of the foregoing provisions, the following procedures, presumptions and remedies shall apply with respect to advancement of expenses and the right to indemnification under this Section 6.1.
(a) Advancement of Expenses. All reasonable expenses incurred by or on behalf of the indemnitee in connection with any proceeding shall be advanced to the indemnitee by the corporation within twenty (20) days after the receipt by the corporation of a statement or statements from the indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such proceeding, unless, prior to the expiration of such twenty-day period, the board of directors shall unanimously (except for the vote, if applicable, of the indemnitee) determine that the indemnitee has no reasonable likelihood of being entitled to indemnification pursuant to this Section 6.1. Such statement or statements shall reasonably evidence the expenses incurred by the indemnitee and, if required by law at the time of such advance, shall include or be accompanied by an undertaking by or on behalf of the indemnitee to repay the amounts advanced if it should ultimately be determined that the indemnitee is not entitled to be indemnified against such expenses pursuant to this Section 6.1.
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(b) Procedure for Determination of Entitlement to Indemnification.
(i) To obtain indemnification under this Section 6.1, an indemnitee shall submit to the secretary of the corporation a written request, including such documentation and information as is reasonably available to the indemnitee and reasonably necessary to determine whether and to what extent the indemnitee is entitled to indemnification (the “Supporting Documentation”). The determination of the indemnitee’s entitlement to indemnification shall be made not later than sixty (60) days after receipt by the corporation of the written request for indemnification together with the Supporting Documentation. The secretary of the corporation shall, promptly upon receipt of such a request for indemnification, advise the board of directors in writing that the indemnitee has requested indemnification, whereupon the corporation shall provide such indemnification, including without limitation advancement of expenses, so long as the indemnitee is legally entitled thereto in accordance with applicable law.
(ii) The indemnitee’s entitlement to indemnification under this Section 6.1 shall be determined in one of the following ways: (A) by a majority vote of the Disinterested Directors (as hereinafter defined), even though less than a quorum of the board of directors; (B) by a committee of such Disinterested Directors, even though less than a quorum of the board of directors; (C) by a written opinion of Independent Counsel (as hereinafter defined) if (x) a Change of Control (as hereinafter defined) shall have occurred and the indemnitee so requests or (y) a quorum of the board of directors consisting of Disinterested Directors is not obtainable or, even if obtainable, a majority of such Disinterested Directors so directs; (D) by the stockholders of the corporation (but only if a majority of the Disinterested Directors, if they constitute a quorum of the board of directors, presents the issue of entitlement to indemnification to the stockholders for their determination); or (E) as provided in paragraph (c) below,
(iii) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to paragraph (b)(ii) above, a majority of the Disinterested Directors shall select the Independent Counsel, but only an Independent Counsel to which the indemnitee does not reasonably object; provided, however, that if a Change of Control shall have occurred, the indemnitee shall select such Independent Counsel, but only an Independent Counsel to which the board of directors does not reasonably object.
(iv) The only basis upon which a finding that indemnification may not be made is that such indemnification is prohibited by law.
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(c) Presumptions and Effect of Certain Proceedings. Except as otherwise expressly provided in this Section 6.1, if a Change of Control shall have occurred, the indemnitee shall be presumed to be entitled to indemnification under this Section 6,1 upon submission of a request for Indemnification together with the Supporting Documentation in accordance with paragraph (b)(i), and thereafter the corporation shall have the burden of proof to overcome that presumption in reaching a contrary determination. In any event, if the person or persons empowered under paragraph (b)(ii) above to determine entitlement to indemnification shall not have been appointed or shall not have made a determination within sixty (60) days after receipt by the corporation of the request therefor together with the Supporting Documentation, the indemnitee shall be deemed to be entitled to indemnification and the indemnitee shall be entitled to such indemnification unless (A) the indemnitee misrepresented or failed to disclose a material fact in making the request for indemnification or in the Supporting Documentation or (B) such indemnification is prohibited by law. The termination of any proceeding described in this Section 6.1, or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, adversely affect the right of the indemnitee to indemnification or create a presumption that the indemnitee did not act in good faith and in a manner that the indemnitee reasonably believed to be in or not opposed to the best interests of the corporation or, with respect to any criminal proceeding, that the indemnitee had reasonable cause to believe that the indemnitee’s conduct was unlawful.
(d) Remedies of Indemnitee.
(i) In the event that a determination is made pursuant to paragraph (b)(ii) that the indemnitee is not entitled to indemnification under this Section 6.1: (A) the indemnitee shall be entitled to seek an adjudication of his or her entitlement to such indemnification either, at the indemnitee’s sole option, in (x) an appropriate court of the State of Delaware or any other court of competent jurisdiction, or (y) an arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association; (B) any such judicial proceeding or arbitration shall be de novo and the indemnitee shall not be prejudiced by reason of such adverse determination; and (C) in any such judicial proceeding or arbitration the corporation shall have the burden of proving that the indemnitee is not entitled to indemnification under this Section 6.1.
(ii) If a determination shall have been made or is deemed to have been made, pursuant to paragraph (b)(ii) or (iii), that the indemnitee is entitled to indemnification, the corporation shall be obligated to pay the amounts constituting such indemnification within five (5) days after such determination has been made or is deemed to have been made and shall be conclusively bound by such determination unless (A) the indemnitee misrepresented or failed to disclose a material fact in making the request for indemnification or in the Supporting Documentation, or (B) such indemnification is prohibited by law. In the event that: (X) advancement of expenses is not timely made pursuant to paragraph (a); or (Y) payment of indemnification is not made within five (5) days after a determination of entitlement to indemnification has been made or deemed to have been made pursuant to paragraph (b)(ii) or (iii), the indemnitee shall be entitled to seek judicial enforcement of the corporation’s obligation to pay to the indemnitee such advancement of expenses or indemnification. Notwithstanding the foregoing, the corporation may bring an action, in an appropriate court in the State of Delaware or any other court of competent jurisdiction, contesting the right of the indemnitee to receive indemnification hereunder due to the occurrence of an event described in subclause (A) or (B) of this clause (ii) (a “Disqualifying Event”); provided, however, that in any such action the corporation shall have the burden of proving the occurrence of such Disqualifying Event.
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(iii) The corporation shall be precluded from asserting in any judicial proceedings or arbitration commenced pursuant to this paragraph (d) that the procedures and presumptions of this Section 6.1 are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the corporation is bound by all the provisions of this Section 6.1.
(iv) In the event that the indemnitee, pursuant to this paragraph (d), seeks a judicial adjudication of or an award in arbitration to enforce his or her rights under, or to recover damages for breach of, this Section 6.1, the indemnitee shall be entitled to recover from the corporation, and shall be indemnified by the corporation against, any expenses actually and reasonably incurred by the indemnitee if the indemnitee prevails in such judicial adjudication or arbitration. If it shall be determined in such judicial adjudication or arbitration that the indemnitee is entitled to receive part but not all of the indemnification or advancement of expenses sought, the expenses incurred by the indemnitee in connection with such judicial adjudication shall be prorated accordingly.
(e) Definitions. For purposes of this Section 6.1:
(i) “Change in Control” means a change in control of the corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Act”), whether or not the corporation is then subject to such reporting requirement; provided that, without limitation, such a change in control shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the corporation representing twenty-five percent (25%) or more of the combined voting power of the corporation’s then outstanding securities without the prior approval of at least a majority of the members of the board of directors in office immediately prior to such acquisition; (ii) the corporation is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the board of directors in office immediately prior to such transaction or event constitute less than a majority of the board of directors thereafter; or (iii) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the board of directors (including for this purpose any new director whose election or nomination for election by the corporation’s stockholders was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the board of directors;
(ii) “Disinterested Director” means a director of the corporation who is not a party to the proceeding in respect of which indemnification is sought by the indemnitee; and
(iii) “Independent Counsel” means a law firm or a member of a law firm that neither presently is, nor in the past five (5) years has been, retained to represent: (A) the corporation or the indemnitee in any matter material to either such party or (B) any other party to the proceeding giving rise to a claim for indemnification under this Section 6.1. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing under such persons, relevant jurisdiction of practice, would have a conflict of interest in representing either the corporation or the indemnitee in an action to determine the indemnitee’s rights under this Section 6.1.
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(f) Invalidity; Severability; Interpretation. If any provision or provisions of this Section 6.1 shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (i) the validity, legality and enforceability of the remaining provisions of this Section 6.1 (including, without limitation, all portions of any paragraph of this Section 6.1 containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (ii) to the fullest extent possible, the provisions of this Section 6.1 (including, without limitation, all portions of any paragraph of this Section 6.1 containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid; illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. Reference herein to laws, regulations or agencies shall be deemed to include all amendments thereof, substitutions therefor and successors thereto.
6.2 Indemnification of Others
The corporation shall have the power, to the extent and in the manner permitted by the General Corporation Law of Delaware, to indemnify each of its officers, employees and agents (other than directors) against expenses (including attorneys’ fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.2, an officer, employee or agent of the corporation (other than a director) includes any person (a) who is or was an employee or agent of the corporation, (b) who is or was serving at the request of the corporation as a director, officer, manager, member, partner, trustee, employee or other agent of another corporation, limited liability company, partnership, joint venture, trust or other enterprise, or (c) who was an employee or agent of a corporation that was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.3 Insurance
The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, manager, member, partner, trustee, employee or other agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, limited liability company, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of the General Corporation Law of Delaware.
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VII. RECORDS AND REPORTS
7.1 Maintenance and Inspection of Records
The corporation shall, either at its principal executive office or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books and other records.
Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation’s stock ledger, a list of its stockholders and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder, In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business.
Any records maintained by a corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. Any corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the certificate of incorporation, these bylaws or the General Corporation Law of Delaware. When records are kept in such manner, a clearly legible paper from or by means of the information storage device or method shall be admissible in evidence, and accepted for all other purposes, to the same extent as an original paper record of the same information would have been, provided the paper form accurately portrays the record.
7.2 Inspection by Directors
Any director shall have the right to examine the corporation’s stock ledger, a list of its stockholders and its other books and records for a purpose reasonably related to his or her position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger and the stock list and to make copies or extracts therefrom. The burden of proof shall be upon the corporation to establish that the inspection such director seeks is for an improper purpose. The court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the court may deem just and proper.
7.3 Annual Statement to Stockholders
The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation.
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VIII. GENERAL MATTERS
8.1 Checks
From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.
8.2 Execution of Corporate Contracts and Instruments
The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
8.3 Stock Certificates; Partly Paid Shares
The shares of the corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice-chairman of the board of directors, or the president or vice president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The corporation shall not have power to issue a certificate in bearer form.
The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, and upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.
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8.4 Special Designation on Certificates
If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in
Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
8.5 Lost Certificates
Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his or her legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
8.6 Construction; Definitions
Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.
8.7 Dividends
The directors of the corporation, subject to any rights or restrictions contained in the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock pursuant to the General Corporation Law of Delaware. Dividends may be paid in cash, in property or in shares of the corporation’s capital stock.
The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve, Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation and meeting contingencies,
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8.8 Fiscal Year
The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors.
8.9 Seal
The corporation may adopt a corporate seal which may be altered as desired, and may use the same by causing it, or a facsimile thereof, to be impressed or affixed or in any other manner reproduced.
8.10 Transfer of Stock
Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction in its books.
8.11 Stock Transfer Agreements and Restrictions
The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware.
8.12 Electronic Transmission
For purposes of these bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process,
IX. AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws.
X. DISSOLUTION
If it should be deemed advisable in the judgment of the board of directors of the corporation that the corporation should be dissolved, the board, after the adoption of a resolution to that effect by a majority of the whole board at any meeting called for that purpose, shall cause notice to be mailed to each stockholder entitled to vote thereon of the adoption of the resolution and of a meeting of stockholders to take action upon the resolution.
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At the meeting a vote shall be taken for and against the proposed dissolution. If a majority of the outstanding stock of the corporation entitled to vote thereon votes for the proposed dissolution, then a certificate stating, among other things, that the dissolution has been authorized in accordance with the provisions of Section 275 of the General Corporation Law of Delaware and setting forth the names and residences of the directors and officers shall be executed, acknowledged, and filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such certificate’s becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in writing, either in person or by duly authorized attorney, to a dissolution, no meeting of directors or stockholders shall be necessary. The consent shall be filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such consent’s becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved. If the consent is signed by an attorney, then the original power of attorney or a photocopy thereof shall be attached to and filed with the consent. The consent filed with the Secretary of State shall have attached to it the affidavit of the secretary or some other officer of the corporation stating that the consent has been signed by or on behalf of all the stockholders entitled to vote on a dissolution; in addition, there shall be attached to the consent a certification by the secretary or some other officer of the corporation setting forth the names and residences of the directors and officers of the corporation.
XI. CUSTODIAN
11.1 Appointment of a Custodian in Certain Cases
The Court of Chancery, upon application of any stockholder, may appoint one or more persons to be custodians and, if the corporation is insolvent, to be receivers, of and for the corporation when:
(a) at any meeting held for the election of directors the stockholders are so divided that they have failed to elect successors to directors whose terms have expired or would have expired upon qualification of their successors;
(b) the business of the corporation is suffering or is threatened with irreparable injury because the directors are so divided respecting the management of the affairs of the corporation that the required vote for action by the board of directors cannot be obtained and the stockholders are unable to terminate this division; or
(c) the corporation has abandoned its business and has failed within a reasonable time to take steps to dissolve, liquidate or distribute its assets.
11.2 Duties of Custodian
The custodian shall have all the powers and title of a receiver appointed under Section 291 of the General Corporation Law of Delaware, but the authority of the custodian shall be to continue the business of the corporation and not to liquidate its affairs and distribute its assets, except when the Court of Chancery otherwise orders and except in cases arising under Sections 226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.
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Exhibit 4.1
Exhibit 10.1
JOURNEY MEDICAL CORPORATION
2015 STOCK PLAN
1. Purpose. This Journey Medical Corporation 2015 Stock Plan (the “Plan”) is intended to provide incentives:
(a) to employees of Journey Medical Corporation (the “Company”), or its parent (if any) or any of its present or future subsidiaries (collectively, “Related Corporations”), by providing them with opportunities to purchase Common Stock (as defined below) of the Company pursuant to options granted hereunder that qualify as “incentive stock options” (“ISOs”) under Section 422 of the Internal Revenue Code of 1986, as amended, or any successor statute (the “Code”);
(b) to employees, directors and consultants of the Company and Related Corporations by providing them with opportunities to purchase Common Stock of the Company pursuant to options granted hereunder that do not qualify as ISOs (“Nonstatutory Stock Options” or “NSOs”);
(c) to employees, directors and consultants of the Company and Related Corporations by providing them with bonus awards of Common Stock of the Company (“Stock Bonuses”); and
(d) to employees, directors and consultants of the Company and Related Corporations by providing them with opportunities to make direct purchases of Common Stock of the Company (“Purchase Rights”).
Both ISOs and NSOs are referred to hereafter individually as “Options”, and Options, Stock Bonuses and Purchase Rights are referred to hereafter collectively as “Stock Rights”. As used herein, the terms “parent” and “subsidiary” mean “parent corporation” and “subsidiary corporation”, respectively, as those terms are defined in Section 424 of the Code.
2. Administration of the Plan.
(a) The Plan shall be administered by (i) the Board of Directors of the Company (the “Board”) or (ii) a committee consisting of directors or other persons appointed by the Board (the “Committee”). The appointment of the members of, and the delegation of powers to, the Committee by the Board shall be consistent with applicable laws and regulations (including, without limitation, the Code, Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any successor rule thereto (“Rule 16b-3”), and any applicable state law (collectively, the “Applicable Laws”). Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time, the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the Applicable Laws.
(b) Subject to ratification of the grant or authorization of each Stock Right by the Board (if so required by an Applicable Law), and subject to the terms of the Plan, the Committee shall have the authority, in its discretion, to:
(i) determine the employees of the Company and Related Corporations (from among the class of employees eligible under Section 3 to receive ISOs) to whom ISOs may be granted, and to determine (from among the classes of individuals and entities eligible under Section 3 to receive NSOs, Stock Bonuses and Purchase Rights) to whom NSOs, Stock Bonuses and Purchase Rights may be granted;
(ii) determine the time or times at which Options, Stock Bonuses or Purchase Rights may be granted (which may be based on performance criteria);
(iii) determine the number of shares of Common Stock subject to any Stock Right granted by the Committee;
(iv) determine the option price of shares subject to each Option, which price shall not be less than the minimum price specified in Section 6 hereof, as appropriate, and the purchase price of shares subject to each Purchase Right and to determine the form of consideration to be paid to the Company for exercise of such Option or purchase of shares with respect to a Purchase Right;
(v) determine whether each Option granted shall be an ISO or NSO;
(vi) determine (subject to Section 7) the time or times when each Option shall become exercisable and the duration of the exercise period;
(vii) determine whether restrictions such as repurchase options are to be imposed on shares subject to Options, Stock Bonuses and Purchase Rights and the nature of such restrictions, if any;
(viii) approve forms of agreement for use under the Plan;
(ix) determine the Fair Market Value (as defined in Section 6(d) below) of a Stock Right or the Common Stock underlying a Stock Right;
(x) accelerate vesting on any Stock Right or to waive any forfeiture restrictions, or to waive any other limitation or restriction with respect to a Stock Right;
(xi) reduce the exercise price of any Stock Right if the Fair Market Value of the Common Stock covered by such Stock Right shall have declined since the date the Stock Right was granted;
(xii) institute a program whereby outstanding Options can be surrendered in exchange for Options with a lower exercise price;
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(xiii) modify or amend each Stock Right (subject to Section 8(d) of the Plan) including the discretionary authority to extend the post-termination exercisability period of Stock Rights longer than is otherwise provided for by terms of the Plan or the Stock Right;
(xiv) construe and interpret the Plan and Stock Rights granted hereunder;
(xv) prescribe and rescind rules and regulations relating to the Plan; and
(xvi) make all other determinations necessary or advisable for the administration of the Plan.
The interpretation and construction by the Committee of any provisions of the Plan or of any Stock Right granted under it shall be final unless otherwise determined by the Board. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Stock Right granted under it.
(c) The Committee may select one of its members as its chairman, and shall hold meetings at such times and places as it may determine. Acts by a majority of the Committee, approved in person at a meeting or in writing, shall be the valid acts of the Committee.
(d) All references in this Plan to the Committee shall mean the Board if no Committee has been appointed.
(e) Those provisions of the Plan that make express reference to Rule 16b-3 shall apply to the Company only at such time as the Company’s Common Stock is registered under the Exchange Act, and then only to such persons as are required to file reports under Section 16(a) of the Exchange Act (a “Reporting Person”).
(f) To the extent that Stock Rights are to be qualified as “performance-based” compensation within the meaning of Section 162(m) of the Code, the Plan shall be administered by a committee consisting of two or more “outside directors” as determined under Section 162(m) of the Code (if the Company has two or more outside directors).
3. Eligible Employees and Others.
(a) Eligibility. ISOs may be granted to any employee of the Company or any Related Corporation. Those officers of the Company who are not employees may not be granted ISOs under the Plan. NSOs, Stock Bonuses and Purchase Rights may be granted to any director, employee or consultant of the Company or any Related Corporation. Granting of any Stock Right to any individual or entity shall neither entitle that individual or entity to, nor disqualify him or her from, participation in any other grant of Stock Rights.
(b) Special Rule for Grant of Stock Rights to Reporting Persons. The selection of a director or an officer who is a Reporting Person (as the terms “director” and “officer” are defined for purposes of Rule 16b-3) as a recipient of a Stock Right, the timing of the Stock Right grant, the exercise price, if any, of the Stock Right and the number of shares subject to the Stock Right shall be determined either (i) by the Board, or (ii) by a committee of the Board that is composed solely of two or more Non-Employee Directors having full authority to act in the matter. For the purposes of the Plan, a director shall be deemed to be a “Non-Employee Director” only if such person is defined as such under Rule 16b-3(b)(3), as interpreted from time to time.
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(c) Annual Limitation for Employees. To the extent the Company is subject to Section 162(m) of the Code, no employee shall be eligible to be granted during any calendar year Stock Rights covering more than eighty percent (80%) of the total shares of Common Stock authorized for issuance under the Plan as set forth in Section 4.
4. Stock. The stock subject to Stock Rights shall be authorized but unissued shares of Common Stock of the Company, par value 0.0001 per share, or such shares of the Company’s capital stock into which such class of shares may be converted pursuant to any reorganization, recapitalization, merger, consolidation or the like (the “Common Stock”), or shares of Common Stock reacquired by the Company in any manner. The aggregate number of shares that may be issued pursuant to the Plan is 3,000,000 shares of Common Stock, subject to adjustment as provided herein. Any such shares may be issued as ISOs, NSOs or Stock Bonuses, or to persons or entities making purchases pursuant to Purchase Rights, so long as the number of shares so issued does not exceed such aggregate number, as adjusted. If any Option granted under the Plan shall expire or terminate for any reason without having been exercised in full or shall cease for any reason to be exercisable in whole or in part, or if the Company shall reacquire any shares issued pursuant to Stock Rights, the unpurchased shares subject to such Options and any shares so reacquired by the Company shall again be available for grants of Stock Rights under the Plan. Shares of Common Stock which are withheld to pay the exercise price of an Option and/or any related withholding obligations shall not be available for issuance under the Plan.
5. Granting of Stock Rights. Stock Rights may be granted under the Plan at any time after the Effective Date, as set forth in Section 16, and prior to 10 years thereafter. The date of grant of a Stock Right under the Plan will be the date specified by the Committee at the time it grants the Stock Right; provided, however, that such date shall not be prior to the date on which the Committee acts.
6. Minimum Price; ISO Limitations.
(a) The price per share specified in the agreement relating to each NSO, Stock Bonus or Purchase Right granted under the Plan shall be established by the Committee, taking into account any noncash consideration to be received by the Company from the recipient of Stock Rights.
(b) The price per share specified in the agreement relating to each ISO granted under the Plan shall not be less than the Fair Market Value per share of Common Stock on the date of such grant. In the case of an ISO to be granted to an employee owning stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Related Corporation, the price per share specified in the agreement relating to such ISO shall not be less than 110% of the Fair Market Value per share of Common Stock on the date of the grant.
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(c) To the extent that the aggregate Fair Market Value (determined at the time an ISO is granted) of Common Stock for which ISOs granted to any employee are exercisable for the first time by such employee during any calendar year (under all stock option plans of the Company and any Related Corporation) exceeds $100,000 (or such higher value as permitted under Code Section 422 at the time of determination) such Options will be treated as NSOs, provided that this Section shall have no force or effect to the extent that its inclusion in the Plan is not necessary for Options issued as ISOs to qualify as ISOs pursuant to Section 422 of the Code. The rule of this Section 6(c) shall be applied by taking Options in the order in which they were granted.
(d) As used herein, “Fair Market Value” means:
(i) if the Common Stock is then traded on a national securities exchange, the closing sale price for such stock (or the closing bid, if no sales were reported as quoted on such exchange or market) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported);
(ii) if the Common Stock is regularly quoted on an automated quotation system but not reported on national securities exchange, the closing sale price or average of bid prices last quoted on that date by an established quotation service (or, if no such prices were reported on that date, on the last date such prices were reported); or
(iii) if the Common Stock is not traded on an established securities market (as defined in Treasury Regulation Section 1.897-1(m)), the fair market value as determined in good faith by the Committee by reasonable application of a reasonable valuation method consistently applied and taking into consideration all available information material to the value of the Company, determined in a manner consistent with Section 409A of the Code and the regulations thereunder.
7. Option Duration. Subject to earlier termination as provided in Sections 9 and 10, each Option shall expire on the date specified by the Committee, but not more than:
(a) 10 years from the date of grant in the case of NSOs;
(b) 10 years from the date of grant in the case of ISOs generally; and
(c) 5 years from the date of grant in the case of ISOs granted to an employee owning stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Related Corporation.
Subject to earlier termination as provided in Sections 9 and 10, the term of each ISO shall be the Willi set forth in the original instrument granting such ISO, except with respect to any part of such ISO that is converted into an NSO pursuant to Section 18.
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8. Exercise of Options. Subject to the provisions of Section 9 through Section 12 of the Plan, each Option granted under the Plan shall be exercisable as follows:
(a) the Option shall either be fully exercisable on the date of grant or shall become exercisable thereafter in such installments as the Committee may specify;
(b) once an installment becomes exercisable it shall remain exercisable until expiration or termination of the Option, unless otherwise specified by the Committee;
(c) each Option or installment may be exercised at any time or from time to time, in whole or in part, for up to the total number of shares with respect to which it is then exercisable; and
(d) the Committee shall have the right to accelerate the date of exercise of any installment, of any Option, provided that the Committee shall not accelerate the exercise date of any installment of any ISO granted to any employee (and not previously converted into an NSO pursuant to Section 18) without the prior consent of such employee if such acceleration would violate the annual vesting limitation contained in Section 422 of the Code, as described in Section 6(c).
9. Effect of Termination of Service. If a grantee ceases to be employed or engaged by the Company and all Related Corporations other than (x) by reason of death or disability as defined in Section 10, or (y) by reason of a termination “For Cause” as defined in this Section 9, then unless otherwise specified in the instrument granting such Stock Right, the grantee shall have the continued right to exercise any Stock Right held by him or her, to the extent of the number of shares with respect to which he or she could have exercised it on the date of termination until the Stock Right’s specified expiration date; provided, however, in the event the grantee exercises any ISO after the date that is three months following the date of termination of employment, such ISO will automatically be converted into an NSO subject to the terms of the Plan. In the event of a termination For Cause (as defined below), the right of a grantee to exercise a Stock Right shall terminate as of the date of termination.
(a) For purposes of this Plan, a change in status from employee to a consultant, or from a consultant to employee, will not constitute a termination of employment, provided that a change in status from an employee to consultant may cause an ISO to become an NSO under the Code.
(b) Employment shall be considered as continuing uninterrupted during any bona fide leave of absence (such as those attributable to illness, military obligations or governmental service) provided that the period of such leave does not exceed 90 days or, if longer, any period during which such grantee’s right to reemployment with the Company is guaranteed by statute or by contract. A bona fide leave of absence with the written approval of the Company shall not be considered an interruption of employment under the Plan, provided that such written approval contractually obligates the Company or any Related Corporation to continue the employment of the grantee after the approved period of absence; provided that the foregoing approval requirement shall not apply to a leave of absence guaranteed by statute or contract. ISOs granted under the Plan shall not be affected by any change of employment within or among the Company and Related Corporations, so long as the optionee continues to be an employee of the Company or any Related Corporation.
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(c) For purposes of this Plan, and unless otherwise defined in the instrument granting a Stock Right, “For Cause” means:
(i) if a grantee has an employment agreement, consulting agreement, service agreement or other similar agreement with the Company or any Related Corporation that defines “Cause” or a like term, the meaning set forth in such agreement at the time of the grantee’s termination of service; or
(ii) in the absence of such an agreement or definition, the termination of a grantee’s status as an employee, a director or consultant (as applicable) for any of the following reasons, as determined by the Committee: (A) the grantee’s breach of any fiduciary duty to the Company or any Related Corporation; (B) the grantee’s failure to follow the reasonable instructions of the Board or such grantee’s direct supervisor, which breach, if curable, is not cured within ten (10) days after notice to such grantee or, if cured, recurs within one hundred eighty (180) days; (C) the grantee’s gross negligence, willful misconduct, fraud or acts of dishonesty relating to the Company or any Related Corporation; (D) the grantee’s material breach of any noncompetition, confidentiality or similar agreement with the Company or a Related Corporation, as determined under such agreement; (E) the grantee’s commission of a crime involving fraud, embezzlement, theft, or other act constituting a felony; or (F) a grantee who is an employee or a consultant and who willfully engages in gross misconduct or willfully violates a Company or a Related Corporation policy which is or is reasonably expected to be materially injurious to the Company and/or a Related Corporation, provided that no act or failure to act on the grantee’s part shall be considered “willful” unless done, or omitted to be done, by the grantee not in good faith and without reasonable belief that the grantee’s action or omission was in the best interest of the Company or the Related Corporation.
(d) NOTHING IN THE PLAN SHALL BE DEEMED TO GIVE ANY GRANTEE OF ANY STOCK RIGHT THE RIGHT TO BE RETAINED IN EMPLOYMENT OR OTHER SERVICE BY THE COMPANY OR ANY RELATED CORPORATION FOR ANY PERIOD OF TIME OR TO AFFECT THE AT-WILL NATURE OF ANY EMPLOYEE’S EMPLOYMENT.
10. Death; Disability.
(a) If a grantee ceases to be employed or engaged by the Company and all Related Corporations by reason of death, or if a grantee dies within three months of the date his or her employment or other affiliation with the Company has been terminated, any Stock Right held by him or her may be exercised to the extent of the number of shares with respect to which he or she could have exercised said Stock Right on the date of death, by his or her estate, personal representative or beneficiary who has acquired the Stock Right by will or by the laws of descent and distribution (the “Successor Grantee”), unless otherwise specified in the instrument granting such Stock Right, prior to the earlier of (i) one year after the date of termination or (ii) the Stock Right’s specified expiration date, provided, however, that a Successor Grantee shall be entitled to ISO treatment under Section 421 of the Code only if the deceased optionee would have been entitled to like treatment had he or she exercised such Option on the date of his or her death; and provided further in the event the Successor Grantee exercises an ISO after the date that is one year following the date of termination by reason of death, such ISO will automatically be converted into a NSO subject to the terms of the Plan.
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(b) If a grantee ceases to be employed or engaged by the Company and all Related Corporations by reason of disability, he or she shall continue to have the right to exercise any Stock Right held by him or her on the date of termination until unless otherwise specified in the instrument granting such Stock Right, the earlier of (i) one year after the date of termination or (ii) the Stock Right’s specified expiration date provided, however, in the event the grantee exercises an ISO after the date that is one year following the date of termination by reason of disability, such ISO will automatically be converted into a NSO subject to the terms of the Plan. For the purposes of the Plan, the term “disability” shall mean “permanent and total disability” as defined in Section 22(e)(3) of the Code.
(c) The provisions of subsections (a) and (b) of this Section 10 regarding the exercise period of a Stock Right may be waived, extended or further limited, in the discretion of the Committee, in an instrument granting a Stock Right that is not an ISO.
11. Transferability and Assignability of Stock Rights.
(a) Except for ISOs, which are governed by Section 11(b) below, no Stock Right may be transferable by the grantee except (i) upon the approval of the Committee, to the grantee’s family members, or (ii) by will or by the laws of descent and distribution. For purposes of the Plan, a grantee’s “family members” shall be deemed to consist of his or her spouse, parents, children, grandparents, grandchildren and any trusts created for the benefit of such individuals. A family member to whom any such Stock Right has been transferred pursuant to this Section 11(a) shall be hereinafter referred to as a “Permitted Transferee.” A Stock Right shall be transferred to a Permitted Transferee in accordance with the foregoing provisions, and subject to all the provisions of the Stock Right Agreement and this Plan, by the execution by the grantee and. the transferee of an assignment in writing in such form approved by the Committee. The Company shall not be required to recognize the rights of a Permitted Transferee until such time as it receives a copy of the assignment from the grantee.
(b) Unless expressly approved by the Committee, no ISO granted under this Plan shall be assignable or otherwise transferable by the optionee except by will or by the laws of descent and distribution. An ISO may be exercised during the lifetime of the optionee only by the optionee.
12. Terms and Conditions of Stock Rights. Stock Rights shall be evidenced by instruments (which need not be identical) in such forms as the Committee may from time to time approve. Such instruments shall conform to the terms and conditions set forth in Sections 6 through 11 hereof and may contain such other provisions as the Committee deems advisable that are not inconsistent with the Plan, including restrictions (or other conditions deemed by the Committee to be in the best interests of the Company) applicable to the exercise of Options or to shares of Common Stock issuable upon exercise of Options or otherwise. If the Committee determines to issue a NSO, it shall take whatever actions it deems necessary, under Section 422 of the Code and the regulations promulgated thereunder, to ensure that such Option is not treated as an ISO, provided however that in granting any NSO, the Committee may specify that such NSO shall be subject to the restrictions set forth herein with respect to ISOs, or to such other termination- and cancellation provisions as the Committee may determine. The Committee may from time to time confer authority and responsibility on one or more of its own members and/or one or more officers of the Company to execute and deliver such instruments. The proper officers of the Company are authorized and directed to take any and all action necessary or advisable from time to time to carry out the terms of such instruments.
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13. Adjustments. Upon the occurrence of any of the following events, the rights of a recipient of a Stock Right granted hereunder shall be adjusted as hereinafter provided, unless otherwise provided in the written agreement between the recipient and the Company relating to such Stock Right.
(a) If the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of Common Stock deliverable upon the exercise of outstanding Stock Rights shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price (if any) per share to reflect such subdivision, combination or stock dividend.
(b) If the Company is to be consolidated with or acquired by another entity in a merger, sale of all or substantially all of the Company’s assets or otherwise (an “Acquisition”), unless otherwise provided by the Committee, in its sole discretion, the Committee or the board of directors of any entity assuming the obligations of the Company hereunder (the “Successor Board”) shall, as to outstanding Stock Rights, make appropriate provision for the continuation of such Stock Rights by either assumption of such Stock Rights or by substitution of such Stock Rights with an equivalent award. For Stock Rights that are so assumed or substituted, in the event of a termination of grantee’s employment or consulting relationship (x) by the Company or its successor other than For Cause, or (y) by grantee for Good Reason (as defined below) within sixty (60) days prior to and one hundred eighty (180) days after an Acquisition, all Stock Rights held by such grantee shall become vested and immediately and fully exercisable and all forfeiture restrictions shall be waived. If the Committee or the Successor Board does not make appropriate provisions for the continuation of such Stock Rights by either assumption or substitution, unless otherwise provided by the Committee in its sole discretion, Stock Rights shall become vested and fully and immediately exercisable and all forfeiture restrictions shall be waived and all Stock Rights not exercised at the time of the closing of such Acquisition shall terminate notwithstanding anything to the contrary in Section 9 hereof. In the event such Stock Rights are so fully vested and become immediately exercisable, the Committee may elect in its discretion in lieu of requiring the exercise of any Stock Rights prior to termination, to cancel outstanding Stock Rights in exchange for cash payments for each outstanding Stock Right equal to the product of (x) the positive difference, if any, of (i) the price per share of Common Stock being paid in connection with the Acquisition less (ii) the applicable purchase or exercise price per share of Common Stock for such Stock Right and (y) the number of shares of Common Stock subject to such Stock Right. Any such cash payments shall be paid to the holders of Stock Rights within thirty (30) days after the closing of the Acquisition (subject to any escrow or other holdback periods and related reductions in amounts otherwise so payable applicable to all holders of Common Stock) and shall be subject to any applicable tax withholding requirements.
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(c) For purposes of this Section 13, a termination for “Good Reason” shall mean the resignation of an employee within thirty (30) days after the Company materially reduces the base annual salary of the employee, without the employee’s consent.
(d) In the event of a transaction, including without limitation, a recapitalization or reorganization of the Company (other than a transaction described in subsection (b) above) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, an optionee or grantee upon exercising a Stock Right shall be entitled to receive for the purchase price paid upon such exercise the securities he or she would have received if he or she had exercised the Stock Right immediately prior to such recapitalization or reorganization.
(e) In the event of the proposed dissolution or liquidation of the Company, each Stock Right will terminate immediately prior to the consummation of such proposed action or at such other time and subject to such other conditions as shall be determined by the Committee.
(f) Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to a Stock Right. No adjustments shall be made for dividends paid in cash or in property other than Common Stock of the Company.
(g) No fractional shares shall be issued under the Plan and any optionee who would otherwise be entitled to receive a fraction of a share upon exercise of a Stock Right shall receive from the Company cash in lieu of such fractional shares in an amount equal to the Fair Market Value of such fractional shares, as determined in the sole discretion of the Committee.
(h) Upon the happening of any of the foregoing events described in subsections (a), (b) or (c) above, the class and aggregate number of shares set forth in Section 4 hereof that are subject to Stock Rights that previously have been or subsequently may be granted under the Plan shall also be appropriately adjusted to reflect the events described. The Committee or the Successor Board shall determine the specific adjustments to be made under this Section 13 and, subject to Section 2, its determination shall be conclusive.
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14. Means of Exercising Stock Rights.
(a) Except as otherwise provided in this Plan or the instrument evidencing the Stock Right, a Stock Right (or any part or installment thereof) shall be exercised by giving written notice to the Company at its principal office address to the attention of its President. Such notice shall identify the Stock Right being exercised and specify the number of shares as to which such Stock Right is being exercised, accompanied by full payment of the exercise price therefor, if any, payable as follows (a) in United States dollars in cash or by check, (b) at the discretion of the Committee, through the delivery of already-owned shares of Common Stock having a Fair Market Value equal as of the date of the exercise to the cash exercise price of the Stock Right and, in the case of such already-owned shares of Common Stock, having been owned by the participant for more than six months from the date of surrender, or (c) at the discretion of the Committee, by delivery of the grantee’s personal recourse note bearing interest payable not less than annually at a market rate that is no less than 100% of the lowest applicable Federal rate, as defined in Section 1274(d) of the Code, or (d) at the discretion of the Committee, through the surrender of shares of Common Stock then issuable upon exercise of the Stock Right having a Fair Market Value on the date of exercise equal to the aggregate price of the Stock Right, (e) at the discretion of the Committee, delivery of a notice that the grantee has placed a market sell order with a broker with respect to shares of Common Stock then issuable upon exercise of the Stock Right and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Stock Right exercise price, provided that payment of such proceeds is then made to the Company upon settlement of the sale, or (f) at the discretion of the Committee, by any combination of (a), (b), (c), (d) and (e) or such other consideration and method of payment for the issuance of shares to the extent permitted by Applicable Laws and the Plan. If the Committee exercises its discretion to permit payment of the exercise price of a Stock Right by means of the methods set forth in clauses (b), (c) (d), (e) or (f) of the preceding sentence, such discretion shall be exercised in writing at the time of the grant of the Stock Right in question and such exercise shall also be governed by any terms set forth in the written agreement evidencing the grant of the Stock Right. The holder of a Stock Right shall not have the rights of a stockholder with respect to the shares covered by the Stock Right until the date of issuance of a stock certificate for such shares. Except as expressly provided above in Section 13 with respect to changes in capitalization and stock dividends, no adjustment shall be made for dividends or similar rights for which the record date is before the date such stock certificate is issued.
(b) The Company shall not be required to issue or deliver any shares of Common Stock upon the exercise of any Stock Right granted hereunder or any portion thereof, prior to fulfillment of all of the following conditions to the satisfaction of the Committee:
(i) the admission of such shares to listing on all stock exchanges on which the common Stock is listed, if any;
(ii) the completion of any registration or other qualification of such shares which the Committee shall deem necessary or advisable under any federal or state law or under the rulings or regulations of the United States Securities and Exchange Commission or any other governmental regulatory body, or the determination by the Company, with the advice of legal counsel, that exemptions are available from such registration and qualification;
(iii) the representation, in form acceptable to the Committee, at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws;
(iv) the obtaining of any approval or other clearance from any federal or state governmental agency or body which the Committee shall determine to be necessary or advisable; and
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(v) the lapse of such reasonable period of time following the exercise of the Option as the Committee from time to time may establish for reasons of administrative convenience.
(c) Stock certificates issued and delivered to grantees shall bear such restrictive legends as the Company shall deem necessary or advisable pursuant to applicable federal and state securities laws.
(d) As an alternative to issuance of stock certificates, subject to any applicable rules or regulations, the Company may deliver to the grantee evidence of book entry shares credited to the account of the grantee.
(e) The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any Common Stock pursuant to Stock Rights shall relieve the Company of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Company shall, however, use its commercially reasonable efforts to obtain all such approvals.
15. Surrender of Stock Rights for Cash or Stock. The Committee may, in its sole and absolute discretion and subject to such terms and conditions as it deems appropriate, accept the surrender by an optionee or grantee of a Stock Right granted to him under the Plan and authorize payment in consideration therefor of an amount equal to the difference between the purchase price payable for the shares of Common Stock under the instrument granting the Option and the Fair Market Value of the shares subject to the Stock Right (determined as of the date of such surrender of the Stock Right). Such payment shall be made in shares of Common Stock valued at Fair Market Value on the date of such surrender, or in cash, or partly in such shares of Common Stock and partly in cash as the Committee shall determine. The surrender shall be permitted only if the Committee determines that such surrender is consistent with the purpose set forth in Section 1, and only to the extent that the Stock Right is exercisable under Section 8 on the date of surrender. In no event shall an optionee or grantee surrender his Stock Right under this Section if the Fair Market Value of the shares on the date of such surrender is less than the purchase price payable for the shares of Common Stock subject to the Stock Right. Any ISO surrendered pursuant to the provisions of this Section 15 shall be deemed to have been converted into a NSO immediately prior to such surrender.
16. Effective Date and Term of Plan. The Plan shall become effective at such time as it has been adopted by the Board (the “Effective Date”). The Plan shall continue in effect for a term of ten (10) years from the Effective Date unless sooner terminated. Continuance of the Plan shall be subject to approval by the stockholders of the Company within twelve (12) months before or after the date the Plan is adopted by the Board. Such stockholder approval shall be obtained in the degree and manner required under the Applicable Laws. Any Stock Right awarded or exercised before stockholder approval is obtained shall be rescinded if stockholder approval is not obtained within the time prescribed, and shares issued on the exercise of any such Stock Right shall not be counted in determining whether stockholder approval is obtained.
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17. Amendment, Suspension, or Termination of Plan.
(a) The Board may at any time amend, suspend or terminate the Plan in any respect, except that it may not, without the approval of the stockholders obtained within twelve (12) months before or after the Board adopts a resolution authorizing any of the following actions, do any of the following:
(i) increase the total number of shares that may be issued under the Plan (except by adjustment pursuant to Section 13);
(ii) modify the provisions of Section 3 regarding eligibility for grants of ISOs;
(iii) modify the provisions of Section 6(b) regarding the exercise price at which shares may be offered pursuant to ISOs (except by adjustment pursuant to Section 13); or
(iv) extend the expiration date of the Plan.
(b) Except as provided in Section 13(b) and this Section 17, in no event may action of the Board or stockholders adversely alter or impair the rights of a grantee, without his or her consent, under any Stock Right previously granted.
18. Conversion of ISOs into NSOs; Termination of ISOs. The Committee, with the consent of any optionee, may in its discretion take such actions as may be necessary to convert an optionee’s ISOs (or any installments or portions of installments thereof) that have not been exercised on the date of conversion into NSOs at any time prior to the expiration of such ISOs. These actions may include, but not be limited to, accelerating the exercisability, extending the exercise period or reducing the exercise price of the appropriate installments of optionee’s Options. At the time of such conversion, the Committee (with the consent of the optionee) may impose these conditions on the exercise of the resulting NSOs as the Committee in its discretion may determine, provided that the conditions shall not be inconsistent with the Plan. Nothing in the Plan shall be deemed to give any optionee the right to have such optionee’s ISOs converted into NSOs, and no conversion shall occur until and unless the Committee takes appropriate action. The Committee, with the consent of the optionee, may also terminate any portion of any ISO that has not been exercised at the time of termination.
19. Withholding of Additional Income Taxes.
(a) Upon the exercise of an NSO, or the grant of a Stock Bonus or Purchase Right for less than the Fair Market Value of the Common Stock, the making of a Disqualifying Disposition (as defined in Section 20), the vesting of restricted Common Stock acquired on the exercise of a Stock Right hereunder or the surrender of an Option pursuant to Section 15, the Company, in accordance with Section 3402(a) of the Code and any applicable state statute or regulation, may require the optionee, Stock Bonus recipient or purchaser to pay to the Company additional withholding taxes in respect of the amount that is considered compensation includable in such person’s gross income. With respect to (i) the exercise of an Option, (ii) the grant of a Stock Bonus, (iii) the grant of a Purchase Right of Common Stock for less than its Fair Market Value, (iv) the vesting of restricted Common Stock acquired by exercising a Stock Right, or (v) the acceptance of a surrender of an Option, the Committee in its discretion may condition such event on the payment by the optionee, Stock Bonus recipient or purchaser of any such additional withholding taxes.
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(b) At the sole and absolute discretion of the Committee, the holder of Stock Rights may pay all or any part of the total estimated federal and state income tax liability arising out of the exercise or receipt of such Stock Rights, the making of a Disqualifying Disposition, or the vesting of restricted Common Stock acquired on the exercise of a Stock Right hereunder (each of the foregoing, a “Tax Event”) by tendering already-owned shares of Common Stock or (except in the case of a Disqualifying Disposition) by directing the Company to withhold shares of Common Stock otherwise to be transferred to the holder of such Stock Rights as a result of the exercise or receipt thereof in an amount equal to the estimated federal and state income tax liability arising out of such event, provided that no more shares may be withheld than are necessary to satisfy the holder’s actual minimum withholding obligation with respect to the exercise of Stock Rights. In such event, the holder of Stock Rights must, however, notify the Committee of his or her desire to pay all or any part of the total estimated federal and state income tax liability arising out of a Tax Event by tendering already-owned shares of Common Stock or having shares of Common Stock withheld prior to the date that the amount of federal or state income tax to be withheld is to be determined. For purposes of this Section 19(b), shares of Common Stock shall be valued at their Fair Market Value on the date that the amount of the tax withholdings is to be determined.
20. Notice to Company of Disqualifying Disposition. Each employee who receives an ISO must agree to notify the Company in writing immediately after the employee makes a Disqualifying Disposition (as defined below) of any Common Stock acquired pursuant to the exercise of an ISO. A “Disqualifying Disposition” is any disposition (including any sale) of such Common Stock before either (a) two years after the date the employee was granted the ISO, or (b) one year after the date the employee acquired Common Stock by exercising the ISO. If the employee has died before such stock is sold, these holding period requirements do not apply and no Disqualifying Disposition can occur thereafter.
21. Governing Law; Construction. The validity and construction of the Plan and the instruments evidencing Stock Rights shall be governed by the laws of the State of Delaware. In construing this Plan, the singular shall include the plural and the masculine gender shall include the feminine and neuter, unless the context otherwise requires.
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22. Lock-up Agreement. Each recipient of securities hereunder agrees that such recipient will not, without the prior written consent of the managing underwriter, if any, during the period commencing on the date of the final prospectus relating to the Company’s first firm commitment underwritten public offering of its Common Stock under the Securities Act of 1933, as amended (such offering “Initial Offering”) and ending on the date specified by the Company and such managing underwriter (such period not to exceed one hundred eighty (180) days) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock (whether such shares or any such securities are then owned by the recipient or are thereafter acquired), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise. The foregoing provisions of this Section 22 shall apply only to the Initial Offering, shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, and shall only be applicable to the recipients if all officers and directors are subject to the same restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all stockholders individually owning greater than one percent (1%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock of the Company). The underwriters in connection with the Initial Offering are intended third-party beneficiaries of this Section 22 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Each recipient of securities hereunder further agrees to execute such agreements as may be reasonably requested by the underwriters in the Initial Offering that are consistent with this Section 22 or that are necessary to give further effect thereto. Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply to all recipients of securities hereunder subject to such agreements pro rata based on the number of shares subject to such agreements.
In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the securities of each recipient of securities hereunder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. Notwithstanding the foregoing, if (i) during the last seventeen (17) days of the one hundred eighty (180)-day restricted period, the Company issues an earnings release or material news or a material event relating to the Company occurs; or (ii) prior to the expiration of the one hundred eighty (180)-day restricted period, the Company announces that it will release earnings results during the sixteen (16)-day period beginning on the last day of the one hundred eighty (180)-day period, the restrictions imposed by this Section 22 shall continue to apply until the expiration of the eighteen (18)-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.
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Exhibit 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this '"Agreement") is made and entered into effective as of 9/22/14 (the "Effective Date") by and between Coronado Dermatology, Inc. (the "Company”) and Claude Maraoui ('"Executive"). The Company and Executive are hereinafter collectively referred to as the "Parties", and individually referred to as a "Party".
Recitals
WHEREAS the Company desires to employ Executive and Executive desires to accept employment, on the terms and conditions set forth in this Agreement; and
WHEREAS, in his position, Executive will have access to confidential information concerning the Company's business, its customers and employees; and
WHEREAS, the Company wishes to protect itself from unauthorized use of this information and to protect its investment in its employees, customer relationships and confidential information.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
Agreement
1. | Employment. |
1.1 Title. Effective as of the Effective Date, Executive is employed by the Company in the position of President and CEO, subject to the terms and conditions set forth in this Agreement. ln his capacity as President and CEO, Executive shall report to the Company's Board of Directors (the "Board'') .
1.2 Term. The term of this Agreement shall begin the Effective Date and shall continue until it is terminated pursuant to Section 4 herein (the "Term").
1.3 Duties. Executive shall do and perform all services, acts or things necessary or advisable to conduct the business of the Company and that are normally associated with the position of President and CEO. Executive's performance of duties shall include finding and evaluating technologies, products, product candidates and/or medical devices from unaffiliated third party entities providing expertise on investments and strategies, and other duties the Board deems appropriate. Executive will devote his full business time, attention, knowledge and skills to the affairs of the Company and to his duties hereunder and will perform such duties diligently and to the best of his ability. Notwithstanding the foregoing, the Company acknowledges that Executive currently serves as a consultant to Medimetriks Pharmaceuticals, and Executive may continue such engagement during his employment by the Company, provided that Executive's performance of services for Medimctriks Pharmaceuticals does not interfere with Executive's performance of his duties to the Company, and provided further that such services for Medimetriks Pharmaceuticals does not constitute a violation of this Agreement or the PIIA (as defined below).
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1.4 Policies and Practices. The employment relationship between the Parties shall be governed by this Agreement and by the policies and practices established by the Company and/or the Company's Board, or any designated committee thereof. In the event that the terms of this Agreement differ from or are in conflict with the Company's policies or practices or the Company's Employee Handbook, this Agreement shall control.
1.5 Location. Unless the Parties otherwise agree in writing, during the Term, Executive shall perform his duties as described in Section 1.3 at his home office in Arizona. Notwithstanding the foregoing, Executive understands and agrees that the nature of his position will frequently require his presence at the Company's offices in New York, New York, and Executive will be present at such offices when and as deemed necessary by the Company. In addition, the Company may from time to time require Executive to travel temporarily to other locations in connection with the Company's business.
1.6 Background Check. Executive understands, acknowledges and agrees that the Company's offer of employment pursuant to this Agreement is contingent upon satisfactory results of Executive's background and credit check.
1.7 Resources. The Company will provide the necessary funding and resources to support Executive's performance of his duties hereunder, as determined by the Board in its discretion.
2. | Loyalty; Restrictive Covenants. |
2.1 Loyalty. During the Term, Executive shall devote Executive's full business time, attention, knowledge and skills to the affairs of the Company and to his duties hereunder, and will perform such duties diligently and to the best of his ability.
2.2 Agreements Protecting Confidential and Proprietary Information. In connection with and as a material condition of the Company's decision to offer Executive employment, Executive understands, acknowledges and agrees to promptly execute and be bound by certain restrictive covenants during and after his employment with the Company, as contained in the Company's Proprietary Information and Inventions Agreement ("PIIA"). A copy of the PIIA is attached to this Agreement as Exhibit A. Executive acknowledges and agrees that his services to the Company pursuant to this Agreement are unique and extraordinary and that in the course of performing such services Executive shall have access to and knowledge of significant confidential, proprietary, and trade secret information belonging to the Company. Executive agrees that the provisions and restrictions set forth in the PIIA are reasonable and necessary to protect the Company's legitimate business interests in its goodwill, its confidential, proprietary, and trade secret information, and its investment in the unique and extraordinary services to be provided by Executive pursuant to this Agreement.
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2.3 Non-Competition and Non-Solicitation.
2.3.1 Purpose. Executive and the Company understand and agree that the purpose of this Section 2.3 is solely to protect the Company's legitimate business interests, including, but not limited to its confidential and proprietary information, customer relationships and goodwill, and the Company's competitive advantage, and is not intended to impair, nor will it impair, Executive's ability or right to work or earn a living. Therefore, Executive agrees to be subject to restrictive covenants under the following terms.
2.3.2 Definitions. As used in this Agreement, the following terms have the meanings given to such terms below.
(i) "Affiliate" means, with respect to any specific entity, any other entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified entity.
(ii) "Business" means the business(es) in which the Company or its Affiliates are or were engaged at the time of, or during the 12 month period prior to, the termination of Executive's employment with the Company for any reason.
(iii) "Customer" means any person or entity who is or was a customer or client of the Company or its Affiliates at the time of, or during the 12 month period prior to, the termination of Executive's employment with the Company for any reason.
(iv) "Company Employee" means any person who is or was an employee of the Company or its Affiliates at the time of, or during the twelve (12) month period prior to, the termination of Executive's employment with the Company for any reason.
(v) "Restricted Period" means (A) the period commencing on the date of termination of Executive's employment with the Company for any reason and ending six (6) months after such date if the date of termination is before the second anniversary of the Effective Date; or (B) the period commencing on the date of termination of Executive's employment with the Company for any reason and ending twelve (12) months after such date if the date of termination is on or after the second anniversary of the Effective Date; provided, however, in either case that the period shall be tolled and shall not run during any time Executive is in violation of this Section 2.3 , it being the intent of the parties that the Restricted Period shall be extended for any period of time in which Executive is in violation of this Section 2.3 .
(vi) "Territory" means the United States of America, it being understood that the Company's business is nationwide in scope and a nationwide restriction is reasonable and necessary to protect the Company's interests.
2.3.3 Non-Participation with the Company's Competitors. During his employment with the Company, Executive will not, on his own behalf or on behalf of any other person, engage in any business competitive with or adverse to that of the Company. In addition, during his employment with the Company, Executive will not acquire, assume or participate in, directly or indirectly, any position, investment or interest known by Executive to be adverse or antagonistic to the Company, its business, or prospects, financial or otherwise, or in any company, person, or entity that is, directly or indirectly, in competition with the business of the Company or any of its Affiliates (as defined above). Ownership by Executive, in professionally managed funds over which the Executive does not have control or discretion in investment decisions, or as a passive investment, of less than two percent (2%) of the outstanding shares of capital stock of any corporation with one or more classes of its capital stock listed on a national securities exchange or publicly traded on a national securities exchange or in the over-the-counter market shall not constitute a breach of this Section 2.3.3.
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2.3.4 Non-Competition. During his employment with the Company and during the Restricted Period, Executive will not, directly or indirectly, (i) engage in the Business in the Territory ( other than on behalf of the Company), or (ii) hold a position based in or with responsibility for all or part of the Territory, with any person or entity engaging in the Business, whether as an employee, consultant, or otherwise, in which Executive will have duties, or will perform or be expected to perform services for such person or entity, that is or are the same as or substantially similar to the position held by Executive or those duties or services actually performed by Executive for the Company within the twelve (12) month period immediately preceding the termination of Executive's employment with the Company, or in which Executive will use or disclose or be reasonably expected to use or disclose any confidential or proprietary information of the Company for the purpose of providing, or attempting to provide, such person or entity with a competitive advantage with respect to the Business.
2.3.5 Non-Solicitation. During his employment with the Company and during the Restricted Period, Executive will not, directly or indirectly, on Executive's own behalf or on behalf of any other party (except on behalf of the Company):
(i) | Call upon, solicit, divert, encourage or attempt to call upon, solicit, divert, or encourage any Customer for purposes of marketing, selling, or providing products or services to such Customer that are similar to or competitive with those offered by the Company; |
(ii) | Accept as a customer any Customer for purposes of marketing, selling, or providing products or services to such Customer that are similar to or competitive with those offered by the Company; |
(iii) | Induce, encourage, or attempt to induce or encourage any Customer to reduce, limit, or cancel its business with the Company; or |
(iv) | Solicit, induce, or attempt to solicit or induce any Company Employee to terminate his or her employment with the Company. |
2.3.6 Reasonableness of Restrictions. Executive acknowledges and agrees that (i) his services to the Company under this Agreement are unique and extraordinary; (ii) the restrictive covenants in this Agreement are essential elements of Executive's employment by the Company and are reasonable given Executive's access to the Company's confidential information and the substantial knowledge and goodwill Executive will acquire with respect to the business of the Company as a result of his employment with the Company, and the unique and extraordinary services to be provided by Executive to the Company; (iii) the restrictive covenants contained in this Agreement are reasonable in time, territory, and scope, and in all other respects; and (iv) enforcement of the restrictions contained herein will not deprive the Executive of the ability to earn a reasonable living. Should any part or provision of this Section 2.3 be held invalid, void, or unenforceable in any court of competent jurisdiction, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement. The parties further agree that if any portion of this Section 2.3 is found to be invalid or unenforceable by a court of competent jurisdiction because its duration, territory, or other restrictions are deemed to be invalid or unreasonable in scope, the invalid or unreasonable terms shall be replaced by terms that are valid and enforceable and that come closest to expressing the intention of such invalid or unenforceable terms.
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2.3.7 Enforcement. Executive acknowledges and agrees that the Company will suffer irreparable harm in the event that Executive breaches any of Executive's obligations under this Section 2.3 and that monetary damages would be inadequate to compensate the Company for such breach. Accordingly, Executive agrees that, in the event of a breach by Executive of any of Executive's obligations under this Section 2.3, the Company will be entitled to obtain from any court of competent jurisdiction preliminary and permanent injunctive relief, and expedited discovery for the purpose of seeking relief, in order to prevent or to restrain any such breach. Executive agrees to waive any requirement for the securing or posting of any bond in connection with such remedies. The Company will be entitled to recover its costs incurred in connection with enforcing this Section 2.3, including reasonable attorneys' fees and expenses.
3. | Compensation Of Executive. |
3.1 Base Salary. The Company shall pay Executive a base salary at the annualized rate of Three Hundred Thousand Dollars ($300,000.00) (the "Base Salary"), less all applicable taxes, deductions and withholdings, to be paid in equal installments in accord with the Company's normal payroll practices. The Base Salary shall be prorated for any partial year of employment on the basis of a 365-day fiscal year and may be changed in the discretion of the CEO and/or the Board. The Base Salary may only be decreased in connection with a Company-wide decrease in executive compensation; provided, however that Executive shall not be subject to any greater percentage reduction than any other Company executive.
3.2 Annual Milestone Bonus. Each year, the compensation committee of the Board (the "Compensation Committee"), shall meet and establish the parameters of Executive's additional cash bonus (the "Annual Milestone Bonus"). Executive shall be eligible for an Annual Milestone Bonus of up to one hundred percent ( 100%) of his Base Salary then in effect. The amount of the Annual Milestone Bonus to be paid shall be based on Executive's attainment of certain financial, clinical development, and/or business milestones (the "Milestones") to be established annually by the Board or the Compensation Committee. The Milestones for 2014 shall be established as soon as practicable following the Effective Date. The determination of whether Executive has met the Milestones, and if so, the bonus amount (if any) that will be paid, shall be determined by the Board or the Compensation Committee in its reasonable discretion. Except as described in Sections 4.5.2 or 4.5.4 below, Executive must remain employed by the Company through and including the last day of the applicable calendar year in order to be eligible to earn or receive any Annual Milestone Bonus for that year. The Parties agree that Executive will be eligible for a pro rata bonus for 2014, provided that he remains employed by the Company through and including December 31 , 2014. The Annual Milestone Bonus shall be paid in cash as a single lump-sum payment no later than March 15 of the next following calendar year.
3.3 Corporate Development Compensation. Upon the closing by the Company of a Corporate Development Transaction (as defined below) occurring during the Term, the Company will issue to Executive shares of common stock in the Company representing fifteen percent (15%) of the total outstanding shares of common stock as of the date of the closing, subject to a Company repurchase right that lapses as the shares vest in accordance with the schedule below (the "Shares"). One half of the Shares will vest in three equal installments on the first, second and third anniversaries of the date of grant, subject to Executive's continued employment with the Company on each such vesting date. The remaining one half of the Shares will vest upon the Company's achievement of certain sales and other performance related goals as described in a separate agreement to be entered between the Company and Executive at the time of the grant of the Shares. The Shares will granted pursuant to, and otherwise governed by, such separate agreement and the Company's applicable stock plan. For purposes of this Agreement, a "Corporate Development Transaction" means the license (including a co-marketing license agreement) or purchase of a technology, product, product candidate, or medical device by the Company from an unaffiliated third party entity, provided that such license, purchase, sale or investment occurs primarily as a result of Executive's efforts on the Company's behalf during the Term through Executive's own direct outreach or his network of contacts outside the Company ( as opposed to Corporate Development Transactions uncovered by other Company agents or that are sent to other Company agents through Company contacts such as board members, bankers, etc.) as determined by the Board in its sole discretion.
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3.4 Expense Reimbursements. The Company will reimburse Executive for all reasonable business expenses incurred by Executive in connection with the performance of his duties hereunder, subject to the Company' s reimbursement policies in effect from time to time.
3.5 Benefits. Executive shall, in accordance with Company policy and the applicable plan documents, be eligible to participate in benefits under any benefit plan or arrangement that may be in effect from time to time and made available to the Company's senior management employees.
3.6 Holidays and Vacation. Executive shall be eligible to accrue up to four (4) weeks of paid vacation per year and will receive paid Company holidays in accordance with Company policy. In addition, Executive will be entitled to three (3) personal days per calendar year. All available time off must be used in accord with the Company's policies and procedures. To the extent Executive would be entitled to a greater number of vacation days or personal days under any other Company policy, such other policy shall govern.
3. 7 Miscellaneous Withholdings. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes required to be withheld pursuant to any applicable law or other amount properly requested by Executive.
4. TERMINATION.
4.1 Termination by the Company. Executive's employment with the Company is at will and may be terminated by the Company at any time and for any reason, or for no reason, including, but not limited to, under the following conditions:
4.1.1 Termination by the Company for Cause. The Company may terminate Executive's employment under this Agreement for "Cause" (as defined below) by delivery of written notice to Executive in accordance with the procedures set forth in Section 4.6.2 below. Any notice of termination given pursuant to this Section 4.1.1 shall effect termination as of the date of the notice or as of such other date as specified in the notice, subject to Section 4.6.2.
4.1.2 Termination by the Company without Cause. The Company may terminate Executive's employment under this Agreement without Cause at any time and for any reason or for no reason. Such termination shall be effective on the date Executive is so informed or as otherwise specified by the Company.
4.2 Termination by Resignation of Executive. Executive's employment with the Company is at will and may be terminated by Executive at any time and for any reason or for no reason, including via a resignation for Good Reason in accordance with the procedures set forth in Section 4.6.3 below.
4.3 Termination for Death or Complete Disability. Executive's employment with the Company shall terminate effective upon the date of Executive's death or Complete Disability (as defined below).
4.4 Termination by Mutual Agreement of the Parties. Executive's employment with the Company may be terminated at any time upon a mutual agreement in writing of the Parties. Any such termination of employment shall have the consequences specified in such agreement.
4.5 Compensation Upon Termination.
4.5.1 Generally. When this Agreement is terminated for any reason, Executive, or his estate, as the case may be, will be entitled to receive the compensation and benefits earned through the effective date of termination, including, but not limited to, as applicable, any Base Salary owed to Executive, expenses reimbursement amounts owed to Executive, all unpaid amounts of the Annual Milestone Bonus(es) earned in the prior year, if any, Executive earned prior to the termination date by meeting the conditions set forth in Section 3 .2, and accrued and unused vacation benefits earned through the date of termination at the rate in effect at the time of termination, less standard deductions and withholdings.
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4.5.2 Death or Complete Disability. If Executive' s employment under this Agreement is terminated by his death or Complete Disability, then, in addition to the amounts described in Section 4.5 .1 , and conditioned upon Executive (or his estate or heirs as applicable) executing and not revoking a release of claims in the form attached as Exhibit B (the "Release") within the time periods specified therein, the Company will provide the following separation benefits: (i) the Company will continue Executive's Base Salary (at the rate in effect as of the termination) for a period of ninety (90) days beginning on the sixtieth (60th) day following the termination of Executive's employment with the Company, and (ii) Executive shall be entitled to a pro-rata share of the Annual Milestone Bonus, to be paid when and if such Annual Milestone Bonus would have been paid under this Agreement. The Base Salary payments will be subject to standard payroll deductions and withholdings and will be made on the Company' s regular payroll cycle, provided, however, that any payments otherwise scheduled to be made prior to the effective date of the Release shall accrue and be paid in the first payroll period that follows such effective date.
4.5.3 Termination For Cause or Resignation without Good Reason. If Executive' s employment is terminated by the Company for Cause, or Executive resigns his employment hereunder without Good Reason, the Company shall pay Executive the amounts described in Section 4.5.1. The Company shall thereafter have no further obligations to Executive under this Agreement, except as otherwise provided by law.
4.5.4 Termination Without Cause or Resignation For Good Reason. If Executive' s employment under this Agreement is terminated by the Company without Cause or Executive resigns for Good Reason, then, in addition to the amounts described in Section 4.5.1 , and conditioned upon Executive executing and not revoking the Release within the time periods specified therein, the Company will provide the following separation benefits: (i) the Company will continue Executive' s Base Salary (at the rate in effect as of the termination) for a period of (A) six (6) months if the termination occurs within two (2) years following the Effective Date, or (B) twelve (12) months if the termination occurs more than two (2) years following the Effective Date, in either case beginning on the sixtieth (60th) day following the termination of Executive' s employment with the Company; (ii) Executive shall be entitled to a pro-rata share of the Annual Milestone Bonus for the year in which the termination occurred, to be paid when and if such Annual Milestone Bonus would have been paid under this Agreement; and (iii) if Executive timely elects continued health insurance coverage under COBRA, the Company shall pay the entire premium necessary to continue such coverage for Executive and Executive's eligible dependents until the conclusion of the time when Executive is receiving continuation of Base Salary payments or until Executive becomes eligible for group health insurance coverage under another employer's plan, whichever occurs first. The Base Salary payments will be subject to standard payroll deductions and withholdings and will be made on the Company's regular payroll cycle, provided, however, that any payments otherwise scheduled to be made prior to the effective date of the Release shall accrue and be paid in the first payroll period that follows such effective date.
4.6 Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
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4.6.1 Complete Disability. As used herein, "Complete Disability" means the inability of Executive, due to the condition of his physical, mental or emotional health, effectively to perform the essential functions of his job with or without reasonable accommodation for a continuous period of more than 90 days or for 90 days in any period of 180 consecutive days. For purposes of making a determination as to whether a Complete Disability exists, at the Company's request Executive agrees to make himself available and to cooperate in a reasonable examination by a licensed independent physician retained by the Company and to authorize the disclosure and release to the Company of all medical records related to such examination.
4.6.2 Cause. As used herein, "Cause" means: (i) Executive's conviction of fraud, embezzlement or misappropriation with respect to the Company, (ii) Executive's material breach of a material term of this Agreement, (iii) Executive's material breach of the Proprietary Information and Inventions Agreement between Executive and the Company, (iv) Executive's breach of fiduciary duties to the Company, (v) Executive's willful failure or refusal to perform his material duties under this Agreement or failure to follow any specific lawful instructions of the Board, (vi) Executive's conviction or plea of nolo contendere in respect of a felony or of a misdemeanor involving moral turpitude, or (vii) Executive's willful or negligent misconduct that has a material adverse effect on the property, business, or reputation of the Company. For purposes of clauses (ii) through (vii), Executive shall have thirty (30) days after Executive's receipt of written notice thereof from the Company to cure any such failure, action or breach.
4.6.3 Good Reason. For purposes of this Agreement, "Good Reason" means the occurrence of any of the following events without Executive's consent: (i) a material reduction of Executive's Base Salary, except in connection with a Company-wide decrease in executive compensation, as provided in Section 3 .1 of this Agreement, (ii) a material diminution of Executive's authority, duties, or responsibilities, or (iii) the Company's material breach of this Agreement. In order for Executive to resign for Good Reason, Executive must provide written notice to the Company of the existence of the Good Reason condition within thirty (30) days of the date on which Executive discovers, or reasonably should have discovered, the existence of such Good Reason condition. Upon receipt of such notice, the Company will have thirty (30) days during which it may remedy the Good Reason condition and not be required to provide for the benefits described in Section 4.5.4 as a result of such proposed resignation. If the Good Reason condition is not remedied within such thirty (30) day period, Executive may resign based on the Good Reason condition specified in the notice effective immediately upon the expiration of the thirty (30) day cure period.
4.7 Survival of Certain Sections. Sections 2, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 17, and 18 of this Agreement will survive the termination of this Agreement.
4.8 Section 409A Compliance. Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this Section 4 that constitute "deferred compensation" within the meaning of Section 409A of the Internal Revenue Code and the regulations and other guidance thereunder and any state law of similar effect (collectively "Section 409A") will not commence in connection with Executive's termination of employment unless and until Executive has also incurred a "separation from service" (as such term is defined in Treasury Regulation Section 1.409A-l(h) (a "Separation From Service"), unless the Company reasonably determines that such amounts may be provided to Executive without causing Executive to incur the additional 20% tax under Section 409A. The parties intend that each installment of the separation benefits payments provided for in this Agreement is a separate "payment" for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i). For the avoidance of doubt, the parties intend that payments of the Separation Benefits set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under Treasury Regulation Sections 1.409A-l(b)(4), 1.409A-l(b)(5) and 1.409A-1(b )(9). Executive and the Company agree to use their best efforts to amend the terms of this Agreement from time to time as may be necessary to avoid the imposition of penalties or additional taxes under Section 409A of the Internal Revenue Code; provided, however, any such amendment will provide Executive substantially equivalent economic payments and benefits as set forth herein and will not in the aggregate, materially increase the cost to, or liability of, the Company hereunder. However, if the Company determines that the Separation Benefits constitute "deferred compensation" under Section 409A and Executive is, on the termination of service, a "specified employee" of the Company or any successor entity thereto, as such term is defined in Section 409A, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the Separation Benefits payments will be delayed until the earlier to occur of: (i) the date that is six months and one day after Executive' s Separation From Service, or (ii) the date of Executive' s death (such applicable date, the "Specified Employee Initial Payment Date"), the Company (or the successor entity thereto, as applicable) will (A) pay to Executive a lump sum amount equal to the sum of the Separation Benefits payments that Executive would otherwise have received through the Specified Employee Initial Payment Date if the commencement of the payment of the Separation Benefits had not been so delayed pursuant to this Section and (B) commence paying the balance of the separation benefits in accordance with the applicable payment schedules set forth in this Agreement.
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5. GUARANTEE BY CORONADO BIOSCIENCES, INC.
Although Executive is an employee of the Company and not of Coronado Biosciences, Inc. (the Company's parent company), in the event that the Company fails or is unable to pay Executive the compensation due to him pursuant to this Agreement, upon notice from Executive, Coronado Biosciences will pay or ensure that the Company will pay such amounts to Executive. Coronado Biosciences' liability pursuant to this guarantee will in no event be greater than the amount that is due to Executive pursuant to this Agreement. In the event of any claim pursuant to this guarantee, Coronado Biosciences will have available to it all defenses and set-offs available to the Company.
6. ASSIGNMENT AND BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of Executive and Executive's heirs, executors, personal representatives, assigns, administrators and legal representatives. Because of the unique and personal nature of Executive's duties under this Agreement, neither this Agreement nor any rights or obligations under this Agreement shall be assignable by Executive. This Agreement shall be binding upon and inure to the benefit of the Company and its successors, assigns and legal representatives. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, "successor" means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company.
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7. NOTICES.
All notices or demands of any kind required or permitted to be given by the Company or Executive under this Agreement shall be given in writing and shall be personally delivered (and receipted for) or faxed during normal business hours or mailed by certified mail, return receipt requested, postage prepaid, addressed as follows :
If to the Company: | ||
Coronado Dermatology, Inc. | ||
Attn: | ||
If to Executive: | ||
Claude Maraoui | ||
10020 N 111th Place | ||
Scottsdale, AZ |
Any such written notice shall be deemed given on the earlier of the date on which such notice is personally delivered or three (3) days after its deposit in the United States mail as specified above. Either Party may change its address for notices by giving notice to the other Party in the manner specified in this Section.
8. CHOICE OF LAW.
This Agreement shall be construed and interpreted in accordance with the internal laws of the State of New York without regard to its conflict of laws principles.
9. INTEGRATION.
This Agreement, including all documents referenced herein, contains the complete, final and exclusive agreement of the Parties relating to the terms and conditions of Executive's employment and the termination of Executive's employment, and supersedes all prior and contemporaneous oral and written employment agreements or arrangements between the Parties.
10. AMENDMENT.
This Agreement cannot be amended or modified except by a written agreement signed by Executive and the Company.
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11. WAIVER.
No term, covenant or condition of this Agreement or any breach thereof shall be deemed waived, except with the written consent of the Party against whom the wavier is claimed, and any waiver or any such term, covenant, condition or breach shall not be deemed to be a waiver of any preceding or succeeding breach of the same or any other term, covenant, condition or breach.
12. SEVERABILITY.
The finding by a court of competent jurisdiction of the unenforceability, invalidity or illegality of any provision of this Agreement shall not render any other provision of this Agreement unenforceable, invalid or illegal. Such court shall have the authority to modify or replace the invalid or unenforceable term or provision with a valid and enforceable term or provision, which most accurately represents the Parties' intention with respect to the invalid or unenforceable term, or provision.
13. INTERPRETATION; CONSTRUCTION.
The headings set forth in this Agreement are for convenience of reference only and shall not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing the Company, but Executive has been encouraged to consult with, and has consulted with, Executive's own independent counsel and tax advisors with respect to the terms of this Agreement. The Parties acknowledge that each Party and its counsel has reviewed and revised, or had an opportunity to review and revise, this Agreement, and any rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.
14. ATTORNEYS FEES.
Except as otherwise prohibited by law, in the event a Party brings an action to enforce the terms of this Agreement, in addition to any other remedies, the prevailing party will be entitled to recovery of its reasonable attorneys' fees and costs incurred by it arising out of such breach or the defense thereof.
15. REPRESENTATIONS AND WARRANTIES.
15.1 Obligations to Prior Employers. Executive represents and warrants to the Company that Executive is not obligated or restricted under any agreement (including any non-competition or confidentiality agreement), judgment, decree, order or other restraint of any kind that could impair Executive's ability to perform the duties and obligations required of Executive hereunder. Executive further represents and warrants to the Company that he has not violated any confidentiality agreement or other similar obligation that he has to any former employer and that he has not disclosed any confidential or trade secret information belonging to any former employer to the Company or its agents. Executive agrees that he will not use confidential information and/or trade secrets belonging to any former employer in his employment with the Company or otherwise as a resource for building the business of the Company and will structure his and the Company's work environment and practices in such a way to ensure that any such information will not be used or disclosed during the course of his relationship with the Company.
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15.2 Litigation Support. Both during and after Executive's employment with the Company, if the Company is evaluating, pursuing, contesting or defending any proceeding, charge, complaint, claim, demand, notice, action, suit, litigation, hearing, audit, investigation, arbitration or mediation, in each case whether initiated by or against the Company (collectively, a "Proceeding"), other than a Proceeding initiated by or against Executive, Executive will reasonably cooperate with the Company and its counsel in the evaluation, pursuit, contest or defense of the Proceeding and provide such testimony and access to books and records as may be necessary in connection therewith. Any such cooperation shall be done at times mutually convenient for Executive and the Company, and the Company will ensure that any such cooperation does not interfere with any duties or obligations that Executive may have to a third party, including any future employer. The Company will reimburse Executive for Executive's out-of-pocket expenses related to such cooperation.
15.3 Future Employment. In the event of Executive's separation from the Company, regardless of the reason or cause of that separation, Executive agrees that for a period of twelve (12) months from the date his employment terminates, he will provide the Company with no fewer than three (3) business days' notice of his intent to accept employment with or for an organization other than Company for the express purpose of allowing the Company to determine if such proposed employment interferes with any of Executive's surviving obligations under this Agreement. The notice of intent to accept employment will identify the new employer, list Executive's anticipated title and describe his anticipated duties.
16. COUNTERPARTS.
This Agreement may be executed in two counterparts, each of which shall be deemed an original, all of which together shall contribute one and the same instrument.
17. JURISDICTION; VENUE.
The Parties agree that any litigation arising out of or related to this Agreement or Executive's employment by the Company shall be brought exclusively in any state or federal court in New York, New York. Each Party (i) consents to the personal jurisdiction of said courts, (ii) waives any venue or inconvenient forum defense to any proceeding maintained in such courts, and (iii) except as otherwise provided in this Agreement, agrees not to bring any proceeding arising out of or relating to this Agreement or Executive's employment by the Company in any other court.
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18. ADVERTISING WAIVER.
Executive agrees to permit the Company, and persons or other organizations authorized by the Company, to use, publish and distribute advertising or sales promotional literature concerning the products and/or services of the Company, or the machinery and equipment used in the provision thereof, in which Executive's name and/or pictures of Executive taken in the course of Executive's provision of services to the Company appear. Executive hereby waives and releases any claim or right Executive may otherwise have arising out of such use, publication or distribution.
[Remainder of Page Intentionally Left Blank. Signature Page Immediately Follows]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written.
Coronado dermatology, inc. | ||
|
9/22/2014 | |
name: | date | |
position: | ||
executive: | ||
/s/ claude maraoui | 9-22-14 | |
claude maraoui | date | |
for purposes of section 5 only: | ||
coronado biosciences, inc. | ||
/s/ lindsay a. Rosenwald,md | 9/22/2014 | |
lindsay a. Rosenwald,md | date | |
chief executive officer |
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EXHIBIT A
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EXHIBITB
Release of Claims
RELEASE OF CLAIMS
THIS RELEASE OF CLAIMS (this "Release") is made by Claude Maraoui ("Executive") into as of the date it is signed by Executive, as indicated on the signature page hereof.
Executive acknowledges that he previously executed an Employment Agreement (the "Agreement") that included, among other items, a promise of severance pay and other benefits by Coronado Dermatology, Inc. (the "Company") in certain situations, contingent upon Executive's execution of a release of claims. Pursuant to the terms of the Agreement and Company' s promise to provide severance pay and other benefits, Executive executes this Release.
Executive, on his own behalf and on behalf of his heirs, personal representatives, successors and assigns, hereby release and forever discharge the Company and each of its Affiliates and each and every one of their respective present and former shareholders, directors, officers, members, employees, agents, insurers, predecessors, successors and assigns (the "Released Parties"), of and from any and all claims, demands, actions, causes of action, damages, costs and expenses which Executive now has or may have by reason of anything occurring, done or omitted to be done as of or prior to date he signs this Release including, but not limited to, (i) any and all claims related to Executive's employment with Company and the termination of same; (ii) any and all claims for additional compensation or benefits other than the compensation and benefits set forth in the Agreement, including but not limited to wages, commissions, deferred compensation, bonuses, or other benefits of any kind; (iii) any and all claims relating to employment practices or policies of Company or its Affiliates; and (iv) any and all claims arising under any state or federal legislation, including, but not limited to, claims under the Employee Retirement Income Security Act, the Family Medical Leave Act, Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991 , the Age Discrimination in Employment Act, the Americans with Disabilities Act, as amended, the Older Workers Benefit Protection Act, any act relating to military service, any New York law related to human rights and/or civil rights, and any other federal, state or local law or regulation prohibiting employment discrimination or otherwise governing the employment relationship between Executive and Company (the "Released Claims"), except that notwithstanding anything contained in this Release, Executive understands that he is not releasing any claims which cannot by law be released.
Executive further covenants and agrees that he will not sue any of the Released Parties on any ground arising out of or related to any of the Released Claims. Executive acknowledges and agrees that this covenant does not preclude him from filing a charge or complaint with any government agency, to the extent permitted by law, but expressly releases, waives, and disclaims any right to compensation or other benefit that may otherwise inure to him as a result of any such charge or complaint involving the Company.
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In making this Release, Executive further represents and acknowledges that:
(a) He is voluntarily entering into and signing this Release;
(b) The claims waived, released and discharged in the above Release include any and all claims Executive has or may have arising out of or related to his employment with the Company and the termination of that employment, including any and all claims under the Age Discrimination in Employment Act;
(c) Those claims waived, released and discharged in this Release do not include, and Executive is not waiving, releasing or discharging, any claims that may arise after the date he signs this Release;
(d) The payments and benefits conditioned upon Executive's execution of this Release constitute consideration that Executive was not entitled to receive before the effective date of this Release absent the execution of this Release;
(e) Executive was given twenty-one (21) days within which to consider this Release;
(f) The Company has advised Executive of his right to consult with an attorney regarding this Release before executing the Release and encouraged him to exercise that right;
(g) Executive may revoke this Release at any time within seven (7) days after the date he signs this Release, and this document will not become effective or enforceable until the eighth (8th) day after the date he signs this Release ( on which day this Release will automatically become effective and enforceable unless previously revoked within that seven (7) day period); and
(h) EXECUTIVE HAS CAREFULLY READ THIS DOCUMENT, AND FULLY UNDERSTANDS EACH AND EVERY TERM.
I hereby execute this Release on the day of , .
Claude Maraoui |
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Exhibit 10.3
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this “Agreement”) is made and entered into as of September 27, 2021 by and between Journey Medical Corporation (the “Company”) and Ernest De Paolantonio (“Executive”). The Company and Executive are hereinafter collectively referred to as the “Parties”, and individually referred to as a “Party”.
Recitals
WHEREAS the Company desires to employ Executive and Executive desires to accept employment, on the terms and conditions set forth in this Agreement;
WHEREAS, in his position, Executive will have access to confidential information concerning the Company’s business, its customers and employees; and
WHEREAS, the Company wishes to protect itself from unauthorized use of this information and to protect its investment in its employees, customer relationships and confidential information.
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
Agreement
1. | Employment. |
1.1 Term. This Agreement will take effect on October 1, 2021 (the “Effective Date”) and will continue in effect until it is terminated pursuant to Section 4 herein.
1.2 Title. Effective as of the Effective Date, Executive is employed by the Company in the position of Chief Financial Officer. Executive will report to the Company’s Chief Executive Officer.
1.3 Duties. Executive will do and perform all services, acts or things necessary or advisable to conduct the business of the Company and that are normally associated with the position of Chief Financial Officer. Executive’s duties will also include such other duties as the Company may direct from time to time. Executive will devote his full business time, attention, knowledge and skills to the affairs of the Company and to his duties hereunder and will perform such duties diligently and to the best of his ability, in compliance with the Company’s policies and procedures and the laws and regulations that apply to the Company’s business.
1.4 Location. Unless the Parties otherwise agree in writing, Executive will work remotely. Notwithstanding the foregoing, Executive understands and agrees that the Company may from time to time require Executive to travel temporarily to other locations in connection with the Company’s business, including but not limited to the Company’s headquarters in Scottsdale, Arizona.
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2. | Restrictive Covenants. |
2.1 Agreements Protecting Confidential and Proprietary Information. In connection with and as a material condition of the Company’s employment of Executive, Executive understands, acknowledges and agrees to promptly execute and be bound by certain restrictive covenants during and after his employment with the Company, as contained in the Company’s Proprietary Information and Inventions Agreement (“PIIA”). A copy of the PIIA is attached to this Agreement as Exhibit A. Executive acknowledges and agrees that his services to the Company pursuant to this Agreement are unique and extraordinary and that in the course of performing such services Executive will have access to and knowledge of significant confidential, proprietary, and trade secret information belonging to the Company. Executive agrees that the provisions and restrictions set forth in the PIIA are reasonable and necessary to protect the Company’s legitimate business interests in its goodwill, its confidential, proprietary, and trade secret information, and its investment in the unique and extraordinary services to be provided by Executive pursuant to this Agreement.
2.2 Non-Competition and Non-Solicitation.
2.2.1 Purpose. Executive understands and agrees that the purpose of this Section 2.2 is to protect the Company’s legitimate business interests, including, but not limited to its confidential and proprietary information, customer relationships and goodwill, and the Company’s competitive advantage, and will not unreasonably impair Executive’s ability or right to work or earn a living. Therefore, Executive agrees to be subject to restrictive covenants under the following terms.
2.2.2 Definitions. As used in this Agreement, the following terms have the meanings given to such terms below.
(i) “Business” means the business(es) in which the Company is or was engaged at the time of, or during the 12-month period prior to, the termination of Executive’s employment with the Company for any reason.
(ii) “Customer” means any person or entity who is or was a customer or client of the Company at the time of, or during the 12-month period prior to, the termination of Executive’s employment with the Company for any reason.
(iii) “Company Employee” means any person who is or was an employee of the Company at the time of, or during the 12-month period prior to, the termination of Executive’s employment with the Company for any reason.
(iv) “Restricted Period” means the period commencing on the date of termination of Executive’s employment with the Company for any reason and ending 12 months after such date; provided, however, that the period will be tolled and will not run during any time Executive is in violation of this Section 2.2, it being the intent of the parties that the Restricted Period will be extended for any period of time in which Executive is in violation of this Section 2.2.
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(v) “Territory” means the United States of America, it being understood that the Company’s business is nationwide in scope and a nationwide restriction is reasonable and necessary to protect the Company’s interests.
2.2.3 Non-Participation with the Company’s Competitors. During his employment with the Company, Executive will not, on his own behalf or on behalf of any other person, engage in any business competitive with or adverse to that of the Company. In addition, during his employment with the Company, Executive will not acquire, assume or participate in, directly or indirectly, any position, investment or interest known by Executive to be adverse or antagonistic to the Company, its business, or prospects, financial or otherwise, or in any company, person, or entity that is, directly or indirectly, in competition with the business of the Company or any of its affiliates. Ownership by Executive, in professionally managed funds over which the Executive does not have control or discretion in investment decisions, or as a passive investment, of less than 2% of the outstanding shares of capital stock of any corporation with one or more classes of its capital stock listed on a national securities exchange or publicly traded on a national securities exchange or in the over-the-counter market will not constitute a breach of this Section 2.2.3.
2.2.4 Non-Competition. During his employment with the Company and during the Restricted Period, Executive will not, directly or indirectly, (i) engage in the Business in the Territory (other than on behalf of the Company), or (ii) hold a position based in or with responsibility for all or part of the Territory, with any person or entity engaging in the Business, whether as an employee, consultant, or otherwise, in which Executive will have duties, or will perform or be expected to perform services for such person or entity, that is or are the same as or substantially similar to the position held by Executive or those duties or services actually performed by Executive for the Company within the 12-month period immediately preceding the termination of Executive’s employment with the Company, or in which Executive will use or disclose or be reasonably expected to use or disclose any confidential or proprietary information of the Company for the purpose of providing, or attempting to provide, such person or entity with a competitive advantage with respect to the Business.
2.2.5 Non-Solicitation. During his employment with the Company and during the Restricted Period, Executive will not, directly or indirectly, on Executive’s own behalf or on behalf of any other party (except on behalf of the Company):
(i) | Call upon, solicit, divert, encourage or attempt to call upon, solicit, divert, or encourage any Customer for purposes of marketing, selling, or providing products or services to such Customer that are competitive with those offered by the Company; |
(ii) | Accept as a customer any Customer for purposes of marketing, selling, or providing products or services to such Customer that are competitive with those offered by the Company; |
(iii) | Induce, encourage, or attempt to induce or encourage any Customer to reduce, limit, or cancel its business with the Company; |
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(iv) | Solicit, induce, or attempt to solicit or induce any Company Employee to terminate his or her employment with the Company; or |
(v) | Otherwise interfere with or engage in any conduct that would have the effect of interfering with the business relationship between the Company and any of its vendors, suppliers, consultants, or contractors. |
2.2.6 Reasonableness of Restrictions. Executive acknowledges and agrees that (i) his services to the Company under this Agreement are unique and extraordinary; (ii) the restrictive covenants in this Agreement are essential elements of Executive’s employment by the Company and are reasonable given Executive’s access to the Company’s confidential information and the substantial knowledge and goodwill Executive will acquire with respect to the business of the Company as a result of his employment with the Company, and the unique and extraordinary services to be provided by Executive to the Company; (iii) the restrictive covenants contained in this Agreement are reasonable in time, territory, and scope, and in all other respects; and (iv) enforcement of the restrictions contained herein will not deprive the Executive of the ability to earn a reasonable living.
2.2.7 Judicial Modification. Should any part or provision of this Section 2.2 be held invalid, void, or unenforceable in any court of competent jurisdiction, such invalidity, voidness, or unenforceability will not render invalid, void, or unenforceable any other part or provision of this Agreement. The parties further agree that if any portion of this Section 2.2 is found to be invalid or unenforceable by a court of competent jurisdiction because its duration, territory, or other restrictions are deemed to be invalid or unreasonable in scope, the invalid or unreasonable terms will be replaced by terms that are valid and enforceable and that come closest to expressing the intention of such invalid or unenforceable terms.
2.2.8 Enforcement. Executive acknowledges and agrees that the Company will suffer irreparable harm in the event that Executive breaches any of Executive’s obligations under this Section 2.2 and that monetary damages would be inadequate to compensate the Company for such breach. Accordingly, Executive agrees that, in the event of a breach by Executive of any of Executive’s obligations under this Section 2.2, the Company will be entitled to obtain from any court of competent jurisdiction preliminary and permanent injunctive relief, in order to prevent or to restrain any such breach. Executive agrees to waive any requirement for the securing or posting of any bond in connection with such remedies. The Company will be entitled to recover its costs incurred in connection with enforcing this Section 2.2, including reasonable attorneys’ fees and expenses.
3. | Compensation of Executive. |
3.1 Base Salary. The Company will pay Executive a base salary at the annualized rate of Three Hundred Thousand Dollars ($300,000.00) (the “Base Salary”), to be paid in equal installments in accordance with the Company’s normal payroll practices. The Base Salary will be prorated for any partial year of employment on the basis of a 365-day fiscal year and may be increased in the discretion of the Company. The Base Salary may only be decreased in connection with a Company-wide decrease in compensation to similarly-situated executive employees of the Company; provided, however that Executive will not be subject to any greater percentage reduction than any other similarly-situated Company executive.
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3.2 Sign on Bonus. Executive will receive a $50,000 sign on bonus, payable in two equal installments, as follows: (i) $25,000 will be payable on the first payroll processing date following the three-month anniversary of Executive’s start date (the “First Installment Date”); and (ii) $25,000 will be payable on the first payroll processing date following the six-month anniversary of the Executive’s start date (the “Second Installment Date”). Executive must remain employed by the Company through each applicable payment date in order to earn and receive the corresponding bonus payment. If Executive is not employed by the Company through the First Installment Date, no pro rata sign on bonus will be payable or received. If Executive is employed by the Company through the First Installment Date but not through the Second Installment Date, no pro rata portion of the second installment of the sign on bonus will be payable or received. If Executive’s employment with the Company ends, except by reason of a termination by the Company without Cause (as defined below) or Executive’s resignation for Good Reason (as defined below), at any time prior to the one-year anniversary of Executive’s start date, then Executive will be required to repay to the Company a prorated portion of the sign on bonus (determined based on the number of months completed since the Effective Date) within 15 days following the end of Executive’s employment.
3.3 Annual Bonus Compensation. Executive will be eligible to receive an annual bonus targeted at 30% of his Base Salary based upon the Company’s performance and his individual performance on behalf of the Company during the preceding calendar year. Whether to award a bonus for any calendar year, and if so, in what amount, will be determined by the Company in its discretion. Executive must remain employed by the Company through the bonus payment date in order to earn or receive any discretionary annual bonus. No pro rata bonus will be earned or payable for partial years of employment.
3.4 Equity Grant. Subject to approval by the Company’s Board of Directors (the “Board”), Executive will be granted an equity grant of 120,000 shares of the Company’s common stock (the “Equity Grant”) in the form of restricted stock, restricted stock units, or options as determined by the Board. One third of the equity award will vest on each of the first, second, and third anniversaries of the grant date subject to Executive’s continuing employment and eligibility on each vesting date. The Equity Grant will be governed by the terms of the Company’s 2014 Stock Plan, as amended from time to time, and a related equity grant agreement to be entered between Executive and the Company. Executive will also be eligible to receive additional equity awards as determined by the Board in its discretion, based upon the Company’s performance and his individual performance on behalf of the Company, and such other factors as the Board may determine.
3.5 Expense Reimbursements. The Company will reimburse Executive for all reasonable business expenses incurred by Executive in connection with the performance of his duties hereunder, subject to the Company’s reimbursement policies in effect from time to time.
3.6 Benefits. Executive will be entitled to such other benefits, and to participate in such benefit plans, as are generally made available to similarly situated senior executive employees of the Company from time to time, subject to Company policy and the terms and conditions of any applicable benefit plans. Nothing in this Agreement will be deemed to alter the Company’s rights to modify or terminate any such plans or programs in its sole discretion.
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3.7 Holidays and Vacation. Executive will be eligible to accrue up to four weeks of paid vacation per year and will receive paid Company holidays in accordance with Company policy. All available time off must be used in accord with the Company’s policies and procedures. To the extent Executive would be entitled to a greater number of vacation days under any other Company policy, such other policy will govern.
3.8 Withholdings. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as the Company determines are required to be withheld pursuant to any applicable law or other amount properly requested by Executive.
4. | Termination. |
4.1 Termination by the Company. Executive’s employment with the Company is at will and may be terminated by the Company at any time and for any reason, or for no reason, including, but not limited to, under the following conditions:
4.1.1 Termination by the Company for Cause. The Company may terminate Executive’s employment for “Cause” (as defined below) by delivery of written notice to Executive in accordance with the definition and procedures set forth in Section 4.6.2 below. Any notice of termination given pursuant to this Section 4.1.1 will effect termination as of the date of the notice or as of such other date as specified in the notice, subject to Section 4.6.2.
4.1.2 Termination by the Company without Cause. The Company may terminate Executive’s employment without Cause at any time and for any reason or for no reason. Such termination will be effective on the date Executive is so informed or as otherwise specified by the Company.
4.2 Termination by Resignation of Executive. Executive’s employment with the Company is at will and may be terminated by Executive at any time and for any reason or for no reason, including via a resignation for Good Reason in accordance with the Good Reason Process set forth in Section 4.6.3 below.
4.3 Termination for Death or Complete Disability. Executive’s employment with the Company will terminate effective upon the date of Executive’s death or upon notice by the Company as a result of Executive’s Complete Disability (as defined below); provided, however, nothing herein will give the Company the right to terminate Executive prior to discharging its obligations to Executive, if any, under the Family and Medical Leave Act, the Americans with Disabilities Act, or any other applicable law.
4.4 Termination by Mutual Agreement of the Parties. Executive’s employment with the Company may be terminated at any time upon a mutual agreement in writing of the Parties. Any such termination of employment will have the consequences specified in such agreement.
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4.5 Compensation Upon Termination.
4.5.1 Generally. When Executive’s employment is terminated for any reason, Executive, or his estate, as the case may be, will be entitled to receive the compensation and benefits earned through the effective date of termination, including, but not limited to, as applicable, any Base Salary earned by Executive through the date of termination, expenses subject to reimbursement pursuant to Company policy incurred by Executive through the date of termination, and accrued and unused vacation benefits earned through the date of termination at the rate in effect at the time of termination.
4.5.2 Termination Without Cause or Resignation For Good Reason. If the Company terminates Executive’s employment without Cause or if Executive resigns for Good Reason, then, in addition to the amounts described in Section 4.5.1, and conditioned upon Executive executing and not revoking a release of claims in a form acceptable to the Company (the “Release”) within the time periods specified therein, the Company will provide Executive with the following separation benefits (together, the “Separation Benefits”): (i) the Company will pay Executive severance in an amount equal to six months of Executive’s Base Salary (at the rate in effect as of the termination); and (ii) if Executive timely elects continued health insurance coverage under COBRA, the Company will pay the entire premium necessary to continue such coverage for Executive and Executive’s eligible dependents for a period of six months or, if earlier, when Executive becomes eligible for group health insurance coverage under another employer’s plan, provided, however, that the Company will have the right to terminate such payment of COBRA premiums on behalf of Executive and instead pay Executive a lump sum amount equal to the COBRA premium times the number of months remaining in the specified period if the Company determines in its discretion that continued payment of the COBRA premiums is or may be discriminatory under Section 105(h) of the Internal Revenue Code. The severance payments under clause (i) above will be payable to Executive over time in accordance with the Company’s payroll practices and procedures beginning on the 60th day following the termination of Executive’s employment with the Company, provided that the first installment will include all installments that would have been paid if the payments had commenced immediately following the date of termination. Notwithstanding the foregoing, if Executive is entitled to receive the Separation Benefits but violates any provisions of Section 2 hereof or the PIIA, the Company will be entitled to immediately stop paying any further installments of the Separation Benefits, in addition to any other remedies that may be available to the Company in law or at equity.
4.5.3 No Further Obligations. Except as expressly provided above or as otherwise required by law, the Company will have no obligations to Executive in the event of the termination of this Agreement for any reason.
4.6 Definitions. For purposes of this Agreement, the following terms will have the following meanings:
4.6.1 Complete Disability. As used herein, “Complete Disability” means the inability of Executive, due to the condition of his physical, mental or emotional health, effectively to perform the essential functions of his job with or without reasonable accommodation for a continuous period of more than 90 days or for 90 days in any period of 180 consecutive days. In the event that a question should arise as to whether a Complete Disability exists, then for purposes of making such a determination, at the Company’s request Executive agrees to make himself available and to cooperate in a reasonable examination by a licensed independent physician retained by the Company and to authorize the disclosure and release to the Company of all medical records related to such examination.
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4.6.2 Cause. As used herein, “Cause” means: (i) Executive’s fraud, embezzlement or misappropriation with respect to the Company; (ii) Executive’s material breach of this Agreement; (iii) Executive’s material breach of the PIIA; (iv) Executive’s breach of fiduciary duties to the Company; (v) Executive’s willful failure or refusal to perform his material duties under this Agreement or failure to follow any specific lawful instructions of the Company’s Chief Executive Officer; (vi) Executive’s conviction or plea of nolo contendere in respect of a felony or of a misdemeanor involving moral turpitude; (vii) Executive’s willful or negligent act or omission that has or may reasonably be expected to have a material adverse effect on the property, business, or reputation of the Company; (viii) Executive’s material failure to comply with the Company’s workplace rules, policies, or procedures; or (ix) Executive’s failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigation. In the event that the Company concludes that Executive has engaged in acts constituting in Cause as defined in clause (ii) or (v) above, prior to terminating this Agreement for Cause the Company will provide Executive with at least 10 days’ notice of the circumstances constituting such Cause and an opportunity to correct such circumstances, to the extent such circumstances are susceptible of being corrected.
4.6.3 Good Reason. Executive may resign for Good Reason by complying with the Good Reason Process. As used in this Agreement, “Good Reason Process” means that (i) Executive reasonably determines in good faith that a “Good Reason” condition has occurred; (ii) Executive notifies the Company in writing of the first occurrence of the Good Reason condition within 30 days of the first occurrence of such condition; (iii) Executive cooperates in good faith with the Company’s efforts, for a period of 30 days following such notice (the “Good Reason Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) Executive terminates Executive’s employment within 30 days after the end of the Good Reason Cure Period. If the Company cures the Good Reason condition during the Good Reason Cure Period, Good Reason shall be deemed not to have occurred with respect to the particular circumstances claimed to have constituted Good Reason. For purposes of this Agreement, “Good Reason” means the occurrence of any of the following events without Executive’s consent: (x) a material reduction of Executive’s Base Salary, except in connection with a Company-wide decrease in executive compensation as provided in Section 3.1 of this Agreement, (y) a material diminution of Executive’s authority, duties, or responsibilities, or (z) the Company’s material breach of this Agreement.
4.7 Survival of Certain Sections. Sections 2, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 16, and 17 of this Agreement will survive the termination of this Agreement.
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4.8 Section 409A Compliance. The Parties intend that all provisions of this Agreement and the payments made pursuant thereto will comply with, or be exempt from, the application of Section 409A of the Internal Revenue Code of 1986 as amended and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”), and all provisions of this Agreement will be construed, to the maximum extent possible, in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A. Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this Section 4 that constitute “deferred compensation” within the meaning of Section 409A will not commence in connection with Executive’s termination of employment unless and until Executive has also incurred a “separation from service” (as such term is defined in Treasury Regulation Section 1.409A-1(h)), unless the Company reasonably determines that such amounts may be provided to Executive without causing Executive to incur the additional 20% tax pursuant to Section 409A. The parties intend that each installment of any series of payments provided for in this Agreement is a separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i). For the avoidance of doubt, the parties intend that payments of the Separation Benefits set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4) and 1.409A-1(b)(9). If the Company determines that the Separation Benefits constitute “deferred compensation” under Section 409A and Executive is, on the termination of service, a “specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the Separation Benefits payments will be delayed until the earlier to occur of: (i) the date that is six months and one day after Executive’s separation from service, or (ii) the date of Executive’s death (such applicable date, the “Specified Employee Initial Payment Date”), and the Company (or the successor entity thereto, as applicable) will (A) pay to Executive a lump sum amount equal to the sum of the Separation Benefits payments that Executive would otherwise have received through the Specified Employee Initial Payment Date if the commencement of the payment of the Separation Benefits had not been so delayed pursuant to this Section and (B) commence paying the balance of the Separation Benefits in accordance with the applicable payment schedules set forth in this Agreement.
5. | Assignment and Binding Effect. |
This Agreement will be binding upon and inure to the benefit of Executive and Executive’s heirs, executors, personal representatives, assigns, administrators and legal representatives. Because of the unique and personal nature of Executive’s duties under this Agreement, neither this Agreement nor any rights or obligations under this Agreement will be assignable by Executive. This Agreement will be binding upon and inure to the benefit of the Company and its successors, assigns and legal representatives. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company.
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6. | Notices. |
Any notice required or permitted to be given pursuant to this Agreement must be in writing and will be deemed effectively given to the other party (i) on the date it is actually delivered by personal delivery of such notice in person, (ii) one business day after its deposit in the custody of a reputable overnight courier service (such as FedEx) next business day delivery charges prepaid; or (iii) three business days after its deposit in the custody of the U.S. mail, certified or registered postage prepaid, return receipt requested; in each case to the appropriate address shown below (or to such other address as a party may designate by notice to the other party):
If to the Company:
Journey Medical Corporation
9237 E. Via de Ventura Blvd, Suite 105
Scottsdale, AZ 85258
Attn: Chief Executive Officer
If to Executive:
Ernest De Paolantonio
4733 Kensington Circle
Naples, FL 34119
7. | Choice of Law. |
This Agreement will be construed and interpreted in accordance with the internal laws of the State of Delaware without regard to its conflict of laws principles.
8. | Integration. |
This Agreement, including the PIIA and all other documents referenced herein, contains the complete, final and exclusive agreement of the Parties relating to the terms and conditions of Executive’s employment and the termination of Executive’s employment, and supersedes all prior and contemporaneous oral and written employment agreements or arrangements between the Parties.
9. | Amendment. |
This Agreement cannot be amended or modified except by a written agreement signed by Executive and the Company.
10. | Waiver. |
No term, covenant or condition of this Agreement or any breach thereof will be deemed waived, except with the written consent of the Party against whom the wavier is claimed, and any waiver or any such term, covenant, condition or breach will not be deemed to be a waiver of any preceding or succeeding breach of the same or any other term, covenant, condition or breach.
11. | Severability. |
The finding by a court of competent jurisdiction of the unenforceability, invalidity or illegality of any provision of this Agreement will not render any other provision of this Agreement unenforceable, invalid or illegal. Such court will have the authority to modify or replace the invalid or unenforceable term or provision with a valid and enforceable term or provision, which most accurately represents the Parties’ intention with respect to the invalid or unenforceable term, or provision.
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12. | Interpretation; Construction. |
The headings set forth in this Agreement are for convenience of reference only and will not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing the Company, but Executive has been encouraged to consult with, and has consulted with, Executive’s own independent counsel and tax advisors with respect to the terms of this Agreement. The Parties acknowledge that each Party and its counsel has reviewed and revised, or had an opportunity to review and revise, this Agreement, and any rule of construction to the effect that any ambiguities are to be resolved against the drafting party will not be employed in the interpretation of this Agreement.
13. | Attorneys Fees. |
Except as otherwise prohibited by law, in the event a Party brings an action to enforce the terms of this Agreement, in addition to any other remedies, the prevailing party will be entitled to recovery of its reasonable attorneys’ fees and costs incurred by it arising out of such breach or the defense thereof.
14. | Representations and Warranties. |
14.1 Obligations to Prior Employers. Executive represents and warrants to the Company that Executive is not obligated or restricted under any agreement (including any non-competition or confidentiality agreement), judgment, decree, order or other restraint of any kind that could impair Executive’s ability to perform the duties and obligations required of Executive hereunder. Executive further represents and warrants to the Company that he has not violated any confidentiality agreement or other similar obligation that he has to any former employer and that he has not disclosed any confidential or trade secret information belonging to any former employer to the Company or its agents. Executive agrees that he will not use confidential information and/or trade secrets belonging to any former employer in his employment with the Company or otherwise as a resource for building the business of the Company and will structure his and the Company’s work environment and practices in such a way to ensure that any such information will not be used or disclosed during the course of his relationship with the Company.
14.2 Litigation Support. Both during and after Executive’s employment with the Company, if the Company is evaluating, pursuing, contesting or defending any proceeding, charge, complaint, claim, demand, notice, action, suit, litigation, hearing, audit, investigation, arbitration or mediation, in each case whether initiated by or against the Company (collectively, a “Proceeding”), other than a Proceeding initiated by or against Executive, Executive will reasonably cooperate with the Company and its counsel in the evaluation, pursuit, contest or defense of the Proceeding and provide such testimony and access to books and records as may be necessary in connection therewith. Any such cooperation will be done at times mutually convenient for Executive and the Company, and the Company will undertake reasonable efforts to minimize the interference such cooperation may cause to any duties or obligations that Executive may have to a third party, including any future employer. The Company will reimburse Executive for Executive’s reasonable out-of-pocket expenses related to such cooperation.
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14.3 Future Employment. In the event of Executive’s separation from the Company, regardless of the reason or cause of that separation, Executive agrees that for a period of 12 months from the date his employment terminates, he will provide the Company with no fewer than three business days’ notice of his intent to accept employment with or for an organization other than Company for the express purpose of allowing the Company to determine if such proposed employment interferes with any of Executive’s surviving obligations under this Agreement. The notice of intent to accept employment will identify the new employer, list Executive’s anticipated title and describe his anticipated duties.
15. | Counterparts. |
This Agreement may be executed in two counterparts, each of which will be deemed an original, all of which together will contribute one and the same instrument. Signatures to this Agreement transmitted by fax, by email in “portable document format” (“.pdf”) or by any other electronic means intended to preserve the original graphic and pictorial appearance of this Agreement will have the same effect as physical delivery of the paper document bearing original signature.
16. | Jurisdiction; Venue. |
The Parties agree that any litigation arising out of or related to this Agreement or Executive’s employment by the Company will be brought exclusively in any state or federal court in New York, New York. Each Party (i) consents to the personal jurisdiction of said courts, (ii) waives any venue or inconvenient forum defense to any proceeding maintained in such courts, and (iii) except as otherwise provided in this Agreement, agrees not to bring any proceeding arising out of or relating to this Agreement or Executive’s employment by the Company in any other court.
17. | Advertising Waiver. |
Executive agrees to permit the Company, and persons or other organizations authorized by the Company, to use, publish and distribute advertising or sales promotional literature concerning the products and/or services of the Company, or the machinery and equipment used in the provision thereof, in which Executive’s name and/or pictures of Executive taken in the course of Executive’s provision of services to the Company appear. Executive hereby waives and releases any claim or right Executive may otherwise have arising out of such use, publication or distribution.
[Signature Page Immediately Follows]
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In Witness Whereof, the Company has caused this Agreement to be signed by its duly authorized officer and Executive has hereunto set his hand and seal.
Journey Medical Corporation
/s/ Claude Maraoui | 9/27/2021 | |
CLAUDE MARAOUI | DATE | |
PRESIDENT AND CEO |
Executive:
/s/ Ernest De Paolantonio | 9/27/2021 | |
Ernest De Paolantonio | Date |
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EXHIBIT A
Proprietary Information and Inventions Agreement
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Exhibit 10.4
journey medical corporation
NON-EMPLOYEE DIRECTORS COMPENSATION PLAN
ARTICLE 1
PURPOSE
1.1. Purpose. The purpose of the Journey Medical Corporation Non-Employee Directors Compensation Plan is to attract, retain and compensate highly-qualified individuals who are not employees of Journey Medical Corporation for service as members of the Board by providing them with competitive compensation and an opportunity to participate in the Company’s future growth through the granting of stock-based incentive awards. The Company intends that the Plan will benefit the Company and its stockholders by allowing Non-Employee Directors to have a personal financial stake in the Company through an ownership interest in the Stock and will closely associate the interests of Non-Employee Directors with that of the Company’s stockholders.
1.2. ELIGIBILITY. All Non-Employee Directors shall automatically be participants in the Plan.
ARTICLE 2
DEFINITIONS
2.1. DEFINITIONS. Capitalized terms used herein and not otherwise defined shall have the meanings given such terms in the LTIP. Unless the context clearly indicates otherwise, the following terms shall have the following meanings:
(a) | “Annual Equity Award” means stock options, stock awards, restricted stock, restricted stock units, stock appreciation rights, or other awards based on or derived from the Stock which are authorized under this Plan for award to Non-Employee Directors under Section 6.2 of the Plan. |
(b) | “Award” means any Initial Equity Award or Annual Equity Award granted to a Non-Employee Director under Article 6 of the Plan. |
(c) | “Basic Cash Retainer” means the annual cash retainer (excluding any Supplemental Cash Retainer, Meeting Fees and expenses) payable by the Company to a Non-Employee Director pursuant to Section 5.1 hereof for service as a director of the Company, as established from time to time by the Board and set forth in Schedule I hereto. |
(d) | “Company” means Journey Medical Corporation, a Delaware corporation. |
(e) | “Initial Equity Award” means stock options, stock awards, restricted stock, restricted stock units, stock appreciation rights, or other awards based on or derived from the Stock which are authorized under this Plan for award to Non-Employee Directors under Section 6.1 of the Plan. |
(f) | “LTIP” means the Journey Medical Corporation 2015 Stock Incentive Plan, as amended, or any subsequent equity compensation plan approved by the Board and designated as the LTIP for purposes of this Plan. |
(g) | “Meeting Fees” means fees for attending a meeting of the Board or one of its Committees as set forth in Section 5.3 hereof. |
(h) | “Non-Employee Director” means a director of the Company who is not an employee of the Company and who is not directly compensated by the Company under a separate Board-approved agreement with such director, or a related entity to such director, for service as a director during a Plan Year. |
(i) | “Plan” means this Journey Medical Corporation Non-Employee Directors Compensation Plan, as amended from time to time. |
(j) |
“Plan Year(s)” means the approximate twelve-month periods between annual meetings of the stockholders of the Company.
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(k) |
“Supplemental Cash Retainer” means the supplemental annual cash retainer (excluding Basic Cash Retainer, Meeting Fees and expenses) payable by the Company to a Non-Employee Director pursuant to Section 5.2 hereof for service as Chairman of the Board, Lead Director, or chair of a committee of the Board, as established from time to time by the Board and set forth in Schedule I hereto.
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ARTICLE 3
ADMINISTRATION
3.1. ADMINISTRATION. The Plan shall be administered by the Board, or, at the discretion of the Board from time to time, the Plan may be administered by a committee of the Board. Subject to the provisions of the Plan, the Board shall be authorized to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. The Board’s interpretation of the Plan, and all actions taken and determinations made by the Board pursuant to the powers vested in it hereunder, shall be conclusive and binding upon all parties concerned including the Company, its stockholders and persons granted awards under the Plan. The Board may appoint a plan administrator to carry out the ministerial functions of the Plan, but the administrator shall have no other authority or powers of the Board. To the extent the Board has delegated any authority and responsibility under this Plan to a committee of the Board, such committee shall have the powers and protections of the Board hereunder, and any reference herein to the Board (other than in this Section 3.1) shall include such committee. To the extent any action of the Board under the Plan conflicts with actions taken by such committee, the actions of the Board shall control.
3.2. RELIANCE. In administering the Plan, the Board may rely upon any information furnished by the Company, its public accountants and other experts. No individual will have personal liability by reason of anything done or omitted to be done by the Company or the Board in connection with the Plan.
3.3. INDEMNIFICATION. Each person who is or has been a member of the Board or who otherwise participates in the administration or operation of the Plan shall be indemnified by the Company against, and held harmless from, any loss, cost, liability or expense that may be imposed upon or incurred by him or her in connection with or resulting from any claim, action, suit or proceeding in which such person may be involved by reason of any action taken or failure to act under the Plan and shall be fully reimbursed by the Company for any and all amounts paid by such person in satisfaction of judgment against him or her in any such action, suit or proceeding, provided he or she will give the Company an opportunity, by written notice to the Board, to defend the same at the Company’s own expense before he or she undertakes to defend it on his or her own behalf. This right of indemnification shall not be exclusive of any other rights of indemnification.
ARTICLE 4
SHARES
4.1. SOURCE OF SHARES FOR THE PLAN. The Awards and shares of Stock that may be issued pursuant to the Plan shall be issued under the LTIP, subject to all of the terms and conditions of the LTIP, including but not limited to Section 5.1 of the LTIP, which provides that the maximum aggregate number of Shares associated with any Award granted under this Plan in any calendar year to any one Non-Employee Director shall be determined by the Company. The terms contained in the LTIP are incorporated into and made a part of this Plan with respect to Awards granted pursuant hereto, and any such Awards shall be governed by and construed in accordance with the LTIP. In the event of any actual or alleged conflict between the provisions of the LTIP and the provisions of this Plan, the provisions of the LTIP shall be controlling and determinative. The Plan is considered to be and shall be operated as a subplan of the LTIP, and does not constitute a separate source of shares for the grant of the Awards provided herein.
ARTICLE 5
CASH COMPENSATION
5.1. BASIC CASH RETAINER. For each Plan Year commencing with 2021, each Non-Employee Director shall be paid a Basic Cash Retainer for service as a director during each Plan Year, payable in advance, on the first business day following each annual meeting of stockholders. The amount of the Basic Cash Retainer shall be established from time to time by the Board. The amount of the Basic Cash Retainer is set forth in Schedule I, as amended from time to time by the Board. Each person who first becomes a Non-Employee Director on a date other than an annual meeting date shall be paid a pro rata amount of the Basic Cash Retainer for that Plan Year to reflect the actual number of days served in the Plan Year.
5.2. SUPPLEMENTAL CASH RETAINER. The Chairman of the Board, Lead Director, and chairs of each committee of the Board may be paid a Supplemental Cash Retainer during a Plan Year, payable at the same times as installments of the Basic Cash Retainer are paid. The amount of the Supplemental Cash Retainers shall be established from time to time by the Board, and shall be set forth in Schedule I, as amended from time to time by the Board. A pro rata Supplemental Cash Retainer will be paid to any Non-Employee Director who is elected by the Board to a position eligible for a Supplemental Cash Retainer on a date other than the beginning of a Plan Year, to reflect the actual number of days served in such eligible capacity during the Plan Year.
5.3. MEETING FEES. Each Non-Employee Director may be paid a fee for each meeting of the Board or committee thereof in which he or she participates. The amount of the fees, if any, shall be established from time to time by the Board and shall be set forth in Schedule I, as amended from time to time by the Board. For purposes of this provision, casual or unscheduled conferences among directors shall not constitute an official meeting.
5.4. EXPENSE REIMBURSEMENT. All Non-Employee Directors shall be reimbursed for reasonable travel and out-of-pocket expenses in connection with attendance at meetings of the Board and its committees, or other Company functions at which the Chief Executive Officer, Chairman of the Board, or Lead Director requests the director to participate.
ARTICLE 6
EQUITY AWARDS
6.1 INITIAL EQUITY AWARD. Subject to share availability under the LTIP, each Non-Employee Director serving as such on July 1, 2021, and each Non-Employee Director thereafter elected or appointed to the Board, shall be granted an Initial Equity Award. The Initial Equity Award is set forth in Schedule I, as amended from time to time by the Board. Such Initial Equity Award shall be subject to the terms and restrictions described in Schedule I and below in this Article 6.
6.2 ANNUAL EQUITY AWARD. Subject to share availability under the LTIP, on the day following each annual meeting of the Company’s stockholders, each Non-Employee Director serving as such on that date (other than a director who first became a Non-Employee Director at the stockholders meeting held on the previous day) shall be granted an Annual Equity Award. The Annual Equity Award is set forth in Schedule I, as amended from time to time by the Board. Such Annual Equity Award shall be subject to the terms and restrictions described in Schedule I and below in this Article 6.
6.3 TERMS AND CONDITIONS OF AWARDS. Awards granted under this Article 6 shall be subject to the terms and conditions described below and in the LTIP.
(a) | Vesting. Each Award granted under this Plan shall vest as provided in Schedule 1, as amended from time to time by the Board; provided, however, that each Award shall become fully vested upon the occurrence of a Change of Control. |
(b) | Effect of Termination of Directorship. Upon termination of a Non-Employee Director’s membership on the Board for any reason (including without limitation, by reason of death, Disability, retirement or failure to be re-nominated or re-elected as a director), the Non-Employee Director shall forfeit all of his or her right, title and interest in and to any unvested portion of the Initial Equity Award or Annual Equity Award, as the case may be. |
(c) | Award Certificates. All Awards shall be evidenced by a written Award Certificate between the Company and the Non-Employee Director, which shall include such provisions, not inconsistent with the Plan or the LTIP, as may be specified by the Board. |
6.4 ADJUSTMENTS. The adjustment provisions of the LTIP shall apply with respect to Awards granted pursuant to this Plan. Without limiting the foregoing, in the event of a subdivision of the outstanding Stock (stock-split), a declaration of a dividend payable in shares of Stock, or a combination or consolidation of the outstanding Stock into a lesser number of shares of Stock, the number of Awards to be granted to Non-Employee Directors in accordance with Article 6 hereof shall be adjusted proportionately and the shares of Stock then subject to each Award shall automatically be adjusted proportionately without any change in the aggregate purchase price therefore.
ARTICLE 7
Amendment, Modification and Termination
7.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board may, at any time and from time to time, amend, modify or terminate the Plan without stockholder approval; provided, however, that if an amendment to the Plan would, in the reasonable opinion of the Board, require stockholder approval under applicable laws, policies or regulations or the applicable listing or other requirements of a securities exchange on which the Stock is listed or traded, then such amendment shall be subject to stockholder approval; and provided further, that the Board may condition any other amendment or modification on the approval of stockholders of the Company for any reason.
ARTICLE 8
General Provisions
8.1. EXPENSES OF THE PLAN. The expenses of administering the Plan shall be borne by the Company.
8.2. EFFECTIVE DATE AND DURATION OF THE PLAN. The Plan shall be effective as of the effective date it is approved by the Board. The Plan shall remain in effect until terminated by the Board.
Journey Medical Corporation | ||
By: | ||
Claude Maraoui | ||
Chief Executive Officer |
SCHEDULE I
Effective as of July 1, 2021
The following shall remain in effect until changed by the Board:
Basic Cash Retainer: |
$50,000 paid quarterly in advance ($12,500 per quarter).
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Supplemental Cash Retainer for Audit Chair: |
$10,000 paid quarterly in advance ($2,500 per quarter).
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Initial Equity Award: |
30,000 of any of the following equity securities, as selected in advance of the Grant Date at the discretion of the Non-Employee Director: (i) Restricted Stock; (ii) Restricted Stock Units; or (iii) Options, which equity securities shall vest and become non-forfeitable in equal annual installments on the first anniversary of the Grant Date, on the second (2nd) anniversary of the Grant Date, and on the third (3rd) anniversary of the Grant date, subject to the Non-Employee Director’s continued service on the Board on each such date.
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Annual Equity Award: |
7,500 shares of Restricted Stock, Restricted Stock Units or Options (as selected in advance of the Grant Date at the discretion of the Non-Employee Director), which equity securities shall vest and become non-forfeitable in full on the first (1st) anniversary of the Grant Date, subject to the Non-Employee Director’s continued service on the Board on such date.
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Exhibit 10.5
JOURNEY MEDICAL CORPORATION
JG PHARMA, INC.
EAST WEST BANK
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of March 31, 2021, by and among EAST WEST BANK (“Bank”) and JOURNEY MEDICAL CORPORATION (“PARENT”) AND JG PHARMA, INC. (“JG”; Parent and JG are sometimes referred to, individually, as a “Borrower” and, collectively, as the “Borrowers”).
RECITALS
The Borrowers wish to obtain credit from time to time from Bank, and Bank desires to extend credit to the Borrowers. This Agreement sets forth the terms on which Bank will advance credit to the Borrowers, and the Borrowers will repay the amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall have the following definitions:
“Accounts” means all presently existing and hereafter arising accounts, contract rights, payment intangibles, and all other forms of obligations owing to a Borrower arising out of the sale or lease of goods (including, without limitation, the licensing of software and other technology) or the rendering of services by a Borrower, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by a Borrower and such Borrower’s Books relating to any of the foregoing.
“Advance” or “Advances” means a cash advance or cash advances under the Revolving Facility.
“Affiliate” means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, and any Person that controls or is controlled by or is under common control with such Person, and each of such Person’s senior executive officers, directors, and partners.
“Bank Expenses” means all costs or expenses (including attorneys’ fees and expenses) incurred in connection with the preparation, negotiation, administration, and enforcement of the Loan Documents; Collateral audit fees; lockbox services fees, and Bank’s attorneys’ fees and expenses incurred in amending, enforcing or defending the Loan Documents (including fees and expenses of appeal), incurred before, during and after an Insolvency Proceeding, whether or not suit is brought.
“Borrower’s Books” means all of a Borrower’s books and records including: ledgers; records concerning a Borrower’s assets or liabilities, the Collateral, business operations or financial condition; and all computer programs, or tape files, and the equipment, containing such information.
“Borrowing Base” means an amount equal to eighty five percent (85%) of Eligible Accounts, as determined by Bank with reference to the most recent Borrowing Base Certificate delivered by the Borrowers, and assuming dilution of not more than 2.5% on each Collateral audit; provided however, that the Borrowing Base may be revised from time to time by Bank following each Collateral audit or as Bank deems necessary in Bank’s Permitted Discretion and upon three (3) Business Days’ prior written notice thereof to the Borrowers.
“Borrowing Base Certificate” is a certificate in substantially the form of Exhibit C.
“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks in the State of California are authorized or required to close.
1.
“Cash Equivalents” means: (a) securities issued or directly and fully guaranteed or insured by the United States, or, any agency or instrumentality thereof, having maturities of not more than one (1) year from the date of acquisition; (b) certificates of deposit, time deposits, overnight bank deposits or bankers’ acceptances issued by any bank or trust company in each case subject to regulation by the Federal Deposit Insurance Corporation; (c) repurchase obligations for underlying securities of the types described in clauses (a) and (b) entered into with any Person referenced in clause (b) above; (d) commercial paper maturing no more than one year from the date of creation thereof and rated at the time of acquisition thereof at least “A-2” or the equivalent thereof by S&P or “P-2” or the equivalent thereof by Moody’s; (e) readily marketable direct obligations issued by any state, commonwealth or territory of the United States of America, or any political subdivision or taxing authority thereof, in each case, having one of the two highest rating categories obtainable from either Moody’s or S&P with maturities of not more than one year from the date of acquisition; (f) interests in any investment company or money market fund which invests a majority of its assets in instruments of the type specified in clauses (a) through (e) above in each case subject to the terms and conditions of Section 6.8 of this Agreement; and (g) any other Investments in cash equivalents as described in any Borrower’s investment policy, as such investment policy has been approved by Bank in writing.
“Change in Control” means (i) at any time prior to an initial public offering of the Equity Interests of any Borrower, the occurrence of any transaction by which (A) the holders of the Equity Interests of Parent as of the Closing Date (collectively, the “Permitted Holders”) shall cease to own at least a majority of the outstanding voting Equity Interests of Parent on a fully diluted basis and (B) Parent shall cease to own at least one hundred percent (100%) of the outstanding voting Equity Interests of JG on a fully diluted basis and (ii) at any time after an initial public offering of the Equity Interests of any Borrower, any Person, entity, or “group” (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended), other than the Permitted Holders, shall at any time have acquired direct or indirect beneficial ownership of a percentage of the outstanding voting Equity Interests of any Borrower that exceeds 35% thereof, unless the Permitted Holders have, at such time, the right or the ability by voting power, contract, or otherwise to elect or designate for election at least a majority of the board of directors of such Borrower.
“Closing Date” means the date of this Agreement.
“Code” means the California Uniform Commercial Code.
“Collateral” means the property described on Exhibit A attached hereto.
“Contingent Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards, or merchant services issued or provided for the account of that Person; and (iii) all obligations arising under any agreement or arrangement designed to protect such Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent Obligation” shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by Bank in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.
“Copyrights” means any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof.
“Credit Extension” means each Advance or any other extension of credit by Bank for the benefit of a Borrower hereunder.
“Daily Balance” means the amount of the Obligations owed at the end of a given day.
“Dollar(s)” and the sign “$” mean lawful money of the United States.
“EBITDA” means (a) Net Income, plus (b) Interest Expense, plus (c) to the extent deducted in the calculation of Net Income, depreciation expense and amortization expense, plus (d) income tax expense, plus (e) non-cash stock based compensation expenses.
2.
“Eligible Accounts” means those Accounts that arise in the ordinary course of a Borrower’s business that comply with all of such Borrower’s representations and warranties to Bank set forth in Section 5.4 and net after all offsets; provided, that standards of eligibility may be fixed and revised from time to time by Bank in Bank’s Permitted Discretion and upon three (3) Business Days’ prior written notice thereof to the Borrowers in accordance with the provisions hereof. Unless otherwise agreed to by Bank, Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within ninety (90) days of invoice date, provided that Accounts owing from AmerisourceBergen may be one hundred twenty (120) days, subject to a Collateral audit;
(b) Accounts with respect to an account debtor, twenty-five percent (25%) of whose Accounts the account debtor has failed to pay within ninety (90) days of invoice date (one hundred twenty (120) days for AmericsourceBergen), in each case solely to the extent of such amount in excess of the aforementioned percentage;
(c) Accounts with respect to which the account debtor is an officer, employee, or agent of a Borrower;
(d) Accounts with respect to which goods are placed on consignment, guaranteed sale, sale or return, sale on approval, bill and hold, demo or promotional, or other terms by reason of which the payment by the account debtor may be conditional;
(e) Accounts with respect to which the account debtor is an Affiliate of a Borrower;
(f) Accounts with respect to which the account debtor does not have its principal place of business in the United States, except for Eligible Foreign Accounts;
(g) Accounts with respect to which the account debtor is the United States or any department, agency, or instrumentality of the United States, except for Accounts of the United States or any department, agency, or instrumentality of the United States, the assignment of which has been acknowledged under the Assignment of Claims Act of 1940 (31 U.S.C. Section 3727) to the extent required and such assignment (to the extent required) otherwise complies with the Assignment of Claims Act to Bank's reasonable satisfaction in the exercise of its reasonable credit judgment;
(h) Accounts with respect to which a Borrower is liable to the account debtor for goods sold or services rendered by the account debtor to a Borrower or for deposits or other property of the account debtor held by a Borrower, but only to the extent of any amounts owing to the account debtor against amounts owed to such Borrower;
(i) Accounts with respect to an account debtor, including Subsidiaries and Affiliates, whose total obligations to the Borrowers exceed twenty-five percent (25%) of all Accounts, to the extent such obligations exceed the aforementioned percentage, except as approved in writing by Bank;
(j) Accounts that have not yet been billed to the account debtor or that relate to deposits (such as good faith deposits) or other property of the account debtor held by a Borrower for the performance of services or delivery of goods which such Borrower has not yet performed or delivered;
(k) Prebillings, retention billings, progress billings or bonded receivables;
(l) Accounts with respect to which the account debtor disputes liability or makes any claim with respect thereto as to which Bank believes, in its sole discretion, that there may be a basis for dispute (but only to the extent of the amount subject to such dispute or claim), or is subject to any Insolvency Proceeding, or becomes insolvent, or goes out of business; and
(m) Accounts that Bank determines in its Permitted Discretion to be unsatisfactory for inclusion as an Eligible Account.
3.
“Eligible Foreign Accounts” means Accounts with respect to which the account debtor does not have its principal place of business in the United States and that (i) are supported by one or more letters of credit in an amount and of a tenor, and issued by a financial institution, reasonably acceptable to Bank, (ii) covered in full by credit insurance satisfactory to Bank, less any deductible, or (iii) that Bank approves on a case-by-case basis.
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any of the foregoing.
“Equipment” means all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which a Borrower has any interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.
“Event of Default” has the meaning assigned in Article 8.
“Fortress” means Fortress Biotech, Inc.
“Fortress Indebtedness” means the Indebtedness owing by Parent to Fortress under the Fortress Note.
“Fortress Note” means the Future Advance Promissory Note issued by Parent in favor of Fortress on June 6, 2015.
“GAAP” means generally accepted accounting principles as in effect from time to time.
“Indebtedness” means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations and (d) all Contingent Obligations.
“Insolvency Proceeding” means any proceeding commenced by or against any person or entity under any provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
“Intellectual Property” means all of a Borrower’s right, title, and interest in and to the Copyrights, Trademarks and Patents.
“Interest Expense” means for any fiscal period, interest expense (whether cash or non-cash) determined in accordance with GAAP for the relevant period ending on such date, including, in any event, interest expense with respect to any Credit Extension and other Indebtedness of a Borrower, including, without limitation or duplication, all commissions, discounts, or related amortization and other fees and charges with respect to letters of credit and bankers’ acceptance financing and the net costs associated with interest rate swap, cap, and similar arrangements, and the interest portion of any deferred payment obligation (including leases of all types).
“Inventory” means all inventory in which a Borrower has or acquires any interest, including work in process and finished products intended for sale or lease or to be furnished under a contract of service, of every kind and description now or at any time hereafter owned by or in the custody or possession, actual or constructive, of a Borrower, including such inventory as is temporarily out of its custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above, and such Borrower’s Books relating to any of the foregoing.
4.
“Investment” means any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any investment, loan, advance or capital contribution or transfer of any assets through advances, equity positions, assumption of liabilities, acquisition of assets or other avenues to any Person.
“Lien” means any mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance.
“Loan Documents” means, collectively, this Agreement, the lockbox services agreement, any note or notes, documents or instruments executed by a Borrower, any guarantees, pledges or security agreements provided by third parties, and any other document, instrument or agreement entered into in connection with this Agreement, all as amended or extended from time to time.
“Material Adverse Effect” means a material adverse effect on (i) the business operations or condition (financial or otherwise) of the Borrowers and their Subsidiaries taken as a whole or (ii) the ability of the Borrowers, taken as a whole, to repay the Obligations or otherwise perform their obligations under the Loan Documents to which they are a party or (iii) the enforceability or priority of Bank’s security interests in the Collateral.
“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.
“Net Income” means, as calculated on a consolidated basis for the Borrowers for any period as at any date of determination, the net profit (or loss), after provision for taxes, of the Borrowers for such period taken as a single accounting period.
“Obligations” means all debt, principal, interest, Bank Expenses and other amounts owed to Bank by a Borrower pursuant to this Agreement or any other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest that accrues after the commencement of an Insolvency Proceeding.
“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
“Periodic Payments” means all installments or similar recurring payments that Borrowers may now or hereafter become obligated to pay to Bank pursuant to the terms and provisions of any instrument, or agreement now or hereafter in existence between such Borrower and Bank.
“Permitted Discretion” means a determination made in good faith and in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment.
“Permitted Indebtedness” means:
(a) Indebtedness of a Borrower in favor of Bank;
(b) Indebtedness existing on the Closing Date and disclosed in the Schedule;
(c) Indebtedness secured by a lien described in clause (c) of the defined term “Permitted Liens,” provided such Indebtedness does not exceed $250,000 in the aggregate at any given time;
(d) Indebtedness to trade creditors incurred in the ordinary course of business, including Indebtedness incurred in the ordinary course of business with corporate credit cards not to exceed in aggregate $75,000 at all times;
(e) Indebtedness arising from the endorsement of instruments in the ordinary course of business;
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(f) intercompany Indebtedness owed by any Subsidiary that is a Borrower to another Borrower;
(g) Indebtedness that also constitutes a Permitted Investment;
(h) Indebtedness arising from the honoring of a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business;
(i) Indebtedness owed to any Person (including obligations in respect of letters of credit for the benefit of such Person not exceeding $75,000 at all times) providing workers’ compensation, health, disability or other employee benefits or property, casualty, liability insurance, self-insurance, pursuant to reimbursement or indemnification obligations to such Person, in each case incurred in the ordinary course of business;
(j) Indebtedness in respect of netting services, overdraft protection and other similar arrangements in connection with deposit or securities accounts in the ordinary course of business;
(k) Indebtedness consisting of unsecured contingent liabilities arising with respect to customary indemnification provisions or deferred purchase price adjustments in connection with any Permitted Investment or in connection with any asset sale or other dispositions permitted hereunder;
(l) Indebtedness of up to $500,000 consisting of installment payments or notes payable in connection with the licensing or acquisition of assets in the ordinary course of business;
(m) the Fortress Indebtedness, subject to Section 6.10 of this Agreement;
(n) Subordinated Debt;
(o) other unsecured Indebtedness not to exceed $250,000 at any time; and
(p) (i) any Contingent Obligations in respect of Indebtedness otherwise permitted pursuant to clauses (a) through (o) above and (ii) the extension, renewal or refinancing of any Indebtedness described in clauses (a) through (o) above, provided that the principal amount of the Indebtedness being extended, renewed or refinanced does not increase.
“Permitted Investment” means:
(a) Investments existing on the Closing Date disclosed in the Schedule;
(b) Investments in deposit accounts maintained with Bank or otherwise permitted hereunder in the ordinary course of business;
(c) Cash Equivalents;
(d) Investments (including debt obligations) acquired in connection with the settlement of delinquent Accounts in the ordinary course of business or in connection with the bankruptcy or reorganization of suppliers or customers;
(e) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business;
(f) Investments consisting of travel advances in the ordinary course of business;
(g) joint ventures, strategic alliances, collaboration arrangements or non-exclusive licensing arrangements in the ordinary course of a Borrower’s business consisting of the nonexclusive licensing of technology, the development of technology or the providing of technical support;
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(h) Investments accepted in connection with Permitted Transfers;
(i) Investments in newly-formed Subsidiaries, provided that each such Subsidiary becomes a Borrower promptly after its formation and executes such other documents as shall be reasonably requested by Bank;
(j) acquisitions of licenses or sublicenses and similar arrangements for the use of Intellectual Property or other assets in the ordinary course of business in an aggregate amount not to exceed $500,000 at any time outstanding;
(k) Investments consisting of in-licensing of technology or products in the ordinary course of business;
(l) loans or advances to partners, consultants and employees of a Borrower or any Subsidiary for relocation, entertainment, travel expenses, or similar expenditures (including payments of taxes) in an aggregate amount not to exceed $100,000 at any time outstanding;
(m) guarantees by a Borrower or any Subsidiary of a Borrower of leases (other than in relation to capital lease obligations), contracts, or of other obligations that do not constitute Indebtedness, in each case entered into in the ordinary course of business;
(n) Investments consisting of endorsements for collection or deposit in the ordinary course of business;
(o) Investments consisting of loans not involving the net transfer on a substantially contemporaneous basis of cash proceeds to employees, officers or directors relating to the purchase of Equity Interests of a Borrower pursuant to employee stock purchase plans or other similar agreements approved by such Borrower’s Board of Directors; and
(p) other Investments in amounts not to exceed an aggregate of $250,000 in any fiscal year, so long as not otherwise restricted or prohibited under any other Section of this Agreement.
“Permitted Liens” means the following:
(a) Any Liens existing on the Closing Date and disclosed in the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings, provided the same have no priority over any of Bank’s security interests;
(c) Liens (i) upon or in any equipment which was not financed by Bank acquired or held by a Borrower or any of its Subsidiaries to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition of such equipment, or (ii) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment;
(d) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other similar Liens arising in the ordinary course of business and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings;
(e) statutory and common law rights of set-off and other similar rights as to deposits of cash and securities in favor of banks, other depository institutions and brokerage firms;
(f) Easements, zoning restrictions, rights of way, and similar encumbrances on real property imposed by law or arising in the ordinary course of business so long as they do not materially impair the value or marketability of the related property;
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(g) Liens consisting of judgment or judicial attachment liens with respect to judgments the existence of which do not constitute an Event of Default;
(h) Nonexclusive licenses or sublicenses of Intellectual Property entered into in the ordinary course of business;
(i) Liens on insurance proceeds securing the payment of financed insurance premiums that are promptly paid on or before the date they become due (provided that such Liens extend only to such insurance proceeds and not to any other property or assets);
(j) utility and similar deposits in the ordinary course of business;
(k) leasehold interests in leases or subleases;
(l) Liens that are contractual rights of set off relating to agreements entered into by a Borrower in the ordinary course of business;
(m) the interests of lessors under operating leases and non-exclusive licensors under
license agreements;
(n) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties that are promptly paid on or before the date they become due;
(o) Liens that are subordinated to the Liens of Bank upon terms satisfactory to Bank in its reasonable discretion as long as no Default or Event Default has then occurred and is continuing or would result from any such action; and
(p) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (a) through (o) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase.
“Permitted Transfer” mean:
(a) sales of Inventory in the ordinary course of business;
(b) non-exclusive licenses and similar arrangements for the use of Intellectual Property in the ordinary course of business (including in the context of joint ventures, strategic alliances, collaboration arrangements or licensing arrangements) and licenses that could not result in a legal transfer of title of the licensed property;
(c) dispositions of worn-out, obsolete or surplus equipment or assets in the ordinary course of business;
(d) sales, transfers and other dispositions of accounts receivable (including write-offs, discounts and compromises) in connection with the compromise, settlement or collection thereof;
(e) other transfers of assets having a fair market value of not more than $250,000 in the aggregate in any fiscal year;
(f) sales, transfers, leases and other dispositions of property to the extent that such property constitutes an Investment that is a Permitted Investment;
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(g) converting any Indebtedness to Equity Interests of a Borrower;
(h) leases or licenses or subleases or sublicenses entered into in the ordinary course of business (other than in respect of Intellectual Property);
(i) the abandonment or lapse of Intellectual Property that is no longer material to the business of the Borrowers or any Subsidiary, or otherwise no longer of material value, including, for the avoidance of doubt, the termination of license agreements and related agreements;
(j) any issuance or sale by a Borrower of its Equity Interests or other securities, in each case to the extent otherwise permitted pursuant to this Agreement;
(k) Permitted Liens;
(l) (i) dispositions of Cash Equivalents in the ordinary course of business made to a Person that is not an Affiliate of a Borrower and (ii) conversions of Cash Equivalents into cash or other Cash Equivalents;
(m) transfer of property from a Borrower or any Subsidiary to another Borrower; and
(n) transfers of cash pursuant to transactions not prohibited herein and in the ordinary course of business.
“Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental agency.
“Prime Rate” means the greater of (i) 3.25% and (ii) the variable rate of interest, per annum, that Bank announces from time to time as its prime rate, whether or not such announced rate is the lowest rate available from Bank.
“Responsible Officer” means each of the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer and the Controller of a Borrower.
“Revolving Facility” means the facility under which the Borrowers may request Bank to issue Advances, as specified in Section 2.1(a).
“Revolving Line” means a credit extension of up to Seven Million Five Hundred Thousand Dollars ($7,500,000).
“Revolving Maturity Date” means March 31, 2024.
“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.
“Schedule” means the schedule of exceptions attached hereto and approved by Bank, if any.
“Subordinated Debt” means any debt incurred by a Borrower that is subordinated to the debt owing by such Borrower to Bank on terms acceptable to Bank (and identified as being such by such Borrower and Bank), pursuant to a subordination agreement in form and substance reasonably satisfactory to Bank. For the avoidance of doubt, the Fortress Indebtedness shall not constitute Subordinated Debt.
“Subsidiary” means, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries (including any Affiliate), or both, by such Person. Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of a Borrower.
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“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of a Borrower connected with and symbolized by such trademarks.
1.2 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP and all calculations made hereunder shall be made in accordance with GAAP. When used herein, the terms “financial statements” shall include the notes and schedules thereto. Notwithstanding anything herein to the contrary, for purposes of representations, covenants and calculations made pursuant to the terms of this Agreement, GAAP will be deemed to treat operating leases and capital leases in a manner consistent with their current treatment under GAAP as in effect on December 31, 2019 with respect to the Borrowers, notwithstanding any modifications or interpretive changes thereto that may occur thereafter.
2. | LOAN AND TERMS OF PAYMENT. |
2.1 Credit Extensions.
The Borrowers jointly and severally promise to pay to the order of Bank, in lawful money of the United States of America, the aggregate unpaid principal amount of all Credit Extensions made by Bank to a Borrower hereunder. The Borrowers shall also pay interest on the unpaid principal amount of such Credit Extensions at rates in accordance with the terms hereof.
(a) Revolving Advances.
(i) Subject to and upon the terms and conditions of this Agreement, a Borrower may request Advances in an aggregate outstanding amount not to exceed the lesser of (i) the Revolving Line and (ii) the Borrowing Base. Subject to the terms and conditions of this Agreement, Advances may be repaid and reborrowed at any time prior to the Revolving Maturity Date, at which time all Advances shall be immediately due and payable. The Borrowers may prepay any Advances without penalty or premium.
(ii) Whenever the Borrowers desire an Advance, a Borrower will notify Bank by email or telephone no later than 11:00 a.m. Pacific Time, on the Business Day that is one day before the Business Day the Advance is to be made (and three (3) Business Days before the initial Advance). Each such notification shall be promptly confirmed by a Loan Paydown/Advance Request Form in substantially the form of Exhibit B. Bank is authorized to make Advances under this Agreement, based upon instructions received from a Responsible Officer or a designee of a Responsible Officer, or without instructions if in Bank’s reasonable discretion such Advances are necessary to meet Obligations which have become due and remain unpaid. Bank may rely on any email or telephonic notice given by a person Bank reasonably believes to be a Responsible Officer or a designee thereof, and the Borrowers shall indemnify and hold Bank harmless for any damages or loss suffered by Bank as a result of such reliance. Bank will credit the amount of Advances made under this Section to a Borrower’s deposit account at Bank, as directed by such Borrower.
2.2 Overadvances. If the aggregate amount of the outstanding Advances exceeds the lesser of the Revolving Line and the Borrowing Base at any time, the Borrowers shall immediately pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section 2.3(b), the Advances shall bear interest, on the outstanding Daily Balance thereof, at a floating rate equal to one percent (1.0%) above the Prime Rate.
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(b) Late Fee; Default Rate. If any payment is not made within ten (10) days after the date such payment is due, the Borrowers shall pay Bank a late fee equal to the lesser of (i) five percent (5%) of the amount of such unpaid amount or (ii) the maximum amount permitted to be charged under applicable law. All Obligations shall bear interest, from and after the occurrence and during the continuance of an Event of Default, at a rate equal to five (5) percentage points above the interest rate applicable immediately prior to the occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on the last business day of each month during the term hereof, commencing on March 31, 2021. Bank shall, at its option, charge such interest, all Bank Expenses, and all Periodic Payments against any of a Borrower’s deposit accounts or against the Revolving Facility, in which case those amounts shall thereafter accrue interest at the rate then applicable hereunder. Any interest not paid when due shall be compounded by becoming a part of the Obligations, and such interest shall thereafter accrue interest at the rate then applicable hereunder. All payments shall be free and clear of any taxes, withholdings, duties, impositions or other charges, to the end that Bank will receive the entire amount of any Obligations payable hereunder, regardless of source of payment.
(d) Lockbox; Collections. The Borrowers shall cause all account debtors to pay any amounts owing to a Borrower made by wire, ACH, electronic funds transfer or other electronic payment method to such restricted account as Bank shall specify (the “Bancontrol Account”), and to mail all payments made by check to a post office box under Bank’s control. All invoices shall specify such post office box address and Bancontrol Account information as the remit to and payment address for all Accounts. Bank shall have sole authority to collect such payments and deposit them to the Bancontrol Account. If a Borrower receives any amount despite such instructions, a Borrower shall immediately deliver such payment to Bank in the form received, except for an endorsement to the order of Bank and, pending such delivery, shall hold such payment in trust for Bank. Bank shall credit all amounts paid into the Bancontrol Account within two Business Days after clearance of any deposits to the Bancontrol Account to Borrower’s operating account, provided however that Bank may, in its sole discretion, credit any amounts paid into the Bancontrol Account first against any amounts outstanding and owing to Bank under this Agreement, and then any remaining balance of such amount shall be credited to a Borrower’s operating account. Borrowers shall enter into such lockbox agreement as Bank shall reasonably request from time to time. Each Borrower shall cause any third-party payment processors to execute and deliver an acknowledgment and payment direction letter in form and substance reasonably satisfactory to Bank. Bank may, at its option, conduct a credit check of the account debtor for each Eligible Account requested by a Borrower for inclusion in the Borrowing Base. During the existence of an Event of Default, Bank may also verify directly with the respective account debtors the validity, amount and other matters relating to the Eligible Accounts, and notify any account debtor of Bank’s security interest in a Borrower’s Accounts. Bank may verify invoices at its sole discretion and various forms of verification may be utilized by Bank, which could include the following: proof of delivery, time cards, matching purchase orders, or contracts to invoices, analyzing customer payment history, and direct telephonic or written confirmation with (or an acknowledgement and promise to pay from) account debtors.
(e) Computation. In the event the Prime Rate is changed from time to time hereafter, the applicable rate of interest hereunder shall be increased or decreased, effective as of the day the Prime Rate is changed, by an amount equal to such change in the Prime Rate. All interest chargeable under the Loan Documents shall be computed on the basis of a three hundred sixty (360) day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence and continuance of an Event of Default, Bank shall credit a wire transfer of funds, check or other item of payment to such deposit account or Obligation as Borrower specifies. During the existence of an Event of Default, the receipt by Bank of any wire transfer of funds, check, or other item of payment shall be immediately applied to conditionally reduce Obligations, but shall not be considered a payment on account unless such payment is of immediately available federal funds or unless and until such check or other item of payment is honored when presented for payment. Notwithstanding anything to the contrary contained herein, any wire transfer or payment received by Bank after 12:00 noon Pacific Time shall be deemed to have been received by Bank as of the opening of business on the immediately following Business Day. Whenever any payment to Bank under the Loan Documents would otherwise be due (except by reason of acceleration) on a date that is not a Business Day, such payment shall instead be due on the next Business Day, and additional fees or interest, as the case may be, shall accrue and be payable for the period of such extension.
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2.5 Fees and Expenses.
(a) Origination Fee. The Borrowers shall pay to Bank the following: on the Closing Date, an origination fee with respect to the Revolving Facility equal to $56,250, which shall be nonrefundable; and
(b) Bank Expenses. The Borrowers shall pay to Bank on the Closing Date, all Bank Expenses incurred through the Closing Date, including reasonable and documented attorneys’ fees and expenses, in an amount not to exceed $45,000, less any amounts paid specifically for Bank Expenses prior to the Closing Date, and, after the Closing Date, all Bank Expenses, including reasonable and documented attorneys’ fees and expenses, as and when they are incurred by Bank.
2.6 Term. This Agreement shall become effective on the Closing Date and, subject to Section 12.7, shall continue in full force and effect for so long as any Obligations (other than unasserted contingent indemnification obligations) remain outstanding or Bank has any obligation to make Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank shall have the right to terminate its obligation to make Credit Extensions under this Agreement immediately and without notice upon the occurrence and during the continuance of an Event of Default. Notwithstanding termination, Bank’s Lien on the Collateral shall remain in effect for so long as any Obligations (other than unasserted contingent indemnification obligations) are outstanding.
3. CONDITIONS OF LOANS.
3.1 Conditions Precedent to Initial Credit Extension. The obligation of Bank to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance reasonably satisfactory to Bank, the following:
(a) | this Agreement; |
(b) a certificate of the Secretary of each Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Agreement;
(c) | UCC National Form Financing Statements; |
(d) | certificate(s) of insurance naming Bank as loss payee and additional insured; |
(e) | payment of the fees and Bank Expenses then due specified in Section 2.5 hereof; |
(f) | current financial statements of the Borrowers; |
(g) | an audit of the Collateral, the results of which shall be reasonably satisfactory to Bank; |
(h) | establishment of the Bancontrol Account and lockbox arrangements; and |
(i) | such other documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate. |
3.2 Conditions Precedent to all Credit Extensions. The obligation of Bank to make each Credit Extension, including the initial Credit Extension, is further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form and Borrowing Base Certificate, together with an aging of accounts receivable and payable, as provided in Section 2.1;
(b) | in Bank’s sole discretion, there has not been a Material Adverse Effect; |
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(c) the representations and warranties contained in Section 5 shall be true and correct in all material respects on and as of the date of a Borrower’s request for such Credit Extension and on the effective date of each Credit Extension as though made at and as of each such date (unless such representation or warranty specifically relates to an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date), and no Event of Default shall have occurred and be continuing, or would exist after giving effect to such Credit Extension. The making of each Credit Extension shall be deemed to be a representation and warranty by each Borrower on the date of such Credit Extension as to the accuracy of the facts referred to in this Section 3.2.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Each Borrower grants and pledges to Bank a continuing security interest in all presently existing and hereafter acquired or arising Collateral in order to secure prompt repayment of any and all Obligations and in order to secure prompt performance by the Borrowers of each of their respective covenants and duties under the Loan Documents. Such security interest constitutes a valid, first priority security interest in the presently existing Collateral, and will constitute a valid, first priority security interest in Collateral acquired after the date hereof.
4.2 Delivery of Additional Documentation Required. Each Borrower shall from time to time execute and deliver to Bank, at the request of Bank, all financing statements and other documents that Bank may reasonably request, in form reasonably satisfactory to Bank, to perfect and continue the perfection of Bank’s security interests in the Collateral and in order to fully consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect and Audit. The Borrowers shall permit any representative of Bank, during normal business hours and upon reasonable advance notice, to inspect, audit, examine and make extracts or copies from all books and records and other data relating to the Collateral to inspect any of a Borrower’s properties, to confirm balances due on Accounts by direct inquiry to Account Debtors, and shall furnish Bank with all information regarding the business or finances of Borrower promptly upon Bank’s request; provided the Borrowers shall only be obligated to reimburse Bank for the expenses for two such field audits per year.
5. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Such Borrower is a corporation duly existing under the laws of its state of incorporation and qualified and licensed to do business in any state in which the failure to be so qualified would result in a Material Adverse Effect.
5.2 Due Authorization; No Conflict. The execution, delivery, and performance of the Loan Documents are within such Borrower’s powers, have been duly authorized, and are not in conflict with nor constitute a breach of any provision contained in such Borrower’s Certificate of Incorporation or Bylaws, nor will they constitute an event of default under any material agreement to which such Borrower is a party or by which such Borrower is bound which would reasonably be expected to have a Material Adverse Effect. Such Borrower is not in default under any material agreement to which it is a party or by which it is bound.
5.3 No Prior Encumbrances. Such Borrower has good and marketable title to its property, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide existing obligations. The property and services giving rise to such Eligible Accounts has been delivered or rendered to the account debtor or to the account debtor’s agent for immediate and unconditional acceptance by the account debtor. Such Borrower has not received written notice of actual or imminent Insolvency Proceeding of any account debtor that is included in any Borrowing Base Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects of good and marketable quality, free from all material defects, except for Inventory for which adequate reserves have been made.
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5.6 Intellectual Property. Such Borrower is the sole owner of its Intellectual Property, except for non-exclusive licenses granted by Borrower to its customers in the ordinary course of business. Each of the Patents is valid and enforceable, and no part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and no claim has been made that any part of the Intellectual Property violates the rights of any third party. Except as set forth in the Schedule, such Borrower’s rights as a licensee of intellectual property do not give rise to more than five percent (5%) of its gross revenue in any given month during most recently ended fiscal quarter, including without limitation revenue derived from the sale, licensing, rendering or disposition of any product or service.
5.7 Name; Location of Chief Executive Office. Except as disclosed in the Schedule, such Borrower has not done business under any name other than that specified on the signature page hereof; or, in the past five (5) years, changed its jurisdiction of formation, corporate structure, organizational type, or any organizational number assigned by its jurisdiction. The chief executive office of such Borrower is located at the address indicated in Section 10 hereof.
5.8 Litigation. Except as set forth in the Schedule, there are no actions or proceedings pending by or against Borrower or any Subsidiary before any court or administrative agency.
5.9 No Material Adverse Change in Financial Statements. All consolidated and consolidating financial statements related to the Borrowers and their Subsidiaries that Bank has received from the Borrowers fairly present in all material respects Borrower’s financial condition as of the date thereof and Borrower’s consolidated and consolidating results of operations for the period then ended. There has not been a material adverse change in the consolidated or the consolidating financial condition of the Borrowers and the Subsidiaries (taken as a whole) since the date of the most recent of such financial statements submitted to Bank.
5.10 Solvency, Payment of Debts. The fair salable value of the Borrowers’ assets (including goodwill minus disposition costs), taken as a whole, exceeds the fair value of its liabilities; the Borrowers are not left with unreasonably small capital after the transactions in this Agreement; and the Borrowers are solvent and able to pay its debts (including trade debts) as they mature.
5.11 Regulatory Compliance. Such Borrower and each Subsidiary have met the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA, and no event has occurred resulting from Borrower’s failure to comply with ERISA that could result in Borrower’s incurring material liability. Such Borrower is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940. Such Borrower is not engaged principally, or as one of the important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T and U of the Board of Governors of the Federal Reserve System). Such Borrower and each Subsidiary have complied with all the provisions of the Federal Fair Labor Standards Act. Such Borrower and each Subsidiary have not violated any material statutes, laws, ordinances or rules applicable to it.
5.12 Environmental Condition. To such Borrower’s best knowledge, none of such Borrower’s properties or assets has ever been used by such Borrower, in the disposal of, or to produce, store, handle, treat, release, or transport, any hazardous waste or hazardous substance other than in accordance with applicable law; To such Borrower’s best knowledge, none of such Borrowers’ properties or assets has ever been designated or identified in any manner pursuant to any environmental protection statute as a hazardous waste or hazardous substance disposal site, or a candidate for closure pursuant to any environmental protection statute; no lien arising under any environmental protection statute has attached to any revenues or to any real or personal property owned by such Borrower which would reasonably be expected to have a Material Adverse Effect; and such Borrower has not received a summons, citation, notice, or directive from the Environmental Protection Agency or any other federal, state or other governmental agency concerning any action or omission by such Borrower resulting in the releasing, or otherwise disposing of hazardous waste or hazardous substances into the environment.
5.13 Taxes. Such Borrower has filed or caused to be filed all tax returns required to be filed, and have paid, or have made adequate provision for the payment of, all taxes reflected therein.
5.14 Subsidiaries. Except as set forth on the Schedule, such Borrower does not own any stock, partnership interest or other equity securities of any Person, except for Permitted Investments.
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5.15 Government Consents. Such Borrower has obtained all material consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all governmental authorities that are necessary for the continued operation of such Borrower’s business as currently conducted.
5.16 Operating, Depository and Investment Accounts. Except as disclosed in the Schedule, none of such Borrower’s cash is maintained or invested with a Person other than Bank.
5.17 Full Disclosure. No representation, warranty or other statement made by the Borrowers in any certificate or written statement furnished to Bank, when taken as a whole, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained in such certificates or statements not misleading (it being recognized that projections and forecasts provided by the Borrowers in good faith and based upon reasonable assumptions are not viewed as facts and that the actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).
6. AFFIRMATIVE COVENANTS.
Each Borrower shall do all of the following:
6.1 Good Standing. Maintain its corporate existence and good standing in its jurisdiction of incorporation and maintain qualification in each jurisdiction in which it is required under applicable law, and maintain in force all licenses, approvals and agreements, the loss of which would reasonably be expected to have a Material Adverse Effect.
6.2 Government Compliance. Meet the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA, and comply with all statutes, laws, ordinances and government rules and regulations to which it is subject, noncompliance with which would reasonably be expected to have a Material Adverse Effect.
6.3 Financial Statements, Reports, Certificates; Other Notices and Information. Deliver the following to Bank:
(a) within thirty (30) days after the last day of each month, aged listings of accounts receivable and accounts payable, together with a deferred revenue listing and a Borrowing Base Certificate signed by a Responsible Officer in substantially the form of Exhibit C hereto;
(b) as soon as available, but in any event within thirty (30) days after the end of each month, a Borrower prepared consolidated balance sheet, income, and cash flow statement covering such Borrower’s consolidated operations during such month, prepared in accordance with GAAP, consistently applied, in a form acceptable to Bank along with a Compliance Certificate signed by a Responsible Officer in substantially the form of Exhibit D hereto;
(c) as soon as available, but in any event within one hundred twenty (120) days after the end of such Borrowers’ fiscal year, audited consolidated financial statements of such Borrower prepared in accordance with GAAP, consistently applied, together with an unqualified opinion on such financial statements of an independent certified public accounting firm reasonably acceptable to Bank;
(d) as a condition to requesting an Advance, and for each month thereafter, as soon as available, but in any event within thirty (30) days after the last day of each month, a Borrowing Base Certificate and accounts receivable and payable agings;
(e) within thirty (30) days after the last day of each month, bank statements for any bank in which Borrower maintains an account outside of Bank;
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(f) within thirty (30) days after the last day of such Borrower’s fiscal year, a contact and address list in form and substance reasonably acceptable to Bank;
(g) copies of all statements, reports and notices sent or made available generally by Borrower to its security holders or to any holders of Subordinated Debt and, if applicable, all reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission;
(h) promptly upon receipt of notice thereof, a report of any legal actions pending or threatened in writing against such Borrower or any Subsidiary that could result in damages or costs to such Borrower or any Subsidiary of Five Hundred Thousand Dollars ($500,000) or more, or any commercial tort claim (as defined in the Code) acquired by such Borrower;
(i) as soon as available, but in any event no later than the earlier of (i) sixty (60) days after the end of each fiscal year and (b) ten (10) days of approval by such Borrower’s board of directors, annual operating projections (including income statements, balance sheets and cash flow statements presented in a monthly format) for the upcoming fiscal year, approved by such Borrower’s board of directors, which shall be in form and substance reasonably satisfactory to Bank;
(j) such budgets, sales projections, operating plans, other financial information including information related to the verification of such Borrower’s Accounts as Bank may reasonably request from time to time; and
(k) promptly (and in any event within three (3) Business Days) upon such Borrower becoming aware of the existence of any Event of Default or event described in Section 8 which, with the giving of notice or passage of time, or both, would constitute an Event of Default, such Borrower shall give written notice to Bank of such occurrence, which such notice shall include a reasonably detailed description of such Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default.
6.4 Audits. Upon reasonable advance notice and during normal business hours, permit Bank from time to time hereafter to audit such Borrower’s Accounts and appraise Collateral at such Borrower’s expense, provided that such audits will be conducted no more often than every six (6) months unless an Event of Default has occurred and is continuing.
6.5 Inventory; Returns. Keep all Inventory in good and marketable condition, free from all material defects except for Inventory for which adequate reserves have been made, maintain returns and allowances, if any, with account debtors on the same basis and in accordance with the usual customary practices of such Borrower, as they exist at the time of the execution and delivery of this Agreement, and promptly notify Bank of all returns and recoveries and of all disputes and claims, where the return, recovery, dispute or claim involves more than Two Hundred Fifty Thousand Dollars ($250,000).
6.6 Taxes. Make due and timely payment or deposit of all federal, state, and other taxes, assessments, or contributions required of it by law, and will execute and deliver to Bank, on demand, appropriate certificates attesting to the payment or deposit thereof; and make, and will cause each Subsidiary to make, timely payment or deposit of all tax payments and withholding taxes required of it by applicable laws, including, but not limited to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal income taxes, and will, upon request, furnish Bank with proof reasonably satisfactory to Bank indicating that such Borrower has made such payments or deposits; provided that such Borrower or a Subsidiary need not make any payment if the amount or validity of such payment is contested in good faith by appropriate proceedings and is reserved against (to the extent required by GAAP) by such Borrower.
6.7 Insurance.
(a) At its expense, keep the Collateral insured against loss or damage by fire, theft, explosion, sprinklers, and all other hazards and risks, and in such amounts, as ordinarily insured against by other owners in similar businesses conducted in the locations where such Borrower’s business is conducted on the date hereof, and also maintain insurance relating to such Borrower’s business, ownership and use of the Collateral in amounts and of a type that are customary to businesses similar to such Borrower’s.
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(b) All such policies of insurance shall be in such form, with such companies, and in such amounts as are reasonably satisfactory to Bank. All such policies of property insurance shall contain a lender’s loss payable endorsement, in a form reasonably satisfactory to Bank, showing Bank as an additional loss payee thereof, and all liability insurance policies shall show the Bank as an additional insured and shall specify that the insurer must give at least twenty (20) days’ notice to Bank before canceling its policy for any reason (or ten (10) days’ notice in the case of the failure to pay any premiums) . Upon Bank’s reasonable request, such Borrower shall deliver to Bank certified copies of such policies of insurance and evidence of the payments of all premiums therefor. All proceeds payable under any such policy shall, at the option of Bank, be payable to Bank to be applied on account of the Obligations; provided that Borrowers may retain property insurance proceeds in the aggregate amount not to exceed $250,000 in any fiscal year, which Borrowers shall apply toward the replacement or repair of destroyed or damaged property.
6.8 Operating, Depository and Investment Accounts. Beginning not later than 180 days after the Closing Date, maintain its primary depository, operating, and investment accounts with Bank. Beginning on the Closing Date, for each account that such Borrower maintains outside of Bank, such Borrower shall cause the applicable bank or financial institution at or with which any such account is maintained to execute and deliver an account control agreement or other appropriate instrument in form and substance reasonably satisfactory to Bank.
6.9 Financial Covenants.
(a) Collateral Ratio. The Borrowers on a consolidated basis shall maintain at all times a ratio of (a) Collateral Value to (b) Obligations outstanding under this Agreement of at least 1.75 to 1.00, where Collateral Value is equal to the sum of (i) Borrower’s Cash on deposit with Bank and (ii) the book value of Eligible Accounts, as reported the most recent Borrowing Base Certificate delivered to Bank, provided that the Borrowers shall at all times maintain a Cash balance in account(s) with Bank of at least One Million Five Hundred Thousand Dollars ($1,500,00).
(b) Performance to Plan. The Borrowers on a consolidated basis shall have EBITDA of at least One Dollar ($1.00) for the fiscal quarter ending March 31, 2021, measured on a trailing three month basis. Thereafter, the Borrowers on a consolidated basis shall achieve EBITDA on a trailing 12-month basis, measured as of the last day of each month in calendar year 2021, and the last day of each calendar quarter thereafter, equal at least that set forth on attached Schedule 6.9.
6.10 Fortress Loan. As a condition to making any payment to Parent under the Fortress Note, cause all amounts owing to Bank under this Agreement to be repaid in full.
6.11 Intellectual Property Rights. Protect, defend and maintain the validity and enforceability of its Intellectual Property; (ii) promptly advise Bank in writing of material infringements of its Intellectual Property; and (iii) not allow any Intellectual Property material to such Borrower’s business to be abandoned, forfeited or dedicated to the public without Bank’s written consent.
6.12 Formation or Acquisition of Subsidiaries. Notwithstanding and without limiting the negative covenants contained in Sections 7.3 and 7.7 hereof, within thirty (30) days following such Borrower forming or acquiring any direct or indirect Subsidiary, (a) cause such new Subsidiary to provide to Bank a joinder to this Agreement to cause such Subsidiary to become a co-borrower hereunder, together with such appropriate financing statements and/or control agreements, all in form and substance reasonably satisfactory to Bank (including being sufficient to grant Bank a first priority Lien (subject to Permitted Liens) in and to the assets of such newly formed or acquired Subsidiary that would constitute Collateral), (b) provide to Bank appropriate certificates and powers and financing statements, pledging all of the direct or beneficial ownership interest in such new Subsidiary, in form and substance reasonably satisfactory to Bank, and (c) provide to Bank all other documentation in form and substance reasonably satisfactory to Bank that in its opinion is appropriate with respect to the execution and delivery of the applicable documentation referred to above.
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6.13 Further Assurances. At any time and from time to time, execute and deliver such further instruments and take such further action as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS.
No Borrower may do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of (collectively, a “Transfer”) all or any part of its business or property (including any spinoffs or divisions), other than Permitted Transfers.
7.2 Change in Business. Engage in any business other than the businesses currently engaged in by Borrower and any business substantially similar or related thereto (or incidental thereto); experience a change in a Chief Executive Officer or Chief Financial Officer unless a replacement reasonably acceptable to Bank is appointed within six (6) months of such officer no longer serving in such position; cease to conduct business in the manner that is not reasonably complementary, ancillary or otherwise related to the nature of the business operations conducted by Borrower as of the Closing Date; change the date on which its fiscal year ends; or without thirty (30) days prior written notification to Bank, change its type of corporate form of entity, relocate its chief executive office or state of incorporation or change its legal name.
7.3 Mergers or Acquisitions or Change in Control. Suffer or permit a Change in Control; or merge or consolidate, with or into any other business organization, or acquire, or permit any of its Subsidiaries to acquire, all or a material part of the capital stock or assets of another Person, or the product line or division of another Person, other than mergers or consolidations (i) of a Subsidiary which is not a Borrower into another Subsidiary or into Borrower, (ii) of a Borrower into another Borrower or (iii) to effectuate a Permitted Investment, provided that after giving effect to any of such transactions, Borrowers on a consolidated basis shall be in compliance with this Agreement.
7.4 Indebtedness. Create, incur, guarantee, assume or be or remain liable with respect to any Indebtedness, or permit any Subsidiary so to do, other than Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien with respect to any of its property, or assign or otherwise convey any right to receive income, including the sale of any Accounts, except for Permitted Liens, or enter into any agreement with any Person other than Bank not to grant a security interest in, or otherwise encumber, any of the Collateral.
7.6 Distributions. Pay any dividends or make any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock (other than in capital stock) at any time that an Event of Default is continuing or would exist after giving effect to such payment or distribution.
7.7 Investments. Directly or indirectly acquire or own, or make any Investment in or to any Person, other than Permitted Investments; or, subject to Section 6.8, maintain or invest any of its property with a Person other than Bank or permit any of its Subsidiaries to do so unless such Person has entered into an account control agreement with Bank in form and substance reasonably satisfactory to Bank.
7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of such Borrower except for (a) transactions that are in the ordinary course of such Borrower’s business, upon fair and reasonable terms that are no less favorable to such Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person, (b) transactions between or among the Borrowers not involving any other Affiliate, (c) loans or advances to employees, officers and directors otherwise constituting a Permitted Investment, (d) so long as it has been approved by such Borrower’s board of directors (or comparable governing body) in accordance with applicable law, the payment of reasonable compensation (including bonuses and the issuance of stock options), severance, or employee benefit arrangements to employees, officers, and directors of such Borrower in the ordinary course of business, (e) any tax sharing arrangements entered into in the ordinary course of business and (f) transactions set forth on the Schedule, as those agreements and instruments may be amended, modified, supplemented, extended, renewed or refinanced from time to time.
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7.9 Subordinated Debt. Make any payment in respect of any Subordinated Debt, except in compliance with the terms of the subordination agreement applicable to such Subordinated Debt, or amend any provision contained in any documentation relating to the Subordinated Debt without Bank’s prior written consent.
7.10 | [Reserved]. |
7.11 Compliance. Become an “investment company” or be controlled by an “investment company,” within the meaning of the Investment Company Act of 1940, or become principally engaged in, or undertake as one of its important activities, the business of extending credit for the purpose of purchasing or carrying margin stock, or use the proceeds of any Credit Extension for such purpose. Fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the Federal Fair Labor Standards Act or violate any law or regulation, which violation could have a Material Adverse Effect.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an Event of Default by the Borrowers under this Agreement:
8.1 | Payment Default. If a Borrower fails to pay, when due, any of the Obligations; |
8.2 | Covenant Default. |
(a) If a Borrower fails to perform or observe any term, covenant or agreement contained (i) in Sections 6.1, 6.3, 6.4, 6.6, 6.7, 6.8, 6.9, 6.10, 6.11, 6.12 or Article VII;
(a) If a Borrower fails to perform or observe any other material term, provision, condition, or covenant contained in this Agreement or in any of the Loan Documents, or in any other present or future agreement between a Borrower and Bank and as to any default under such other term, provision, condition or covenant that can be cured, has failed to cure such default within ten days after a Borrower receives notice thereof or any officer of a Borrower becomes aware thereof; provided, however, that if the default cannot by its nature be cured within the ten day period or cannot after diligent attempts by such Borrower be cured within such ten day period, and such default is likely to be cured within a reasonable time, then such Borrower shall have an additional reasonable period (which shall not in any case exceed 30 days) to attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event of Default but no Credit Extensions will be made;
8.3 Material Adverse Effect. If there occurs any circumstance or circumstances that could reasonably be expected to have a Material Adverse Effect;
8.4 Attachment. If any portion of a Borrower’s assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any trustee, receiver or person acting in a similar capacity, or if a Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any part of its business affairs, or if a judgment or other claim becomes a lien or encumbrance upon any portion of a Borrower’s assets, or if a notice of lien, levy, or assessment is filed of record with respect to any of a Borrower’s assets by the United States Government, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, provided that none of the foregoing shall constitute an Event of Default where such action or event is stayed or an adequate bond has been posted pending a good faith contest by a Borrower;
8.5 Insolvency. If a Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced against a Borrower; provided however, that such Borrower, as applicable, shall have forty-five (45) days to obtain the dismissal or discharge of an Insolvency Proceeding filed commenced it;
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8.6 Other Agreements. If a Borrower is in breach of any agreement (i) relating to any Indebtedness in an amount in excess of Five Hundred Thousand ($500,000) to which a Borrower is a party (which breach remains uncured after the applicable grace or notice period, if any) resulting in a right by a third party or parties, whether or not exercised, to accelerate the maturity of any such Indebtedness or (ii) that would reasonably be expected to have a Material Adverse Effect;
8.7 Judgments; Settlements; Fines; Penalties. If a judgment or judgments for the payment of money in an amount, individually or in the aggregate, of at least Five Hundred Thousand ($500,000) shall be rendered against a Borrower, or if a Borrower enters into any settlement agreement with respect to any litigation matters that results in payment obligations or liabilities incurred by such Borrower in excess of Five Hundred Thousand ($500,000); or if one or more fines, penalties or orders or decrees for the payment of money in excess of Five Hundred Thousand ($500,000) shall be rendered against a Borrower by any governmental authority; in each case, excluding amounts covered by insurance to the extent the relevant independent third party insurer has provided coverage therefor and to the extent the foregoing shall remain unsatisfied and unstayed for a period of thirty(30) days (provided that no Credit Extensions will be made prior to the satisfaction or stay of such judgment, settlement, fine, penalty or orders or decree); or
8.8 Misrepresentations. If any material misrepresentation or material misstatement exists now or hereafter in any warranty or representation set forth herein or in any other Loan Document or certificate delivered to Bank by any Responsible Officer pursuant to this Agreement or to induce Bank to enter into this Agreement or any other Loan Document.
9. BANK’S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence and during the continuance of an Event of Default, Bank may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by the Borrowers:
(a) Declare all or any portion of the Obligations, immediately due and payable (provided that upon the occurrence of an Event of Default described in Section 8.5, all Obligations shall become immediately due and payable without any action by Bank);
(b) Cease advancing money or extending credit to or for the benefit of a Borrower under this Agreement or under any other agreement between a Borrower and Bank;
(c) Make such payments and do such acts as Bank considers necessary or reasonable to protect its security interest in the Collateral. The Borrowers shall assemble the Collateral if Bank so requires, and to make the Collateral available to Bank as Bank may designate. The Borrowers authorize Bank to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Bank’s determination appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith. With respect to any of Borrower’s owned premises, the Borrowers grant Bank a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of Bank’s rights or remedies provided herein, at law, in equity, or otherwise;
(d) Set off and apply to the Obligations any and all (i) balances and deposits of a Borrower held by Bank, or (ii) indebtedness at any time owing to or for the credit or the account of a Borrower held by Bank;
(e) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral. Bank is granted a license or other right, solely pursuant to the provisions of this Section 9.1, to use, without charge, a Borrower’s labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section 9.1, a Borrower’s rights under all licenses and all franchise agreements shall inure to Bank’s benefit;
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(f) Dispose of the Collateral by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including a Borrower’s premises) as Bank determines is commercially reasonable, and apply any proceeds to the Obligations in whatever manner or order Bank deems appropriate;
(g) Bank may credit bid and purchase at any public sale; and
(h) Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by the Borrowers.
9.2 Power of Attorney. Effective only upon the occurrence and during the continuance of an Event of Default, each Borrower irrevocably appoints Bank (and any of Bank’s designated officers, or employees) as such Borrower’s true and lawful attorney to:(a) send requests for verification of Accounts or notify account debtors of Bank’s security interest in the Accounts; (b) notify all account debtors with respect to the Accounts or any other debtors of a Borrower to pay Bank directly; (c) sign a Borrower’s name on any invoice or bill of lading relating to any Account, drafts against account debtors, schedules and assignments of Accounts, verifications of Accounts, and notices to account debtors; (d) make, settle, and adjust all claims under and decisions with respect to a Borrower’s policies of insurance; (e) demand, collect, receive, sue, and give releases to any account debtor or other debtor of a Borrower for the monies due or which may become due upon or with respect to the Accounts and to compromise, prosecute, or defend any action, claim, case or proceeding relating to the Accounts; (f) settle and adjust disputes and claims respecting the accounts directly with account debtors, for amounts and upon terms which Bank determines to be reasonable; (g) sell, assign, transfer, pledge, compromise, discharge or otherwise dispose of any Collateral; (h) receive and open all mail addressed to a Borrower for the purpose of collecting the Accounts; (i) endorse a Borrower’s name on any checks or other forms of payment or security that may come into Bank’s possession; (j) execute on behalf of a Borrower any and all instruments, documents, financing statements and the like to perfect Bank's interests in the Accounts and file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the Collateral; and (k) do all acts and things necessary or expedient, in furtherance of any such purposes; provided however Bank may exercise such power of attorney with respect to any actions described in clause (j) above, regardless of whether an Event of Default has occurred. The appointment of Bank as a Borrower’s attorney in fact, and each of Bank’s rights and powers, being coupled with an interest, is irrevocable until all of the Obligations have been fully repaid and performed and Bank’s obligation to provide Credit Extensions hereunder is terminated.
9.3 Accounts Collection. In addition to the foregoing, at any time after the occurrence and during the continuance of an Event of Default, Bank may notify any Person owing funds to a Borrower of Bank’s security interest in such funds and verify the amount of such Account. Each Borrower shall collect all amounts owing to Borrower for Bank, receive in trust all payments as Bank’s trustee, and immediately deliver such payments to Bank in their original form as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If a Borrower fails to pay any amounts or furnish any required proof of payment due to third persons or entities, as required under the terms of this Agreement, then Bank may do any or all of the following: (a) make payment of the same or any part thereof; (b) set up such reserves under the Revolving Line as Bank deems necessary to protect Bank from the exposure created by such failure; or (c) obtain and maintain insurance policies of the type discussed in Section 6.7 of this Agreement, and take any action with respect to such policies as Bank deems prudent. Any amounts so paid or deposited by Bank shall constitute Bank Expenses, shall be immediately due and payable, and shall bear interest at the then applicable rate hereinabove provided, and shall be secured by the Collateral. Any payments made by Bank shall not constitute an agreement by Bank to make similar payments in the future or a waiver by Bank of any Event of Default under this Agreement.
9.5 Bank’s Liability. So long as Bank complies with reasonable banking practices, Bank shall not in any way or manner be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring or arising in any manner or fashion from any cause; (c) any diminution in the value thereof; or (d) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of loss, damage or destruction of the Collateral shall be borne by the Borrowers. Bank shall in no case be liable for special, consequential or punitive damages arising out of this Agreement or any transactions contemplated by this Agreement.
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9.6 Remedies Cumulative. Bank’s rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be cumulative. Bank shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of any Event of Default on Borrower’s part shall be deemed a continuing waiver. No delay by Bank shall constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be effective unless made in a written document signed on behalf of Bank and then shall be effective only in the specific instance and for the specific purpose for which it was given.
9.7 Demand; Protest. Each Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees at any time held by Bank on which a Borrower may in any way be liable.
10. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by a recognized overnight delivery service, certified mail, postage prepaid, return receipt requested, or by email to Borrower or to Bank, as the case may be, at its addresses set forth below:
If to a Borrower: | c/o JOURNEY MEDICAL CORPORATION |
9237 East Via de Ventura
Scottsdale, AZ 85258
Attn: Claude Maraoui
Nirav Jhaveri
Email: cmaraoui@jmcderm.com
njhaveri@jmcderm.com
and
c/o FORTRESS BIOTECH, INC.
2 Gansevoort Street, 9th Floor
New York, NY 10014
Attn: Robyn Hunter, CFO and Sam Berry, General Counsel
Email: rhunter@fortressbiotech.com; sberry@fortressbiotech.com
With a copy to (which copy shall not constitute notice):
Alston & Bird LLP
90 Park Avenue
New York, NY 10016
Attn: Paul Hespel
Email: paul.hespel@alston.com
If to Bank: | EAST WEST BANK |
2350 Mission College Boulevard, Suite 988
Santa Clara, CA 95054
Attn: James Tai
Email: james.tai@eastwestbank.com
The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other.
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11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of California, without regard to principles of conflicts of law. Jurisdiction shall lie in the State of California. BANK AND EACH BORROWER ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH OF THEM, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTION OF ANY OF THEM. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK OR BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM. WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Los Angeles County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Los Angeles County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Los Angeles County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.
12. GENERAL PROVISIONS.
12.1 Successors and Assigns. This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties; provided, however, that neither this Agreement nor any rights hereunder may be assigned by a Borrower without Bank’s prior written consent, which consent may be granted or withheld in Bank’s sole discretion. Bank may without the consent of or notice to a Borrower sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights and benefits hereunder; provided that so long as no Event of Default has occurred and is continuing Bank may not assign, transfer or grant participation in all or any part of, or any interest in, Bank’s obligations, rights and benefits hereunder or any other Loan Documents to any Person who is (i) direct competitor of Borrower, whether as an operating company or direct or indirect parent with voting control over such operating company, or (ii) a vulture or distressed debt fund.
12.2 Indemnification. The Borrowers shall defend, indemnify and hold harmless Bank and its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this Agreement; and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank as a result of or in any way arising out of, following, or consequential to transactions between Bank a and a Borrower whether under this Agreement, or otherwise (including without limitation reasonable and documented attorneys’ fees and expenses), except for losses caused by Bank’s gross negligence or willful misconduct.
23.
12.3 Time of Essence. Time is of the essence for the performance of all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. Neither this Agreement nor the Loan Documents can be amended or terminated orally. All prior agreements, understandings, representations, warranties, and negotiations between the parties hereto with respect to the subject matter of this Agreement and the Loan Documents, if any, are merged into this Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. In the event that any signature to this Agreement or any other Loan Document is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof. Notwithstanding the foregoing, the Borrowers shall deliver all original signed documents requested by Bank no later than ten (10) Business Days following the Closing Date.
12.7 Survival. All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any Obligations (other than unasserted contingent indemnification obligations) remain outstanding or Bank has any obligation to make Credit Extensions to a Borrower. The obligations of the Borrowers to indemnify Bank with respect to the expenses, damages, losses, costs and liabilities described in Section 12.2 shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Bank have run.
12.8 Confidentiality. In handling any confidential information, Bank will exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made (a) to Bank’s subsidiaries or affiliates in connection with their business with a Borrower (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (b) to prospective transferees or purchasers of any interest in the loans (provided, however, Bank shall use commercially reasonable efforts in obtaining such prospective transferee or purchasers agreement of the terms of this provision or terms substantially similar to the terms of this provision), (c) as required by law, regulation, subpoena, or other order, (d) to Bank’s regulators or as otherwise required in connection with Bank’s examination or audit (in which case such Person agrees, to the extent permitted by applicable law, to use commercially reasonable efforts to inform the Borrowers thereof prior to such disclosure), (e) as Bank considers appropriate exercising remedies under this Agreement and (f) to third-party service providers of Bank so long as such service providers have executed a confidentiality agreement with Bank with terms no less restrictive than those contained herein. Confidential information does not include information that is in the public domain or in Bank’s possession when disclosed to Bank, or becomes part of the public domain (other than as a result of its disclosure by Bank in violation of this Agreement) after disclosure to Bank or (y) is disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information.
12.9 Patriot Act Notice. Bank notifies the Borrowers that, pursuant to the requirements of the USA Patriot Act, Title III of Pub. L. 107-56 (signed into law on October 26, 2001) (the “Patriot Act”), it is required to obtain, verify and record information that identifies a Borrower, which information includes names and addresses and other information that will allow Bank to identify a Borrower in accordance with the Patriot Act.
24.
13. CO-BORROWER PROVISIONS
13.1 Primary Obligation. This Agreement is a primary and original obligation of each Borrower and shall remain in effect notwithstanding future changes in conditions, including any change of law or any invalidity or irregularity in the creation or acquisition of any Obligations or in the execution or delivery of any agreement between Bank and any Borrower. Each Borrower shall be liable for existing and future Obligations as fully as if all of all Credit Extensions were advanced to such Borrower. Bank may rely on any certificate or representation made by any Borrower as made on behalf of, and binding on, all Borrowers.
13.2 Enforcement of Rights. The Borrowers are jointly and severally liable for the Obligations and Bank may proceed against one or more of the Borrowers to enforce the Obligations without waiving its right to proceed against any of the other Borrowers.
13.3 Borrowers as Agents. Each Borrower appoints the other Borrower as its agent with all necessary power and authority to give and receive notices, certificates or demands for and on behalf of both Borrowers, to act as disbursing agent for receipt of any Credit Extensions on behalf of each Borrower and to apply to Bank on behalf of each Borrower for Credit Extensions, any waivers and any consents. This authorization cannot be revoked, and Bank need not inquire as to each Borrower’s authority to act for or on behalf of the Borrowers.
13.4 Subrogation and Similar Rights. Notwithstanding any other provision of this Agreement or any other Loan Document, until the Obligations have been repaid in full, each Borrower irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating such Borrower to the rights of Bank under the Loan Documents) to seek contribution, indemnification, or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by such Borrower with respect to the Obligations in connection with the Loan Documents or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by such Borrower with respect to the Obligations in connection with the Loan Documents or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section 13.4 shall be null and void. If any payment is made to a Borrower in contravention of this Section 13.4, such Borrower shall hold such payment in trust for Bank and such payment shall be promptly delivered to Bank for application to the Obligations, whether matured or unmatured.
13.5 Waivers of Notice. To the maximum extent permitted by applicable law, each Borrower waives any defense arising from any defense of any other Borrower, or by reason of the cessation from any cause whatsoever of the liability of any other Borrower. Bank’s failure at any time to require strict performance by any Borrower of any provision of the Loan Documents shall not waive, alter or diminish any right of Bank thereafter to demand strict compliance and performance therewith. Nothing contained herein shall prevent Bank from foreclosing on the Lien of any deed of trust, mortgage or other security instrument, or exercising any rights available thereunder, and the exercise of any such rights shall not constitute a legal or equitable discharge of any Borrower. To the maximum extent permitted by applicable law, each Borrower also waives any defense arising from any act or omission of Bank that changes the scope of such Borrower’s risks hereunder.
13.6 Subrogation Defenses. To the maximum extent permitted by applicable law, each Borrower hereby waives any defense based on impairment or destruction of its subrogation or other rights against any other Borrower, and under any other similar statutes now and hereafter in effect.
13.7 Right to Settle, Release.
(a) The liability of the Borrowers hereunder shall not be diminished by (i) any agreement, understanding or representation that any of the Obligations is or was to be guaranteed by another Person or secured by other property, or (ii) any release or unenforceability, whether partial or total, of rights, if any, which Bank may now or hereafter have against any other Person, including another Borrower, or property with respect to any of the Obligations.
25.
(b) Without affecting the liability of any Borrower hereunder, Bank may (i) compromise, settle, renew, extend the time for payment, change the manner or terms of payment, discharge the performance of, decline to enforce, or release all or any of the Obligations with respect to a Borrower, (ii) grant other indulgences to a Borrower in respect of the Obligations, (iii) modify in any manner any documents relating to the Obligations with respect to the other Borrower, (iv) release, surrender or exchange any deposits or other property securing the Obligations, whether pledged by a Borrower or any other Person, or (v) compromise, settle, renew, or extend the time for payment, discharge the performance of, decline to enforce, or release all or any obligations of any guarantor, endorser or other Person who is now or may hereafter be liable with respect to any of the Obligations.
13.8 Subordination. All Indebtedness of a Borrower now or hereafter arising and held by another Borrower is subordinated to the Obligations and the Borrower holding such Indebtedness shall take all actions reasonably requested by Bank to effect, to enforce and to give notice of such subordination.
[SIGNATURE PAGE FOLLOWS]
26.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.
JOURNEY MEDICAL CORPORATION |
By: | /s/ Claude Maraoui |
Name: | Claude Maraoui |
Title: | President & CEO |
JP PHARMA, INC. |
By: | /s/ Claude Maraoui |
Name: | Claude Maraoui |
Title: | President & CEO |
EAST WEST BANK |
By: | /s/ James Tai |
Name: | James Tai |
Title: | Managing Partner |
[SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.
JOURNEY MEDICAL CORPORATION |
By: |
Name: |
Title: |
JP PHARMA, INC. |
By: |
Name: |
Title: |
EAST WEST BANK |
By: | /s/ James Tai |
Name: | James Tai |
Title: | Managing Director |
[SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT]
Exhibit 10.6
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
ASSET PURCHASE AGREEMENT
BETWEEN
DERMIRA, INC.
AND
JOURNEY MEDICAL CORPORATION
DATED AS OF
MARCH 31, 2021
TABLE OF CONTENTS
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Page |
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ARTICLE I |
DEFINITIONS |
1 |
Section 1.1. |
Definitions |
1 |
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ARTICLE II |
SALE AND PURCHASE OF TRANSFERRED ASSETS |
13 |
Section 2.1. |
Purchase and Sale of Assets |
13 |
Section 2.2. |
Transferred Assets; Excluded Assets |
13 |
Section 2.3. |
Assumption of Certain Liabilities and Obligations |
16 |
Section 2.4. |
Assignment of Certain Transferred Assets |
18 |
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ARTICLE III |
PURCHASE PRICE |
19 |
Section 3.1. |
Purchase Price |
19 |
Section 3.2. |
Milestone Payments and Sales-Based Payments |
19 |
Section 3.3. |
Intended Tax Treatment |
27 |
Section 3.4. |
Allocation of Purchase Price |
27 |
Section 3.5. |
Withholding Taxes |
28 |
Section 3.6. |
Maruho Licensing Agreement |
28 |
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ARTICLE IV |
THE CLOSING |
28 |
Section 4.1. |
Closing Date |
28 |
Section 4.2. |
Closing Deliveries by Seller |
29 |
Section 4.3. |
Closing Deliveries by Buyer |
29 |
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ARTICLE V |
REPRESENTATIONS AND WARRANTIES OF SELLER |
30 |
Section 5.1. |
Seller Organization; Good Standing |
30 |
Section 5.2. |
Authority; Enforceability |
30 |
Section 5.3. |
No Conflicts |
30 |
Section 5.4. |
Consents and Approvals |
31 |
Section 5.5. |
Title to Transferred Assets |
31 |
Section 5.6. |
Litigation |
31 |
Section 5.7. |
Compliance with Laws |
31 |
Section 5.8. |
Regulatory Approvals |
31 |
Section 5.9. |
Brokers |
32 |
Section 5.10. |
Permits |
33 |
Section 5.11. |
Transferred Contracts |
33 |
Section 5.12. |
Taxes |
33 |
i
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Section 5.13. |
Intellectual Property |
33 |
Section 5.14. |
Development Product |
35 |
Section 5.15. |
Conduct in the Ordinary Course of Business |
35 |
Section 5.16. |
No Other Representations |
36 |
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ARTICLE VI |
REPRESENTATIONS AND WARRANTIES OF BUYER |
36 |
Section 6.1. |
Buyer’s Organization; Good Standing |
36 |
Section 6.2. |
Authority; Enforceability |
37 |
Section 6.3. |
No Conflicts |
37 |
Section 6.4. |
Consents and Approvals |
37 |
Section 6.5. |
Absence of Restraints; Compliance with Laws |
38 |
Section 6.6. |
Litigation |
38 |
Section 6.7. |
No Brokers |
38 |
Section 6.8. |
Availability of Funds |
38 |
Section 6.9. |
Solvency |
38 |
Section 6.10. |
Investigation |
39 |
Section 6.11. |
Disclaimer of Other Representations and Warranties |
40 |
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ARTICLE VII |
ADDITIONAL COVENANTS AND AGREEMENTS |
40 |
Section 7.1. |
Conduct of Business Prior to the Closing |
40 |
Section 7.2. |
Access to Information |
41 |
Section 7.3. |
Confidentiality |
42 |
Section 7.4. |
Insurance |
43 |
Section 7.5. |
Regulatory and Other Authorizations; Consents |
44 |
Section 7.6. |
Third Party Consents |
46 |
Section 7.7. |
Further Action |
46 |
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ARTICLE VIII |
CERTAIN COVENANTS AND AGREEMENTS |
46 |
Section 8.1. |
Access |
46 |
Section 8.2. |
Books and Records |
47 |
Section 8.3. |
Transfer and Assumption of Regulatory Commitments |
47 |
Section 8.4. |
Certain Tax Matters |
48 |
Section 8.5. |
PIV Challenge |
49 |
Section 8.6. |
Further Assurances |
49 |
Section 8.7. |
Corporate Existence |
50 |
Section 8.8. |
No Setoff |
50 |
ii
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ARTICLE IX |
CONDITIONS PRECEDENT |
50 |
Section 9.1. |
Conditions to Each Party’s Obligations |
50 |
Section 9.2. |
Conditions to Obligations of Buyer |
51 |
Section 9.3. |
Conditions to the Obligations of Seller |
51 |
Section 9.4. |
Frustration of Closing Conditions |
52 |
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ARTICLE X |
TERMINATION, AMENDMENT AND WAIVER |
52 |
Section 10.1. |
Termination |
52 |
Section 10.2. |
Notice of Termination |
53 |
Section 10.3. |
Effect of Termination |
53 |
Section 10.4. |
Event of Termination |
53 |
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ARTICLE XI |
INDEMNIFICATION |
53 |
Section 11.1. |
Survival |
53 |
Section 11.2. |
Indemnification by Seller |
54 |
Section 11.3. |
Indemnification by Buyer |
54 |
Section 11.4. |
Limitations |
55 |
Section 11.5. |
Procedure |
56 |
Section 11.6. |
Tax Treatment of Indemnification Payments |
58 |
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ARTICLE XII |
GENERAL PROVISIONS |
58 |
Section 12.1. |
Expenses |
58 |
Section 12.2. |
Notices |
58 |
Section 12.3. |
Public Announcements |
59 |
Section 12.4. |
Severability |
59 |
Section 12.5. |
Counterparts |
60 |
Section 12.6. |
Entire Agreement |
60 |
Section 12.7. |
Assignment |
60 |
Section 12.8. |
No Third-Party Beneficiaries and Affiliates |
61 |
Section 12.9. |
Amendment; Waiver |
61 |
Section 12.10. |
Schedules |
61 |
Section 12.11. |
Governing Law; Submission to Jurisdiction |
62 |
Section 12.12. |
Specific Performance |
62 |
Section 12.13. |
Mitigation |
63 |
Section 12.14. |
Limitation on Liability |
63 |
Section 12.15. |
Rules of Construction |
63 |
Section 12.16. |
Waiver of Jury Trial |
64 |
Section 12.17. |
Admissibility into Evidence |
64 |
iii
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Section 12.18. |
Privilege |
64 |
Section 12.19. |
Non-Recourse |
65 |
EXHIBITS
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Exhibit A |
Assignment and Assumption Agreement |
Exhibit B |
Bill of Sale |
Exhibit C |
IP Assignment Agreement |
Exhibit D |
Transferred Contracts |
Exhibit E |
Assigned Patents |
Exhibit F |
Trademark and Domain Names |
Exhibit G |
Transition Services Agreement |
Exhibit H |
Inventory Statement |
Exhibit I-1 |
Seller FDA Letter |
Exhibit I-2 |
Buyer FDA Letter |
Exhibit J |
Allocation Statement |
iv
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of March 31, 2021, is made by and between Journey Medical Corporation, a Delaware corporation (“Buyer”), and Dermira, Inc., a Delaware corporation (“Seller”).
WHEREAS, Seller sells the pharmaceutical product that currently is marketed for sale to consumers under the trademark Qbrexza®, and in connection therewith, operates the Business (as defined herein); and
WHEREAS, Seller wishes to sell to Buyer, and Buyer wishes to (a) purchase (or cause its Affiliates to purchase) from Seller the Transferred Assets (as defined herein) and (b) assume (or cause its Affiliates to assume) the Assumed Liabilities (as defined herein), in each case, upon the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1.Definitions.
As used in this Agreement, the following terms have the meanings set forth below:
“Affiliate” means, with respect to any Person, any other Person that controls, is controlled by or is under common control with such Person (and for this purpose, the term control means the power to direct the management and policies of a Person (directly or indirectly), whether through ownership of voting securities, by Contract or otherwise (and the terms controlling and controlled have meanings correlative to the foregoing)). For purposes of [***], [***] and [***] shall be considered its [***]. For purposes of [***], [***] shall be considered its [***].
“Agreement” has the meaning set forth in the preamble.
“Allocation Statement” has the meaning set forth in Section 3.4.
“Ancillary Agreements” means the Assignment and Assumption Agreement, the Bill of Sale, the IP Assignment Agreement, the Confidentiality Agreement, the Transition Services Agreement and the other documents, instruments, exhibits, annexes, schedules or certificates contemplated hereby and thereby.
“ANDA” means an abbreviated new drug application submitted to the FDA under section 505(j) of the Federal Food, Drug, and Cosmetic Act and any amendments or supplements thereto.
1
“Assignment and Assumption Agreement” means the Assignment and Assumption Agreement, in the form attached hereto as Exhibit A.
“Assumed Liabilities” has the meaning set forth in Section 2.3(a).
“Auditors” has the meaning set forth in Section 3.2(c)(iii).
“Authorized Generic” means a pharmaceutical product that would otherwise satisfy the requirements for a Generic Product under this Agreement, but which (a) is or will be manufactured, sold or otherwise distributed under the Product NDA and is (b) (i) manufactured, sold or otherwise distributed by a Third Party whose operations relating to such pharmaceutical product use rights received, directly or indirectly, from the Buyer pursuant to a license, settlement or other agreement or (ii) otherwise authorized, directly or indirectly, by the Buyer. For the avoidance of doubt, any pharmaceutical product that is manufactured, sold or otherwise distributed under an ANDA shall not be deemed to be an “Authorized Generic”.
“Bill of Sale” means the Bill of Sale, in the form attached hereto as Exhibit B.
“Business” means (a) the commercialization, manufacturing, packaging, distributing, marketing, storing, managing, importing, exporting and selling of the Product as conducted by Seller as of the Closing Date and (b) the development by Seller as of the Closing Date of (i) [***] or (ii) [***] (but with respect to (ii), solely to the extent performed under the [***] or otherwise related to the following indications: [***] [***].
“Business Day” means any day other than a Saturday, Sunday or other day on which banks in New York City, New York or Indianapolis, Indiana are permitted or required to close by applicable Law.
“Buyer” has the meaning set forth in the preamble.
“Buyer Fundamental Representations” means the representations and warranties made in Section 6.1(a) (Buyer’s Organization; Good Standing), Section 6.2 (Authority; Enforceability), Section 6.3(ii) (No Conflict) and Section 6.7 (No Brokers).
“Buyer Indemnified Parties” has the meaning set forth in Section 11.2.
“Buyer Officer’s Certificate” has the meaning set forth in Section 9.3(a).
“Calendar Quarter” shall mean the three-month period commencing on January 1, April 1, July 1, and October 1 during a given Calendar Year (defined below).
“Calendar Year” shall mean the twelve-month period commencing on January 1 and ending on December 31 of a given year.
“Closing” and “Closing Date” have the respective meanings set forth in Section 4.1.
“Closing Payment” has the meaning set forth in Section 3.1.
2
“Code” means the United States Internal Revenue Code of 1986, as amended.
“Combination Product” has the meaning set forth in Section 3.2(i)(ii)(1).
“Commercialization and Medical Materials” has the meaning set forth in Section 2.2(a)(iv).
“Commercially Reasonable Efforts” means, (a) with respect to a referenced obligation or activity other than the development or commercialization of a pharmaceutical product, such efforts that are consistent with the efforts normally used by a comparable pharmaceutical company in the fulfilment of such an obligation or performance of such an activity, and (b) with respect to a referenced obligation or activity relating to development or commercialization of a pharmaceutical product, such efforts consistent with the efforts normally used by a comparable pharmaceutical company in the development or commercialization of a pharmaceutical product at a similar stage in its development or commercialization, taking into account, as applicable, for purposes of clause (b): the commercial and market potential of the product; competitiveness of the marketplace (including the existence and developmental stages of alternative products); the likelihood of receipt of regulatory approval and any applicable actual or anticipated labeling; status of intellectual property coverage, regulatory exclusivity, or proprietary position; product profile, safety, and efficacy; profitability (including pricing and reimbursement status achieved or likely to be achieved and costs of producing finished goods); cost of further development or commercialization, time required for development or profitability; and any applicable regulatory or legal issues; provided, however, that for purposes of clause (b) Buyer may not take into account or consider in any manner the payments that could be due and owing to Seller pursuant to the terms of this Agreement.
“Compound” means [***].
“Confidentiality Agreement” has the meaning set forth in Section 7.3.
“Contract” means any written legally binding contract, subcontracts, agreement, instrument, lease, license, commitment, sales and purchase orders, and other instruments, arrangements or understandings of any kind, together with amendments, modifications and supplements thereto.
“Control” means, with respect to any document, information, material or intellectual property right, possession of the right, whether directly or indirectly, and whether by ownership, license or otherwise, to sell, transfer or assign or grant a license, sublicense or other right (including the right to reference any regulatory documentation) to or under such document, information, material, or intellectual property right to the extent permitted under applicable law and as provided for herein without violating the terms of any agreement or other arrangement with any Third Party.
“Covers” means, with respect to intellectual property and a thing or method, such as a referenced product, activity or service, that such intellectual property reads on, encompasses, or otherwise would be infringed or misappropriated by the unauthorized making, use, sale, offer for sale, sale, copying, distribution, display, practice, performance, import, export, lease or other disposition, of such thing or method.
3
“COVID-19” means COVID-19 or SARS-COV-2, including any future resurgence or evolutions or mutations thereof and/or any related or associated disease outbreaks, epidemics and/or pandemics.
“COVID-19 Measures” means any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, safety or similar Law, directive, guidelines or recommendations promulgated by any industry group or any Governmental Authority, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to COVID-19, including any Law passed by any Governmental Authority in response to COVID-19.
“Deductible” has the meaning set forth in Section 11.4(b).
“Development Product” means a prescription pharmaceutical product developed by or on behalf of Buyer that (a) [***] and [***] or (b) [***] as an active ingredient and is approved by the FDA for the treatment of any indication.
“Encumbrance” means, any mortgage, charge, lien, security interest, easement, right of way, pledge or encumbrance of any kind.
“Enforceability Exceptions” has the meaning set forth in Section 5.2.
“Evercore” has the meaning set forth in Section 5.9.
“Excluded Actions” has the meaning set forth in Section 2.2(b)(xiv).
“Excluded Assets” has the meaning set forth in Section 2.2(b).
“Excluded Contracts” has the meaning set forth in Section 2.2(b)(x).
“Excluded Liabilities” has the meaning set forth in Section 2.3(b).
“Excluded Taxes” means without duplication, (i) all Taxes of Seller; (ii) all Taxes relating to the Business, the Transferred Assets or the Assumed Liabilities for any Pre-Closing Tax Period (determined in the case of a Proration Period in accordance with Section 8.4(b)); (iii) all Taxes related to the Excluded Assets or Excluded Liabilities for any taxable period; (iv) Taxes of any Affiliate of Seller of any kind or description (including any Liability for Taxes of Seller or any Affiliate of Seller that becomes a Liability of Buyer, including under any common law doctrine of de facto merger or as transferee or successor liability, or otherwise by operation of contract (other than a contract entered into in the ordinary course of business the primary purpose of which is not Tax) or Law), in each case, that relate to an event or transaction occurring prior to the effective time on the Closing Date; (v) any bulk sales taxes of Seller that were due and payable in the Pre-Closing Tax Period and, as a result of Seller’s non-payment thereof, remain due and payable; and (vi) Transfer Taxes for which Seller is liable under Section 8.4(a); provided, however, that Excluded Taxes shall not cover any withholding Taxes under Section 3.5(b).
“Exhibits” means, collectively, the Exhibits referred to throughout this Agreement.
4
“FDA” means the U.S. Food and Drug Administration.
“Finished Goods” means the Product packaged, labeled and ready for distribution and sale in finished form.
“First Initial Sales-Based Payment Term” shall have the meaning set forth in Section 3.2(b)(i).
“Fraud” means failure of Seller’s representations and warranties in ARTICLE V hereof to be accurate in any material respect; provided that at the time such representation and warranty was made, one or more of the individuals listed in the definition of “Knowledge” had actual knowledge (as opposed to constructive knowledge) that such representation and warranty was inaccurate in a material respect with the specific intent that Buyer rely thereon to its detriment.
“Generic Product” means with respect to a given Milestone Product in a given country, a product sold by a Third Party that is not an Authorized Generic, and (a) contains the Compound, (b) is approved by the Regulatory Authority in such country for use in such country for the same indication(s) as such Milestone Product; and (c) is deemed by the applicable Regulatory Authority to be substitutable or interchangeable for, or therapeutically equivalent or bioequivalent to, such Milestone Product by healthcare practitioners, reimbursement organizations, or pharmacists in such country.
“Governmental Authority” means any supra-national, federal, foreign, national, state, county, local, municipal or other governmental, regulatory or administrative authority, agency, commission or other instrumentality, any court, tribunal or arbitral body with competent jurisdiction.
“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder.
“Indemnified Party” has the meaning set forth in Section 11.5(a).
“Initial Sales-Based Payment” has the meaning set forth in Section 3.2(b)(i).
“Initial Sales-Based Payment Term” has the meaning set forth in Section 3.2(b)(i).
“Intellectual Property” means all intellectual property that is Controlled by Seller as of the Closing Date (including all worldwide rights, title and interests associated with or arising out of such intellectual property) that (a) is exclusively related to the Business as of the Closing Date and/or (b) exclusively Covers [***] or [***], including: (i) the Patents; (ii) the Know-How; (iii) the Trademarks and Domain Names and (iv) rights in works of authorship (including advertisements and publications), copyrights, software, database rights, including registrations, applications, renewals and extensions of any or all of the foregoing.
“Interest Rate” has the meaning set forth in Section 3.2(a).
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“Inventory” means all inventories, wherever located, including all supplies, raw materials, bulk drug substances, work-in-progress, Finished Goods and packaging and labeling materials, in each case, exclusively related to [***], [***] or the Business.
“Inventory Statement” has the meaning set forth in Section 2.2(a)(iii).
“IP Assignment Agreement” means the IP assignment agreement, in the form attached hereto as Exhibit C.
“Know-How” means all existing and available technical information, know-how and data, including, but not limited to, inventions (whether patentable or not), patent disclosures, discoveries, trade secrets, specifications, instructions, processes and formulae, including all biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical, safety, quality control, preclinical and clinical data, in each case, exclusively relating to the Product or the Development Product.
“Knowledge” of Seller or Buyer, as the case may be, means all such facts, circumstances or other information, of which with respect to Seller, the applicable Person listed on Section 1.1(a) of the Seller Schedules or with respect to Buyer, Claude Maraoui or Ramsey Alloush, as applicable, is actually aware or should be aware after reasonable inquiry of such Person’s direct reports.
“Law” means any applicable law, judgment, order, decree, statute, ordinance, rule, code, regulation, directive or other requirement or rule of law enacted, issued or promulgated by any Governmental Authority.
“Liability” means any debt, liability, claim, expense, commitment or obligation of whatever kind, whether direct or indirect, accrued or fixed, absolute or contingent, matured or not or determined or determinable.
“Licensed Intellectual Property” means all Intellectual Property that is Controlled, but not owned (in whole or in part) by Seller or any of its Affiliates as of the Closing Date.
“LOE Country” shall have the meaning set forth in Section 3.2(b)(iv).
“LOE Milestone Product” shall have the meaning set forth in Section 3.2(b)(iv).
“Loss of Exclusivity” means, with respect to a Milestone Product that is being marketed or sold in a given country, a condition in which one or more Third Parties launches, sells or otherwise distributes a Generic Product in such country, and such Generic Product accounts for [***] ([***]%) or more of aggregate sales of [***] and [***] in [***] in [***] or [***] to be mutually agreed between Buyer and Seller [***] and [***] to be mutually agreed between Buyer and Seller [***] in [***].
“Losses” means any and all damages, losses, Liabilities, judgments, penalties, costs and expenses actually suffered or incurred and paid (including reasonable legal fees and expenses incurred in investigating and/or prosecuting any claim for indemnification).
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“[***]” has the meaning set forth in [***].
“[***]” means that certain [***], dated as of [***], by and between [***] and [***].
“Material Adverse Effect” means a material adverse effect on the financial condition or results of operations of the Business, taken as a whole; provided, however, that any adverse effect arising out of, resulting from or attributable to (a) an event or circumstances or series of events or circumstances affecting (i) the U.S. (or any other country or jurisdiction in which the Business or Seller operates) or the global economy generally or capital, financial, banking, credit or securities markets generally, including changes in interest or exchange rates, (ii) political conditions generally of the U.S. or any other country or jurisdiction in which the Business or Seller operates or (iii) any industry generally in which the Business or Seller or any customer thereof operates or in which products or services of the Business are used or distributed, (b) the negotiation, pendency, announcement or consummation of the transactions contemplated by, or the performance of obligations under, this Agreement or any other Transaction Agreement, including adverse effects related to compliance with the covenants or agreements contained herein, the failure to take any action as a result of any restrictions or prohibitions set forth herein or the identity of Buyer or its Affiliates, and any adverse effect proximately caused by (i) shortfalls or declines in revenue, margins or profitability, (ii) threatened or actual loss of, or disruption in, any customer, supplier, vendor, employee or landlord relationships or (iii) loss of any personnel, (c) any changes in applicable Law or U.S. GAAP, or accounting principles, practices or policies that Seller required to adopt, or the enforcement or interpretation thereof, (d) actions specifically permitted to be taken or omitted pursuant to this Agreement or actions taken or omitted at the request or with the consent of Buyer, (e) the effect of any action taken by Buyer or its Affiliates with respect to any transaction contemplated hereby or with respect to Seller or any of its Affiliates, (f) the occurrence of any act of God or other calamity or force majeure events (whether or not declared as such), including any strike, labor dispute, civil disturbance, embargo, cyber-attack or malware attack, pandemic (including the COVID-19 pandemic, and any future resurgence, or evolutions or mutations, of COVID-19 or related disease outbreaks, epidemics or pandemics), natural disaster, fire, flood, hurricane, tornado, or other weather event, (g) any hostilities, acts of war (whether or not declared), sabotage, terrorism or military actions, or any escalation or worsening of any such hostilities, act of war, sabotage, terrorism or military actions, (h) any failure to meet internal or published projections, estimates or forecasts of revenues, earnings, or other measures of financial or operating performance for any period (provided, that the underlying causes of such failures (subject to the other provisions of this definition) shall not be excluded), or (i) any adverse change or effect that is cured before the Closing shall not, in any such case, constitute or be deemed to contribute to a Material Adverse Effect, and otherwise shall not be taken into account in determining whether a Material Adverse Effect has occurred or would be reasonably likely to occur; provided further, that, in the case of clause (a), the event or circumstance referred to therein does not disproportionately adversely affect the Business, taken as a whole, as compared to other comparable companies in the industries in which the Seller operates.
“Milestone” has the meaning set forth in Section 3.2(a).
“Milestone Abandonment Notice” has the meaning set forth in Section 3.2(d)(i).
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“Milestone Notice” has the meaning set forth in Section 3.2(a).
“Milestone Payment” has the meaning set forth in Section 3.2(a).
“Milestone Payment Date” has the meaning set forth in Section 3.2(a).
“Milestone Product” means (a) [***], (b) [***] and (c) [***].
“Milestone Product Parties” means, collectively, Buyer, its Affiliates and/or its or their respective partners, licensees, and/or sublicensees, and any assignees and/or successors of any of the foregoing with respect to rights to a Milestone Product, or any other Person who receives from any of the foregoing rights for the development, manufacturing and/or commercialization of any Milestone Product or any other Person that has been delegated responsibility for achieving a Milestone for which a Milestone Payment must be paid, and each, an “Milestone Product Party.”
“NDC” means a national drug code as issued by the FDA.
“Net Sales” has the meaning set forth in Section 3.2(i)(i).
“Non-Party Affiliates” has the meaning set forth in Section 12.19.
“Non-Transferable Asset” has the meaning set forth in Section 2.4(a).
“Open Claims” has the meaning set forth in Section 8.7.
“Ordinary Course of Business” means the ordinary and usual course of normal day to day operations of the Business through the date hereof consistent with past practice (giving effect to any adjustments and modifications thereto reasonably necessary and reasonably taken in response to or as a result of the COVID-19 pandemic). Notwithstanding anything contrary contained herein, the definition of Ordinary Course of Business shall not include: “channel stuffing” or discounting products beyond what is commercially reasonable and consistent with past practice (giving effect to any adjustments and modifications thereto reasonably necessary and reasonably taken in response to or as a result of the COVID-19 pandemic).
“Outside Date” has the meaning set forth in Section 10.1(d).
“Party” or “Parties” means the Parties to this Agreement.
“Patents” means (a) the patent applications or patents in Exhibit E; (b) any continuations, divisionals, or other patent applications that claim priority to any of the patent applications or patents in Exhibit E or that share a common claim of priority therewith; (c) any patents issuing on any such patent applications (of either (a) or (b)); (d) any substitutions, reexaminations, reissues, registrations, corrections, additions, confirmation patents, revivals, and/or any similar modifications of any such patents in (c) or listed in Exhibit E; (e) any extensions (including pediatric exclusivity, patent term extension, and supplementary patent certificate extensions), and/or or restorations of such patents (referenced in (d)), including all rights in any such patent
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applications or patents (in (a)-(e)), in each case, whether domestic or foreign, including all rights of priority, rights to file and prosecute, and the like.
“Permits” means all consents, approvals, authorizations, certificates, filings, notices, permits, concessions, registrations, franchises, licenses or rights of or issued by any Regulatory Authority or other Governmental Authority, including Regulatory Approvals.
“Permitted Encumbrances” means: (i) Encumbrances for Taxes, assessments and charges or levies of any Governmental Authority not yet delinquent or that are being contested in good faith by appropriate Proceedings or that may thereafter be paid without penalty; (ii) Encumbrances that do not materially impair the ownership or use of assets to which they relate; (iii) Encumbrances imposed by applicable Law (including materialmen’s, mechanics’, carriers’, workmens’ and repairmen’s liens and transfer restrictions imposed by national, federal or state securities laws); (iv) Encumbrances imposed in the Ordinary Course of Business that are not yet due and payable, which are being contested in good faith or which are securing obligations or Liabilities that are not material to the applicable Transferred Asset; (v) pledges or deposits to secure obligations under applicable Law to secure public or statutory obligations; (vi) liens, title retention arrangements or deposits to secure the performance of bids, trade contracts (other than for borrowed money), conditional sales contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the Ordinary Course of Business; and (vii) other Encumbrances that do not, and would not reasonably be expected to, materially detract from the value of any of the asset, right or property to which they relate or that do not materially interfere with the use of such asset, right or property as currently used.
“Person” means any individual, corporation, partnership, limited liability company, joint venture, trust, business association, organization, Governmental Authority or other entity.
“Personal Information” means, in addition to any definition for any similar term (e.g., “personal data” or “personally identifiable information” or “PII”) provided by applicable Laws, all information that identifies, could be used to identify or is otherwise associated with an individual person (including employees), whether or not such information is directly associated with an identified individual person.
“PIV Challenge” has the meaning set forth in Section 2.3(a)(iv).
“Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and, with respect to any Straddle Period, the portion of such taxable period ending on and including the Closing Date.
“Proceeding” means any civil, criminal, judicial, administrative or arbitral actions, suits, hearings, litigation, proceedings (public or private), claims or investigations, in each case by or before a Governmental Authority.
“Product” means [***].
“Product Liabilities” means all claims, Liabilities and Proceedings related to or arising from actual or alleged harm, injury, damage or death to Persons, or damage to property or businesses, including the Business, irrespective of the legal theory asserted, and resulting from or
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alleged to result from the use, sale or manufacture of any of the Product or the Development Product.
“Product NDA” means [***], including all amendments, supplements, variations, extensions and renewals thereof.
“Proration Period” has the meaning set forth in Section 8.4(b).
“Purchase Price” has the meaning set forth in Section 3.1.
“Records” has the meaning set forth in Section 2.2(a)(iv).
“Regulatory Approvals” means with respect to the applicable Milestone Product in the applicable regulatory jurisdiction, all permits, licenses, certificates, approvals, clearances, or other authorizations of or recognized by the applicable Regulatory Authority necessary to conduct clinical trials of, manufacture, distribute, market, sell and/or use such Milestone Product in such regulatory jurisdiction in accordance with applicable Law (including NDAs, INDs, 510(k)s, 505(b)(2)s or their foreign equivalents, and pricing and reimbursement approvals, and all supplements and amendments thereto).
“Registered Intellectual Property” has the meaning set forth in Section 5.13(a).
“Regulatory Authority” means any applicable supranational, federal, foreign, national, regional, state, provincial, local or municipal regulatory agencies, departments, bureaus, commissions, councils or other Governmental Authority (including the FDA) regulating or otherwise exercising authority with respect to any of the Milestone Products.
“Representatives” means the directors, officers, employees, agents, subsidiaries or advisors (including attorneys, accountants, investment bankers, financial advisers and other consultants and advisors) of the specified party hereto.
“Rose U Related Agreements” means (i) that certain [***], dated as of [***], by and between [***] [***] and (ii) that certain [***], dated as of [***], by and between [***]and [***].
“Sales-Based Payment Term” has the meaning set forth in Section 3.2(b)(ii).
“Sales-Based Payment” has the meaning set forth in Section 3.2(b)(ii).
“Sales-Based Payment Date” has the meaning set forth in Section 3.2(b)(iii).
“Schedules” means the Seller Schedules.
“SEC” means the United States Securities and Exchange Commission.
“Seller” has the meaning set forth in the preamble.
“Seller Fundamental Representations” means the representations and warranties of Seller set forth in Section 5.1(a) (Seller Organization; Good Standing), Section 5.2 (Authority;
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Enforceability), Section 5.3(ii) (No Conflicts), Section 5.5 (Title to Transferred Assets), and Section 5.9 (Brokers).
“Seller Indemnified Parties” has the meaning set forth in Section 11.3.
“Seller Intellectual Property” means all Intellectual Property that is owned (in whole or in part) by Seller or any of its Affiliates as of the Closing Date.
“Seller Licensed Intellectual Property” means, collectively: (a) all (i) patent applications or patents, (ii) any continuations, divisionals, or other patent applications that claim priority to any of the patent applications or patents in subsection (i) or that share a common claim of priority therewith, (iii) any patents issuing on any such patent applications (of either (i) or (ii)), (iv) any substitutions, reexaminations, reissues, registrations, corrections, additions, confirmation patents, revivals, and/or any similar modifications of any such patents in (i)-(iii), (v) any extensions (including pediatric exclusivity, patent term extension, and supplementary patent certificate extensions), and/or or restorations of such patents (referenced in (iv)), including all rights in any such patent applications or patents (in (i)-(v)), in each case, whether domestic or foreign, including all rights of priority, rights to file and prosecute, and the like; and (b) all technical information, know-how and data, including, but not limited to, inventions (whether patentable or not), patent disclosures, discoveries, trade secrets, specifications, instructions, processes and formulae, including all biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical, safety, quality control, preclinical and clinical data, in each case of (a) and (b), Controlled (consistent with the modified definition below) by Seller as of the Closing Date and which is not Intellectual Property, that is necessary for, or then-currently used by Seller in connection with, the manufacturing or sale of the Product. For clarity, solely for purposes of this definition, the definition of “Control” shall be modified such that any intellectual property right that is licensed or sublicensed by Seller that would otherwise be considered to be under the “Control” of Seller shall not be deemed to be under the “Control” of Seller if the application of such definition in the context of any licenses or sublicenses granted to Buyer under this Agreement would require Seller to provide any consideration to any Third Party or make any additional payments or royalties to a Third Party in connection with such license or sublicense grant unless and to the extent Buyer agrees to pay and does in fact pay such consideration, payments or royalties, after the Closing. Upon Seller becoming aware of any such payment obligations, Seller will provide Buyer with written notice of any such payment obligations and reasonably cooperate in the provision of such information.
“Seller Officer’s Certificate” has the meaning set forth in Section 9.2(a).
“Seller Schedules” means, collectively, the disclosure schedules, dated as of the date hereof, delivered by Seller to Buyer, as supplemented or amended in accordance with this Agreement, which forms a part of this Agreement.
“Seller Special Representations” means Section 5.8 (Regulatory Approvals) and Section 5.13 (Intellectual Property).
“Seller NDC Numbers” means [***] and [***].
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“Straddle Period” means any taxable period that begins on or before and ends after the Closing Date.
“Subsidiary” means [***], a [***] organized under the laws of [***] and a [***].
“Tax(es)” means all federal, state, local and non-U.S. taxes, including income, gross receipts, license, excise, sales, use, transfer, registration, value added, severance, stamp, environmental, customs duties, franchise, escheat, profits, withholding, real property, personal property or other taxes of any kind whatsoever that may be imposed by any Governmental Authority together with all interest, penalties, fines, additions to tax or additional amounts imposed by any Governmental Authority in connection therewith.
“Tax Return” means any report, return, election, notice, estimate, declaration, information statement and other forms and documents (including all schedules, exhibits and other attachments thereto and including all amendments thereof) relating to and filed or required to be filed with a taxing authority in connection with any Taxes (including estimated Taxes).
“Territory” means all countries of the world other than [***].
“Third Party” means any Person, other than the Parties and their Affiliates.
“Third Party Claim” has the meaning set forth in Section 11.5(a).
“Third Party Compensation” has the meaning set forth in Section 3.2(b)(v).
“Third Party Consents” has the meaning set forth in Section 7.6.
“Third Party Rights” has the meaning set forth in Section 2.4(b).
“Trademarks and Domain Names” means all trademarks, service marks, trade names, certification marks, service names, industrial designs, brand marks, trade dress rights, identifying symbols, logos, emblems, signs, insignia and domain names listed on Exhibit F, including all goodwill therein and any trademark applications or registrations for the foregoing.
“Transaction Agreements” means this Agreement and the Ancillary Agreements.
“Transaction Dispute” has the meaning set forth in Section 12.11(a).
“Transferred Assets” has the meaning set forth in Section 2.2(a).
“Transferred Contracts” has the meaning set forth in Section 2.2(a)(i).
“Transferred Inventory” has the meaning set forth in Section 2.2(a)(iii).
“Transferred Records” has the meaning set forth in Section 2.2(a)(iv).
“Transferred Regulatory Documentation” has the meaning set forth in Section 2.2(a)(vii).
“Transfer Taxes” has the meaning set forth in Section 8.4(a).
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"Transition Services" has the meaning set forth in Section 3.2(f).
“Transition Period” has the meaning set forth in Section 3.2(f).
“Update Report” has the meaning set forth in Section 3.2(c)(i).
“U.S.” or “U.S.A.” means the United States of America.
“U.S. GAAP” means U. S. Generally Accepted Accounting Principles.
“Willful Breach” means a breach that is a consequence of an act or omission knowingly undertaken or omitted by the breaching Party with the intent of causing a breach of this Agreement.
ARTICLE II
SALE AND PURCHASE OF TRANSFERRED ASSETS
Section 2.1.Purchase and Sale of Assets. Upon the terms and subject to the conditions of this Agreement, and subject to Section 2.4, at the Closing, Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller all right, title and interest of Seller in, to and under the Transferred Assets, free and clear of all Encumbrances, other than Permitted Encumbrances.
Section 2.2.Transferred Assets; Excluded Assets.
(a)The term “Transferred Assets” means the following assets, rights or interests of Seller:
(i)the Contracts listed on Exhibit D (the “Transferred Contracts”);
(ii)all accounts receivable of Seller relating to (A) [***] or (B) [***];
(iii)all Inventory, including all Finished Goods, in each case, existing as of the effective time on the Closing Date, as set forth in the inventory statement attached hereto as Exhibit H (the “Inventory Statement”), as and to the extent such inventory complies with the requirements set forth in the Inventory Statement (it being understood that the Finished Goods shall constitute Transferred Inventory solely to the extent they [***]) (collectively, the “Transferred Inventory”);
(iv)copies of all books and records, including customer, supplier and consultant lists, customer relationship management data, account lists, distribution lists, sales history, development plans and life cycle management data, correspondence (in all cases, in any form or medium), non-clinical, research and/or development-related notes, studies, records, reports and other documents or data (collectively, “Records”), in each case, exclusively related to the Business, the Product or the Development Product, other than any Excluded Assets, and to the extent in the possession or Control of Seller (collectively, the “Transferred Records”);
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(v)all rights to causes of action, lawsuits, judgments, claims, counterclaims, rights of recovery and demands exclusively related to the Business, the Product or the Development Product, other than the Excluded Actions;
(vi)(A) all labeling, advertising, marketing, sales and promotional materials (including television, radio and print content and materials), point of sale materials and website content, (B) all consumer and end-user information, (C) materials used for medical education activities and medical informational services, (D) training materials, (E) healthcare provider payor and consumer market research, and (F) investigator sponsored study agreements, in each case to the extent (x) exclusively related to the Business and (y) transferable in compliance with applicable Law (the "Commercialization and Medical Materials");
(vii)all (A) applications, submissions, registrations, or notifications submitted to a Regulatory Authority with a view to the obtaining, updating or maintaining of any Regulatory Approval, in each case including any investigational medicinal product dossier relating to the Product or the Development Product (including, for clarity, INDs), (B) correspondence with or to Regulatory Authorities (including Regulatory Approval letters, minutes and official contact reports relating to any communications with any Regulatory Authorities) with respect to the assets described in clause (A) above, (C) records contained in the pharmacovigilance and study databases, all adverse drug experience or reaction reports and associated documents, investigations of adverse drug experience or reaction reports, and any other information relevant to the assessment of safety or benefit-risk ratios, (D) non-clinical, clinical and other files, writings, notes, studies, reports and other documents or data contained or referenced in or supporting any of the foregoing, in each case, that were acquired, developed, compiled, collected or generated by Seller or by any Third Party on behalf of Seller, in each case, to the extent exclusively related to the Business, the Product or the Development Product and (E) all Regulatory Approvals for the Product, including the Product NDA (the “Transferred Regulatory Documentation”);
(viii)all Permits exclusively used or held for use in the conduct of the Business, the Product or the Development Product, to the extent transferable;
(ix)the Intellectual Property, including any applicable intellectual property rights in the Product, the Development Product, Transferred Records, Commercialization and Medical Materials and the Transferred Regulatory Documentation;
(x)all Non-Transferable Assets that are subsequently assigned or transferred to Buyer pursuant to Section 2.4;
(xi)Seller’s labeler code for the Product and the Seller NDC Numbers; and
(xii)all goodwill associated with any of the assets described in the foregoing clauses.
(b)Seller and Buyer expressly agree and acknowledge that the Transferred Assets will not include any assets of any kind, nature, character or description (whether real, personal or mixed, whether tangible or intangible, whether
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absolute, accrued, contingent, fixed or otherwise, and wherever situated) that is not expressly included in the definition of “Transferred Assets” in Section 2.2(a). For clarity, the “Transferred Assets” do not include the following assets, rights or interests of Seller collectively, the “Excluded Assets”):
(i)all personal property or personal productivity equipment (including laptops, personal computers, tablets, printers and mobile devices) used by any employees of Seller in the conduct of the Business;
(ii)the following Records: (A) personnel records; (B) Records to the extent relating to any Excluded Asset or Excluded Liability, (C) Records (including accounting Records and Tax Returns) relating to (1) Taxes paid or payable by Seller and all financial and Tax Records relating to the conduct of the Business that form part of Seller’s general ledger or otherwise constitute accounting Records or (2) any Tax refund, deposit, prepayment, credit, attribute, or other Tax asset of or with respect to Seller, (D) file copies of the Records retained by Seller, (E) sales representative call notes, (F) headquarter personnel notes, (G) all privileged materials; and (H) reports and financial statements prepared or received by Seller or its Affiliates relating to the financial condition of the Business.
(iii)all accounts receivable of Seller relating to sales of the Product made prior to the effective time on the Closing Date, provided that such sales were made in accordance with the terms of Section 5.15;
(iv)all equity interests in the Subsidiary;
(v)all cash and cash equivalents;
(vi)any Contracts or other arrangements related to employees or employment matters, including any and all proprietary materials used for Seller’s human resource program and supporting documentation thereto, and all cash and other assets of or relating to any employee benefit plan, program or arrangement or related trust (including any pension and savings plan assets) in which any employees of Seller participate;
(vii)all rights of Seller under this Agreement and the other Transaction Agreements;
(viii)all insurance policies and binders and all claims, refunds and credits from insurance policies or binders due or to become due with respect to such policies or binders;
(ix)all electronic mail;
(x)all Contracts other than the Transferred Contracts (“Excluded Contracts”);
(xi)all claims, rights or interests of Seller in or to any Tax refund, deposit, prepayment, credit, attribute or other Tax asset attributable to Excluded Taxes or otherwise attributable to a Pre-Closing Tax Period;
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(xii)(A) all records and reports prepared or received by Seller in connection with the sale of the Business and the transactions contemplated hereby, including all analyses, financial statements, including balance sheets and projections relating to the Business or Buyer so prepared or received; (y) all confidentiality agreements with prospective purchasers of the Business or any portion thereof, and all bids and expressions of interest received from Third Parties with respect to the Business;
(xiii)the lease for the headquarters at 275 Middlefield Road, Menlo Park, CA;
(xiv)any claims, causes of action, lawsuits, judgments, privileges, counterclaims, defenses, demands, right of recovery, rights of set-off, rights of subrogation and all other rights of any kind, in each case to the extent arising from the Excluded Assets or the Excluded Liabilities (the “Excluded Actions”)
(xv)Non-Transferable Assets, subject to Section 2.4; and
(xvi)all computer hardware, software and networks owned by Seller.
(c)License to Buyer. Seller hereby grants to Buyer a [***] under the [***], for Buyer to use solely in connection with [***] provided, that with respect to [***], Buyer [***]; provided further, that, Seller shall promptly respond to Buyer’s reasonable requests for information regarding [***] in a manner sufficient for Buyer to comply with its obligations under this Section 2.2(c) ([***]). The Parties acknowledge and agree that [***] is solely intended to grant Buyer [***], and that this license does not require Seller to [***].
Section 2.3.Assumption of Certain Liabilities and Obligations.
(a)On the terms and subject to the conditions set forth in this Agreement and subject to Section 2.4, effective as of the effective time on the Closing Date, Buyer shall assume, become responsible for, and thereafter timely pay, perform and otherwise discharge, in accordance with their respective terms, all Liabilities of Seller, to the extent arising out of or in connection with or related to the Business to the extent, except as otherwise expressly set forth to the contrary below, arising or occurring on or after the effective time on the Closing Date (whether accrued or unaccrued, fixed, known or unknown, absolute or contingent, matured or unmatured or determined or determinable as of the effective time on the Closing Date), including the following Liabilities (collectively, the “Assumed Liabilities”):
(i)all Liabilities arising from any patent infringement claim or Proceeding brought by any Third Party, including any Governmental Authority, on or after the effective time on the Closing Date, in all cases including such Liabilities related to Products sold on or after the effective time on the Closing Date by or on behalf of Buyer or its Affiliates;
(ii)all Liabilities arising from any Governmental Authority action or notification filed by a Governmental Authority initiated on or after the effective time on the
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Closing Date, related to Products sold on or after such time by or on behalf of Buyer or its Affiliates;
(iii)[***] (the “PIV Challenge”) and all Liabilities arising therefrom, [***];
(iv)all Liabilities arising under the Transferred Contracts, including all Liabilities for accounts payable, accrued and unaccrued expenses and similar items, in each case, to the extent that they arise or are to be performed or completed on or after the effective time on the Closing Date;
(v)all Liabilities arising out of or relating to the Products or Development Products made, sold or otherwise exploited on or after the effective time on the Closing Date, or made prior to such time and comprising Transferred Inventory, including all Liabilities for product warranty service claims or Product Liabilities arising on or after the effective time on the Closing Date relating to such Products, Development Products or Transferred Inventory;
(vi)all Liabilities for Taxes to the extent relating to the Business for all taxable periods (or portions thereof), beginning after the effective time on the Closing Date (determined in the case of a Proration Period in accordance with Section 8.4(b));
(vii)any other Liability, obligation or commitment, but solely to the extent arising from the Business on or after the effective time on the Closing Date or the ownership, sale, lease, use or misuse of any of the Transferred Assets or the conduct of the Business on or after the effective time on the Closing Date; and
(viii)any other Liability of Buyer to the extent indicated as such in the Transition Services Agreement (including in the event such Liability falls within one or more of the categories of Excluded Liabilities set forth in Section 2.3(b)).
(b)Except to the extent expressly included in the Assumed Liabilities, Buyer will not assume or be responsible or liable for any Liabilities of Seller, including the following (collectively, the “Excluded Liabilities”):
(i)all Liabilities to the extent relating to any breach of or default under any Transferred Contract by Seller prior to the effective time on the Closing Date;
(ii)all Liabilities for Excluded Taxes;
(iii)any Liabilities to the extent exclusively related to or arising under any Excluded Asset;
(iv)any Liabilities to the extent related to any Inventory that does not constitute Transferred Inventory (which, for clarity, shall include any costs associated with the storage, handling or destruction of any such Inventory);
(v)any obligations of Seller under this Agreement and the Transaction Agreements;
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(vi)all other Liabilities of Seller to the extent relating to the conduct of the Business or ownership, lease or operation of the Transferred Assets, in each case to the extent arising prior to the effective time on the Closing Date, except as otherwise set forth in the Assumed Liabilities; and
(vii)any other Liability of Seller to the extent indicated as such in the Transition Services Agreement (including in the event such Liability falls within one or more of the categories of Assumed Liabilities set forth in Section 2.3(a)).
Section 2.4.Assignment of Certain Transferred Assets.
(a)Notwithstanding any other provision of this Agreement to the contrary, but without limiting Section 9.1(c), this Agreement shall not constitute an agreement for Seller to sell, convey, assign, transfer or deliver to Buyer any Transferred Asset or any claim or right or any benefit arising thereunder or resulting therefrom or for Buyer to purchase, acquire, or receive any Transferred Asset or to enter into or fulfil its obligations under the Transaction Agreements if an attempted sale, conveyance, assignment, transfer or delivery thereof, or an agreement to do any of the foregoing, without the consent, authorization or approval of a Third Party (including any Governmental Authority), would constitute a breach or other contravention thereof or a violation of Law. Subject to Section 7.6, Seller shall use its Commercially Reasonable Efforts to obtain any such consent, authorization or approval as promptly as practicable after the date hereof and, Buyer shall, and shall cause each of its applicable Affiliates to, use its Commercially Reasonable Efforts to cooperate with Seller to obtain any such consent, authorization or approval necessary for the sale, conveyance, assignment, transfer or delivery of any such Transferred Asset, claim, right or benefit to Buyer and its Affiliates. For clarity, any Contract that would otherwise constitute a Transferred Contract, or other asset that would otherwise constitute a Transferred Asset, that is not assignable or transferable as contemplated in this Section 2.4(a) (each, a “Non-Transferable Asset”) shall not be deemed a Transferred Asset; provided however, following Seller’s receipt of the relevant consent, authorization or approval, as applicable, Seller shall promptly assign or transfer to Buyer the Non-Transferable Asset, and such asset shall thereafter be deemed a “Transferred Asset” for purposes of this Agreement.
(b)If, on the Closing Date, any such consent, authorization or approval is not obtained, or if an attempted sale, conveyance, assignment, transfer or delivery thereof would constitute a breach or other contravention or a violation of Law, subject to Section 7.6, Seller will, on and after the Closing, use Commercially Reasonable Efforts to transfer such Non-Transferable Asset to Buyer. Prior to having the ability to convey a Non-Transferable Asset as provided in this Section 2.4(b), Seller and Buyer will cooperate and use Commercially Reasonable Efforts to obtain a mutually acceptable arrangement under which Buyer (and/or its Affiliates) would, in compliance with Law and the terms of the applicable Non-Transferable Asset, obtain the benefits of, and assume the obligations and bear the economic burdens associated with, such Transferred Asset, claim, right or benefit in accordance with this Agreement, including subcontracting, sublicensing or subleasing to Buyer (and/or its
18
Affiliates), or under which Seller would (i) enforce for the benefit of Buyer (and/or its Affiliates) any and all of its or their rights against a Third Party (including any Governmental Authority) associated with such Transferred Asset, claim, right or benefit (collectively, “Third Party Rights”), and (ii) promptly pay to Buyer (and/or its Affiliates), when received, all monies received by it or them under any such Transferred Asset, claim, right or benefit, and Buyer (and/or its Affiliates) would assume the obligations and bear the economic burdens associated therewith. If, notwithstanding Seller’s efforts any consent, authorization or approval is not obtained, Seller shall use Commercially Reasonable Efforts to assist Buyer with entering into its own arrangements with respect to any Non-Transferable Asset(s) by providing contact information for individuals employed by the applicable counterparty with whom Seller has a relationship and facilitating discussions between Representatives of Buyer and such individuals. Buyer shall use Commercially Reasonable Efforts to provide to Seller whatever is reasonably required for Seller to meet its or its Affiliates’ obligations on a timely basis in relation to any such Transferred Asset, claim, right or benefit.
(c)The obligations of Seller under Section 2.4(a) and Section 2.4(b) shall terminate upon the earliest of (i) receipt of the requisite consent, authorization or approval (in which event the applicable Transferred Asset shall be sold, conveyed, assigned, transferred or delivered to Buyer (and/or its Affiliates)), (ii) such time as Buyer enters into its own arrangement with respect to a Non-Transferable Asset and (iii) June 30, 2021.
ARTICLE III
PURCHASE PRICE
Section 3.1.Purchase Price. The consideration for the Transferred Assets shall be (i) an aggregate cash amount equal to the sum of (A) Twelve Million Five Hundred Thousand Dollars ($12,500,000) (the “Closing Payment), plus (B) the Milestone Payments, plus (C) the Sales-Based Payments, plus (D) the Initial Sales-Based Payments, plus (E) the [***] (such sum, the “Purchase Price”) and (ii) Buyer’s assumption of the Assumed Liabilities.
Section 3.2.Milestone Payments and Sales-Based Payments.
(a)Buyer shall pay or cause to be paid to Seller each of the payments set forth below (each a “Milestone Payment” and together, the “Milestone Payments”) following the first achievement of the corresponding event (each a “Milestone”) set forth in Table 3.2(a)(i) and Table 3.2(a)(ii) below. Each Milestone Payment set forth in this Section 3.2 is payable only once (i.e., the first time the Milestone event is achieved) irrespective of the number of Milestone Products and the times such event is achieved and is non-refundable once paid. Within twenty (20) Business Days after achievement of a Milestone in respect of which a payment is required to be made under this Agreement (the “Milestone Payment Date”), Buyer shall (i) notify Seller in writing of such achievement (the “Milestone Notice”) and (ii) pay the corresponding Milestone Payment that is due and payable to Seller. The
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Milestone Notice shall include (A) with respect to the Milestones in Table 3.2(a)(i), Buyer’s good faith determination of the amount of Net Sales for the applicable measurement period and the corresponding Milestone Payment, with reasonable details and supporting materials in respect of such calculations set forth in the Milestone Notice, and (B) with respect to the Milestones in Table 3.2(a)(ii), whether or not there exists a Loss of Exclusivity as of the relevant date(s) set forth in such table. In the event that Buyer fails to pay a Milestone Payment on the Milestone Payment Date, such payment shall accrue interest for the period commencing on the Milestone Payment Date at an annual rate equal to the lesser of: (x) [***] or (y) [***], in each case calculated on the number of days such payment is delinquent, compounded monthly (the “Interest Rate”). In addition, if Buyer fails to pay the Milestone Payment when due, Buyer shall pay to Seller all of Seller’s costs and expenses (including attorneys’ fees) in connection with efforts to collect such Milestone Payment.
Table 3.2(a)(i) |
||
---|---|---|
Amount of annual Net Sales of all Milestone Products in a given Calendar Year in the Territory: |
Milestone Payment (in Dollars): |
|
1. |
$[***]– $[***] |
$[***] |
2. |
$[***]– $[***] |
$[***] |
3. |
$[***]– $[***] |
$[***] |
4. |
$[***]– $[***] |
$[***] |
For purposes of determining whether a Milestone set forth in Table 3.2(a)(i) has been achieved, Net Sales of the Product, the Development Product and any other Milestone Product in a given Calendar Year in the Territory shall be aggregated. The Milestones set forth in Table 3.2(a)(i) are intended to be sequential, such that satisfaction of any numbered Milestone other than 1. shall be deemed to have satisfied all lower numbered Milestones (to the extent not previously satisfied), and Buyer shall be obligated to make Milestone Payments for any such lower numbered Milestone that were not previously paid concurrently with the Milestone Payment for such higher numbered Milestone. Without prejudice to the generality of the foregoing, satisfaction of a Milestone at any Net Sales threshold would be deemed to satisfy all Milestones at any lower Net Sales threshold(s) (to the extent not previously satisfied). For the sake of clarity, the aggregate maximum amount payable in Milestone Payments to Seller under this Agreement pursuant to Table 3.2(a)(i) is [***]Dollars ($[***]).
Table 3.2(a)(ii) |
|
No Loss of Exclusivity as of the Following Date with respect to the Milestone Products being sold in the U.S. as of such date: |
Milestone Payment (in Dollars): |
[***] |
$[***] |
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[***] |
$[***] |
[***] |
$[***] |
The Milestones set forth in Table 3.2(a)(ii) shall be deemed achieved if, as of the relevant dates set forth in table above, at least one (1) Milestone Product is being sold by or on behalf of Buyer in the U.S. and there is no Loss of Exclusivity for all Milestone Products being sold by or on behalf of Buyer in the U.S. as of such dates. For clarity, as of the date of the first Loss of Exclusivity for a Milestone Product in the U.S., there shall be no further Milestone Payments due in connection with the Milestones listed in Table 3.2(a)(ii) for any Milestone Product. For the sake of clarity, the aggregate maximum amount payable in Milestone Payments to Seller under this Agreement pursuant to Table 3.2(a)(ii) is [***]Dollars ($[***]).
(b)Sales-Based Payments are payable as follows:
(i)Subject to Section 3.2(b)(iv)-(v), from and after (A) the first day after the Closing Date until the date that is the last day of the month that includes the date that is the first anniversary of the Closing Date (the “First Initial Sales-Based Payment Term”), Buyer shall pay to Seller an amount equal to [***]percent ([***]%) of Net Sales of the Milestone Products in the Territory for such twelve-month (12) period, and (B) the first day after the last day of the First Initial Sales-Based Payment Term until the first anniversary of the last day of the First Initial Sales-Based Payment Term (such period, together with the First Initial Sales-Based Payment Term, the “Initial Sales-Based Payment Term”), Buyer shall pay to Seller an amount equal to [***]percent ([***]%) of Net Sales of the Milestone Products in the Territory for such twelve-month (12) period. Each payment described in clauses (A) and (B) of this Section 3.2(b)(i) shall be deemed an “Initial Sales-Based Payment”.
(ii)Subject to Section 3.2(b)(iv)-(v), for each twelve (12) month period (or with respect to the last period, such shorter period) commencing with the first day after the date that is the end of the Initial Sales-Based Payment Term until the date that is the later of (x) the last day of the month that includes the date that is eight (8) years from the Closing Date and (y) the date that is the last day of the month that includes the first date on which all Milestone Products have suffered a Loss of Exclusivity in each country in which all Milestone Products are marketed or sold (“Sales-Based Payment Term”), Buyer shall pay to Seller a sales-based payment (each of (A)-(C) below, a “Sales-Based Payment” and collectively, “Sales Based Payments”) set forth in Table 3.2(b)(ii) below, as calculated by multiplying the applicable percentage rate by the corresponding amount of incremental Net Sales of all Milestone Products in the Territory during the first and each successive twelve (12)-month period (or for the last period, such shorter period).
Table 3.2(b)(ii) |
|
Amount of Net Sales of all Milestone Products in the Territory during the twelve (12) month period to which the Sales-Based Payment relates: |
The percentage rate of such Sales-Based Payment applicable to such Net Sales: |
(A) $[***]-[***] |
[***]% |
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(B) $[***]-[***] |
[***]% |
(C) Greater than $[***] |
[***]% |
For the avoidance of doubt, Buyer shall only be required to pay the Initial Sales-Based Payments or the Sales-Based Payments as set forth in this Agreement.
(iii)All Initial Sales-Based Payments and Sales-Based Payments payable to Seller shall be paid by Buyer on a quarterly basis within thirty (30) days after the end of each Calendar Quarter in which the applicable Net Sales were recorded (each a “Sales-Based Payment Date”). In the event that Buyer fails to pay an Initial Sales-Based Payments or Sales-Based Payment on the applicable Sales-Based Payment Date, such payment shall accrue interest for the period commencing on the Sales-Based Payment Date at a rate equal to the Interest Rate.
(iv)Loss of Exclusivity.
(1)In the event of a Loss of Exclusivity with respect to a particular Milestone Product (each, an “LOE Milestone Product”) in a particular country in which such LOE Milestone Product is marketed or sold (such country, an “LOE Country”), any Initial Sales-Based Payment and/or Sales-Based Payment allocable to such LOE Milestone Product (and only such LOE Milestone Product) sold in such LOE Country (and only such LOE Country) shall be reduced by Fifty Percent (50%) of the amounts otherwise payable under Section 3.2(b)(i) and Section 3.2(b)(ii), effective as of the first date of the month following the date of such Loss of Exclusivity for such LOE Milestone Product in such LOE Country. For the avoidance of doubt, with respect to any instance of Loss of Exclusivity for a particular LOE Milestone Product in a particular LOE Country, there shall be no reduction in any Initial Sales-Based Payments and/or Sales-Based Payments for any other Milestone Products in such LOE Country nor shall there be any reduction in any Initial Sales-Based Payments and/or Sales-Based Payments for such LOE Milestone Product in any country other than the applicable LOE Country.
(2)Notwithstanding anything to the contrary set forth in Section 3.2(b)(ii), for purposes of Section 3.2(b)(ii), the Net Sales of any given Milestone Product in any given country from and after the date that is the later of (x) the last day of the month that includes the date that is eight (8) years from the Closing Date and (y) the date that is the last day of the month that includes the first date on which such Milestone Product has suffered a Loss of Exclusivity in such country, shall be deemed to be reduced to zero (0), and for the avoidance of doubt, no further Initial Sales-Based Payments or Sales-Based Payments will be due on the sales of such Milestone Product in such country as of such date.
(v)Third Party Intellectual Property.
(1)If Buyer believes, in its reasonable discretion, that it is necessary for Buyer to obtain a license from a Third Party to a patent or patent
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application in connection with the manufacture, use, sale or other exploitation of a Development Product, and Buyer is required to pay to such Third Party a royalty, milestone payments or other monetary compensation in consideration for the grant or maintenance of such license (“Third Party Compensation”), then for the period during which Buyer owes any Initial Sales-Based Payments or Sales-Based Payments to Seller hereunder with respect to such Development Product, the amounts that would otherwise have been payable as Initial Sales-Based Payments or Sales-Based Payments to Seller under this Agreement shall be reduced by fifty percent (50%) of all Third Party Compensation payable by or on behalf of Buyer to such Third Party; provided that, the foregoing royalty reduction shall not act to reduce the Initial Sales-Based Payments or Sales-Based Payments payable by Buyer to less than fifty percent (50%) of the amounts payable by Buyer for a given Calendar Quarter pursuant to Section 3.2(b).
(c)Reporting Obligations.
(i)Buyer shall provide Seller with a quarterly report, within thirty (30) days of the end of each Calendar Quarter beginning with the first full Calendar Quarter after the Closing Date and until the payment of all Milestone Payments and Initial Sales-Based Payments and Sales-Based Payments in full pursuant to this Agreement (each such report, an “Update Report”). Each Update Report shall (A) describe in reasonable detail the Milestone Product Parties’ commercial progress towards achievement of the Milestone events resulting in each Milestone Payment (including, for the first Calendar Quarter of each Calendar Year until 2031, whether or not there exists a Loss of Exclusivity with respect to the Product), (B) the total amount of Net Sales during the applicable quarter, (C) the calculation of Initial Sales-Based Payments or Sales-Based Payments due for such quarter, including the exchange rates used, if any, (D) if any Loss of Exclusivity has occurred with respect to any Milestone Product in that Calendar Quarter, documents providing the basis for such claim of Loss of Exclusivity, and (E) for each Update Report delivered with respect to the fourth quarter of any applicable Calendar Year, such Update Report shall also include an annual report, setting forth in reasonable detail the calculation of the annual Net Sales for such applicable Calendar Year and an annual forecast for the following Calendar Year that details the Net Sales estimates per quarter, including gross to net sales calculations and assumptions, together with reasonable information and documentation supporting Buyer’s calculations therefor (but excluding, for clarity, any related budget). In addition, from time to time, but no more than once per Calendar Year, upon Seller’s reasonable request, Buyer shall provide Seller with a reasonable update setting forth a high-level overview of Buyer’s development activities, if any, with respect to the Product and/or the Development Product and/or any other Milestone Product, as applicable, including related regulatory activities.
(ii)If after delivery of an Update Report, Seller requests in writing a meeting with representatives of Buyer to discuss such Update Report, Buyer shall make available in person or by phone for such a meeting appropriate representative(s) involved (including employees of Buyer or its Affiliates who are responsible for managing the business related to the Milestone Products and knowledgeable about its operations) with representatives of Seller. Unless otherwise agreed by Seller, any such meeting shall occur with fifteen (15) days of the applicable request by Seller.
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(iii)Buyer shall permit Seller, by an independent qualified public accounting firm of international reputation engaged by Seller and reasonably acceptable to Buyer (such accounting firm, the “Auditors”), to examine the books and records relating to the Milestone Products at any reasonable time at Buyer’s principal place of business to assess the accuracy of the reports, accountings and payments made by Buyer hereunder. Such Auditors may be required by Buyer to enter into a reasonably acceptable confidentiality agreement. The opinion of the Auditors regarding such reports, accountings and payments shall be furnished to Buyer and Seller and shall be Confidential Information of Buyer and binding on the Parties other than in the case of clear error. If it is determined by the Auditors that additional Milestone Payments, Initial Sales-Based Payments or Sales-Based Payments are owed by Buyer to Seller in respect of any period, Buyer will pay Seller the additional payments, including interest calculated at the Interest Rate in accordance with Section 3.2(a), owed to Seller within thirty (30) days of the date the written report of the Auditors is received by Buyer. If it is determined by the Auditors that Milestone Payments, Initial Sales-Based Payments or Sales-Based Payments were overpaid during any period, Buyer will credit such overpayments to future Milestone Payments, Initial Sales-Based Payments or Sales-Based Payments, as applicable, owed to Seller. The fees charged by the Auditors in connection with this Section 3.2(c) will be paid by Seller, unless any additional Milestone Payments, Initial Sales-Based Payments or Sales-Based Payments owed by Buyer to Seller exceed $50,000 of the amounts paid for the period subject to such audit, in which case Buyer will pay the fees charged by the Auditors. No period, once audited, may be re-audited by or on behalf of Seller.
(d)Buyer Obligations. Buyer shall, and shall cause its Affiliates and the other Milestone Product Parties, to use Commercially Reasonable Efforts to (A) achieve each Milestone set forth in Table 3.2(a)(i) with respect to the Product in a prompt and expeditious manner, (B) use Commercially Reasonable Efforts to commercialize the Product in countries where Buyer has obtained Regulatory Approval for such Product, and (C) evaluate the Development Product, in its sole discretion, in accordance with Section 3.2(e). Without limiting the generality of the foregoing, Buyer shall not, and shall not authorize or permit its Affiliates or other Milestone Product Parties to, take any action, or omit to take any action, with the intent of avoiding, delaying or reducing the payment of any Milestone Payment(s), Sales-Based Payments or Initial Sales-Based Payments. In the event that a Milestone Product Party determines that a Milestone will not be achieved, Buyer shall promptly notify Seller in writing of such determination (a “Milestone Abandonment Notice”) and shall provide Seller with access to any information, data, books, records, work papers or personnel that could be reasonably expected to assist in evaluating such determination. The Milestone Abandonment Notice shall specify in reasonable detail the reasons the applicable determination was made.
(e)Buyer will at a time that Buyer deems suitable, in its sole discretion, after the Closing use Commercially Reasonable Efforts to evaluate further development of the Development Product. If Buyer determines, in its sole discretion, through such analysis, that further development of the Development Product is warranted, Buyer will employ Commercially Reasonable Efforts with respect to the development of such Development Product; provided, however, that if at any time
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Buyer reasonably determines, in its sole discretion, that continued development of the Development Product is no longer warranted, Buyer may discontinue such development. Notwithstanding any other provision of this Agreement, any such discontinuance or determination not to develop the Development Product will not result in a breach by Buyer of any obligation, warranty, representation, or covenant under this Agreement, provided that Buyer used Commercially Reasonable Efforts in its initial evaluation of the development potential of the Development Product, and Buyer has and will have no obligations under this Agreement with respect to the Development Product other than those specifically described herein.
(f)Transition Services. The Parties shall enter into that certain Transition Services Agreement, substantially in the form attached hereto as Exhibit G (the “Transition Services Agreement”).
(g)Acceleration of Milestone Payments. Notwithstanding anything to the contrary herein, in the event that any of the following events occur, the maximum amount of each Milestone Payment and/or [***] that have not yet been satisfied or deemed to have been satisfied shall be immediately due and payable: (i) Buyer commences any Proceeding in bankruptcy or for dissolution, liquidation, or winding-up; (ii) any such Proceeding is commenced against Buyer or a receiver or trustee is appointed for Buyer or a substantial part of its respective property, and such Proceeding or appointment is not dismissed or discharged within thirty (30) days after its commencement; or (iii) Buyer (x) makes an assignment for the benefit of creditors, or (y) petitions or applies to any tribunal for the appointment of a custodian, receiver or trustee for all or substantially all of its assets or (z) has a receiver, custodian or trustee appointed for all or substantially all of its assets and such receiver, custodian or trustee is not discharged within thirty (30) days thereafter.
(h)For clarity, the achievement of a Milestone, Initial Sales-Based Payment and/or Sales-Based Payment by or under authority of any Milestone Product Party shall be deemed the achievement of such Milestone, Initial Sales-Based Payment and/or Sales-Based Payment by Buyer, and Buyer (not the Milestone Product Party) shall be obligated to pay or cause to be paid the corresponding Milestone Payment, Initial Sales-Based Payment and/or Sales-Based Payment as set forth in this Section 3.2.
(i)For purposes of this Section 3.2 and where otherwise used in this Agreement:
(i)“Net Sales” means the gross amounts invoiced for sales of Milestone Products by any Milestone Product Party to any unrelated third parties less the following deductions: (a) normal and customary trade, quantity and cash discounts allowed; (b) discounts, refunds, rebates, chargebacks, retroactive price adjustments, and any other allowances which effectively reduce the net selling price; (c) sales, excise taxes, duties, and other government charges on the sales of Milestone Products; (d) freight, postage, shipping, insurance, and other transportation costs but only up to an amount equal to [***] percent ([***]%) of the gross amounts invoiced for sales for the applicable period, in the aggregate;
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(e) Milestone Product returns and allowances and related allowances or credits, billing corrections, and bad debt; and (f) any other customary adjustments in accordance with U.S. GAAP.
(ii)Combination Products.
(1)In the event that any Milestone Product is sold as part of a Combination Product, the Net Sales of the Milestone Product, for the purposes of determining Milestone Payments, Initial Sales-Based Payments and Sales-Based Payments, as the case may be, shall be determined by multiplying the Net Sales of the Combination Product by the fraction, A / (A+B) where A is the weighted average sale price of the applicable Milestone Product when sold separately in finished form, and B is the weighted average sale price of the other product(s) sold separately in finished form. “Combination Product” means any pharmaceutical product which comprises any Milestone Product and other active compound(s) and/or ingredients).
(2)In the event that the weighted average sale price of the applicable Milestone Product can be determined but the weighted average sale price of the other product(s) cannot be determined, Net Sales for purposes of determining Milestone Payments, Initial Sales-Based Payments and Sales-Based Payments, as the case may be, shall be calculated by multiplying the Net Sales of the Combination Product by the fraction A / C where A is the weighted average sale price of the applicable Milestone Product when sold separately in finished form and C is the weighted average sale price of the Combination Product.
(3)In the event that the weighted average sale price of the other product(s) can be determined but the weighted average sale price of the applicable Milestone Product cannot be determined, Net Sales for purposes of determining Milestone Payments, Initial Sales-Based Payments and Sales-Based Payments, as the case may be, shall be calculated by multiplying the Net Sales of the Combination Product by the following formula: one (1) minus (B / C) where B is the weighted average sale price of the other product(s) when sold separately in finished form and C is the weighted average sale price of the Combination Product.
(4)In the event that the weighted average sale price of both the applicable Milestone Product and the other product(s) in the Combination Product cannot be determined, the parties will negotiate in good faith the appropriate allocation percentage of Net Sales of the Combination Product to the applicable Milestone Product.
(5)The weighted average sale price for a Milestone Product, other product(s), or Combination Product shall be calculated once each Calendar Year and such price shall be used during all applicable royalty reporting periods for the entire following Calendar Year. When determining the weighted average sale price of a Milestone Product, other product(s), or Combination Product, the
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weighted average sale price shall be calculated by dividing the sales dollars (translated into U.S. dollars) by the units of active ingredient sold during the twelve (12) months (or the number of months sold in a partial calendar year) of the preceding Calendar Year for the respective Milestone Product, other product(s), or Combination Product. In the initial Calendar Year, a forecasted weighted average sale price will be used for the Milestone Product, other product(s), or Combination Product. Any over or under payment due to a difference between forecasted and actual weighted average sale prices will be paid or credited in the first Milestone Payments, Initial Sales-Based Payments and Sales-Based Payments, as the case may be, of the following Calendar Year or Calendar Quarter, as applicable.
(iii)Such amounts shall be determined from the books and records of the Milestone Product Parties maintained in accordance with U.S. GAAP consistently applied. Buyer further agrees in determining such amounts, it will use Buyer’s then current standard procedures and methodology, including Buyer's then current standard exchange rate methodology for the translation of foreign currency sales into U.S. Dollars.
(iv)Sales or commercial dispositions of Milestone Products between or among Milestone Product Parties and their Affiliates shall be excluded from the computation of Net Sales (except where such Milestone Product Parties or Affiliates are end users of the Product), but Net Sales shall include the subsequent final sales to third parties by such Milestone Product Parties or their Affiliates. Notwithstanding the foregoing, if a Milestone Product is sold or otherwise commercially disposed of for consideration other than cash or in a transaction that is not at arm’s length between buyer and seller, then the gross amount to be included in the calculation of Net Sales shall be the amount that would have been invoiced had the transaction been conducted at arm’s length and for cash. Such amount that would have been invoiced shall be determined, wherever possible, by reference to the average selling price of such Milestone Product in arm’s length transactions in the relevant country.
Section 3.3.Intended Tax Treatment. The Parties will treat the Milestone Payments, Initial Sales-Based Payments, Sales-Based Payments and the [***] as an adjustment to the Purchase Price and such payments will be recognized by Seller (as proceeds of the sale of the Transferred Assets) and Buyer (as an adjustment to the tax basis of the Transferred Assets) at such time and in such amounts as finally determined hereunder, in each case, for U.S. federal, state, and local income and foreign tax purposes.
Section 3.4.Allocation of Purchase Price. The Purchase Price will be allocated among the relevant classes of Transferred Assets in accordance with Exhibit J (the “Allocation Statement”). From time to time, Seller shall send to Buyer an updated Allocation Statement to reflect any adjustments to the Purchase Price (including as a result of any Initial Sales-Based Payments and Sales-Based Payments, [***] or Milestone Payments made by Buyer pursuant to this Agreement). The Parties (a) shall allocate the Purchase Price in accordance with the Allocation Statement, (b) shall, unless otherwise required a final “determination” as defined under Section 1313(a) of the Code, prepare and file, or cause to be prepared and filed, all Tax Returns (including IRS Form 8594 and any amendments thereto) and reports in a manner consistent with the Allocation Statement and (c) shall not take any position (whether in audits, Tax Returns, or otherwise) that is inconsistent with such allocation. If the values set forth on the
27
Allocation Statement are disputed by any tax authority, the Party hereto receiving notice of such dispute shall make reasonable efforts to notify the other Party hereto concerning the existence of such dispute and the Parties shall, where and when practicable, consult with each other with respect to all issues related to the Allocation Statement in connection with such dispute. Any adjustments to the consideration payable pursuant to this Agreement shall be allocated in a manner consistent with the Allocation Statement.
Section 3.5.Withholding Taxes.
(a)Except as otherwise provided in Section 3.5(b), Buyer shall be entitled to deduct and withhold from any consideration payable pursuant to this Agreement such amounts as are required to be deducted or withheld therefrom under any applicable Law. To the extent such amounts are so deducted or withheld and paid over to the applicable Governmental Authority, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid. Buyer shall use commercially reasonable efforts to provide Seller a notice of its intention to make such deduction or withholding five (5) Business Days prior to making such deduction or withholding on amounts paid on the Closing.
(b)In the event that Buyer assigns its rights under this Agreement and, solely by reason of such assignment, Buyer is required to deduct or withhold in respect of payments made hereunder to Seller under applicable Law, then Section 3.5(a) shall not apply and all payments to Seller shall be made in full, without any set-off, counterclaim, deduction or withholding, regardless of any requirement under applicable Law or otherwise.
Section 3.6.[***]. All capitalized terms used or referenced in this Section 3.6 shall have the meaning set forth in the [***], other than the terms [***] and [***].
(a)[***].
(b)[***].
ARTICLE IV
THE CLOSING
Section 4.1.Closing Date. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place remotely via the electronic exchange of documents and signature pages (or such other location as shall be mutually agreed upon by Seller and Buyer) commencing at 10:00 am eastern standard time on a date (the “Closing Date”) that is the third (3rd) Business Day following the date on which all of the conditions to the obligations of Seller and Buyer to consummate the transactions contemplated hereby set forth in ARTICLE X (other than conditions that by their nature are to be satisfied at the Closing itself, but subject to the satisfaction or waiver of those conditions) have been satisfied or waived, or on such other date as shall be mutually agreed upon by Sellers and Buyer prior thereto. For purposes of this Agreement and the transactions contemplated hereby, the Closing will be deemed to occur and
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be effective, and title to and risk of loss associated with the Acquired Assets, shall be deemed to occur at 11:59 pm, New York City time, on the Closing Date.
Section 4.2.Closing Deliveries by Seller. At the Closing, Seller shall deliver or cause to be delivered to Buyer:
(a)a counterpart of the Assignment and Assumption Agreement, duly executed by Seller;
(b)a counterpart of the Bill of Sale, duly executed by Seller;
(c)a counterpart of the IP Assignment Agreement, duly executed by Seller;
(d)a counterpart of the Transition Services Agreement, duly executed by Seller;
(e)a letter to the FDA, substantially in the form attached hereto as Exhibit I-1 (the “Seller FDA Letter”), executed by Seller, informing the FDA of the transfer of the Product NDA to Buyer;
(f)a list of the Contracts that constitute Non-Transferable Assets as of the Closing Date; and
(g)a duly executed IRS Form W-9 by Seller.
Section 4.3.Closing Deliveries by Buyer. At the Closing, Buyer shall deliver to Seller:
(a)the Closing Payment by wire transfer of immediately available funds into an account (or accounts) designated in advance by Seller;
(b)a counterpart of the Assignment and Assumption Agreement, duly executed by Buyer;
(c)a counterpart of the Bill of Sale, duly executed by Buyer;
(d)a counterpart of the IP Assignment Agreement, duly executed by Buyer;
(e)a counterpart of the Transition Services Agreement, duly executed by Seller; and
(f)a letter to the FDA, substantially in the form attached hereto as Exhibit I-2 (the “Buyer FDA Letter”), executed by Buyer, accepting the transfer of the Product NDA to Buyer.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that, except as set forth in the Seller Schedules:
Section 5.1.Seller Organization; Good Standing.
(a)Seller is duly incorporated, validly existing and, to the extent legally applicable, in good standing under the laws of Delaware and has the requisite power and authority to operate its business as now conducted.
(b)Seller is duly qualified to conduct business as a foreign corporation and, to the extent legally applicable, is in good standing in each jurisdiction where the nature of the business conducted by it makes such qualification necessary, except where the failure to so qualify or be in good standing would not, individually or in the aggregate, reasonably be expected to materially delay the ability of Seller to consummate the transactions contemplated hereby or have a Material Adverse Effect.
Section 5.2.Authority; Enforceability. Seller has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the other Transaction Agreements by Seller and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized. This Agreement has been duly executed and delivered by Seller, and upon execution and delivery thereof, the other Transaction Agreements will have been duly executed and delivered by Seller, and assuming the due authorization, execution and delivery of this Agreement by Buyer, this Agreement constitutes, and upon the due authorization, execution and delivery thereof by Buyer, the other Transaction Agreements will constitute the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with the terms hereof, subject to the effect of any applicable Laws relating to bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar applicable Laws relating to or affecting creditors’ rights generally from time to time in effect and to general principles of equity, regardless of whether considered in a Proceeding in equity or at law (the “Enforceability Exceptions”).
Section 5.3.No Conflicts. The execution, delivery and performance by Seller of the Transaction Agreements and the consummation by Seller of the transactions contemplated hereby and thereby do not, and will not (i) conflict with or violate any Law or Governmental Order applicable to Seller or the Business, (ii) conflict with or violate, in any material respect, any provision of the articles of incorporation or by-laws (or similar organizational document) of Seller, (iii) result in any breach of, or constitute a default under, or give to any Person any rights of termination, amendment, acceleration or cancellation of, or result in the creation of any Encumbrance (other than a Permitted Encumbrance) on any of the Transferred Assets pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument to which Seller (with respect to the Transferred Assets) is a party or by which any Transferred Asset is bound, except, with respect to the foregoing clauses (i) and (iii), for (x)
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such violations or conflicts which would not, individually or in the aggregate, reasonably be expected to be material to the Business, the Product and the Development Product, taken as a whole, or (y) any consents, approvals, authorizations and other actions described in Section 5.4.
Section 5.4.Consents and Approvals. The execution, delivery and performance by Seller of the Transaction Agreements and the consummation by Seller of the transactions contemplated hereby and thereby do not and will not require any material consent, approval, authorization or other action by, or any material filing with or notification to, any Governmental Authority by Seller, except (a) as contemplated by Section 4.2 and Section 8.2, (b) in connection, or in compliance, with the notification and waiting period requirements of the HSR Act and applicable filings or approvals under non-U.S. antitrust and competition Laws, require any approval, authorization, consent, license, exemption, filing or registration with any Governmental Authority or, (c) where the failure to obtain such consent, approval, authorization, or action or to make such filing or notification would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or would not prevent or materially delay the ability of Seller to consummate the transactions contemplated by, or perform its obligations under, the Transaction Agreements.
Section 5.5.Title to Transferred Assets. Seller has good and valid title to all of the tangible Transferred Assets, free and clear of all Encumbrances, other than Permitted Encumbrances.
Section 5.6.Litigation. As of the date hereof, there is no Proceeding pending or, to the Knowledge of Seller, threatened in writing, against Seller (with respect to the Business, the Product or the Development Product) that would reasonably be expected to result in (i) damages exceeding $50,000, based on a reasonable analysis of counsel or (ii) any injunctive, declaratory, or other equitable relief or remedy affecting the ownership right of or in any Transferred Asset or that involves an investigation or suit by any Governmental Authority relating to the Product, the Business or the Development Product.
Section 5.7.Compliance with Laws. Seller (with respect to the Business) is not in violation of any Laws or Governmental Orders applicable to the conduct of the Business, the Development Product, or the Product, except for such violations the existence of which would not reasonably be expected to have a Material Adverse Effect or materially delay the ability of Seller to consummate the transactions contemplated by, or perform its obligations under, the Transaction Agreements.
Section 5.8.Regulatory Approvals.
(a)Except as set forth in Section 5.8(a) of the Seller Schedule, Seller is the registered or beneficial holder of each of the material Regulatory Approvals, including all of the Transferred Regulatory Documentation. All Regulatory Approvals held by Seller are in full force and effect, except, in each case, where the failure to so be in full force and effect would not reasonably be expected to be material to the Business, the Product and the Development Product, taken as a whole.
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(b)Seller has not received, as of the date hereof, any written or, to the Knowledge of Seller, oral notice that any Governmental Authority with jurisdiction over the Business has commenced or will commence any action to (i) withdraw any Regulatory Approval of any Milestone Product or (ii) enjoin production, marketing or sale of the Product except, in each case, where such action would not, individually or in the aggregate, reasonably be expected to be material to the Business, the Product and the Development Product, taken as a whole.
(c)To the Knowledge of Seller, the Product is being distributed, manufactured, sold and marketed in compliance in all material respects with all requirements under applicable Law. As of the date hereof, Seller has not received any unresolved written or, to the Knowledge of Seller, oral notice from any Governmental Authority that with respect to the Product, Seller is not in material compliance with any requirement under applicable Law.
(d)The Seller has not made an untrue statement of material fact or fraudulent statement to the FDA or any other Governmental Authority or failed to disclose a material fact expressly required to be disclosed to the FDA or any other Governmental Authority, that, at the time of the relevant disclosure or failure to disclose, as applicable, would reasonably be excepted to provide a basis for the FDA or any other Governmental Authority to invoke the FDA Application Integrity Policy respecting “Fraud, Untrue Statements of Material Facts, Bribery and Illegal Gratuities,” set forth in FDA’s Compliance Policy Guide Sec. 120.100 (CPG 7150.09) or any similar policy, in each case, as related to the Product.
(e)Neither Seller, nor to the Knowledge of Seller, any officers, employees, clinical investigator or distributor of Seller has been suspended or debarred or convicted of any crime or engaged in any conduct that would reasonably be expected to result in (i) debarment under 21 U.S.C. Section 335a or any similar applicable Law, (ii) exclusion under 42 U.S.C. Section 1320a-7 or any similar applicable Law or (iii) other action arising from the exploitation of the Product or the Development Product, and, to the Knowledge of Seller, no such action is proposed or pending as of the date hereof.
(f)All application and renewal fees due and payable with respect to all material Regulatory Approvals have been paid, except where the failure to make such payment would not reasonably be expected to have a Material Adverse Effect or materially delay the ability of Seller to consummate the transactions contemplated by, or perform its obligations under, the Transaction Agreements.
Section 5.9.Brokers. Except for Evercore Group L.L.C. (“Evercore”), no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based on arrangements made between Seller and Evercore and any such arrangements, including compensation, shall be the sole responsibility of Seller.
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Section 5.10.Permits. Seller holds or has the right to use all Permits. Seller is not in default under, or violating, any of the Permits, except for such defaults or violations as would not reasonably be expected to have a Material Adverse Effect or materially delay the ability of Seller to consummate the transactions contemplated by, or perform its obligations under, the Transaction Agreements.
Section 5.11.Transferred Contracts. As of the date hereof (i) each Transferred Contract is a legal, valid and binding obligation of Seller, and, to the Knowledge of Seller, each other party to such material Transferred Contract, and is enforceable against Seller, and, to the Knowledge of Seller, each such other party thereto in accordance with its terms subject, in each case, to the Enforceability Exceptions and (ii) there does not exist any material breach or material default on the part of Seller, under the terms of any Transferred Contract, and to the Knowledge of Seller, no other party to any Transferred Contract is in material breach or default thereunder.
Section 5.12.Taxes.
(a)Seller has timely filed or caused to be timely filed all material Tax Returns exclusively relating to the Business or the Transferred Assets that are required to be filed, and has timely paid or caused to be timely paid all material amounts of Taxes shown as due on such Tax Returns.
(b)No deficiency has been assessed by a Governmental Authority in writing against Seller with respect to a material amount of Taxes exclusively relating to the Business.
(c)There are no Encumbrances for Taxes upon any of the Transferred Assets, other than Encumbrances for Taxes that are Permitted Encumbrances.
(d)No Transferred Contract is a Tax allocation, Tax sharing, Tax indemnification or similar Contract that would, in any manner, bind, obligate or restrict Buyer or its Affiliates (or the Business or the Transferred Assets), other than a Transferred Contract entered into in the ordinary course of business the primary purpose of which is not Tax.
Section 5.13.Intellectual Property.
(a)Section 5.13(a) of the Seller Schedules sets forth a list of all Seller Intellectual Property and material Licensed Intellectual Property that is registered or for which an application for registration has been filed, in each case under the authority of any Governmental Authority (collectively, the “Registered Intellectual Property”), including (i) the jurisdiction in which such item of Registered Intellectual Property has been registered or filed and the applicable registration or serial number; (ii) the current owner thereof; and (iii) the applicable application, registration or serial number and the expiration date thereof.
(b)To the Knowledge of Seller, the Intellectual Property includes all intellectual property that exclusively relates to, and all material intellectual property
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that is necessary to, the operation of the Business as conducted on the date of this Agreement, and includes all patent applications and patents including claims that exclusively Cover the Product or the Development Product; provided, that this Section 5.13(b) shall not be deemed to be breached (i) as a result of any action for which Buyer has provided its consent in writing (including pursuant to Section 7.1), or (ii) in the event that Seller does not take action as a result of Buyer not providing consent following the written request of Seller therefor pursuant to Section 7.1.
(c)Seller solely and exclusively owns all right, title and interest in the Seller Intellectual Property, and Seller Controls all other Intellectual Property, in each case, free and clear of Encumbrances other than Permitted Encumbrances. As of the date hereof, to the Knowledge of Seller, the Seller Intellectual Property and material Licensed Intellectual Property, is valid and enforceable. Except as set forth in Section 5.13(c) of the Seller Schedules, neither Seller nor any of its Affiliates has abandoned, canceled or forfeited any Intellectual Property (including by failing to pay any filing or renewals fees), and Seller has not taken any actions that would render a Patent invalid or unenforceable.
(d)Seller has the full and legal right and authority to grant Buyer a license under the Seller Licensed Intellectual Property.
(e)To the Knowledge of Seller, Seller has accurately and completely disclosed to the US Patent and Trademark Office all references or other evidence that Seller is obligated to disclose to comply with the duty of candor.
(f)Other than in the PIV Challenge, no Third Party, except a patent examiner or patent authority in the ordinary course of patent prosecution, has notified Seller in writing, or to the Knowledge of Seller, otherwise alleged, that any claim of a Patent is invalid, unpatentable, or unenforceable. Seller has not received any written notice (or, to the Knowledge of Seller, oral notice) from any Third Party challenging the validity, enforceability or ownership of any of the Intellectual Property.
(g)As of the date hereof, there is no, and for the past three (3) years there has been no, material judicial, administrative or arbitral action, suit, hearing, inquiry, investigation or other Proceeding (public or private) before any Governmental Authority alleging that the development, manufacture, sale or commercialization of the Product, or the development of the Development Product, constitutes infringement, misappropriation or other violation of any intellectual property of any Third Party. Except as set forth in Section 5.13(g) of the Seller Schedules, (i) to the Knowledge of Seller, there is no reasonable basis for any such allegation of infringement, misappropriation or violation; (ii) Seller has not received any written notice (or, to the Knowledge of Seller, oral notice) from any Third Party making any such allegation, and (iii) to the Knowledge of Seller, no Third Party is infringing, misappropriating or otherwise violating any of the Intellectual Property and to the Knowledge of Seller, no Third Party has infringed, misappropriated or otherwise violated any of the Intellectual Property in the past three (3) years.
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(h)Other than as set forth on Section 5.13(h) of the Seller Schedules, none of Seller or any of its Affiliates has granted any outbound licenses under the Seller Intellectual Property, other than non-exclusive licenses granted to manufacturers, suppliers, distributors or other Persons performing manufacturing, supply, marketing or other services on behalf of Seller or any of its Affiliates, in each case to the extent necessary to perform such services in the Ordinary Course of Business.
(i)Except as set forth on Section 5.13(i) of the Seller Schedules, all Persons named as inventors on any Patents included in the Seller Intellectual Property, or who should have been listed as such in accordance with applicable Law, have executed and delivered to Seller or its Affiliate, as applicable, a Contract providing for the present assignment by such Person to Seller or its Affiliate, as applicable, of all rights in such Patents.
(j)Notwithstanding anything to the contrary, Buyer acknowledges and agrees that the only representations and warranties given in relation to matters relating to the Intellectual Property specifically addressed in this Section 5.13, are those set out in this Section 5.13, and no other representation or warranty is given in relation to such matters.
(k)Seller does not Control any trademarks, trademark applications, service marks, trade names, certification marks, service names, industrial designs, brand marks, trade dress rights, identifying symbols, logos, emblems, signs, insignia or domain names, or any registrations for any of the foregoing, other than those set forth in Exhibit F, that are exclusively related to the Business, the Product or the Development Product as of the Closing Date.
Section 5.14.Development Product. The development of the Product and the Development Product and the production of the Transferred Inventory have been carried out in accordance with all applicable Laws in all material respects, including GLP, GCP and GMP, as applicable. As of the date hereof, Seller has not received any written notice or other communication indicating that there are any material safety issues, including any facts, data, finding, analysis, information, or belief that there is a substantial risk that (a) the Product presents an unacceptable (i) risk of death, (ii) a life-threatening condition, or (iii) a serious safety or health concern to patients, (b) Regulatory Approval for the Product has been terminated or suspended in any country, or (c) a Regulatory Authority with jurisdiction over the Product has directed or requested discontinuance of development, distribution, use, sale, or importation of the Product, and to the Knowledge of Seller, there is no reasonable basis for any findings related to any of the foregoing (a)-(c).
Section 5.15.Conduct in the Ordinary Course of Business. Neither Seller nor any of its Affiliates has, with respect to the Business, made any change in the selling, distribution, advertising, terms of sale or collection practices in the period twelve (12) months before this Agreement that is inconsistent with the Ordinary Course of Business and would be material to the Business, taken as a whole. In the past twelve (12) months, neither Seller nor any of its Affiliates has, with respect to the Business, (i) entered into any business practices, programs or
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long-term allowances not previously used in the Ordinary Course of Business that would be material to the Business, taken as a whole, or (ii) engaged in the practice of “channel stuffing” or any program, activity or other action (including any rebate, discount, chargeback or refund policy or practice, any acceleration of a Transferred Contract), in the case of this clause (ii), that would reasonably be expected to result, directly or indirectly, in a trade buy-in that is significantly in excess of normal customer purchasing patterns consistent in all material respects with the past practices of the Business during the previous twelve (12) months.
Section 5.16.No Other Representations. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY CONTAINED IN THIS ARTICLE V (AS MODIFIED BY THE SELLER SCHEDULES, IF APPLICABLE) OR IN THE ANCILLARY AGREEMENTS, NEITHER SELLER NOR ANY OTHER PERSON MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO SELLER OR ITS AFFILIATES, THE BUSINESS OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE ANCILLARY AGREEMENTS AND ANY RIGHTS OR OBLIGATIONS (INCLUDING THE ASSUMED LIABILITIES) TO BE TRANSFERRED HEREUNDER AND THEREUNDER OR PURSUANT HERETO OR THERETO, AND SELLER DISCLAIMS (ON BEHALF OF ITSELF AND ITS AFFILIATES) ANY OTHER REPRESENTATIONS OR WARRANTIES, WHETHER MADE BY SELLER OR ANY OF ITS AFFILIATES OR REPRESENTATIVES. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY CONTAINED IN THIS ARTICLE V (AS MODIFIED BY THE SELLER SCHEDULES) OR IN THE ANCILLARY AGREEMENTS, SELLER HEREBY DISCLAIMS (ON BEHALF OF ITSELF AND ITS AFFILIATES) ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION WARRANTY, PROJECTION, FORECAST, STATEMENT, OR INFORMATION MADE, COMMUNICATED, OR FURNISHED (ORALLY OR IN WRITING) TO BUYER OR ITS AFFILIATES OR REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION, PROJECTION, OR ADVICE THAT MAY HAVE BEEN OR MAY BE PROVIDED TO BUYER BY ANY REPRESENTATIVE OF SELLER OR ANY OF ITS AFFILIATES). WITHOUT LIMITING THE FOREGOING, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES TO BUYER REGARDING THE PROBABLE SUCCESS, VALUE OR PROFITABILITY OF THE TRANSFERRED ASSETS.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
Section 6.1.Buyer’s Organization; Good Standing.
(a)Buyer is duly incorporated, validly existing and, to the extent legally applicable, in good standing under the laws of Delaware and has the requisite power and authority to operate its business as now conducted.
(b)Buyer is duly qualified to conduct business as a foreign corporation and is in good standing in every jurisdiction where the nature of the
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business conducted by it makes such qualification necessary, except where the failure to so qualify or be in good standing would not prevent or materially delay the consummation of the transactions contemplated hereby.
Section 6.2.Authority; Enforceability. Buyer has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the other Transaction Agreements by Buyer and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized. This Agreement has been duly executed and delivered by Buyer, and upon execution and delivery thereof, the other Transaction Agreements will have been duly executed and delivered by Buyer, and assuming the due authorization, execution and delivery of this Agreement by Seller, this Agreement constitutes, and upon the due authorization, execution and delivery thereof by Seller, the other Transaction Agreements will constitute the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with the terms hereof, subject to the Enforceability Exceptions.
Section 6.3.No Conflicts. Provided that all consents, approvals, authorizations and other actions described in Section 6.4 have been obtained or taken, except as may result from any facts or circumstances relating to Seller or its Affiliates, the execution, delivery and performance by Buyer of the Transaction Agreements and the consummation by Buyer of the transactions contemplated hereby and thereby do not, and will not (i) conflict with or violate any Law or Governmental Order applicable to Buyer, (ii) conflict with or violate, in any material respect, any provision of the articles of incorporation or by-laws (or similar organizational document) of Buyer, or (iii) result in any breach of, or constitute a default under, or give to any Person any rights of termination, amendment, acceleration or cancellation of, or result in the creation of any Encumbrance pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other material instrument to which Buyer is a party, except, with respect to the foregoing clauses (i) and (iii) which would not prevent or materially delay the ability of Buyer to consummate the transactions contemplated by, or perform its obligations under, the Transaction Agreements.
Section 6.4.Consents and Approvals. The execution, delivery and performance by Buyer of the Transaction Agreements and the consummation by Buyer of the transactions contemplated hereby and thereby do not and will not require any material consent, approval, authorization or other action by, or any material filing with or notification to, any Governmental Authority by Buyer or any of its Affiliates, except (a) in connection, or in compliance, with the notification and waiting period requirements of the HSR Act and applicable filings or approvals under non-U.S. antitrust and competition Laws, require any approval, authorization, consent, license, exemption, filing or registration with any Governmental Authority or, (b) where the failure to obtain such consent, approval, authorization, or action or to make such filing or notification would not reasonably be expected to materially delay the ability of Buyer to consummate the transactions contemplated by, or perform its obligations under, the Transaction Agreements.
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Section 6.5.Absence of Restraints; Compliance with Laws.
(a)To the Knowledge of Buyer, there exist no facts or circumstances that would reasonably be expected to prevent or delay the ability of Buyer or its applicable Affiliates to consummate the transactions contemplated by, or to perform their respective obligations under, the Transaction Agreements.
(b)Neither Buyer nor any of its Affiliates that are or will be party to any Transaction Agreements are in violation of any Laws or Governmental Orders applicable to them or by which any of their respective material assets is bound or affected, except for violations the existence of which would not reasonably be expected to materially prevent or delay their ability to consummate the transactions contemplated by, or to materially perform their respective obligations under, the Transaction Agreements.
Section 6.6.Litigation. As of the date hereof, there is no Proceeding pending or, to the Knowledge of Buyer, threatened against Buyer or any of its Affiliates which, if adversely determined, would materially interfere with the ability of Buyer to perform its obligations hereunder.
Section 6.7.No Brokers. Buyer will be solely responsible for any commission, finder’s fee or other fees and expenses for services rendered by any broker, finder, financial advisor or investment bank in connection with the transactions contemplated hereby based on arrangements made by Buyer or any of its Affiliates.
Section 6.8.Availability of Funds. Buyer (a) has, and will have at the Closing, sufficient immediately available funds available and the financial ability to pay the Purchase Price and any expenses incurred by, on behalf of, or for the account of Buyer in connection with the transactions contemplated by the Transaction Agreements, and (b) has, and will have at the Closing, the resources and capabilities (financial and otherwise) to perform its obligations hereunder and thereunder. Buyer has not incurred any obligation, commitment, restriction or liability of any kind, and is not contemplating or aware of any obligation, commitment, restriction or Liability of any kind, in each case which would prevent, impair or adversely affect such resources and capabilities
Section 6.9.Solvency. Immediately after giving effect to the consummation of the transactions contemplated by this Agreement (including any financings being entered into in connection therewith):
(a)the fair saleable value (determined on a going concern basis) of the assets of Buyer will be greater than the total amount of its Liabilities (including all Liabilities, whether or not reflected in a balance sheet prepared in accordance with U.S. GAAP, and whether direct or indirect, fixed or contingent, secured or unsecured, disputed or undisputed);
(b)Buyer will be able to pay its debts and obligations in the ordinary course of business as they become due except where the failure to make such
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payment would not reasonably be expected to have a material adverse effect on Buyer’s ability to perform its obligations under this Agreement; and
(c)Buyer will have adequate capital to carry on its businesses and all businesses in which it is about to engage.
Section 6.10.Investigation.
BUYER ACKNOWLEDGES AND AGREES THAT IT (I) HAS MADE ITS OWN INQUIRY AND INVESTIGATION INTO, AND, BASED THEREON, HAS FORMED AN INDEPENDENT JUDGMENT CONCERNING THE BUSINESS AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE ANCILLARY AGREEMENTS AND ANY OTHER ASSETS, RIGHTS OR OBLIGATIONS (INCLUDING THE ASSUMED LIABILITIES) TO BE TRANSFERRED HEREUNDER OR THEREUNDER OR PURSUANT HERETO OR THERETO, AND (II) HAS BEEN FURNISHED WITH, OR GIVEN ADEQUATE ACCESS TO, SUCH INFORMATION ABOUT THE BUSINESS AND ALL RIGHTS OR OBLIGATIONS (INCLUDING THE ASSUMED LIABILITIES) TO BE TRANSFERRED HEREUNDER OR THEREUNDER OR PURSUANT HERETO OR THERETO, AS IT HAS REQUESTED. EXCEPT FOR THE SPECIFIC REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY SELLER IN ARTICLE V, (A) BUYER ACKNOWLEDGES AND AGREES THAT (Y) SELLER IS NOT MAKING AND HAS NOT MADE ANY REPRESENTATION OR WARRANTY, EXPRESSED OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF THE BUSINESS OR THE TRANSFERRED ASSETS, OR SELLER’S OR ITS AFFILIATES’ RESPECTIVE BUSINESSES, ASSETS, LIABILITIES, OPERATIONS, PROSPECTS, OR CONDITION (FINANCIAL OR OTHERWISE), INCLUDING WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY ASSETS, THE NATURE OR EXTENT OF ANY LIABILITIES, THE PROSPECTS OF THE BUSINESS, THE EFFECTIVENESS OR THE SUCCESS OF ANY OPERATIONS, OR THE ACCURACY OR COMPLETENESS OF ANY CONFIDENTIAL INFORMATION MEMORANDA, MANAGEMENT PRESENTATION, DOCUMENTS, PROJECTIONS, MATERIAL OR OTHER INFORMATION (FINANCIAL OR OTHERWISE) REGARDING THE BUSINESS, OR THE TRANSFERRED ASSETS, OR SELLER OR ITS AFFILIATES FURNISHED TO BUYER OR ITS REPRESENTATIVES OR MADE AVAILABLE TO BUYER AND ITS REPRESENTATIVES IN ANY “DATA ROOMS,” “VIRTUAL DATA ROOMS,” MANAGEMENT PRESENTATIONS OR IN ANY OTHER FORM IN EXPECTATION OF, OR IN CONNECTION WITH, THE TRANSACTIONS CONTEMPLATED HEREBY, OR IN RESPECT OF ANY OTHER MATTER WHATSOEVER, AND (Z) NO OFFICER, AGENT, REPRESENTATIVE OR EMPLOYEE OF THE BUSINESS HAS ANY AUTHORITY, EXPRESS OR IMPLIED, TO MAKE ANY REPRESENTATIONS, WARRANTIES OR AGREEMENTS NOT SPECIFICALLY SET FORTH IN THIS AGREEMENT AND SUBJECT TO THE LIMITED REMEDIES HEREIN PROVIDED; (B) BUYER SPECIFICALLY DISCLAIMS THAT IT IS RELYING UPON OR HAS RELIED UPON ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES THAT MAY HAVE BEEN MADE BY ANY PERSON, AND ACKNOWLEDGES AND AGREES THAT THE SELLER HAS SPECIFICALLY DISCLAIMED AND DO HEREBY SPECIFICALLY DISCLAIM ANY SUCH OTHER REPRESENTATION OR WARRANTY MADE BY ANY PERSON; AND (C) BUYER IS
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ACQUIRING THE TRANSFERRED ASSETS AND THE ASSUMED LIABILITIES IN “AS IS” CONDITION AND ON A “WHERE IS” BASIS, SUBJECT ONLY TO THE SPECIFIC REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE V (AS MODIFIED BY THE SELLER SCHEDULES, AS IT MAY BE SUPPLEMENTED OR AMENDED IN ACCORDANCE WITH THIS AGREEMENT). BUYER ACKNOWLEDGES THAT IT HAS HAD THE OPPORTUNITY TO CONDUCT DUE DILIGENCE AND INVESTIGATION WITH RESPECT TO THE TRANSFERRED ASSETS, THE BUSINESS AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE ANCILLARY AGREEMENTS AND ANY OTHER ASSETS, RIGHTS OR OBLIGATIONS (INCLUDING THE ASSUMED LIABILITIES) TO BE TRANSFERRED HEREUNDER OR THEREUNDER OR PURSUANT HERETO OR THERETO, AND IN NO EVENT SHALL SELLER OR ANY OF ITS AFFILIATES HAVE ANY LIABILITY TO BUYER WITH RESPECT TO A BREACH OF REPRESENTATION, WARRANTY OR COVENANT UNDER THIS AGREEMENT OR ANY ANCILLARY AGREEMENT TO THE EXTENT THAT BUYER HAD KNOWLEDGE OF SUCH BREACH AS OF THE CLOSING DATE.
Section 6.11.Disclaimer of Other Representations and Warranties. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY CONTAINED IN THIS ARTICLE VI AND IN THE ANCILLARY AGREEMENTS, NEITHER BUYER NOR ANY OTHER PERSON MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO BUYER OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE ANCILLARY AGREEMENTS AND BUYER DISCLAIMS (ON BEHALF OF ITSELF AND ITS AFFILIATES) ANY OTHER REPRESENTATIONS AND WARRANTIES, WHETHER MADE BY BUYER OR ANY OF ITS AFFILIATES OR REPRESENTATIVES.
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS
Section 7.1.Conduct of Business Prior to the Closing.
(a)Except as required by applicable Law or as otherwise contemplated by or necessary to effectuate the Transaction Agreements and except for matters identified in Section 7.1 of the Seller Schedules, from the date of this Agreement through the Closing (or until earlier termination of this Agreement), unless Buyer otherwise consents in advance (which consent shall not be unreasonably withheld, conditioned or delayed), Seller will (x) conduct the Business in the Ordinary Course of Business, (y) use Commercially Reasonable Efforts to preserve intact, in all material respects, its business organization (to the extent exclusively related to the Business) and (z) with respect solely to the Business, not to do any of the following:
(i)grant any Encumbrance on any Transferred Assets other than in the Ordinary Course of Business;
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(ii)sell, transfer, lease, sublease or otherwise dispose of any Transferred Assets (other than Inventory in the Ordinary Course of Business);
(iii)amend any material term of, or waive any material right under, any Transferred Contract;
(iv)enter into any settlement or release with respect to any Proceeding that will be a Transferred Asset or Assumed Liability (including, for clarity, the PIV Challenge);
(v)omit to act so as to prevent stocks of Inventory to fall below those maintained in the Ordinary Course of Business in any material respects (other than any actions or omissions taken at the request of Buyer); or
(vi)enter into any legally binding commitment with respect to any of the foregoing.
(b)Notwithstanding anything to the contrary herein, including the provisions of Section 7.1(a), Seller may take reasonable actions in compliance with applicable Law with respect to any operational emergencies (including any restoration measures in response to any hurricane, strong winds, ice event, fire, tornado, tsunami, flood, earthquake or other natural disaster or severe weather-related event, circumstance or development), equipment failures, outages or an immediate and material threat to the health or safety of natural Persons (including any reasonable good faith action taken to address an event stemming from or arising out of the COVID-19 pandemic, including any action by Seller reasonably necessary to comply with any guidelines, advice or decree of any Governmental Authority in connection with or related to COVID-19 (including COVID-19 Measures) and any action taken by Seller in the operation of the Business in its reasonable discretion in connection with or related to COVID-19 or similar pandemic); provided, that Seller shall provide Buyer with notice of any such action taken that would have any impact with respect to the Transferred Assets or the Transaction Agreements as soon as reasonably practicable thereafter (and in no event later than ten (10) Business Days after such action is taken).
Section 7.2.Access to Information.
(a)From the date of this Agreement until the Transition Period (or until earlier termination of this Agreement), upon reasonable prior notice, and except as determined in good faith by Seller to be appropriate to ensure compliance with any applicable Laws and subject to any applicable privileges (including the attorney-client privilege) and contractual confidentiality obligations, Seller shall (i) afford the Representatives of Buyer reasonable access, during normal business hours, to the books and records that will be Transferred Records and Transferred Regulatory Documentation and (ii) furnish to the Representatives of Buyer such additional financial and operating data and other information related to the Business, in each case to the extent readily available to Seller, and prepared or gathered in the ordinary course of business, as Buyer may from time to time reasonably request for purposes
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of preparing to operate the Business following the Transition Period; provided, however, that the provision of such access and such data and information shall not (y) unreasonably interfere with any of the businesses, personnel or operations of Seller, or (z) that the Auditors and accountants of Seller or its Affiliates, as applicable, shall not be obliged to make any work papers available to any Person except in accordance with such Auditors’ and accountants’ normal disclosure procedures and then only after such Person has signed a customary agreement relating to such access to work papers in form and substance reasonably acceptable to such Auditors or accountants. From the date of this Agreement until the Closing, except for the parties listed in Section 7.2 of the Seller Schedules or such other parties for whom Seller provides prior written consent (not to be unreasonably withheld, conditioned or delayed), neither Buyer, its Affiliates nor any of their respective Representatives shall contact any employees of, suppliers to, or customers of, Seller in connection with or with respect to this Agreement, any other Transaction Agreement or the transactions contemplated hereby and thereby, or (other than in the ordinary course of business consistent with past practice) to otherwise discuss the business or operations of any of the Business; provided, further, however, that neither Buyer, its Affiliates nor any of their respective Representatives shall have any contact or discussion with any party (including those parties listed on Section 7.2 of the Seller Schedules or such other party for whom Seller has otherwise provided prior written consent) during the referenced period, without first consulting Seller and its Affiliates, and the applicable Representatives of Seller and its Affiliates shall be copied on all written correspondence and present for all oral communications and meetings; provided, further, that, with respect to the parties listed on Section 7.2 of the Seller Schedules, any contact or discussion shall be limited to the topics set forth on such Schedule.
(b)Notwithstanding anything in this Agreement to the contrary, Seller shall not be required, prior to the Closing, to disclose, or cause or seek to cause the disclosure, to Buyer or its Affiliates or Representatives (or provide access to any properties, books or records of Seller that would reasonably be expected to result in the disclosure to such Persons or others) of (i) any competitively sensitive information or any confidential information relating to Know-How, processes or Patent, Trademark, trade name, service mark or copyright applications or product development, or pricing and marketing plans, nor shall Seller be required to permit or cause or seek to cause others to permit Buyer or its Affiliates or Representatives to have access to or to copy or remove from the properties of Seller any documents, drawings or other materials that might reveal any such confidential information or (ii) any Personal Information of any data subjects for which any necessary notices and/or consents have not been received.
Section 7.3.Confidentiality. The terms of that certain confidential disclosure agreement dated October 29, 2020 (the “Confidentiality Agreement”) between Seller and Buyer are incorporated into this Agreement by reference and shall continue in full force and effect (and the confidentiality obligations thereunder shall be binding upon Buyer and its Affiliates and their respective Representatives) until the Closing, at which time the confidentiality obligations under the Confidentiality Agreement shall terminate; provided, however, that Buyer’s confidentiality obligations shall terminate only in respect of that portion of the Confidential Information (as
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defined in the Confidentiality Agreement) exclusively relating to the Business or otherwise constituting a Transferred Asset, and for all other Confidential Information, the Confidentiality Agreement shall continue in full force and effect in accordance with its terms. If, for any reason, the Closing does not occur, then, irrespective of its terms, the Confidentiality Agreement shall continue in full force and effect for a period of two (2) years following the termination of this Agreement. Upon Closing, all Confidential Information as it relates to the Business, the Product, the Development Product and the Transferred Assets shall solely and exclusively vest with the Buyer and notwithstanding any conflicting provision of the Confidentiality Agreement, except in connection with the performance of Seller’s obligations under any of the Transaction Agreements, Seller and its Affiliates and their respective Representatives will be obligated to maintain the confidentiality of any of such Confidential Information and to not use such Confidential Information after the Closing without the express written consent of Buyer, as the receiving Party of such Confidential Information, for a period of two (2) years after the Closing; provided that, with respect to any such Confidential Information that constitutes a trade secret under applicable Law such confidentiality obligations shall continue so long as the Confidential Information maintains its status as a trade secret. Notwithstanding anything to the contrary in the Confidentiality Agreement, the terms of this Agreement shall be deemed the Confidential Information of both Parties, and each Party shall maintain the confidentiality of such information in accordance with the terms of the Confidentiality Agreement and this Section 7.3; provided, that, each Party shall have the right to disclose the terms of this Agreement (a) as may be required by Law (including any disclosure obligations under the federal securities Laws or applicable accounting principles), the rules and regulations of any national securities exchange upon which the securities of Seller, Buyer or their respective Affiliates are listed or to any Governmental Authority (including federal, state, or foreign taxing authorities) with jurisdiction over such Party upon request by such Governmental Authority or (b) to any bona fide potential or actual investor, acquiror, merger partner, or other financial or commercial partner for the sole purpose of evaluating or carrying out an actual or potential investment, acquisition or other business relationship, in each case, involving the Product, Development Product, other Milestone Products, the Transferred Assets or the Assumed Liabilities; provided, that in connection with such disclosure, such Party shall inform each disclosee of the confidential nature of such information and require each disclosee to execute a customary non-disclosure agreement pursuant to which such disclosee agrees to treat such information as confidential.
Section 7.4.Insurance. Buyer acknowledges and agrees that, upon Closing, all insurance coverage provided under Seller’s insurance policies or otherwise in relation to the Transferred Assets pursuant to policies, risk funding programs or arrangements maintained by Seller or by any Affiliate of Seller (whether such policies are maintained in whole or in part with Third Party insurers or with Seller or its Affiliates and including any captive policies or fronting arrangements, and including any “occurrence” based insurance policies provided in relation to Seller and its Affiliates with respect to any occurrences prior to Closing) shall cease, and no further coverage shall be available in respect of any Transferred Asset or Assumed Liability under any such policies, programs or arrangements; provided, that, if a material Transferred Asset suffers a casualty loss prior to the Closing Date that is covered by insurance maintained by Seller or its Affiliates, Seller shall cause any insurance proceeds actually received in respect of such casualty loss, net of any expenses (including any deductibles retained by Seller) incurred in connection with the receipt of such proceeds, to be applied to restore or replace such Transferred Asset.
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Section 7.5.Regulatory and Other Authorizations; Consents.
(a)Buyer shall, and shall cause its Affiliates to, take any and all reasonable steps to (i) promptly obtain all Governmental Approvals that may be, or become, necessary for the execution and delivery of, and performance of its obligations pursuant to, the Transaction Agreements (including the consummation of the transactions contemplated thereby), and to furnish promptly any additional information and documentary material that may be requested by a Governmental Authority (including to promptly make available any information and appropriate personnel in response to any queries made by a Governmental Authority, which may include information regarding this Agreement, Buyer’s capabilities as the potential purchaser of the Transferred Assets or other matters), (ii) promptly secure the issuance, reissuance or transfer of all licenses and permits that may be or become necessary to operate the Business following the Closing; (iii) take all such actions as may be requested by any such Governmental Authority to obtain such Governmental Approvals, licenses and permits and (iv) avoid the entry of, or effect the dissolution of, any permanent, preliminary or temporary Governmental Order, that would otherwise have the effect of preventing or materially delaying the consummation of the transactions contemplated by this Agreement. Seller will cooperate with the reasonable requests of Buyer in seeking promptly to obtain all such Governmental Approvals and the issuance, reissuance or transfer of such licenses and permits. Buyer shall, and shall cause its Affiliates to, pay all fees or make other payments required by applicable Law to any Governmental Authority in order to obtain any such Governmental Approvals, licenses and permits, except for any and all past due amounts that were either (i) due and payable prior to or on the Closing Date, or (ii) are a result, whether direct or indirect, of Seller’s failure to timely, and fully, pay such fees or other payments as required by Applicable Law that become due and payable prior to or on the Closing Date, including any penalties, fees or interest. Buyer shall not undertake any actions that would reasonably be likely to have the effect of preventing or materially delaying the consummation of the transactions contemplated by this Agreement.
(b)Each of Seller and Buyer agrees to make or cause to be made the necessary filing of a notification and report form pursuant to the HSR Act with respect to the transactions contemplated by this Agreement as promptly as practicable after the date of this Agreement (but in no event later than ten (10) Business Days after the date of this Agreement, unless agreed to in writing by the Parties) and to furnish as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act. In addition, each of Seller and Buyer agrees to make promptly any filing or notice that may be required with respect to the transactions contemplated by this Agreement or by the other Transaction Agreements under any other applicable antitrust or competition Laws or by any other Governmental Authority. Buyer shall have sole responsibility for the filing fees associated with the HSR Act filings and all other filing fees associated with any other filings required by any other applicable Laws or Governmental Order in any other jurisdictions. Each Party shall be responsible for its respective legal fees associated with the filing of a notification and report as it relates to the HSR Act.
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Buyer shall not (i) withdraw its HSR notification and report form or (ii) enter into any agreement with any Governmental Authority to delay consummation of the transactions contemplated by this agreement without the prior written consent of the Seller.
(c)The Parties shall, and shall cause each of its Affiliates to, apply Commercially Reasonable Efforts to avoid or eliminate each and every impediment under any antitrust, competition, trade regulation or foreign investment regulation Law that may be asserted by any antitrust or competition or any other Governmental Authority or any other Person so as to enable the Parties to close the transactions contemplated hereby and by the other Transaction Agreements.
(d)Each of Buyer and Seller shall promptly notify the other of any oral or written communication it or any of its Representatives receives from any Governmental Authority relating to the matters that are the subject of this Section 7.5, permit the other Party and its Representatives to review in advance any communication relating to the matters that are the subject of this Section 7.5 proposed to be made by such Party to any Governmental Authority and provide the other Party with copies of all substantive correspondence, filings or other communications between them or any of their Representatives, on the one hand, and any Governmental Authority or members of its staff, on the other hand, relating to the matters that are the subject of this Section 7.5, provided, however, that materials may be redacted (i) to remove references concerning the valuation of the Business, (ii) as necessary to comply with contractual arrangements or applicable Law and (iii) as necessary to address reasonable attorney-client or other privilege or confidentiality concerns. Neither Buyer nor Seller shall agree to participate in any meeting or discussion with any Governmental Authority in respect of any such filings, investigation or other inquiry unless it consults with the other party in advance and, to the extent permitted by such Governmental Authority, gives the other party the opportunity to attend and participate at such meeting. Subject to the Confidentiality Agreement, Section 7.2(b), and any other applicable terms and conditions of this Agreement the Parties will coordinate and cooperate fully with each other in exchanging such information and providing such assistance as the other party may reasonably request in connection with the foregoing and in seeking early termination of any applicable waiting periods.
(e)Notwithstanding anything in this Agreement to the contrary (including Section 7.1), Buyer acknowledges on behalf of itself and its Affiliates and its and their Representatives, successors and assigns that the operation of the Business shall remain in the dominion and control of Seller until the Closing and that none of Buyer, any of its Affiliates or its or their respective successors or assigns will provide, directly or indirectly, any directions, orders, advice, aid, assistance or information to any director, officer or employee of any of Seller or its Affiliates, except as specifically contemplated or permitted by this ARTICLE VII or as otherwise consented to in writing in advance by an executive officer of Seller.
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Section 7.6.Third Party Consents. Each of Buyer and Seller agrees to cooperate to obtain any consents and approvals from any third person other than a Governmental Authority that may be required in connection with the transactions contemplated by the Transaction Agreements, which, with respect to Seller, shall include the consents and approvals identified in Section 9.1(c) of the Seller Schedules (collectively, the “Third Party Consents”). Notwithstanding anything in this Agreement to the contrary, Seller shall not be required to compensate any Third Party, commence or participate in any Proceeding or offer or grant any accommodation (financial or otherwise, including any accommodation or arrangement to remain secondarily liable or contingently liable for any Assumed Liability) to any Third Party (x) to obtain any such Third Party Consent or (y) in connection with Seller’s obligations under Section 2.4.
Section 7.7.Further Action.
(a)Each of Seller and Buyer shall execute and deliver, or cause to be executed and delivered, such documents and other instruments and take, or cause to be taken, such further actions as may be reasonably required to carry out the provisions of the Transaction Agreements and give effect to the transactions contemplated hereby or thereby.
(b)Each of Seller and Buyer shall keep each other reasonably apprised of the status of the matters relating to the completion of the transactions contemplated hereby, including matters relating to the satisfaction of the conditions set forth in ARTICLE IX.
ARTICLE VIII
CERTAIN COVENANTS AND AGREEMENTS
Section 8.1.Access. In addition to the provisions of Section 8.2, from and after the Closing Date, in connection with any reasonable business purpose, including in connection with the preparation of Tax Returns, claims relating to Excluded Liabilities, the preparation of financial statements, SEC reporting obligations, or any Proceeding to which a Party or any of its Affiliates is a party, the requirements of any Laws applicable to the Party and its Affiliates or the determination of any matter relating to the rights or obligations of the Party and/or its Affiliates under any of the Transaction Agreements, upon reasonable prior notice, and except as determined in good faith by the other Party to be necessary to (a) ensure compliance with any applicable Law, (b) preserve any applicable privilege (including the attorney-client privilege), or (c) comply with any contractual confidentiality obligations, the other Party shall, and shall cause each of its Affiliates and Representatives to (i) afford the Representatives of the Party and its Affiliates reasonable access, during normal business hours, to the properties, electronically stored data and information, books and records of the other Party and its Affiliates in respect of the Business, the Transferred Assets (and related liabilities), the Product and the Development Product, and permit copies of such materials to be made for the Party and its Affiliates solely for use in connection with the reasonable business purposes described in this paragraph, (ii) furnish to the Representatives of the Party and its Affiliates such additional financial and other information regarding the Business, the Transferred Assets (and Assumed Liabilities), as the
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Party, its Affiliates or their respective Representatives may from time to time reasonably request, (iii) make available to the Representatives of the Party and its Affiliates those employees of the other Party and its Affiliates whose assistance, expertise, testimony, notes and recollections or presence may be necessary to assist Seller and its Affiliates in connection with their inquiries for any of the purposes referred to above, including the presence of such persons as witnesses in hearings or trials for such purposes, and (iv) assist in providing or obtaining any necessary notice or consent for disclosure of Personal Information where required; provided, however, that the provision or such access and such data and information shall not unreasonably interfere with the business or operations of the other Party or any of its Affiliates; and provided, further, that the auditors and accountants of the other Party or its Affiliates shall not be obligated to make any work papers available to any Person except in accordance with such auditors’ and accountants’ normal disclosure procedures and then only after such Person has signed a customary agreement relating to such access to work papers in form and substance reasonably acceptable to such auditors or accountants.
Section 8.2.Books and Records. Seller and its Affiliates shall have the right to retain copies of all Transferred Records relating to periods ending on or prior to the Closing Date. For a period of six (6) years after the Closing, Buyer shall: (a) retain the Transferred Records and all other books and records related to the Transferred Assets held by Buyer or any of its Affiliates; and (b) upon Seller’s reasonable notice to Buyer and during normal business hours, cooperate with and provide Seller, any of Seller’s Affiliates, and the officers, employees, agents and Representatives of Seller and Seller’s Affiliates reasonable access (including the right to make copies at Seller’s expense or the expense of any Affiliate of Seller) to such Transferred Records, including as may be necessary for the preparation of financial statements, regulatory filings, Tax Returns, or in connection with any Proceedings. Seller and its Affiliates shall be entitled, at their expense and subject to reasonable and customary confidentiality undertakings, to make copies of the books and records to which they are entitled access pursuant to this Section 8.2. For the sake of clarity, any Confidential Information in the Transferred Records or otherwise in the Transferred Assets shall become Buyer’s Confidential Information upon Closing.
Section 8.3.Transfer and Assumption of Regulatory Commitments.
(a)From and after the Closing Date, Buyer will assume control of, and responsibility for all costs and Liabilities arising from or related to any Transferred Regulatory Documentation, including, but not limited to, any commitments or obligations to any Governmental Authority involving the Products arising after the Closing Date. Seller and Buyer acknowledge that the transfer of Regulatory Approvals to Buyer may be subject to the approval of applicable Governmental Authorities, and that, notwithstanding anything in this Agreement to the contrary, each Regulatory Approval shall continue to be held by Seller from and after the Closing Date until the date upon which the relevant Governmental Authority approves the Regulatory Approval naming Buyer or one of its Affiliates as the holder of such Regulatory Approval in the relevant country or territory covered by such Regulatory Approval. Each of Buyer and Seller shall cooperate to transfer to Buyer the Transferred Regulatory Documentation as quickly as possible following the Closing.
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(b)As soon as practicable following the transfer of the Product NDA from Seller to Buyer, Seller shall transfer and Buyer shall assume the Seller NDC Numbers. Following the transfer of the Seller NDC Numbers to Buyer, Buyer shall assume any and all reporting obligations arising from or related to the Seller NDC Numbers, including any required reporting calculations to a Governmental Authority (such as MDRP, 340B CP and Non-FAMP). Upon Buyer’s request, Seller shall provide Buyer with sales data from any pre-Closing period included in the Calendar Quarter in which the Closing occurs and other historical data required in connection with Buyer’s reporting obligations to a Governmental Authority, in each case in accordance with Section 8.1. Each of Buyer and Seller shall cooperate to transfer the Seller NDC Numbers as quickly as possible following the transfer of the Product NDA.
Section 8.4.Certain Tax Matters.
(a)Transfer Taxes. Seller and Buyer shall equally share all stamp, documentary, filing, recording, registration, sales, use, transfer, value added, and other non-income or non-capital gains Taxes and all fees, duties, assessments and governmental charges imposed under applicable Law in connection with the transactions contemplated hereby (collectively, “Transfer Taxes”) and (i) Seller shall prepare and timely file all necessary Tax Returns and other documentation with respect to all such Transfer Taxes and, if required by applicable Law, Buyer shall join in the execution of any such Tax Returns and other documentation in connection therewith, (ii) Seller shall deliver an invoice to Buyer and (iii) Buyer shall within thirty (30) days of receipt of such invoice reimburse Seller for the amount of Transfer Taxes for which Buyer is liable under this Section 8.4(a).
(b)Tax Adjustments. Taxes (other than Transfer Taxes) imposed upon or assessed directly against the Transferred Assets (including real estate Taxes, personal property Taxes and similar Taxes) for the tax period in which the Closing occurs (the “Proration Period”) will be apportioned and prorated between Seller and Buyer as of the Closing Date with Buyer bearing the expense of Buyer's proportionate share of such Taxes which shall be equal to the product obtained by multiplying (i) a fraction, the numerator being the amount of the Taxes and the denominator being the total number of days in the Proration Period, times (ii) the number of days in the Proration Period following the Closing Date, and Seller shall bear the remaining portion of such Taxes. If the precise amount of any such Tax cannot be ascertained on the Closing Date, apportionment and proration shall be computed on the basis of the amount payable for each respective item during the tax period immediately preceding the Proration Period and any proration shall be adjusted thereafter on the basis of the actual charges for such items in the Proration Period. When the actual amounts become known, such proration shall be recalculated by Buyer and Seller, and Buyer or Seller, as the case may be, promptly (but not later than ten (10) days after notice of payment due and delivery of reasonable supporting documentation with respect to such amounts) shall make any additional payment or refund so that the correct prorated amount is paid by each of Buyer and Seller.
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Section 8.5.PIV Challenge. From and after the Closing Date, Buyer shall (a) use Commercially Reasonable Efforts to defend and litigate the PIV Challenge, (b) perform Seller’s obligations under the Rose U Related Agreements, in accordance with the terms thereunder and (c) keep Seller informed of the entry into a settlement in connection with the PIV Challenge (as promptly as practicable, but in any event within five (5) Business Days of entering into such settlement). For the avoidance of doubt, Buyer shall have the right, in its sole discretion, to select counsel with respect to the PIV Challenge and, subject to clause (a) of the preceding sentence, the right to control the PIV Challenge, and if deemed by Buyer to be consistent with Buyer’s use of Commercially Reasonable Efforts as described in this Section 8.5, to settle the PIV Challenge.
Section 8.6.Further Assurances.
(a)From time to time following the Closing, Seller and Buyer shall, and shall cause their respective Affiliates to, execute, acknowledge and deliver all reasonable further conveyances, notices, assumptions, releases and acquittances and instruments, and shall take such reasonable actions as may be necessary or appropriate, to make effective the transactions contemplated hereby as may be reasonably requested by the other party hereto (including (i) transferring back to Seller or its designated Affiliates (and having Seller or its Affiliate assume) any asset or liability not contemplated by this Agreement to be a Transferred Asset or an Assumed Liability, respectively, which asset or liability was transferred to Buyer or its Affiliates at or after the Closing, and (ii) transferring to Buyer or its designated Affiliates (and having Buyer or its Affiliate assume) any asset or liability contemplated by this Agreement to be a Transferred Asset or an Assumed Liability, respectively, which was not transferred to or assumed by Buyer or its Affiliates at the Closing.
(b)In the event that, notwithstanding the provisions of this Agreement, any Third Party attempts to collect an Assumed Liability from Seller or its Affiliates, or an Excluded Liability from Buyer or its Affiliates, and (i) any claim or demand is made by such Third Party in respect of any such liability against Seller or its Affiliates or Buyer or its Affiliates, respectively or (ii) any investigation, suit or Proceeding is commenced against Seller or its Affiliates or Buyer or its Affiliates, respectively, in respect of any such liability, then, in each such case, (y) the Party receiving such claim or demand, or notice of such investigation, suit or Proceeding, shall promptly notify the other party and send such party any relevant documentation received in connection therewith, and (z) the Party whose liability such liability was intended to be hereunder (e.g., if such liability was specifically contemplated by this Agreement to be an Assumed Liability, then Buyer, or if such liability was specifically contemplated by this Agreement to be an Excluded Liability, then Seller) shall assume the defense and control of any such claim, demand, investigation, suit or Proceeding, and the other Party shall provide reasonably requested necessary support in connection therewith. For the avoidance of doubt, (1) Seller shall not be authorized to consent to a settlement of, or the entry of any judgment arising from, any Assumed Liability, without the consent of Buyer, (2) Buyer shall not be authorized to consent to a settlement of, or the entry of any judgment arising from, any Excluded Liability, without the consent of Seller; provided, that Buyer or Seller,
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respectively, shall (A) pay all amounts arising out of such settlement or judgment concurrently with the effectiveness thereof and (B) obtain, as a condition of such settlement or other resolution, a complete release of Seller and its Affiliates or Buyer and its Affiliates, respectively and (3) any Losses incurred by Seller or its Affiliates in respect of any such Assumed Liability, or any Losses incurred by Buyer or its Affiliates in respect of any such Excluded Liability, shall be deemed to be Assumed Liabilities and Excluded Liabilities, respectively, and Buyer and Seller, shall reimburse Seller and Buyer, respectively, for any such reasonable and documented Losses.
Section 8.7.Corporate Existence. Until the date that is three (3) years from the Closing Date, the Seller shall maintain its corporate existence and will not liquidate, dissolve or otherwise wind up its affairs. At all times, until the first anniversary of the Closing Date, the Seller shall maintain at least $500,000 in unrestricted cash in its bank account. From the Closing Date until the date that is three (3) years from the Closing Date, if a Buyer Indemnified Party has (1) an undisputed, finally adjudicated or settled indemnification claim for which Seller has not made payment, (2) a pending indemnification claim against Seller under Article XI that is then subject to a Proceeding or (3) an indemnification claim made in good faith against Seller for which Buyer has properly notified Seller in accordance with Section 11.5 (the “Open Claims”), Seller shall not (i) dividend, distribute, or transfer or (ii) encumber, with the intention to frustrate a Buyer Indemnified Party’s ability to enforce its indemnification rights, any cash received by Seller at a time when one or more Open Claims exist [***], Milestone Payments, Initial Sales-Based Payments or Sales-Based Payments in an amount so as to cause Seller’s available cash balances to be less than the amount of Losses then owed or reasonably claimed to be then owing to a Buyer Indemnified Party pursuant to any Open Claim then in existence.
Section 8.8.No Setoff. Unless otherwise provided herein to the contrary, all payments to be made under this Agreement shall be made at the time and in the amounts provided for in this Agreement without set-off or deduction.
ARTICLE IX
CONDITIONS PRECEDENT
Section 9.1.Conditions to Each Party’s Obligations. The obligation of Buyer to consummate the transactions contemplated by this Agreement and the obligations of Seller to consummate the transactions contemplated by this Agreement will be subject to the satisfaction prior to the Closing of the following conditions:
(a)Governmental Approvals. Any applicable waiting period under the HSR Act (and any extensions thereof, including any agreement with any Government Authority to delay consummation of the transactions contemplated by the Transaction Agreements) shall have expired or been terminated.
(b)No Governmental Order. There shall be no Governmental Order in existence that prohibits the sale of the Transferred Assets or the assumption of the Assumed Liabilities or other transactions contemplated by the Transaction
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Agreements, and there shall be no proceeding pending by any Governmental Authority seeking such a Governmental Order.
(c)Third Party Consents. All Third Party consents listed on Section 9.1(c) of the Seller Schedules shall have been obtained.
Section 9.2.Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated by this Agreement are subject to the satisfaction on and as of the Closing of each of the following additional conditions:
(a)Representations and Warranties. (i) Each of the representations and warranties of Seller contained in ARTICLE V (other than as set forth in clause (ii) of this Section 9.2(a)) shall be true and correct (without giving effect to any “materiality” or “Material Adverse Effect” qualifiers therein) as of the Closing Date as though made on the Closing Date, except to the extent that any failure to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (other than any representations and warranties made as of a specific date, which representations and warranties shall have been true and correct as of such date, except to the extent that any failure to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect as of such date); (ii) each of the Seller Fundamental Representations shall be true and correct in all material respects as of the Closing Date as though made on the Closing Date, other than any Seller Fundamental Representations made as of a specific date, which representations and warranties shall have been true and correct in all material respects as of such date; and (iii) the covenants contained in this Agreement required to be complied with by Seller on or before the Closing shall have been complied with in all material respects. Buyer shall have received a certificate signed by an authorized officer of Seller, dated as of the Closing Date, with respect to the matters set forth in the foregoing clauses (i) through (iii) (such certificate, the “Seller Officer’s Certificate”).
(b)Deliveries. Seller will have duly executed and delivered to Buyer each of the items required under Section 4.2.
Section 9.3.Conditions to the Obligations of Seller. The obligations of Seller to consummate the transactions contemplated by this Agreement are subject to the satisfaction on and as of the Closing of each of the following additional conditions:
(a)Representations and Warranties. (i) Each of the representations and warranties of Buyer contained in ARTICLE VI (other than as set forth in clause (ii) of this Section 9.3(a)) shall be true and correct (without giving effect to any “materiality” or “Material Adverse Effect” qualifiers therein) as of the Closing as if made on the Closing Date, other than representations and warranties made as of a specific date, which representations and warranties shall have been true and correct as of such date, except to the extent that any failure to be so true and correct would not, individually or in the aggregate, have a material adverse effect on the ability of Buyer to perform its obligations under this Agreement and any other Transaction Agreement
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to which it or any of its Affiliates is a party or to consummate the transactions contemplated hereby or thereby; (ii) each of the Buyer Fundamental Representations shall be true and correct in all material respects as of the Closing Date as though made on the Closing Date, other than any Buyer Fundamental Representation made as of a specific date, which representations and warranties shall have been true and correct in all material respects as of such date; and (iii) the covenants contained in this Agreement required to be complied with by Buyer on or before the Closing shall have been complied with in all material respects. Seller shall have received a certificate signed by an authorized officer of Buyer, dated as of the Closing Date, with respect to the matters set forth in the foregoing clauses (i) through (iii) (such certificate, the “Buyer Officer’s Certificate”).
(b)Deliveries. Buyer will have duly executed and delivered to Seller each of the items required under Section 4.3.
Section 9.4.Frustration of Closing Conditions. Neither Seller nor Buyer may rely on the failure of any condition set forth in this ARTICLE IX to be satisfied if such failure was caused by such Party’s failure to act in good faith or to use reasonable best efforts to cause the conditions to Closing of the other party to be satisfied, including as required by Section 7.5.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1.Termination. This Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing:
(a)by mutual written consent of Seller and Buyer;
(b)by Seller, if Buyer shall have breached any of its representations or warranties under this Agreement or failed to, or failed to cause its Affiliates to, comply with any covenant or agreement applicable to Buyer and/or its Affiliates that would cause any of the conditions set forth in Section 9.3 not to be satisfied, and such condition is incapable of being satisfied by the Outside Date; provided, however, that Seller is not then in material breach of its obligations under this Agreement;
(c)by Buyer, if Seller shall have breached any of its representations or warranties under this Agreement or failed to comply with any covenant or agreement applicable to Seller that would cause any of the conditions set forth in Section 9.2 not to be satisfied, and such condition is incapable of being satisfied by the Outside Date; provided, however, that Buyer is not then in material breach of its obligations under this Agreement;
(d)by either Seller or Buyer if the Closing shall not have occurred on or before [***] (the “Outside Date”); provided, however, that the right to terminate this Agreement under this Section 10.1(d) shall not be available to any Party whose breach of this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur prior to such Outside Date; or
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(e)by either Seller or Buyer in the event that any Governmental Authority of competent jurisdiction shall have issued a final, non-appealable Governmental Order permanently restraining or prohibiting the transactions contemplated by this Agreement; provided, however, that the right to terminate this Agreement under this Section 10.1(e) shall not be available to any party whose action or failure to fulfill any obligation under this Agreement has been the cause of, or has resulted in, the issuance of such Governmental Order.
Section 10.2.Notice of Termination. Any Party hereto desiring to terminate this Agreement pursuant to this ARTICLE X shall give written notice of such termination to the other Party to this Agreement.
Section 10.3.Effect of Termination. In the event this Agreement is terminated pursuant to this ARTICLE X, this Agreement shall forthwith become null and void and be of no further force and effect and there shall be no liability on the part of any Party to this Agreement, except that this Section 10.3, and Sections 7.3 and 10.1 and ARTICLE XI shall survive any such termination in accordance with their terms and shall be enforceable hereunder. Nothing in this Section 10.3 shall be deemed to release any Party hereto from any Liability for any breach by such Party prior to the termination of this Agreement of any term of this Agreement; provided, however, that, if this Agreement is validly terminated pursuant to this ARTICLE X, no Party hereto shall have any remedy or right to recover for any Liabilities resulting from any breach of any representation or warranty contained herein unless such breach was a Willful Breach committed by the breaching Party.
Section 10.4.Event of Termination. In the event of termination of this Agreement pursuant to this ARTICLE X, written notice thereof will forthwith be given to the other party and the transactions contemplated by this Agreement will be terminated, without further action by any party. If the transactions contemplated by this Agreement are terminated as provided herein:
(a)Buyer will return all documents and other material received from Seller relating to the Products or the Transferred Assets or the transactions contemplated hereby, whether so obtained before or after the execution hereof, to Seller; and
(b)all confidential information received by Buyer with respect to Seller, the Products or the Transferred Assets will be treated in accordance with the Confidentiality Agreement as modified by this Agreement, which will remain in full force and effect in accordance with its terms notwithstanding the termination of this Agreement.
ARTICLE XI
INDEMNIFICATION
Section 11.1.Survival.
(a)All representations and warranties of Seller and Buyer contained herein or made pursuant hereto (other than the Seller Fundamental Representations,
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Seller Special Representations and the Buyer Fundamental Representations) and the covenants in this Agreement that by their terms apply or are to be performed in whole or in part prior to the Closing Date will remain operative and in full force and effect until the expiration of the nine (9) month period following the Closing Date. The Seller Fundamental Representations and the Buyer Fundamental Representations will remain operative and in full force and effect until 90 days following the applicable statute of limitations. The Seller Special Representations will remain operative and in full force and effect until the expiration of the eighteen (18) month period following the Closing Date. The covenants and agreements of the Parties contained in this Agreement that by their terms apply or are to be performed in whole or in part after the Closing Date shall survive the Closing for the period provided in such covenants and agreements.
(b)Notwithstanding anything herein to the contrary, any breach of any representation, warranty, covenant or agreement in respect of which indemnification may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to Section 11.1(a) if notice of the breach thereof giving rise to such right of indemnification shall have been given in accordance with Section 11.5 at or prior to the time at which such representation, warranty, covenant or agreement would have otherwise expired pursuant to Section 11.1(a).
Section 11.2.Indemnification by Seller. Subject to Section 11.4, Seller hereby agrees that, from and after the Closing Date, Seller shall indemnify Buyer and its Affiliates and their respective directors, officers and employees (the “Buyer Indemnified Parties”) against, and hold them harmless from, and pay and reimburse such parties for, any Losses to the extent such Losses arise from or in connection with the following:
(a)any breach by Seller of any representation or warranty made by Seller in ARTICLE V of this Agreement;
(b)any breach by Seller of any of its covenants, agreements or obligations to be performed following the Closing contained in this Agreement; and
(c)any and all Excluded Liabilities.
Section 11.3.Indemnification by Buyer. Subject to Section 11.4, Buyer hereby agrees that, from and after the Closing Date, Buyer shall indemnify Seller and its Affiliates and their respective directors, officers and employees (the “Seller Indemnified Parties”) against, and hold them harmless from, and pay and reimburse such parties for, any Losses to the extent such Losses arise from or in connection with the following:
(a)any breach by Buyer of any representation or warranty made by Buyer in ARTICLE VI of this Agreement;
(b)any breach by Buyer of any of its covenants, agreements or obligations to be performed following the Closing contained in this Agreement; and
(c)any and all Assumed Liabilities.
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Section 11.4.Limitations.
(a)The amount of any Losses for which either Seller or Buyer, as the case may be, is liable under this ARTICLE XI shall be reduced by (i) the amount of any insurance proceeds actually paid to the Indemnified Party (as defined herein) and (ii) the amount of any cash Tax benefit actually realized by the Indemnified Party in connection with such Loss and any of the circumstances giving rise thereto prior to the indemnification payment.
(b)Seller shall not be required to indemnify any Person for any Losses pursuant to Section 11.2(a) (other than with respect to the Seller Fundamental Representations) until the aggregate amount of an Indemnified Party’s Losses exceed $[***] (the “Deductible”), after which Seller shall only be obligated for such aggregate Losses in excess of the Deductible.
(c)Seller shall not be required to indemnify any Person under Section 11.2(a) for an aggregate amount of Losses exceeding $[***] (other than for breaches of the Seller Fundamental Representations and Seller Special Representations). Seller shall not be required to indemnify any Person under Section 11.2(a) for an aggregate amount of Losses exceeding (i) $[***] for breaches of the Seller Special Representations and (ii) the Purchase Price actually paid to Seller under this Agreement at the time the claim is finally adjudicated or settled for breaches of the Seller Fundamental Representations.
(d)Subject to Section 11.4(g), the right of the Buyer Indemnified Parties and the Seller Indemnified Parties under this ARTICLE XI shall be the sole and exclusive monetary remedy of the Buyer Indemnified Parties and the Seller Indemnified Parties, as the case may be, with respect to matters covered hereunder, including claims relating to the Product, the Transferred Assets, Assumed Liabilities or Excluded Liabilities.
(e)Notwithstanding anything contained herein or elsewhere to the contrary, all “material” or similar materiality type qualifications contained in the representations and warranties set forth in this Agreement shall be ignored and not given any effect for the indemnification provisions of this ARTICLE XI, solely for purposes of determining the amount of any Losses incurred with respect to the indemnification provisions hereof.
(f)Notwithstanding anything herein to the contrary in this Agreement, a Party shall not be liable pursuant to this ARTICLE XI for any Loss incurred by the other Party hereto:
(i)relating to any Liability which is contingent only, unless and until such contingent Liability gives rise (within the time periods contemplated by Section 11.1) to an actual obligation to make payment;
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(ii)to the extent that mitigation by the other party and its Affiliates (or its or their respective Representatives) as required by applicable Law would have eliminated or reduced such Loss; or
(iii)to the extent the Liability giving rise to the Loss is attributable to, or the amount of such Loss is increased as a result of, any: (A) applicable Law not in force at the date of this Agreement; or (B) any change of applicable Law (or any change in interpretation on the basis of applicable Law) or in applicable accounting standards, principles or interpretations.
(g)Notwithstanding anything herein to the contrary in this Agreement, nothing shall limit any remedy that a Buyer Indemnified Party may have against any Person for Fraud.
(h)Notwithstanding anything herein to the contrary, the Parties acknowledge and agree that any and all due diligence conducted with respect to the transaction, the Assets or the Business shall not in any way limit the rights of the Buyer Indemnified Parties to make a claim for indemnification hereunder.
Section 11.5.Procedure.
(a)Any Person to seeking indemnification provided for under this ARTICLE XI (an “Indemnified Party”) in respect of, arising out of or involving a claim made by any Person (other than a party hereto) against an Indemnified Party (a “Third Party Claim”), shall promptly notify the indemnifying Party in writing of the Third Party Claim stating the amount of the Loss claimed, if known, and method of computation thereof, the facts and circumstances giving rise to such claim in reasonable detail, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed to arise within ten (10) Business Days after receipt by such Indemnified Party of written notice of the Third Party Claim (or sooner, to the extent the nature of the Third Party Claim requires a response in a shorter period of time); provided, that failure to give such notice shall not affect the right to indemnification provided hereunder except to the extent the indemnifying Party shall have been actually and materially prejudiced as a result of such failure. Thereafter, the Indemnified Party shall deliver to the indemnifying Party, as promptly as reasonably practicable following such Indemnified Party’s receipt thereof, copies of all written notices and documents (including any court papers) received by such Indemnified Party relating to the Third Party Claim.
(b)If a Third Party Claim is made against an Indemnified Party, the indemnifying Party shall be entitled at its election and its cost to assume the defense of such Third Party Claim with counsel selected by the indemnifying Party; provided, that, should, following any such election, the indemnifying Party determine that it will contest its obligation to indemnify the Indemnified Party, it may do so only if the cessation of its control of the defense can be effected in a manner that does not materially prejudice the Indemnified Party’s ability to conduct a defense of such matter. If the indemnifying Party assumes such defense, the Indemnified Party shall
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nonetheless have the right to employ counsel separate from the counsel employed by the indemnifying Party; provided, that the indemnifying Party shall not be liable to such Indemnified Party for any fees of such separate counsel with respect to the defense of such Third Party Claim, unless the employment and reimbursement of such separate counsel is authorized by the indemnifying Party in writing. If the indemnifying Party does not assume such defense, and for any period during which the indemnifying Party has not assumed such defense, the indemnifying Party shall be liable for the reasonable fees and expenses of one (1) single counsel (in addition to reasonable fees and expenses of local counsel required in jurisdictions not central to the Third Party Claim) employed (and reasonably acceptable to the indemnifying Party) by such Indemnified Party (which reasonable fees and expenses shall be considered Losses for purposes of this Agreement). If the indemnifying Party chooses to defend a Third Party Claim or prosecute a claim in connection therewith, each Indemnified Party shall provide all cooperation as is reasonably requested by the indemnifying Party in such defense or prosecution.
(c)Notwithstanding anything to the contrary in this Section 11.5, no party may settle, compromise or discharge (and in doing so, make any reasonable admission of liability with respect to) such Third Party Claim other than for money damages only without the prior written consent of the other party, subject to such party paying or causing to be paid all amounts arising out of such settlement or obtaining and delivering to such other party, prior to the execution of such settlement, a general release prepared and executed by all Persons bringing such Third Party Claim.
(d)An indemnifying Party shall not be entitled to assume or continue control of the defense of any Third Party Claim if the Third Party Claim (A) relates to or arises in connection with any criminal proceeding, (B) seeks an injunction or other equitable relief against any Indemnified Party, or (C) if unsuccessful, would reasonably be expected to exceed the cap applicable to such a claim in Section 11.4(c) of this Agreement.
(e)In the event an Indemnified Party has a claim against an indemnifying Party under Sections 11.2 or 11.3 that does not involve a Third Party Claim, such Indemnified Party shall deliver notice of such claim to the indemnifying Party stating the amount of the Loss, if known, and method of computation thereof, the facts and circumstances giving rise to such claim in reasonable detail and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed to arise, within ten (10) Business Days of becoming aware of the facts or circumstances giving rise to such claim; provided, that failure to give such notice shall not affect the indemnification provided hereunder except to the extent the indemnifying Party shall have been actually prejudiced as a result of such failure. The Indemnified Party and the indemnifying Party shall, for a period of not less than twenty (20) Business Days following receipt by the indemnifying Party of the notice of such claim, negotiate, in good faith, to resolve the claim, and such Indemnified Party shall not commence Proceedings with respect to such claim prior to the end of such period.
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Section 11.6.Tax Treatment of Indemnification Payments. Seller and Buyer agree to treat any indemnification payment made pursuant to this ARTICLE XI as an adjustment to the Purchase Price for U.S. federal, state, local and foreign income tax purposes.
ARTICLE XII
GENERAL PROVISIONS
Section 12.1.Expenses. Except as may be otherwise specified in the Transaction Agreements, all costs and expenses, including fees and disbursements of counsel, financial advisers and accountants, incurred in connection with the Transaction Agreements and the transactions contemplated thereby shall be paid by the Party incurring such costs and expenses (or the Party on whose behalf such costs and expenses have been incurred), irrespective of when incurred or whether or not the Closing occurs or this Agreement is terminated.
Section 12.2.Notices. All notices and other communications under or by reason of the Transaction Agreements shall be in writing and shall be deemed to have been duly given or made (a) when personally delivered, (b) when delivered by e-mail transmission with receipt confirmed or (c) upon delivery by overnight courier service, in each case to the addresses and attention Parties indicated below (or such other address, e-mail address or attention Party as the recipient Party has specified by prior notice given to the sending Party in accordance with this Section 12.2):
if to Seller, to:
Dermira,
Inc.
[***]
[***]:
[***]
and
Weil,
Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Raymond O. Gietz, Esq.
Email:raymond.gietz@weil.com
if to Buyer, to:
Journey
Medical Corporation
9237 E Via De Ventura Blvd.
Suite 105
Scottsdale, Arizona 85258
Attention: President & CEO
Email:cmaraoui@jmcderm.com
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with a copy (which shall not constitute notice) to:
Journey
Medical Corporation
9237 E Via De Ventura Blvd.
Suite 105
Scottsdale,
Arizona 85258
Attention: General Counsel
Email:ralloush@jmcderm.com
and
Cooley
LLP
Reston Town Center
11951 Freedom Drive, 14th
Floor
Reston, VA 20190
Attention: Kenneth Krisko
Email:kkrisko@cooley.com
Section 12.3.Public Announcements. The press release regarding this Agreement shall be a press release mutually acceptable to each of Seller and Buyer. Following the release of such aforementioned press release, neither Seller nor Buyer (nor any of their respective Affiliates) shall issue any other press release or make any other public announcement with respect to any of the Transaction Agreements without the prior written consent of the other Party (such consent not to be unreasonably withheld, conditioned or delayed), except as may be required by Law (including any disclosure obligations under the federal securities Laws or applicable accounting principles) or the rules and regulations of any national securities exchange upon which the securities of Seller, Buyer or their respective Affiliates are listed, in which case the Party proposing or required to issue such press release or make such public announcement shall use its commercially reasonable efforts to consult in good faith with the other Party before making any such public announcements; provided, that neither Seller nor Buyer will be required to obtain the prior approval of or consult with the other Party in connection with any such press release or public announcement if such press release or public announcement consists solely of information previously disclosed in all material respects in a previously distributed press release or public announcement.
Section 12.4.Severability. If any term or other provision of this Agreement is held invalid, illegal or incapable of being enforced under any applicable Law or as a matter of public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. If the final judgement of a court of competent jurisdiction or other Governmental Authority declares that any term or other provision hereof is invalid, illegal or unenforceable, Seller and Buyer agree that the court making such determination will have the power to reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, or to replace any invalid, illegal or unenforceable term or provision with a term or provision that is valid, legal and
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enforceable and that comes closest to expressing the intention of the invalid, illegal or unenforceable term or provision.
Section 12.5.Counterparts. This Agreement may be executed in one or more counterparts, and signature pages may be delivered by facsimile, portable document format (PDF), DocuSign or any other electronic signature complying with the U.S. federal ESIGN Act of 2000 or the Electronic Signatures and Records Act of the State of New York, each of which shall be deemed an original, but all of which will be considered one and the same agreement and will become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties, it being understood that all Parties need not sign the same counterpart.
Section 12.6.Entire Agreement. This Agreement (including the Schedules) and the other Transaction Agreements (and all exhibits and schedules hereto and thereto) and the Confidentiality Agreement collectively constitute and contain the entire agreement and understanding of Seller and Buyer with respect to the subject matter hereof and thereof and supersede all prior negotiations, correspondence, understandings, agreements and contracts, whether written or oral, among the Parties and thereto respecting the subject matter hereof and thereof.
Section 12.7.Assignment. This Agreement shall not be assigned by (a) Buyer without the prior written consent of Seller, and (b) Seller, without the prior written consent of Buyer, except that each of Buyer and Seller may assign this Agreement to any of its Affiliates, upon prior written notice to the other party; provided, that no such assignment shall release Buyer or Seller, as applicable, from any Liability or obligation under this Agreement. Following the Closing, neither Buyer nor its Affiliates shall transfer, sell or assign to any Person who is not an Affiliate of Buyer, all or substantially all of Buyer’s rights related to the Product or Development Product or the Transferred Assets or its rights and obligations under this Agreement, except as provided in the next sentence. Notwithstanding the foregoing, following the Closing Buyer may transfer, sell or assign this Agreement together with Buyer’s rights related to the Product, the Development Product and the Transferred Assets (a “Sale Transaction”) as follows: either (x) in connection with any sale of all or substantially all of the assets of Buyer (whether pursuant to sale of assets, stock, merger or reorganization of Buyer) to any Third Party successor, assignee or transferee or (y) in connection with a Sale Transaction that is not a transaction contemplated by clause (x), to any Third Party that is a publicly listed pharmaceutical company with a market capitalization at the time of such sale of at least $[***], provided, that in each case of clauses (x) and (y), the successor, assignee, or transferee expressly assumes in writing the obligations of Buyer under this Agreement, including Buyer’s diligence obligations under this Agreement, payment of the Milestone Payments, Initial Sales-Based Payments, Sales-Based Payments and [***] (except to the extent previously paid). For the avoidance of doubt, this Section 12.7 shall not restrict or prevent in any way Buyer from entering into a license or sublicense agreement, distribution agreement or other development, research, commercial or similar agreement with any Third Party in connection with the Product, Development Product or other Milestone Product, or in connection with any of the Transferred Assets. Buyer shall deliver a copy of the written definitive agreements related to any Sale Transaction to Seller within five (5) Business Days following the consummation of such transaction, including such agreements pursuant to which the successor, assignee, or transferee expressly assumes Buyer’s obligations as set forth in
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the preceding sentence. Any attempted assignment in violation of this Section 12.7 shall be void ab initio. This Agreement shall be binding upon, shall inure to the benefit of, and shall be enforceable by the Parties and their permitted successors and assigns.
Section 12.8.No Third-Party Beneficiaries and Affiliates. Except as provided for herein, this Agreement is for the sole benefit of the Persons specifically named in the preamble to this Agreement as Parties and their permitted successors and assigns, no Party hereto is acting as an agent for any other Person not named herein as a Party hereto, and nothing in this Agreement or any other Transaction Agreements, express or implied, is intended to or shall confer upon any other Person, any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 12.9.Amendment; Waiver. No provision of this Agreement or any other Transaction Agreement may be amended, supplemented or modified, including any Exhibits or Schedules thereto, except by a written instrument making specific reference hereto or thereto signed by all the parties to such agreement. No consent from any Indemnified Party under Section 11.5 (in each case other than the Parties) shall be required to amend this Agreement. At any time before the Closing, either Seller or Buyer may (a) extend the time for the performance of any obligation or other acts of the other Person, (b) waive any breaches or inaccuracies in the representations and warranties of the other Person contained in this Agreement or in any document delivered pursuant to this Agreement or (c) waive compliance with any covenant, agreement or condition contained in this Agreement, but such waiver of compliance with any such covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Any such waiver shall be in a written instrument duly executed by the waiving Party. No failure on the part of either Person to exercise, and no delay in exercising, any right, power or remedy under any Transaction Agreement except as expressly set forth in this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such Person preclude any other or further exercise thereof or the exercise of any other right, power or remedy.
Section 12.10.Schedules. Any disclosure with respect to a Section of this Agreement, including any Section of the Schedules, shall be deemed to be disclosed for purposes of other Sections of this Agreement, including any Section of the Schedules, to the extent that the relevance of such disclosure would be reasonably apparent to a reader of this Agreement and such disclosure. Matters reflected in any Section of the Schedules are not necessarily limited to matters required by this Agreement to be so reflected and such additional matters are set forth for informational purposes and do not necessarily include other matters of a similar nature. No reference to or disclosure of any item or other matter in any Section of this Agreement, including any Section of the Schedules, shall be construed as an admission of Liability or an indication that such item or other matter is material or that such item or other matter is required to be referred to or disclosed in this Agreement. Without limiting the foregoing, no such reference to or disclosure of a possible breach or violation of any contract, Law or Governmental Order shall be construed as an admission or indication that breach or violation exists or has actually occurred.
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Section 12.11.Governing Law; Submission to Jurisdiction.
(a)This Agreement and each other Transaction Agreement and all Proceedings (whether at Law, in contract, tort or otherwise, or in equity) that may be based upon, arise out of or relate to this Agreement, or any other Transaction Agreement or the negotiation, execution or performance of this Agreement or any other Transaction Agreement or the inducement of any party to enter into any Transaction Agreement, whether for breach of contract, tortious conduct or otherwise, and whether now existing or hereafter arising (each, a “Transaction Dispute”), shall be governed by and enforced in accordance with the internal laws of the State of New York applicable to contracts made and performed in such State without giving effect to any Law or rule that would cause the Laws of any jurisdiction other than the State of New York to be applied.
(b)The Parties hereby irrevocably submit to the exclusive jurisdiction the U.S. District Court for the Southern District of New York (where federal jurisdiction exists) or the Commercial Division of the Courts of the State of New York sitting in the County of New York (where federal jurisdiction does not exist), and the appellate courts having jurisdiction of appeals in such courts, in each case, over any Transaction Dispute and each Party hereby irrevocably agrees that all claims in respect of any Transaction Dispute shall be heard and determined in such courts. The Parties hereby irrevocably waive, to the fullest extent permitted by applicable Law, any objection which they may now or hereafter have to the laying of venue of any such Transaction Dispute brought in such court or any defense of inconvenient forum for the maintenance of such Transaction Dispute. Each of the Parties agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
(c)Each of the Parties hereby consents to process being served by any party to this Agreement in any Proceeding by the delivery of a copy thereof in accordance with the provisions of Section 12.2.
(d)The foregoing consent to jurisdiction will not constitute submission to jurisdiction or general consent to service of process in the State of New York for any purpose except with respect to any Transaction Dispute.
Section 12.12.Specific Performance. Each Party hereto acknowledges and agrees that irreparable damage would occur, damages would be difficult to determine and would be an insufficient remedy and no adequate remedy other than specific performance would exist at law or in equity in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached (or any party hereto threatens such a breach). Therefore, it is agreed that each Party shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which it may be entitled, at Law or in equity. Such remedies shall, however, be cumulative with and not exclusive of and shall be in addition to any other remedies which any party may have under this Agreement, or at Law or in equity or otherwise, and the exercise by a party hereto of any one remedy shall not preclude the
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exercise of any other remedy. The Parties further agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to applicable Law or inequitable for any reason, and not to assert that a remedy of monetary damages would provide an adequate remedy for any such breach or that Seller or Buyer otherwise have an adequate remedy at Law. If any Party hereto brings any claim to enforce specifically the performance of the terms and provisions of this Agreement, in accordance with the terms of this Agreement, then, notwithstanding anything to the contrary contained herein, the Outside Date shall automatically be extended by the period of time between the commencement of such claim and the date on which such claim is fully and finally resolved.
Section 12.13.Mitigation. Each Party hereto shall, and shall cause its applicable Affiliates and Representatives to, to the extent required by applicable Law, take reasonable steps to mitigate their respective Losses upon and after becoming aware of any fact, event, circumstance or condition that has given rise to or would reasonably be expected to give rise to, any Losses for which it would have the right to seek damages hereunder.
Section 12.14.Limitation on Liability. Notwithstanding anything in this Agreement or in any other Transaction Agreement to the contrary, in no event shall either Seller or Buyer have any Liability under any Transaction Agreement (including under this Section 12.14) for any consequential, special, incidental, indirect or punitive damages, lost profits or similar items (including loss of revenue, income or profits, diminution of value or loss of business reputation or opportunity relating to a breach or alleged breach of this Agreement), or damages calculated on multiples of earnings or other metrics approaches (except that special and punitive damages shall not be excluded with respect to any such damages payable in connection with a Third Party Claim).
Section 12.15.Rules of Construction. Interpretation of this Agreement (except as specifically provided in this Agreement, in which case such specified rules of construction shall govern with respect to this Agreement) shall be governed by the following rules of construction: (a) words in the singular shall be held to include the plural and vice versa, and words of one gender shall be held to include the other gender as the context requires; (b) references to the terms Article, Section, paragraph and Exhibit are references to the Articles, Sections, paragraphs and Exhibits to this Agreement unless otherwise specified; (c) the terms “hereof”, “herein”, “hereby”, “hereto” and derivative or similar words refer to this entire Agreement, including the Schedules and Exhibits hereto; (d) references to “$” shall mean U.S. dollars; (e) the word “including” and words of similar import shall mean “including without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive unless clearly indicated and the occasional inclusion of "and/or" will not change this interpretation; (g) references to “written” or “in writing” include in electronic form; (h) provisions shall apply, when appropriate, to successive events and transactions; (i) the headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (j) Seller and Buyer have each participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or burdening any party by virtue of the authorship of any of the provisions in this Agreement; (k) a reference to any Person includes such Person’s permitted successors and permitted assigns; (l) any reference to “days” means calendar days unless Business Days are expressly specified; (m)
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when calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded and, if the last day of such period is not a Business Day, the period shall end on the next succeeding Business Day; (n) each of the representations and warranties of the Parties set forth herein shall be deemed to have been made as of the date such representation and warranty is made hereunder; and (o) an item arising with respect to a specific representation or warranty shall be deemed to be “reflected on” or “set forth in” a balance sheet or financial statements, to the extent Further, prior drafts of this Agreement or the other Transaction Agreements or the fact that any clauses have been added, deleted or otherwise modified from any prior drafts of this Agreement or any of the other Transaction Agreements shall not be used as an aid of construction or otherwise constitute evidence of the intent of the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any party hereto by virtue of such prior drafts.
Section 12.16.Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY TRANSACTION DISPUTE. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF A DISPUTE, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION AGREEMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12.16.
Section 12.17.Admissibility into Evidence. All offers of compromise or settlement among the Parties or their Representatives in connection with the attempted resolution of any Transaction Dispute (a) shall be deemed to have been delivered in furtherance of a Transaction Dispute settlement, (b) shall be exempt from discovery and production and (c) shall not be admissible into evidence (whether as an admission or otherwise) in any proceeding for the resolution of the Transaction Dispute.
Section 12.18.Privilege. Buyer, for itself and its Affiliates, and its and its Affiliates’ respective successors and assigns, hereby irrevocably and unconditionally acknowledges and agrees that all attorney-client privileged communications between Seller and its respective current or former Affiliates or Representatives and their counsel, including Weil, Gotshal & Manges LLP, made before the Closing Date in connection with the negotiation, preparation, execution, delivery and Closing under any Transaction Agreement, any Transaction Dispute or, before the Closing, any other matter, shall continue after the Closing to be privileged communications with such counsel and neither Buyer nor any of its former or current Affiliates or Representatives nor any Person purporting to act on behalf of or through Buyer or any of its current of former Affiliates or Representatives, shall seek to obtain the same by any process on the grounds that the privilege attaching to such communications belongs to Buyer or the Business or on any other grounds.
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Section 12.19.Non-Recourse. All Proceedings (whether at Law, in contract, tort or otherwise, or in equity) that may be based upon, arise out of or relate to this Agreement or the other Transaction Agreements, or the negotiation, execution or performance of this Agreement or the other Transaction Agreements (including any representation or warranty made in or in connection with this Agreement or the other Transaction Agreements or as an inducement to enter into this Agreement or the other Transaction Agreements), may be made only against the entities that are expressly identified as Parties hereto and parties thereto. No Person who is not a named party to this Agreement or the other Transaction Agreements, including any past, present or future director, officer, employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney or representative of any named party to this Agreement or the other Transaction Agreements (“Non-Party Affiliates”), shall have any liability (whether at Law, in contract, tort or otherwise, or in equity, or based upon any theory that seeks to impose liability of an entity party against its owners or affiliates) for any obligations or liabilities arising under, in connection with or related to this Agreement or such other Transaction Agreement (as the case may be) or for any claim based on, in respect of, or by reason of this Agreement or such other Transaction Agreement (as the case may be) or the negotiation or execution hereof or thereof; and each party hereto waives and releases all such liabilities, claims and obligations against any such Non-Party Affiliates. Non-Party Affiliates are expressly intended as third party beneficiaries of this provision of this Agreement.
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IN WITNESS WHEREOF, the Parties have caused this Asset Purchase Agreement to be signed by their respective representatives thereunto duly authorized, all as of the date first written above.
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JOURNEY MEDICAL CORPORATION |
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[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
Exhibit 10.7
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM
THE EXHIBIT
BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN
MARKED WITH “[***].
LICENSE AND SUPPLY AGREEMENT
BY AND BETWEEN
DR. REDDY'S LABORATORIES LTD.
AND
JOURNEY MEDICAL CORPORATION
DATED AS OF
JULY 29, 2020
LICENSE AND SUPPLY AGREEMENT
This License and Supply Agreement (this “Agreement”), is dated as of July 29, 2020 (the “Effective Date”), by and between Dr. Reddy’s Laboratories Ltd. (the “Licensor”) and Journey Medical Corporation, a Delaware corporation located at 9237 East Via De Ventura Blvd., Suite 105, Scottsdale, AZ 85258, USA (the “Licensee”). Licensor and Licensee may each be referred to individually as a “Party” and collectively as the “Parties.”
WITNESSETH:
WHEREAS, the Licensor owns and markets the Licensed Product (as defined below);
WHEREAS, the Licensee desires (i) to receive the exclusive right and license to Commercialize the Product in the Territory (with each capitalized term as defined below) and (ii) for Licensor to manufacture and supply the Product to Licensee for such purpose, each upon the terms and subject to the conditions set forth herein; and
WHEREAS, in order to increase access to the Licensed Product in the Territory, the Parties are entering into this Agreement and Licensor is granting the rights provided herein to Licensee upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Capitalized terms used in this Agreement have the meanings specified in Schedule 1.1 to this Agreement. Certain other terms are defined in the text of this Agreement.
Section 1.2 Other Definitional and Interpretive Provisions.
(a) The words "hereof", "herein", "hereto" and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable meaning when used in the plural and vice versa.
(c) The terms "dollars" and "$" shall mean United States of America dollars.
(d) The term "including" (and with correlative meaning "include") shall mean "including, without limitation."
(e) Reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assign are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity.
(f) Reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended, modified or supplemented and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof.
(g) When a reference is made in this Agreement to an Article, a Section, an Exhibit or a Schedule, such reference shall be to an Article of, a Section of, an Exhibit to or a Schedule to, this Agreement unless otherwise indicated.
(h) The Parties acknowledge that: (i) this Agreement is the result of negotiations between the Parties and shall not be deemed or construed as having been drafted by any one Party; (ii) each Party and its counsel have reviewed and negotiated the terms and provisions of this Agreement (including any exhibits and schedules attached hereto) and have contributed to its revision; (iii) the rule of construction to the effect that any ambiguities are resolved against the drafting Party shall not be employed in the interpretation of this Agreement; and (iv) the terms and provisions of this Agreement shall be construed fairly as to all Parties and not in favor of or against any Party, regardless of which Party was generally responsible for the preparation of this Agreement.
ARTICLE II
LICENSE
Section 2.1 License. Subject to the terms of this Agreement, including the limitations set forth in Section 2.2 and 2.3, Licensor hereby grants to Licensee a non-transferable, non-assignable, non-sublicensable (except in accordance with this Section 2.1), exclusive (even as to Licensor) right and license, under the Product [***] and any intellectual property rights controlled by Licensor, to market, promote, import, export, offer to sell, sell, have sold and distribute ("Commercialize") a branded version of the Licensed Product under the Licensee Trade Name (the "Product") in the Territory and in accordance with this Agreement. The Parties expressly agree that Licensor (and its applicable Affiliates) shall not have any restrictions on its ability to Commercialize the Licensed Product in the Territory under Licensor's label which contains the DRL Trademarks (the "DRL Product"), which trademarks Licensor shall be permitted to update at its sole option. Licensee will sell the Product only in the Territory and will not directly or indirectly sell or otherwise distribute the Product outside of the Territory. The license provided herein shall terminate at the end of the Term. Licensee shall not sublicense its rights under this Agreement without the prior written consent of Licensor (not to be unreasonably withheld, conditioned or delayed) other than to an Affiliate of Licensee, provided further that (i) any sublicense provided hereunder is in writing and its terms are consistent with the terms and conditions of this Agreement; (ii) Licensee shall be responsible to Licensor for the performance of its sublicensees; (iii) any act or omission by a sublicensee that would be a breach of this Agreement had it been performed (or not performed) by Licensee shall be treated as a breach of this Agreement by Licensee; (iv) upon request, Licensee will provide Licensor a copy of any such sublicense (with reasonable redaction to protect any financial or other sensitive information), to permit Licensor to assess such sublicenses compliance with the terms and conditions of this Agreement; and (v) sublicensee is not a Direct Competitor of Licensor. Any transfer of Licensee's rights hereunder shall be permitted solely in accordance with Section 14.1.
Section 2.2 Customers. Licensee shall only sell or have sold the Product to Specialty Pharmacies, provided however, that Licensee shall be permitted to sell up to a maximum of [***] ([***]%) percent of its total annual volume of Units of Product in a Calendar Year to Wholesalers (the "Wholesaler Limit"). The Wholesaler Limit shall be measured on a Calendar Year basis. Licensor acknowledges and agrees that as long as Licensee is using Commercially Reasonable Efforts not to exceed the Wholesaler Limit, if the Wholesaler Ratio in a Calendar Year does not exceed [***] ([***]%) percent, Licensee shall not be deemed to be in material breach of this Section 2.2. Licensee acknowledges and agrees, that notwithstanding the foregoing sentence or anything to the contrary provided herein or elsewhere, if the Wholesaler Ratio exceeds (i) [***] ([***]%) for three (3) consecutive Calendar Years or (ii) [***] ([***]%) percent in any Calendar Year, it shall be deemed a material breach of this Agreement, regardless of the efforts expended by Licensee.
Section 2.3 Trade Name; Trademarks.
(a) Licensee shall sell the Product under a trade name owned by Licensee (the "Licensee Trade Name"), which Licensee Trade Name shall be subject to the prior approval of (i) Licensor, not to be unreasonably withheld (it being understood that, as of the Effective Date, Licensor has approved of the trade name(s) set forth in Schedule 2.3(a)), (ii) the members, sponsors and administrators of the REMS Program (as applicable) and (iii) the applicable Governmental Entities in the Territory. Licensee shall sell the Product in its own trade dress, trademarks, service marks, corporate names, logos, slogans and NDC/labeler codes, all of which shall not contain the DRL Trade Dress or any DRL Trademark (all of the foregoing used by Licensee on or for the Product, together with the Licensee Trade Name, the "Licensee Trademarks"); provided that, the foregoing restriction shall be subject to Sections 4.3 and 13.2. Subject to Licensor's limited rights with respect to [***]-Related Trade Name Submissions, as further described below, Licensee shall own all rights in the Licensee Trademarks and shall be solely responsible for any and all trademark filings, maintenance, payments and other actions required to be taken in connection with the USPTO or other relevant Governmental Authorities to maintain in full force and effect all intellectual property rights relating to the Licensee Trademarks (collectively, "Licensee Trademark Submissions").
(b) As soon as practicable following the date hereof, Licensee shall provide Licensor with its requested Licensee Trade Name, and upon Licensor's approval in accordance with Section 2.3(a) (which, for clarity, shall be required only in the event the proposed Licensee Trade Name is different from the trade name(s) set forth in Schedule 2.3(a)), the Licensor and Licensee shall work together in good faith to enable Licensor to make any and all necessary submissions, notifications and/or amendments under the Product [***] (to the extent not already obtained as of the Effective Date) to Governmental Entities (other than the USPTO) in each case, as required to Commercialize the Product in the Territory with the Licensee Trade Name (each an "[***]-Related Trade Name Submission" and collectively, the "[***]-Related Trade Name Submissions"). The Parties agree and acknowledge that the [***]-Related Trade Name Submission relating to the trade name set forth in Schedule 2.3(a) shall be made by Licensor by filing a prior- approval supplement with the FDA (the "Accutane PAS"). As soon as practicable following the Effective Date, Licensor and Licensee shall work together in good faith to enable Licensor to take such actions necessary to include the Product (under the Licensee Trade Name) in the REMS Program which may include amendments to the REMS Program and related documents and updates to the REMS Program necessary to permit Licensee to Commercialize the Product under the Licensee Trade Name in the Territory (collectively, the "REMS Related Approvals"). Licensor shall be responsible for any initial filing fees due upon filing of the Accutane PAS, if any. Licensee shall be responsible for any and all other costs and expenses associated with (i) any [***]-Related Trade Name Submissions and (ii) otherwise obtaining Regulatory Approval of the Licensee Trade Names. The fees and expenses related to the REMS Related Approvals shall be allocated between the Parties as described in Section 4.8. Licensor shall own all [***]-Related Trade Name Submissions and any Regulatory Approvals obtained in connection therewith (excluding, for clarity, any Licensee Trademark Submissions) ("[***]-Related Trade Name Approvals") and the REMS Related Approvals, all of which shall be deemed Regulatory Documentation. The Parties agree that Licensor shall make all [***]-Related Trade Name Submissions and other actions to obtain REMS Related Approvals as required to enable the sale of Product in the Territory under the Licensee Trade Name, and Licensee shall not be permitted to make any [***]-Related Trade Name Submissions or other submissions to any Governmental Authorities or REMS Program, except for Licensee Trademark Submissions or such other submissions as the Parties may mutually agree in writing. Licensor shall not be permitted to Commercialize any Products containing any Licensee Trademarks. This Section 2.3(b) shall not apply to Licensee's obligation to register as a "wholesaler" under the REMS Program, which shall be the responsibility of Licensee.
Section 2.4 Exclusivity. During the Term:
(a) Licensor will not grant to any Third Party the right to Commercialize the Licensed Product under the Product [***], other than with respect to the DRL Product, in the Territory; and
(b) Subject to the terms and conditions of this Agreement (including Section 5.2(h)), Licensee shall purchase its requirements of Products exclusively from Licensor.
Section 2.5 Non-Compete. During the Non-Compete Period, Licensee shall not, and shall cause its Affiliates not to, develop or have developed for themselves or any Third Party any generic, branded or private labeled version of the Licensed Product or any other generic, branded or private labeled product, in each case, (i) containing Isotretinoin as the sole active ingredient, (ii) that is in any of the same dosage strengths as the Licensed Product, and (iii) that is AB Rated with respect to either the Licensed Product, the reference listed drug set forth on the [***]or [***] ((i)-(iii) collectively, a "Competitive Product"). Licensee shall not Knowingly provide to any Person any assistance or information relating to the development, manufacture and supply of the Licensed Product, the [***] or [***], in order to facilitate the development, manufacture, or commercialization of a Competitive Product in violation of this Section 2.5 (it being understood that this restriction shall not apply to, and shall not be construed to limit in any way, Licensee's or its Affiliates' exercise of its or their rights or performance of its or their obligations under this Agreement with respect to the Licensed Product, including in connection with Section 5.2(h)).
ARTICLE III
MILESTONES AND ROYALTIES
Section 3.1 Milestones.
(a) Milestone Payments; Events. In addition to any other amounts due and payable to the Licensor hereunder, as consideration for the license provided herein, subject to the terms and conditions of this Agreement, Licensee shall pay to the Licensor the following non-refundable, non-creditable amounts (each, a "Milestone Payment") upon the achievement (except as adjusted as set forth below) by or on behalf of the Licensee or its Affiliates, or its or their permitted sublicensees, if any, of the following events (each, a "Milestone Event"):
(i) one million dollars ($1,000,000) upon the execution of this Agreement (the "Upfront Payment");
(ii) [***] ($[***]) upon approval of the Accutane PAS by the FDA (as evidenced by receipt of written correspondence (or similar) from the FDA stating that the Accutane PAS has been approved, which correspondence Licensor shall promptly provide to Licensee), provided, however, that if Licensee voluntarily determines to use a Licensee Trade Name other than the trade name set forth on Schedule 2.3(a) prior to the FDA making a final determination on whether to approve or reject such trade name, such amount shall be due upon Licensee's notification to Licensor that Licensee has elected to use an alternative trade name (the "Accutane PAS Milestone");
(iii) [***] ($[***]) upon the notification by Licensor or its applicable Affiliate that the Initial Firm Order of Product is available for pick-up or shipment to Licensee as a Finished Product from the third party finished packaging manufacturer (in accordance with the order) (the "Initial Order Milestone");
(iv) [***] ($[***]) upon the eighteen (18) month anniversary of the Effective Date;
(v) [***] ($[***]) upon the twenty-four (24) month anniversary of the Effective Date;
(vi) [***] ($[***]) upon the thirty-six (36) month anniversary of the Effective Date;
(vii) [***] ($[***]) upon attainment of $[***] aggregate Net Sales of Product by or on behalf of Licensee (or its Affiliates, or its or their permitted sublicenses, if any) in a Calendar Year;
(viii) [***] ($[***]) upon attainment of $[***] dollars aggregate Net Sales of Product by or on behalf of Licensee (or its Affiliates, or its or their permitted sublicenses, if any) in a Calendar Year; and
(ix) [***] ($[***]) upon attainment of $[***] aggregate Net Sales of Product by or on behalf of Licensee (or its Affiliates, or its or their permitted sublicenses, if any) in a Calendar Year.
(b) Adjustments to Milestones Payments.
(i) Notwithstanding the foregoing, in the event that the FDA rejects the trade name set forth in Schedule 2.3(a) submitted pursuant to the Accutane PAS (except in a case where Licensee voluntarily determines to use a Licensee Trade Name other than the trade name set forth on Schedule 2.3(a) prior to the FDA making a final determination on whether to approve or reject such trade name) (an "Accutane PAS Rejection"), the Milestone Payments and Milestone Events set forth in Section 3.1(a) shall be modified as follows:
(A) The Milestone Payment for the Accutane PAS Milestone, as set forth in Section 3.1(a)(ii), shall no longer be payable by Licensee;
(B) The Milestone Payment set forth in Section 3.1(a)(iv) shall remain [***] ($[***]) and shall be payable upon the twenty-four (24) month anniversary of the Effective Date;
(C) The Milestone Payment set forth in Section 3.1(a)(v) shall be increased to [***] ($[***]) and shall be due on the thirty (30) month anniversary of the Effective Date;
(D) The Milestone Payment set forth in Section 3.1(a)(vi) shall remain [***] ($[***]) and shall be payable upon the earlier to occur of (x) upon attainment of $[***] in aggregate Net Sales of Product by or on behalf of Licensee (or its Affiliates, or its or their permitted sublicenses, if any) in a Calendar Year or (y) upon attainment of $[***] cumulative Net Sales of Product by or on behalf of Licensee (or its Affiliates, or its or their permitted sublicenses, if any); and
(E) The Milestone Payment for the Initial Order Milestone, as set forth in Section 3.1(a)(iii), shall not be modified.
(F) The Milestone Payments set forth in Section 3.1(a)(vii), Section 3.1(a)(viii) and Section 3.1(1)(ix) shall not be modified.
(ii) In the event that the Initial Order Milestone is delayed beyond the ten (10) month anniversary of the Effective Date other than as a result of (A) Licensee's failure to promptly provide Licensor or its Affiliates with any documentation or information reasonably requested in writing (which shall include notification by e-mail) by Licensor (x) in order to supply the Initial Firm Order (including, preparation of the final digital proofs for secondary packaging, pursuant to Section 4.3), provided that Licensor submits such request with reasonable advance notice to Licensee or (y) relating to any response or submission to any Governmental Entity to which Licensee has an obligation to provide or is required to prepare a response for Licensor to provide to such Governmental Entity, including to the extent specified as such in Section 4.3 and Section 4.7, (B) any breach of any covenant hereunder by Licensee of which Licensor has notified Licensee in writing (which shall include notification by e-mail) and Licensee has failed to cure within seven (7) Business Days after receipt of such notice, and which breach directly causes a delay in achieving the Initial Order Milestone (which includes, but is not limited to, the failure of Licensee to provide timely Forecasts in accordance with Section 5.1 or place the Initial Order (defined below) in accordance with the remainder of this Section 3.1(b)), or (C) any delays attributable to customs clearance of Products that were otherwise delivered to Licensee in a timely manner in accordance with Sections 5.2 and 5.4 (each of (A), (B) and (C), a "Permissible Delay"), each of the Milestone Payments payable pursuant to Sections 3.1(a)(iv), (v), and (vi) above shall be deferred by the amount of time equal to the number of days between the ten (10) month anniversary and the achievement of the Initial Order Milestone. Following an Accutane PAS Rejection, the term "ten (10) month" in the foregoing sentence shall be replaced with "sixteen (16) month" and shall only apply to the milestones set forth in Sections 3.1(a)(iv) and 3.1(a)(v), as adjusted by Sections 3.1(b)(i)(B) and 3.1(b)(i)(C), respectively.
(A) Notwithstanding the foregoing and except as set forth in Section 3.1(b)(ii)(B), no Milestone Payments shall be deferred pursuant to Section 3.1(b)(ii) unless Licensee has placed the initial Firm Order for Product with Licensor (the "Initial Firm Order") and a corresponding purchase order with the third party finished packaging manufacturer relating to such Initial Firm Order (the "Initial Packaging Order"), on or before the three (3) month anniversary of the Effective Date (the "Initial Order Date").
(B) In the event that prior to the Initial Order Date an Accutane PAS Rejection occurs (or the FDA provides written notice to Licensor that an Accutane PAS Rejection will occur), Licensee shall not be required to place the Initial Firm Order or Initial Packaging Order prior to the Initial Order Date.
(C) The Parties expressly agree that in order for Licensor to complete the Initial Order Milestone on or prior to the ten (10) month anniversary of the Effective Date, Licensee will be required to place the Initial Packaging Order on or before the Initial Order Date, and such Initial Packaging Order may be "at-risk" (prior to the receipt of all Licensee Regulatory Approvals).
(iii) As a way of example, if there is no Accutane PAS Rejection and the Initial Order Milestone is achieved on the date that is forty-five days after the ten (10) month anniversary, the Milestone Payments payable pursuant to Sections 3.1(a)(iv), (v), and (vi) shall each be due forty-five days following the time period set forth in each such Section above.
(c) If Licensor fails to achieve the Initial Order Milestone by the eighteen (18) month anniversary of the Effective Date (or, in the event of an Accutane PAS Rejection, by the twenty-four (24) month anniversary of the Effective Date), except if such failure results solely from a Permissible Delay, Licensee shall have the right to terminate this Agreement, upon thirty (30) days' written notice to the Licensor, and Licensor shall refund to Licensee [***] percent ([***]%) of the Upfront Payment promptly, but in any event within thirty (30) Business Days after the effective date of termination.
Section 3.2 Royalty Payments.
(a) In addition to any other amounts due hereunder, subject to the terms and conditions of this Agreement, in consideration of the license provided herein, each Calendar Quarter, the Licensee shall pay to the Licensor non-refundable, non-creditable amounts based upon the cumulative total Net Sales of the Product in the Territory in the Calendar Year to which such Calendar Quarter relates (each a "Royalty Payment"). Each Royalty Payment payable in a Calendar Quarter shall be equal to the sum of (i) and (ii) below:
(i) An amount equal to the product obtained by multiplying:
(A) (1) [***], by
(B) [***]:
Table 3.2(a)(i) | |
Amount of incremental cumulative total aggregate Net Sales of the Product in the Territory in the Calendar Year to which the Calendar Quarter relates: | The percentage rate applicable to such total aggregate Net Sales (but only for that portion of Net Sales within such range) to calculate the Royalty Payment is: |
$[***]– $[***] | [***]% |
$[***]– $[***] | [***]% |
Greater than $[***] | [***]% |
([***]x [***]) x ([***])
(ii) An amount equal to the product obtained by multiplying:
(A) (1) [***] by (2) [***], by
(B) by [***];
([***]) x [***]%
Section 3.3 Payment of Milestone Payments and Royalty Payments.
(a) Each of the Milestone Payments due and payable under Section 3.1 shall be paid by the Licensee to the Licensor promptly (but no more than thirty (30) days) following the occurrence of the corresponding Milestone Event, except that the Milestone Payment due as pursuant to Section 3.1(a)(i) above shall be payable within fifteen (15) days following the Effective Date. The Licensee shall provide notice to the Licensor of the occurrence of the Milestone Event set forth in Section 3.1 prior to, or no later than on, the date of the payment of the corresponding Milestone Payment.
(b) Each of the Royalty Payments due and payable under Section 3.2 shall be paid by the Licensee to the Licensor promptly (but no more than forty-five (45) days) following the end of the Calendar Quarter to which they relate to. The Licensee shall provide a notice to the Licensor prior to, or no later than on, the date such of payment, which notice shall provide sufficient details to permit confirmation by the Licensor of the accuracy of the payments made.
(c) All Royalty Payments and Milestone Payments shall be made by wire transfer of immediately available funds, in United States dollars, to an account designated in writing by the Licensor (such designation to be made at least two (2) Business Days prior to the date on which such payment is due).
Section 3.4 Milestone and Royalty Information, Sales Reports, Audits.
(a) The Licensee shall, and shall cause its Affiliates, and its and their permitted sublicensees to keep reasonable, correct and complete books, records and documents (whether in hardcopy, electronic or other form) substantiating the achievement (or non-achievement) of the Milestone Events and the Net Sales amounts recognized in each Calendar Year for the Product in the Territory, as related to the Royalty Payments and Milestone Events (the "Milestone and Royalty Information") and shall maintain such Milestone and Royalty Information until the third (3rd) year following the end of the Calendar Year to which such Milestone and Royalty Information relates. The Milestone and Royalty Information shall also include sufficient details and documentation to determine the volume of Product sold to Wholesalers and Specialty Pharmacies and the Net Sales calculations.
(b) During the Term and continuing until the first Calendar Year following the Calendar Year in which the Licensor has received all Milestone Payments and Royalty Payments, the Licensee shall provide the Licensor, (i) on a Calendar Quarterly basis together with the corresponding Royalty Payments, not later than forty-five (45) days after the end of each Calendar Quarter; and (ii) on an annual basis, not later than sixty (60) days after the end of each Calendar Year, the annual Sales Report (the Sales Report due pursuant to (ii) being an "Annual Sales Report"). "Sales Reports" shall mean reasonably detailed quarterly (or annual, as applicable) reports of the aggregate gross sales and aggregate Net Sales of the Product in the Territory including the customer type (i.e. Wholesaler, Specialty Pharmacy), for such Calendar Quarter or Calendar Year, as applicable. All Annual Sales Reports shall also include separate line items for the volume of Product by customer type, as well as the volume of Product sold to each Wholesaler and cumulative sales volume for all Specialty Pharmacies, together with a classification of each customer as a Wholesaler or Specialty Pharmacy. The Annual Sales Reports delivered at the end of each Calendar Year shall also include an annual certification, executed by an officer of the Licensee, certifying the Wholesaler Ratio and that sales of Product by the Licensee, its Affiliates, and its or their permitted sublicensees, if any, did not exceed the Wholesaler Limit (or, in the event that the volume of sales of Product did exceed the Wholesaler Limit, such limit was breached).
(c) During the Term and for a period of two (2) Calendar Years thereafter, the Licensor or an independent certified public accountant selected by Licensor and reasonably acceptable to Licensee (not to be unreasonably withheld), (provided all of such Persons shall be subject to the obligations of confidentiality as set forth herein), if any, shall have reasonable access to, and shall be able to review and audit, once every twelve (12) months upon no less than fifteen (15) days written notice and during normal business hours, the books, records, documents (whether in hardcopy, electronic or other form), personnel, work papers and operations of the Licensee to the extent necessary to permit the Licensor to reasonably verify compliance of Licensee with its obligations under Article III and the Sales Reports. The Licensee agrees to reasonably assist the Licensor (or the independent certified public accountant, as applicable) in connection with the exercise of the audit rights granted by this Section 3.4(c). All expenses and costs associated with the review and audit in this Section 3.4(c) shall be borne solely by the Licensor; provided that in the event that such review and audit results in a finding and determination that a Milestone Payment should have become payable earlier or a Milestone Payment or Royalty Payment payable was not otherwise paid or that the amount paid was lower by more than five percent (5%) than the amount that should have been paid, then the expenses and costs of such review and audit (including reasonable attorney's fees) shall be borne and paid by the Licensee. All amounts due to the Licensor as shown by the audit (that have not been previously paid by the Licensee to the Licensor) shall be paid within thirty (30) days following the receipt by the Licensee of a copy of the final audit report. In the event that the audit uncovers an overpayment by Licensee, Licensor shall promptly credit such amount towards the subsequent Milestone Payment or Royalty Payment payable by Licensee; provided that, in the event that no further payments are payable by Licensee hereunder, Licensor shall promptly refund such overpaid amount to Licensee. Licensee will include in all sublicenses granted with respect to the Product, an audit provision substantially similar to the foregoing requiring such sublicensee to keep full and accurate books and records relating to the Product and granting Licensor the right to audit the accuracy of the information reported by any sublicensee in connection therewith in accordance with terms and conditions substantially similar to those provided in this Section above.
Section 3.5 Financial Reports. During the Term and continuing until all Milestone Payments payable pursuant to Section 3.1(a)(ii) - (vi) have been paid to the Licensor by the Licensee (as adjusted pursuant to Section 3.1(b), as applicable), Licensee shall, no later than sixty (60) days following the end of each Calendar Year, furnish to Licensor unaudited financial statements of the Licensee as of the end of such Calendar Year which shall contain include a balance sheet and related statements of income and cash flows statement prepared in accordance with GAAP.
ARTICLE IV
MANUFACTURE AND SALE OF PRODUCTS
Section 4.1 Manufacture of Products. During the Term, upon receipt of all Licensee Regulatory Approvals and upon the terms and subject to the conditions set forth herein, the Licensee hereby agrees to purchase exclusively from Licensor and the Licensor agrees to supply the Products to Licensee for Commercialization by Licensee in the Territory. The Licensor shall have the right to subcontract its obligations under this Agreement to a Third Party or to any of its Affiliates; provided that, any subcontracting of the Manufacture of the Product shall be in accordance with Section 5.2(d); provided further that, Licensor shall remain primarily responsible for the actions and omissions of its subcontractors, including any subcontractor that performs services on behalf of Licensor pursuant to Section 4.3. All Product to be supplied pursuant to this Agreement shall be in blister packs, without label and without any tradename or trademarks and as further set forth in Schedule 8.1.
Section 4.2 Sale and Distribution. The Licensee will sell the Products only in the Territory and will not directly or indirectly sell or otherwise distribute the Products outside of the Territory. The Licensee shall have the sole and exclusive right to determine all terms and conditions of sale by it of the Products (including, for clarity, pricing), subject to the limitations expressly set forth in this Agreement and applicable Law.
Section 4.3 Packaging and Labeling.
(a) Immediately following execution of this Agreement Licensor shall provide Licensee with a copy of the label for the Licensed Product (the "Licensed Product Labeling"). Licensor is responsible for ensuring that the Licensed Product Labeling is accurate, current and complete (consistent with the Product [***]), and complies with applicable requirements of the FDA (and applicable Governmental Entities), the REMS Program and applicable Governmental Rules. Licensee will be responsible for modifying the Licensed Product Labeling in order to generate the content of the label for the Product, together with any other written or graphic matter contained upon any wrapper, packaging, package insert or outset utilized for the Product (which for clarity, shall include the appropriate Licensee Trademarks and any other prescribing information for the Licensed Product that is required by the FDA (and applicable Governmental Entities) and the REMS Program, in the manner and to the extent specified in the Specifications (collectively, the "Product Labeling", with the content of the Product Labeling that is added and/or modified in any way (including relating to formatting and placement) by Licensee (excluding, for clarity, the unmodified Licensed Product Labeling) being referred to as the "Modified Product Labeling"); provided that, Licensor shall have a reasonable opportunity to review and provide comments on the proposed Product Labeling. Licensee shall not include any information on the Modified Product Labeling that is not approved by the FDA or, solely with respect to Additional Changes, Licensor. The Licensee will be responsible for ensuring the accuracy of all information contained on the Product Labeling and for the compliance of all such labels with applicable Governmental Rules and the REMS Program. Such packaging and labels will be in accordance with the Specifications. Licensor shall promptly inform Licensee of any changes to the Licensed Product Labeling. Upon written notification from Licensor, the Licensee will make any changes to the Product Labeling to conform to the License Product Labeling (as applicable) or as otherwise required by applicable Law, the REMS Program or the FDA, and will consider in good faith making any other changes requested by the Licensor, at the Licensee's sole cost and expense, within a reasonable timeframe to be agreed upon in writing by both Parties. The Licensee will be responsible for preparing (but shall not submit) all regulatory or governmental submissions relating to the Product Labeling (whether for the initial submissions to the Product Labeling or subsequent submissions relating to changes required by Governmental Rules, or by any Governmental Entity or the REMS Program) and the parties will work together to submit any such changes to all applicable Governmental Entities for approval, if required, which filings shall be completed by the Licensor unless otherwise agreed to in writing. At such time that Licensor has established its own internal capabilities to secondary package and label products, if ever, in [***] (the "Licensor Facility"), the Parties shall negotiate in good faith an amendment to this Agreement to take into account such capabilities (which amendment, for clarity, shall contain the following terms: (i) Licensor will provide at the Licensor Facility any secondary packaging, labeling and related services with respect to the Product, with the Supply Price to be negotiated at the time of such amendment, (ii) the Product will be delivered to Licensee as a fully labeled and packaged product that is ready for shipment (the "DRL Finished Product") and (iii) the DRL Finished Product will be delivered CIP US Port (Incoterms 2010)). Additionally, as part of the entry into such amendment, the Parties shall negotiate in good faith the remaining shelf life of the DRL Finished Product at the time of delivery to Licensee (which for clarity, shall be no less than eighteen (18) months' as of the date of delivery of such DRL Finished Product to Licensee).
(b) In the event that Licensee wishes to make any change to the artwork on the Product Labeling, including color changes or updates to packaging or Licensee Trademarks, etc., in each case, that would require a submission to any Governmental Entity or to the REMS Program (each an "Additional Change"), Licensee shall first discuss such proposed Additional Change with the Licensor. In the event that Licensor agrees to permit any such Additional Change (such permission not to be unreasonably withheld, conditioned or delayed), Licensee shall prepare all submissions and Licensor shall cooperate with Licensee to make any applicable submissions to Governmental Entities and/or REMS Program, provided, that Licensee shall bear all costs and expenses associated with any Additional Change. For clarity, the Licensor may reject in its sole discretion any Additional Change or other change to the Product that is requested by the Licensee.
Section 4.4 Facility Maintenance; Inspection; Reports.
(a) The Licensor shall, at all times, maintain and operate, or cause its contractors to maintain and operate, all facilities where Products are Manufactured, packaged, tested, stored, warehoused or shipped, and implement such quality control procedures, as is reasonably required so as to be able to perform its obligations hereunder in accordance with all applicable Governmental Rules, including without limitation, the cGMP Requirements. Not more than once every twelve (12) months (or more often for follow-up audits or inspections directed at significant or critical quality issues observed during the regular audit or brought to the Licensee's attention through customer complaints or claims or by Governmental Entities), the Licensor shall permit, or cause its contractors to permit, quality assurance representatives of the Licensee or designated third parties to inspect such facilities, operations, documents, and records related to the handling, manufacture, testing, inspection, packaging, storage, disposal and transportation of the Products by the Licensor or the applicable contractor upon reasonable notice (which shall not be less than ten (10) days), during normal business hours and on a confidential basis. The Licensor shall also permit, and cause its contractors to permit, representatives of the FDA to inspect such facilities as requested by the FDA.
(b) The Licensor shall maintain adequate and accurate records consistent with the applicable Specifications, including records covering quality control testing and release of the Products and all other Manufacturing services provided hereunder in compliance with the cGMP Requirements and any other relevant Governmental Rules, at all times during the performance of the Manufacturing services and for three (3) years after the date of Manufacture, or such longer period as required by Governmental Rules.
Section 4.5 Adverse Events. Prior to the first commercial sale of the Product by or on behalf of Licensee, but no later than ninety (90) days after the Effective Date, the Parties shall each assign a representative to negotiate in good faith and agree on a process and procedure for sharing and reporting of adverse event information, which shall be documented in a pharmacovigilance agreement ("Pharmacovigilance Agreement"). The Parties shall execute a Pharmacovigilance Agreement within one hundred twenty (120) days after the commencement of discussions with respect thereto.
Section 4.6 Ownership of Regulatory Approvals; Regulatory Communications.
(a) The Parties acknowledge and agree that, in addition to the Licensee Trademark Submissions, Licensee will be responsible for making, obtaining or filing, the following: (i) obtaining the NDC numbers for all Product to be sold by Licensee, including the drug listing of NDC numbers and annual drug listing of the NDC numbers, (ii) making all filings relating to its promotional materials with the Office Prescription Drug Promotion ("OPDP") and (iii) registering as a "wholesaler" (but not a participant or sponsor) under the REMS Program (collectively, the "Licensee Required Filings"). Following execution of this Agreement, Licensor shall provide Licensee with an authorization letter, to allow Licensee to make all filings relating to its promotional materials with OPDP. Prior to making any submissions to OPDP pursuant to this Section 4.6(a), Licensee shall provide Licensor with a copy of such filings to be made with OPDP and a copy of all such promotional materials at least seven (7) Business Days prior to making such submissions to OPDP. In the event that Licensor raises any objection to or concern with the promotional materials, the Parties shall discuss in good faith and shall work together to reasonably and promptly address such concerns prior to Licensee making such filings with OPDP.
(b) All Regulatory Approvals and Regulatory Documentation relating to the Product, other than the Licensee Trademark Submissions and Licensee Required Filings, shall be owned solely by Licensor, and Licensee shall not have, nor shall it claim, any ownership interest or other right in such Regulatory Approvals and Regulatory Documentation.
(c) Notwithstanding anything to the contrary provided herein or elsewhere, the Parties expressly agree that Licensee shall not be permitted to make any submissions to any Governmental Entity or changes to any of the Regulatory Documentation without the express prior written consent of the Licensor, except that Licensee shall be responsible for the Licensee Trademark Submissions and Licensee Required Filings. Licensor shall own all Regulatory Documentation except that Licensee shall own the Licensee Trademark Submissions and Licensee Required Filings.
(d) Licensor shall provide in good faith regular updates to Licensee regarding the status of the [***]-Related Trade Name Submissions and any matters related thereto, including anticipated approval dates (and any changes or updates thereto) and any requests by the FDA for documentation or additional information in connection therewith. Additionally, Licensor shall promptly inform Licensee of any communications from, or material issues raised by, the FDA or other applicable Governmental Entity in connection with the [***]-Related Trade Name Submissions and shall promptly (but in any event within three (3) Business Days) provide Licensee with copies of any correspondence (including emails) relating thereto. With respect to the [***]-Related Trade Name Submissions, Licensor shall discuss such matter with Licensee and consider in good faith Licensee's comments with respect thereto prior to responding to the FDA or other Governmental Entity, as applicable. Upon Licensee's reasonable request, Licensor shall address the various matters set forth in this Section 4.6(d) through a meeting between the Parties (on a monthly basis, or such lesser frequency requested by Licensee). For the avoidance of doubt, Licensor shall not file, or respond to any communications with respect to, any [***]-Related Trade Name Submissions without discussing the content of such submissions or communications, and any proposed responses with respect thereto, with Licensee and addressing in good faith Licensee's concerns or objections with respect to any of the foregoing, provided, that Licensor shall be permitted to make filings or respond to communications with Governmental Entities in the event that the failure to respond would adversely impact the Product [***] in any manner other than with respect to the [***]-Related Trade Name Submissions.
Section 4.7 Licensee Submissions. Subject to the terms and conditions set forth in this Agreement, each of the Parties hereto shall (subject to, and in accordance with, Governmental Rules) cooperate and take such reasonable actions, to make all Licensee Submissions with the goal of obtaining all Licensee Regulatory Approvals. Other than any [***]-Related Trade Name Submissions, REMS Related Approvals, Licensee Trademark Submissions, Licensee Required Filings or Additional Changes, which shall be made in accordance with Sections 2.3(b), 2.3(b), 2.3(a), 4.6(a) and 4.3(b), respectively, to the extent that any other Licensee Submissions (or any other regulatory filings) are required to be made during the Term relating to the Commercialization of the Product in the Territory, Licensee shall be responsible for preparing all such submissions and filings (but shall not make any such submissions) and Licensor shall use Commercially Reasonable Efforts to review and make such filings. Other than as set forth in Sections 2.3(b) and 4.8, all costs and expenses relating to any Licensee Submissions and all other Licensee Regulatory Approvals shall be paid by Licensee upon demand from Licensor.
Section 4.8 REMS Program; REMS Fees.
(a) Licensee acknowledges and agrees that as of the date hereof the Product is the subject of the REMS Program. Each Party agrees that it shall, and shall ensure that its Affiliates (and in the case of Licensee, permitted sublicensees (if any)), comply with all rules, regulations, and laws relating to the REMS Program.
(b) Licensor shall use good faith efforts to request the applicable REMS Program authorities to display the Product on the iPledge website as a distinct product from the DRL Product.
(c) With respect to the Product (but not the DRL Product) and subject to Licensor's confidentiality obligations to any Person relating to the REMS Program, Licensor shall not file, submit or respond to any written communications with respect to, any REMS Related Approvals without providing a copy of such submissions to Licensee reasonably in advance of the proposed submission date, and shall discuss the strategy and content of such submissions or communications and any proposed responses with respect thereto, with Licensee and addressing Licensee's good faith concerns and objections with respect to any of the foregoing; provided that, such submissions and/or communications may be reasonably redacted by Licensor with respect to confidential or proprietary information of Licensor or with respect to any matters to which Licensor has any obligations of confidentiality to another Person.
(d) Licensee shall be responsible for all costs and expenses incurred by Licensee or Licensor associated with updating, amending, printing (or re-printing) or otherwise modifying the documents, materials, websites or other media (in all cases whether in hardcopy, electronic or other form) relating to the REMS Program as a result of the Product or as required for Licensee to Commercialize the Product in the Territory.
(e) Licensee shall be responsible for all REMS Program related fees and expenses, including, without limitation, maintenance fees, operational fees, program fees and expenses, in each case, incurred as a result of inclusion of the Product in the REMS Program, permitting the Licensee to Commercialize the Product in the Territory and to the extent related to sales of the Product in the Territory by or on behalf of Licensee (together with the costs and expenses set forth in Section 4.8(d), collectively, "REMS Fees"). Licensee shall be responsible for, pay and discharge directly any REMS Fees charged to Licensee. To the extent that any REMS Fees relating to the Product are attributable to Licensee and charged to Licensor, Licensee shall promptly reimburse any such REMS Fees in accordance with the invoices associated with such fees. Licensor shall send Licensee an invoice setting forth such REMS Fees, which invoice shall: (i) set forth expenses that are solely attributable to the Product or relating to fees set forth in Section 4.8(d) (collectively, "Product-Only REMS Fees") (which shall (A) not include any expenses attributable to the DRL Product, (B) for all Product-Only REMS Fees, include, to the extent possible, a separate line item for each category of expense (and with respect to all pass-through expenses, include appropriate substantiating documentation for such expense)); and (ii) for all other REMS Fees, (x) include a separate line item for each category of expense and (y) provide a calculation of the pro-rata amount of such expense for which Licensee is responsible (based on a determination of the volume of sales attributable solely to the Product versus the DRL Product) (the "Pro-Rata REMS Fees"). Licensee shall promptly, after receipt of the applicable invoice from Licensor, reimburse any such Pro-Rata REMS Fees and Product-Only REMS Fees. For clarity, following the receipt by Licensor of market share invoices, Licensor shall determine the volume of sales attributable solely to the Product versus the DRL Product. Licensee shall be responsible for the REMS Fees that are attributable to its Product based on volume-based sales, amounts due pursuant to Section 4.8(d), and its pro rata portion of all other REMS Fees (determined by volume) that are attributable to the participation of the Product [***] in the REMS Program. For the avoidance of doubt, Licensee shall not be responsible for any REMS Fees charged to Licensor and attributable to sales of the DRL Product.
(f) Licensee agrees that it shall not Knowingly contact or communicate with any REMS Program members, participants or administrators without the prior written consent of the Licensor with regard to the REMS Program, other than in connection with Licensee's obligations under Section 2.3(b). Licensee acknowledges that it is not a "member" of the REMS Program.
(g) Subject to Licensor's confidentiality obligations to any other Person with respect to the REMS Program, each Party hereto agrees that it shall promptly (but in any event no later than five (5) days after receiving such information) provide the other Party hereto copies of any reports, documents or other information received by such Party from the REMS Program in connection with adverse events, quality complaints or similar matters, in each case, related to the Product. In the event of any conflict between this Section 4.8(g) on the one hand, and either a Quality Agreement or any Pharmacovigilance Agreement on the other, such Quality Agreement or Pharmacovigilance Agreement shall control.
Section 4.9 Regulatory Cooperation. Licensee shall, upon the request of the Licensor, provide any such data in Licensee's actual possession to Licensor that is required to be submitted by Licensor to a Governmental Authority or to the REMS Program. The Licensee shall reasonably cooperate with the Licensor, at Licensor's reasonable request, with respect to any regulatory matters for which the Licensor is responsible in relation to the Licensed Product. Without limiting the foregoing, the Licensee shall cooperate with the Licensor in all matters regarding information requests for a Governmental Entity or REMS Program involving the Licensed Product.
ARTICLE V
FORECASTS, ORDERS AND SHIPMENT
Section 5.1 Forecasts. On or prior to the tenth (10th) Business Day of each Calendar Quarter during the Term, Licensee will provide the Licensor with a non-binding written forecast of estimated quantities of Product that the Licensee anticipates ordering from the Licensor during the next twenty-four (24) month period commencing upon the following Calendar Quarter (the "Forecast"). In order to assist in the planning of production runs for the Products, Licensee will provide an initial Forecast to Licensor within thirty (30) days following the execution of this Agreement (the "Initial Forecast"), which Initial Forecast shall only be effective upon mutual agreement of the Parties (provided that, neither Party may withhold agreement to an Initial Forecast that provides for an order quantity that falls within the range of 150,000 Units to 250,000 Units of Product for the first twelve (12) months of such forecast). The Initial Forecast will be updated on or prior to the tenth (10th) Business Day of each following Calendar Quarter and such updated Forecast in accordance with this Section 5.1 will be promptly delivered to the Licensor by the Licensee. The quantity of Product set forth in the first twelve (12) months of a Forecast for a particular Calendar Year shall not decrease by [***] ([***]%) percent, or increase by more than [***]percent ([***]%), from the original Forecast in which such Calendar Year was first included, unless agreed to in writing by the Parties (the "Annual Variation Limit"). The first three (3) months of each such Forecast (the "Firm Order Period") shall be binding on Licensee. The remaining twenty-one (21) months of each such Forecast shall be non-binding estimates for planning purposes. The Licensee will forecast the volume of Products comprising full batch and in multiples of batch quantities, as such quantities are set forth on Schedule 8.1. Each Forecast will be made by the Licensee in good faith, taking into account reasonable projections of demand for the Products including, without limitation, demand in line with prescription trends, and allowing for reasonable safety stock. The Licensor shall use its Commercially Reasonable Efforts to ensure sufficient manufacturing capacity to meet the Forecast.
Section 5.2 Orders.
(a) The Licensee will place firm purchase orders ("Firm Orders") for Products in writing with a delivery date for such Firm Order of one hundred twenty (120) days after the Purchase Order Date, unless otherwise agreed to by the Parties in writing and except for the Initial Firm Order, which shall be placed in accordance with Section 3.1(b)(ii)(A) and Schedule 5.2(B), or as otherwise agreed to by the Parties. For clarity, notwithstanding anything to the contrary in this Article 5, the Initial Firm Order shall become binding on both Parties only upon receipt of the [***]-Related Trade Name Approval, or earlier as agreed to by the Parties in writing. Without limitation to the terms and conditions relating to each Firm Order, unless otherwise agreed to in writing, Licensee shall not be permitted to place any Firm Orders after the Initial Firm Order until the receipt of the [***]-Related Trade Name Approval, and the delivery date for the Firm Order following the Initial Firm Order shall be at least thirty (30) days following the delivery date of the Initial Firm Order. Each Firm Order will specify the quantity and description of each Product ordered, the requested delivery date (which delivery dates will not be on a Saturday, Sunday or holiday), the delivery address and any special instructions requested; provided that, the quantity of Product ordered pursuant to each Firm Order shall be consistent with the amounts set forth in the Firm Order Period of the most recent Forecast, as further described in Section 5.1. The minimum size of any order placed by the Licensee will be a full batch in accordance with Schedule 8.1 hereto, except with the advance written approval of the Licensor and payment of any additional expenses or fees that are required for split batches. All Firm Orders will be in full batch increments and Licensor shall not be required to produce split batches unless mutually agreed to in writing. The Products set forth in Firm Orders will be delivered to an identified finished packager in accordance with the Firm Order. The date an order will be deemed placed (the "Purchase Order Date") will be the date that the Licensor actually receives the purchase order form. The Licensee will be responsible for any delays arising from any changes requested by Licensee in connection with any Firm Order. Any changes to any Firm Order requested by Licensee will neither reduce nor in any way affect the Minimum Requirement obligations set forth in Section 5.3. Orders will be deemed accepted by the Licensor unless the Licensor provides notification of rejection to the Licensee within ten (10) Business Days of receipt of the Firm Order. In the event that a Firm Order is rejected (it being understood that Licensor may only reject a Firm Order that fails to meet the requirements specified in this Agreement), the Licensor shall provide to Licensee the reasons for rejection in writing and the Licensor and the Licensee will cooperate in good faith to promptly resolve any issues raised by such order. The Licensor shall use Commercially Reasonable Efforts to timely supply any Products in accordance with the resolution of a rejected Firm Order.
(b) The Licensor will supply the Products in accordance with each Firm Order placed pursuant to the terms of this Agreement by the Licensee and accepted by the Licensor including the quantities and delivery dates requested in each Firm Order. Each Firm Order will set forth a delivery date of one hundred twenty (120) days after the date of such order. The Initial Firm Order is set forth in Schedule 5.2(b) hereto. Licensee acknowledges that the lead time for any Firm Order is one hundred twenty (120) days, except for the Initial Firm Order, which shall be placed in accordance with Section 3.1(b)(ii)(A) and Schedule 5.2(B).
(c) Subject to Section 5.1, Licensee may submit Firm Orders for quantities of Product in excess of the Forecast amounts (such excess amounts being "Special Orders"), and shall separately provide notice to Licensor that it would like to place a Special Order. Licensor shall use Commercially Reasonable Efforts to fill such Special Order and shall notify Licensee within ten (10) Business Days after receipt of a Special Order if it expects to be unable to do so. If Licensor is unable to fulfill any Special Order, it shall not be deemed a breach of this Agreement.
(d) Notwithstanding any other provisions to the contrary herein, the Licensor in its sole discretion may supply or cause its Affiliate to supply Licensee with the Products, in the form listed on Schedule 8.1 from a facility retained by the Licensor or any of its Affiliates and approved as a Manufacturing site under the Product [***] (which facilities, as of the Effective Date, are listed on Schedule 5.2(d)), and the Parties shall cooperate with each other, at Licensor's cost, to effectuate any changes to the labeling, packaging or other aspects of the Manufacture of the Product that may be required due to such fulfillment from the alternate Manufacturing site.
(e) Subject to Section 4.3(a), Product supplied by Licensor hereunder shall have at least twenty-one (21) months' remaining shelf life as of the date of delivery of such Product to Licensee. During the Term, Licensor shall reasonably inform Licensee of any changes to the approved shelf life of the Product.
(f) In the event that Licensor manufactures excess Product, without limiting any of Licensee's rights to reject such Product in accordance with Section 7.3, Licensee shall accept delivery of up to [***] ([***]%) of the quantity of Product ordered by Licensee pursuant to Firm Orders placed under Section 5.2.
(g) The terms of this Agreement shall prevail over any conflicting, inconsistent or additional terms set forth in any Firm Order.
(h) Shortfall Event; Alternative Supply.
(i) Notwithstanding any provision herein to the contrary, in the event that Licensor is unable to deliver in accordance with Section 5.4 at least eighty (80%) of the volume quantity of Product set forth in a Firm Order (each a "Shortfall") for three consecutive Firm Orders (the occurrence of the third consecutive Shortfall being a "Shortfall Event") (provided that Replacement Firm Orders shall not count as a Firm Order for the purposes of this Section 5.2(h)), and the Shortfall amount of Finished Product attributable to at least two out of three Firm Orders making up a Shortfall Event is not cured within ninety (90) days of receipt of written notice to Licensor of such Shortfall Event violation (such 90-day period with respect to a given Shortfall, the "Shortfall Cure Period"), then an "Interruption Event" shall be deemed to have occurred. Upon the commencement of any Interruption Event, Licensee, in addition to any other rights and remedies hereunder, shall have the right, in its sole discretion to purchase the Product from a third party supplier ("Secondary Supplier"). Licensee shall be responsible for Product actually delivered pursuant to any Firm Order accepted prior to the occurrence an Interruption Event.
(ii) The replacement of Finished Product pursuant to a Replacement Firm Order in accordance with Section 8.3(c), shall cure of a Shortfall for the Firm Order it relates to in the event that Licensee receives at least one hundred percent (100%) of the Product ordered under the original Firm Order (in the form of Finished Product) during the Shortfall Cure Period. Notwithstanding the foregoing sentences, the Shortfall Cure Period shall not commence until Licensee has issued Replacement Firm Orders to Licensor for Product representing such Shortfalls, provided, however, that if Licensor delivers written notice to Licensee during the Shortfall Cure Period that it will be unable to complete such additional Replacement Firm Orders to Licensor for Product representing such Shortfalls, then the Shortfall Cure Period shall automatically end upon the giving of such written notice. Licensor acknowledges and agrees that Licensee shall have the right to issue Replacement Firm Orders for the quantity of Product representing such Shortfalls (in accordance with Section 8.3(c) (including that such Replacement Firm Orders shall be in full batch increments)) as soon as practicable after delivery of Product pursuant to Section 5.4 until the end of the Order Period. For the avoidance of doubt, Licensee must issue a Replacement Firm Order in accordance with Section 8.3(c)(i) following a Shortfall in order for such Shortfall to be one of the three consecutive Firm Orders that make up a Shortfall Event.
(iii) During any Interruption Event (irrespective of whether Licensee elects to purchase the Product from a Secondary Supplier), Licensee shall be relieved of its obligation to order its purchase requirements of the Product from Licensor until the one hundred twentieth (120th) day (the "Resumption Date", and the period beginning on the expiration of the Shortfall Cure Period and ending on the Resumption Date being the "Interruption Period") following the date that Licensor provides written notice (a "Resumption Notice") to Licensee that it is able to fulfil Firm Orders in accordance with the terms of this Agreement. For clarity, the non-placement of Firm Orders during any Interruption Period shall not be deemed to be a breach of Licensee's obligations under this Agreement. Following a Resumption Date, subject to the remainder of this Section 5.2(h), Licensee shall be required to purchase from Licensor for the remainder of the Term the greater of (i) [***] ([***]%) percent of the total cumulative annual quantities of Product ordered in such Calendar Year from Licensor and any Secondary Supplier and (ii) the Minimum Requirement of Product (subject to Licensee's rights in the event of any subsequent Shortfall Events occurring after the initial Resumption Date, if any, as set forth in this Section 5.2(h), mutatis mutandis) (the "Annual Purchase Requirement"). For clarity, the calculation of [***] percent ([***]%) of annual Product volume or the Minimum Requirement of Product, as referenced in the immediately preceding sentence, shall be made on a pro rata basis for the Calendar Year in which an Interruption Period occurs. By way of example, if Licensee ordered [***]Units of Product for delivery in a given Calendar Year ([***] Units each month), of which [***] Units were delivered from January through April, and May through August constituted an Interruption Period, Licensee would be required to order the following amount of Product for delivery in September through December of such Calendar Year in order to satisfy the Annual Purchase Requirement: the greater of (i) [***]Units (calculated as follows: [***]% of [***]Units - [***]Units already sold = [***] Units remaining for the Calendar Year; [***] Units remaining x (4 months non-Interruption Period / 8 months remaining in Calendar Year = [***]) or (ii) [***] Units (calculated as follows: [***] Units - [***] Units already sold = [***] Units remaining for the Calendar Year; [***] Units remaining x (4 months non-Interruption Period / 8 months remaining in Calendar Year = [***]).
(iv) Notwithstanding Section 2.4, and subject to the terms and conditions set forth below, Licensee shall have the right at any time during the Term to engage a manufacturer to establish and validate such manufacturer as a Secondary Supplier for the Product in the Territory under the Product [***] (and Licensor shall be required to be a party to any such arrangement with a Secondary Supplier). Licensor shall, upon Licensee's reasonable request and at Licensee's sole cost, reasonably cooperate by providing copies of all data, documents, information or other know-how that is reasonably necessary to make or have made Product ("Technology and Manufacturing Information"). Licensor shall not be required to provide any personnel or manufacturing technology transfer other than such Technology and Manufacturing Information referred to in the foregoing sentence; provided that, Licensor shall make itself reasonably available by telephone, video conference and/or e-mail (but not in-person), for a period of ninety (90) days after the completion of the technology transfer in this subsection (iv), to answer Licensee's reasonable questions regarding the transferred know-how (subject to reimbursement by Licensee for Licensor's internal costs incurred in providing such assistance, at pre-agreed personnel rates). As a condition to engaging in any discussions with a potential Secondary Supplier, the Parties and such potential Secondary Supplier shall enter into a tri-partite confidentiality agreement and such Secondary Supplier shall agree not to develop, manufacture, supply or otherwise commercialize a Competitive Product during the Term. Any Secondary Supplier shall not be a Direct Competitor of Licensor. Any filings required to be made to any Governmental Entity relating to a Secondary Supplier shall be prepared by Licensee (but not filed) and subject to review by Licensor, and Licensor shall be permitted to make any changes to such filings as it deems necessary or advisable in its sole discretion. Licensor shall only be required to share Technology and Manufacturing Information with those persons that need to know such information, and shall not be required to disclose any such Technology and Manufacturing Information to any Person (including the Licensee) prior to entering into the tri-partite disclosure agreement. The Parties agree that the Technology and Manufacturing Information is the Confidential Information of Licensor. Only Licensor shall be permitted to make any filings required to be made to any Governmental Entity relating to a Secondary Supplier unless otherwise agreed to in writing. Licensor shall solely own all Regulatory Approvals, Regulatory Documentation and intellectual property (including know-how) relating to or created as a result of the engagement of a Secondary Supplier (which shall exclude such Secondary Supplier's background intellectual property in existence prior to Licensee's engagement of such Secondary Supplier). Secondary Supplier shall only be permitted to supply Product to Licensee or Licensor for sales in the Territory and shall not supply Product outside of the Territory. Licensee shall not have any rights or privileges under this Section 5.2(h)(iv) and shall not contact, engage in any discussions or negotiations with any potential Secondary Supplier until it has provided prior written notice to Licensor (a "Secondary Supplier Election Notice") that has elected to exercise its rights under this Section 5.2(h)(iv).
(v) For the avoidance of doubt, the Parties hereby expressly agree that product supplied by a Secondary Supplier shall be considered "Product" as defined hereunder and subject to the terms and conditions of this Agreement, including with respect to Article III and the payment and calculation of Royalty Payments and Milestone Payments.
(i) The Parties acknowledge and agree that, as of the Effective Date, Licensor intends to Manufacture Product utilizing the batch size set forth in Schedule 8.1. Licensor shall promptly inform Licensee in the event that Licensor intends to change the batch size used to Manufacture Product and shall negotiate in good faith and agree to reasonable amendments to the forecasting and ordering procedures, and related provisions, to account for the changed batch size for Product.
Section 5.3 Minimum Requirement. During each Calendar Year (and pro-rata for the first Calendar Year beginning on the achievement of the Initial Order Milestone and for the final Calendar Year of the Term), Licensee shall "purchase" (as further described in this Section 5.3) at least [***] ([***]) Units of Product from Licensor (the "Minimum Requirement"). For purposes of the Minimum Requirement, the amount "purchased" in a Calendar Year shall be based on the amount ordered in Firm Orders placed for Product with a requested delivery date in the applicable Calendar Year, as long as such requested delivery dates are made pursuant to Sections 5.1, Section 5.2 and Section 5.3. If Licensee does not purchase at least the Minimum Requirement during any Calendar Year, then within forty-five (45) days after the end of such Calendar Year, Licensee shall pay Licensor an amount equal to (1) the difference between (A) [***] Units of Product and (B) the number of Units of Product ordered by Licensee during such Calendar Year (it being understood that the quantity of Product ordered by Licensee may be greater than the quantity delivered by Licensor) (such difference being the "Shortfall Quantity"), multiplied by (2) $[***] per Unit. Licensee shall not be obligated to pay for the Shortfall Quantity to the extent Licensee's failure to meet the Minimum Requirement is due to Licensor's inability to timely supply Licensee with Product in the applicable Calendar Year in accordance with properly placed Firm Orders (including in the event of any Interruption Period) or provided that such inability to timely supply Licensee is not directly caused by Licensee's failure to meet its obligations under this Agreement. At the end of each Calendar Year Licensor shall issue an invoice to Licensee indicating the amount owed by Licensee to Licensor pursuant to this Section 5.3, which amount, if any, shall be due within forty-five (45) days of receipt of such invoice.
Section 5.4 Delivery.
(a) All Products shipped under this Agreement will be shipped CIP US PORT (Incoterms 2010) as bulk product, without any secondary packaging to such location designated by the Licensee in the applicable Firm Order. The Licensor will pay all freight, and insurance charges and Licensee will pay taxes, import and export duties, inspection fees and other charges applicable to the sale and transport of Products purchased by the Licensee. Title and risk of loss and damages to Products purchased by the Licensee will pass to the Licensee upon delivery to the carrier. In the event of damage or loss to the Products after delivery to the carrier, the Licensee will be responsible for filing appropriate claims; provided that, Licensor shall reasonably cooperate with Licensee in filing and receiving reimbursement for such claims. The Licensor shall notify Licensee in writing of the following information concurrently with each shipment of Product: (i) date of shipment, (ii) quantity and type of Product shipped, and (iii) order number or other identifying information.
(b) Licensor shall promptly report to Licensee the occurrence of any event within or beyond its control that is likely to affect delivery of any order of Product, provided that, the giving of such notice shall not otherwise excuse Licensor's performance hereunder.
(c) Licensor shall perform quality assurance testing with respect to the Products sold hereunder, including stability testing, so that the Products conform with the Specifications. With each shipment of Products to Licensee, Licensor shall provide Licensee with a Certificate of Analysis ("COA") and a Certificate of Compliance ("COC") confirming that the Products in such shipment have been tested in accordance with the Product [***] and meet the Product's Specifications. Any deviations and investigations related to such Products shall be completed in compliance with the Product [***], cGMP Requirements and the Quality Agreement.
Section 5.5 Customs Clearance. Licensee shall be responsible for the customs clearance of the Product, and the Parties agree to cooperate with each other including to provide information and documents reasonably requested by the other Party hereto and in such non-requesting Parties' possession relating to the Product (including statement of origin or other customs documentation). Licensee shall not take any actions, or omit to take any actions, to intentionally delay the customs clearance of any Products by Licensee's customs agent (it being understood that Licensee shall have no control over the independent actions or omissions of such customs agent).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.1 Representations and Warranties of the Licensor.
The Licensor hereby represents and warrants to the Licensee as follows:
(a) Product Compliance. All Products delivered pursuant to this Agreement by the Licensor (or any sub-contractor thereof) to the Licensee or its designee during the Term will at shipment be in compliance in all material respects with this Agreement, the Specifications, the Quality Agreement and applicable Governmental Rules, including the cGMP Requirements, and the Manufacturing of such Products will have been in accordance with the cGMP Requirements. Product delivered hereunder will be free and clear of any (i) liens (other than liens entered into in the ordinary course of business or arising as a matter of Law) or (ii) encumbrances that would prevent Licensor from transferring all right, title and interest in the Product to Licensee (e.g., payment obligations to third parties upon sale of the Product), but excluding any encumbrances arising as a result of the status of the Product as a bulk product (e.g., regulatory or quality-related encumbrances). At the time Licensor makes each shipment of Product available for pick-up by Licensee (or Licensee's carrier), the Products shall: (A) not be adulterated or misbranded within the meaning of the FFDCA or within the meaning of any applicable state or municipal law in which the definitions of adulteration and misbranding are substantially the same as those contained in the FFDCA, as such FFDCA and such laws are constituted and in effect at the time of delivery; and (ii) not be an article that may not be introduced into interstate commerce under the provisions of Sections 404 and 505 of the FFDCA.
(b) Authorization. This Agreement has been duly executed and delivered by the Licensor and, assuming due execution and delivery by the Licensee, constitutes a valid and binding obligation, enforceable against the Licensor in accordance with its terms, except as enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to creditors' rights generally and by general equitable principles. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Licensor and its respective officers and directors.
(c) No Other Commercialization Right. As of the Effective Date, Licensor has not granted to any third party, any license to Commercialize the Licensed Product under the Product [***], other than under the trade name [***], in the Territory.
(d) Absence of Conflicts. The execution, delivery and performance of this Agreement by the Licensor does not conflict with or constitute a default under any agreement, instrument or understanding, oral or written to which it is a party or by which it may be bound, does not conflict with any provision of any of its organizational documents and does not conflict with or violate any Governmental Rule or court order or decree.
(e) Organization and Standing. The Licensor is a corporation, duly organized, validly existing and in good standing under the laws of [***].
(f) Power and Authority. The Licensor has the corporate power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby.
(g) Compliance With Law. Licensor has and will maintain throughout the Term of this Agreement all permits, licenses, registrations and other forms of governmental authorization and approval as required by Law in order for Licensor to execute and deliver this Agreement and to perform its obligations hereunder in accordance with all Governmental Rules.
(h) No Debarment. Licensor is not debarred and has not and will not use in any capacity the services of any person debarred under subsection 306(a) or (b) of the Generic Drug Enforcement Act of 1992. If at any time this representation and warranty is no longer accurate, Licensor shall promptly notify Licensee of such fact.
(i) No Suits. As of the Effective Date, Licensor (i) is not a party to any legal action, suit or proceeding relating to the Licensed Product in the Territory; and (ii) has not received any written communication from any Third Party (including any Governmental Entity) threatening any action, suit or proceeding relating to the Licensed Product in the Territory.
Section 6.2 Representations and Warranties of the Licensee.
The Licensee hereby represents and warrants to the Licensor, as of the Effective Date, as follows:
(a) Authorization. This Agreement has been duly executed and delivered by the Licensee and, assuming due execution and delivery by the Licensor, constitutes a valid and binding obligation, enforceable against the Licensee in accordance with its terms, except as enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to creditors' rights generally and by general equitable principles. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Licensee and its respective officers and directors.
(b) Absence of Conflicts. The execution, delivery and performance of this Agreement by the Licensee does not conflict with or constitute a default under any agreement, instrument or understanding, oral or written to which it is a party or by which it may be bound, does not conflict with any provision of any organizational documents of the Licensee and does not conflict with or violate any Governmental Rule or court order or decree.
(c) Organization and Standing. The Licensee is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware.
(d) Power and Authority. The Licensee has the corporate power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby.
(e) Licensee Trademarks. To the best knowledge of the Licensee, the Licensee Trademarks including the trade name set forth on Schedule 2.3(a) does not and will not infringe any intellectual property rights or other proprietary rights of any third party in the Territory and that as of the Effective Date, Licensee (i) is not a party to any lawsuit or proceeding relating to the Licensed Trademarks in the Territory and (ii) has not received any written communication from any Third Party (including any Governmental Entity) threatening any action, suit or proceeding relating to the Licensed Trademarks in the Territory.
(f) Packaging Capabilities. Licensee acknowledges and agrees that Licensor has no obligation to, has made no representation or warranty that it has or will, and makes no assurances that it can or will, establish its own internal capabilities to secondary package and label Product.
(g) High Risk Product. Licensee acknowledges that the Licensed Product is an enhanced/ high risk product and that it is aware of the current and past regulatory and product liability matters relating to Isotretinoin products. Prior to the Effective Date, Licensee has completed its legal and business due diligence relating to the risks to users of the Product and the results thereof are satisfactory to the Licensee in its sole and absolute discretion.
(h) Product Yield. Without limiting any of Licensee's rights under Section 8.3(c), Licensee acknowledges that the output from each full batch size of 4,000 Units will likely be in the range of eighty percent (80%) to one hundred percent (100%) of the batch size and the delivery of Products in such range shall not be deemed a breach of this Agreement.
Section 6.3 DISCLAIMER. THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT ARE THE PARTIES' ONLY WARRANTIES AND NO OTHER WARRANTY, EXPRESS, IMPLIED OR STATUTORY, WILL APPLY. EACH PARTY EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. FOR THE AVOIDANCE OF DOUBT, EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF NON-INFRINGEMENT THAT ARE NOT EXPRESSLY SET FORTH IN THIS AGREEMENT.
ARTICLE VII
QUALITY ASSURANCE
Section 7.1 The Licensor's Covenants.
The Licensor hereby covenants during the Term that it will (and use Commercially Reasonable Efforts to cause its Affiliates, and its or their employees, agents or contractors to):
(a) Manufacture, fill, bulk package (but not secondary or retail package), test, handle, store, warehouse and ship the Products in conformity with this Agreement, Quality Agreement, Governmental Rules, cGMP Requirements and the Specifications;
(b) promptly inform Licensee of any adverse events related to the Products and significant complaints regarding the quality of the Products, and any inspections, communications, or material issues raised by the FDA in connection with the Manufacturing of the Products, and shall provide Licensee with copies of any correspondence (including emails) relating thereto, in accordance with the Pharmacovigilance Agreement entered into between the Parties pursuant to Section 4.5 (but in any event no later than five (5) days after becoming aware of the occurrence of such adverse event);
(c) obtain and maintain all permits reasonably necessary to Manufacture and supply all Product subject to an FDA approved Product [***] in accordance with the Specifications, applicable Governmental Rules and this Agreement;
(d) use Commercially Reasonable Efforts to keep the Product [***] valid, subsisting and in full force and effect;
(e) comply with its obligations set forth in the Quality Agreement with respect to the Product; and
(f) if Licensor becomes aware of any Products that have not been Manufactured in accordance with the Specifications and that have been supplied, promptly take such corrective action as shall be reasonably necessary to correct such nonconformity and inform Licensee in writing.
Section 7.2 The Licensee's Covenants
The Licensee hereby covenants during the Term that it will:
(a) hold, store, handle, ship, deliver, market, distribute and/or sell the Products (i) in accordance with applicable cGMP Requirements and Governmental Rules, including but not limited to any risk management programs required by the FDA (which includes the REMS Program); and (ii) in compliance with the Specifications;
(b) enter into all necessary compliance agreements as may be reasonably designated by the Licensor, including but not limited to agreements to cover quality assurance and adverse incident reporting;
(c) promptly inform Licensor of any adverse events related to the Products and significant complaints regarding the quality of the Products, in accordance with the Pharmacovigilance Agreement entered into between the Parties pursuant to Section 4.5 (but in any event no later than five (5) days after becoming aware of the occurrence of such adverse event); and
(d) comply with its obligations set forth in the Quality Agreement with respect to the Product.
Section 7.3 Rejection of Delivered Products. Within thirty (30) days of receipt of any shipment of Finished Product and applicable COA and COC by the Licensee in accordance with Section 8.3(b), the Licensee will inspect the Finished Product, COA and COC and advise the Licensor of any defect whereby the Finished Product does not conform to the Specifications. Except with respect to any Finished Product containing a hidden defect (that was not otherwise discoverable), any Finished Product not refused within thirty (30) days will be deemed accepted. If the Licensee wishes to refuse acceptance, the Licensee will, within such 30-day period, provide written notice to the Licensor of its refusal to accept the defective Finished Product and the reason(s) therefor. In the event a hidden defect (i.e., one which could not have been reasonably identified during the initial 30-day Licensee inspection period) is discovered at a later date whereby the Finished Product does not conform to the Specifications, the Licensee shall inform the Licensor as soon as Licensee becomes aware of the alleged hidden defect (that was not otherwise discoverable). In the event that the Licensee refuses acceptance or rejects the Finished Product due to a defect discovered within the initial thirty (30) day period after delivery or due to a hidden defect that is subsequently discovered, the Licensor, upon confirmation of the reasons for refusal or rejection of the Finished Product, will replace within ninety (90) days or as soon as reasonably practicable the defective Finished Product at the Licensor's sole cost and expense or refund the Supply Price, at the Licensee's option. If the Licensor and the Licensee do not agree on the refusal or rejection of Finished Products, then either Party may refer the matter for final analysis to a specialized laboratory of national reputation acceptable to both Parties for the purpose of determining the results. Any determination by such laboratory will be final and binding upon the Parties. The cost of any such review by a laboratory shall be borne by the Party against whom such specialized laboratory rules. Without limiting Licensee's rights under Article 12, except as set out in this Section 7.3 or Section 10.1, the Licensor shall have no liability to Licensee for any defect for which it has not received notice from the Licensee as specified herein.
Section 7.4 Recall. Licensor shall maintain traceability records in accordance with the applicable Governmental Rules, including cGMP Requirements, and in accordance with any written instructions or guidelines provided to Licensor by the Licensee, necessary to permit a recall, field correction or other notification to the field, of the Products. Licensor, in consultation with Licensee, shall have the exclusive right to institute a recall and shall be responsible for managing the recall and communications with customers and Governmental Entities, provided that with respect to Licensee's customers, Licensee shall be responsible for communications (in cooperation with Licensor) and the facilitation of return of Product. The Parties shall cooperate with each other in connection with any such efforts. In the event that any Product is quarantined or recalled, or is subject to stop-sale action, whether voluntary or by governmental action, it is agreed and understood that any expenses, including any out-of-pocket administrative costs and reasonable and documented fees of any experts or attorneys that may be utilized by either Party, government fines or penalties, related to such recall, quarantine or stop-sale, will be borne by the Parties in proportion of the amount of Product sold by each respective Party, unless it is determined that the reason for the quarantine, recall or stop-sale action is the result of the breach by the either Party of its obligations under this Agreement, and in such case such expenses will be borne by such Party in its proportion of fault.
Section 7.5 Quality Procedures. Licensor and Licensee shall comply with the terms of the quality requirements set forth in a quality agreement to be negotiated in good faith by the Parties and entered into by the Parties as soon as practicable after the date hereof, but on or prior to the earlier of the receipt of the Licensee Regulatory Approvals or sixty (60) days after the Effective Date (the "Quality Agreement"). To the extent that any inconsistencies or conflicts exist between the Quality Agreement and this Agreement, the provisions in the Quality Agreement shall prevail solely with respect to quality requirements and compliance with Governmental Rules.
Section 7.6 Regulatory Communications. Licensor shall be responsible for communicating with the FDA regarding the Products and the Manufacturing performed by Licensor hereunder and Licensee shall not, other than in connection with Licensee Trademark Submissions or Licensee Required Filings, initiate contact with any Governmental Entity (including the FDA) regarding the Products or the Manufacturing without Licensor's prior written consent, except when required by the terms of this Agreement or by applicable Governmental Rules. Each Party shall provide reasonable assistance to the other Party upon such Party's reasonable request, and at the requesting Party's sole cost and expense, with respect to such regulatory communications.
ARTICLE VIII
PRICE AND PAYMENTS
Section 8.1 Prices. The prices payable by the Licensee for each of the Products for the first Calendar Year following the Effective Date will be the prices set forth on Schedule 8.1, and thereafter will be adjusted pursuant to Section 8.2(b) (the "Supply Price").
Section 8.2 Adjustment.
(a) Any additional costs that were not included in the computation of the Supply Price based on Section 8.1 above and (i) specifically incurred at the request of Licensee, or otherwise authorized by Licensee (such as stability costs, scale-up expenses, and additional analytical or testing expenses), will be charged at actual cost to the Licensee, (ii) required for the Manufacture of the Product in accordance with the Specifications, where the Specifications have been changed or have been otherwise modified by Licensor in order to enhance the performance, safety or reliability of the Licensed Product shall be shared by the Licensor and the Licensee on a pro rata basis (based on a determination of the volume of sales attributable solely to the Product versus the DRL Product) or (iii) required for the Manufacture of the Product as a result of changes to applicable Law (including cGMP Requirements) or Governmental Rule shall be shared by the Licensor and the Licensee on a pro rata basis (based on a determination of the volume of sales attributable solely to the Product versus the DRL Product). A separate invoice will be issued to Licensee for such costs and/or expenses.
(b) On the first anniversary of the Effective Date and each subsequent annual anniversary of the Effective Date, Licensor shall have the right to increase or decrease the Supply Price of such Product to the extent of any actual increase or decrease in the Manufacturing Costs (and any change in the Supply Price shall be to the extent of such increase or decrease). Upon request, Licensor shall provide Licensee with documented proof of any increase in the corresponding component of Manufacturing Cost.
Section 8.3 Invoices; Adjustment to Invoices.
(a) Invoices. Licensor will send all invoices in respect of any Products to a single address specified in writing by the Licensee to the Licensor following the date that such Products subject to any Firm Order shall have been made available to the Licensee under Section 5.4(a). Payments for Product sold hereunder (as adjusted pursuant to 8.3(b)) will be made by the Licensee to the Licensor within the later to occur of (i) thirty (30) days after the date the Licensee is delivered Finished Product (defined below) as set forth in Section 8.3(b) and (ii) ninety (90) days after the date of the invoice by Licensor in each case, by electronic funds transmission in United States dollars as specified in any invoice, without any offset or deduction of any nature whatsoever. In the event that a payment for Product sold hereunder is disputed in good faith, Licensee shall pay such portion of the payment that is undisputed, and the Parties shall immediately attempt in good faith to resolve such dispute by negotiation and consultation between themselves for a period of thirty (30) days. If the Parties are unable to come to an agreement on such disputed amount each Party shall be free to pursue any and all available remedies at law or in equity. For clarity, notwithstanding anything to the contrary in this Section 8, in the event that (A) the transition services agreement that Licensee enters into with the Person set forth therein on the date hereof with respect to the secondary packaging or labeling of the Product terminates or expires or (B) Licensee enters into an arrangement with a Person other than the Person referred to in "(A)" above for the secondary packaging or labeling of the Product (the first to occur of (A) or (B) above being a "Packager Change"), the Parties shall promptly discuss in good faith and enter into an amendment to this Agreement (and any related agreement between the Parties or their respective Affiliates) to adjust pricing terms, invoicing procedures and related terms, to account for the receipt of bulk Product, without any secondary packaging or labeling, by Licensee.
(b) Adjustment to Invoices. Prior to a Packager Change, with respect to each Firm Order, Licensee shall only be responsible to pay for Product that becomes Finished Product (defined below) and which is delivered to Licensee (delivery shall be deemed to occur when such Finished Product departs the third party packaging facility). Upon delivery of Finished Product to Licensee, Licensee shall deliver a debit note to Licensor for an amount equal (i) to the Product that did not become Finished Product, multiplied by (ii) the applicable Supply Price for such Firm Order.
(c) Replacement.
(i) In the event that Licensor delivers less than eighty (80%) percent of the Product ordered pursuant to an accepted Firm Order (a "Supply Shortage"), then at any time after delivery of Product containing such applicable Supply Shortage pursuant to Section 5.4 until fifteen (15) Business Days after such Finished Product is made available at the third party packaging facility in accordance with Section 8.3(b) (such period, the "Order Period"), Licensee shall have the right to issue a Replacement Firm Order in the amount of such undelivered Product, rounded up such that the Product is only ordered in increments of full batches of Product (with the amount of Product ordered in excess of the undelivered amount deemed "Excess Major Product"). Any Product ordered pursuant to a Replacement Firm Order shall be delivered by Licensor and the relevant secondary packager pursuant to Section 8.3(b), as applicable, as Finished Product within ninety (90) days following the receipt by Licensor of such Replacement Firm Order. The Parties shall cooperate with each other and the relevant secondary packager in the issuing of Replacement Firm Orders and the carrying out of any related obligations necessary to accomplish the foregoing.
(ii) In the event that Licensee receives eighty (80%) percent or more, but less than one hundred percent (100%), of the Product ordered pursuant to a Firm Order (a "Minor Shortage"), then, upon mutual written agreement of both the Licensor and the Licensee, which either Party may reject in their sole discretion, Licensee may request to order one (1) additional full batch of Product (with the amount of Product in such batch that is in excess of the undelivered amount being deemed "Excess Minor Product"; together with Excess Major Product, "Excess Product"). Following such mutual written agreement Licensee shall issue such Replacement Firm Order for one (1) batch of Product (which shall be placed no later than fifteen (15) Business Days following such written mutual agreement), and Licensor and the relevant secondary packager pursuant to Section 8.3(b), as applicable, shall supply such Product as Finished Product as soon as practicable (but no later than ninety (90) days after the receipt by Licensor of such Replacement Firm Order). The Parties shall cooperate with each other and the relevant secondary packager in the issuing of Replacement Firm Orders and such other items necessary to accomplish the foregoing.
(iii) For clarity, the delivery of Excess Product pursuant to Replacement Firm Orders issued pursuant to subsections (i) and (ii) above in a given Calendar Quarter shall not count towards the Annual Variation Limit, or cause Licensee to become in breach of the Annual Variation Limit in such Calendar Year, as described in Section 5.1, if Licensee was not in breach of such requirement prior to such delivery. Licensee shall be required to pay for any Excess Product delivered pursuant to a Replacement Firm Order. The Parties agree to cooperate to issue Replacement Firm Orders or invoices as necessary to accomplish the foregoing in subsections (i) and (ii) above. Notwithstanding the foregoing, the Parties acknowledge any Replacement Firm Order shall only be in full batch increments and Licensor will not be required to provide replacement Product in partial batch increments when replacing Product hereunder.
(iv) Following the successful replacement of any Supply Shortage or Minor Shortage within ninety (90) days after receipt of the relevant Replacement Firm Order by Licensor, such that Product delivered pursuant to a Replacement Firm Order together with the amount delivered pursuant to the original Firm Order results in Licensee receiving 100% of the amount set forth in the original Firm Order to which such Replacement Firm Order relates, Licensor shall have cured any default hereunder solely relating to such shortfall of such applicable Firm Order.
(v) Any Product delivered pursuant to this Section 8.3(c) shall conform to the requirements of Section 5.2(e).
(vi) For the avoidance of doubt, the issuance of a Replacement Firm Order by Licensee shall operate to replace the undelivered quantities in the Firm Order that was the basis for issuing such Replacement Firm Order, and the undelivered quantity of Product in the original Firm Order shall no longer be delivered or deliverable by Licensor other than as expressly set forth in the applicable Replacement Firm Order.
(d) The term "Finished Product" means fully packaged and labeled finished Product, released by the applicable quality teams (as set forth in the quality agreements), at the secondary packager/labeler of the Product.
Section 8.4 Payments; Exchange Rate. All payments hereunder will be made in U.S. Dollars. When conversion of payments from any currency other than Dollars is required, such conversion shall be at the exchange rate published by The Wall Street Journal, Eastern U.S. Edition, on the last day of the Calendar Quarter in which the applicable sales were made. Payments made to Licensor will be made to such account as the Licensor will have specified in writing to the Licensee with written confirmation of payment sent by facsimile or email to such address as the Licensor will have specified in writing to the Licensee.
Section 8.5 Taxes, etc. Any tax required to be withheld by a Party on amounts payable under this Agreement will promptly be paid by Licensee on behalf of the Licensor to the appropriate Governmental Entity, and Licensee will furnish Licensor with proof of payment of such tax within fifteen (15) days of payment of such taxes. Any such amounts deducted or withheld by the Licensee shall be treated as having been paid to the Licensor for purposes of this Agreement. Licensor and Licensee shall cooperate with each other and use their commercially reasonable efforts to obtain any certificate or other document from any person as may be necessary to mitigate, reduce or eliminate any such Licensee Taxes. Licensee will take into account the Tax Treaty when determining the rate at which withholding tax will be deducted hereunder. The Parties agree that the maximum withholding tax, as of the Effective Date, is fifteen (15%) percent. Within thirty (30) days of the Effective Date, Licensor shall deliver to Licensee a properly completed Internal Revenue Service Form W-8BEN-E. Notwithstanding anything to the contrary in this Agreement, Licensor shall timely pay and be responsible for (and shall indemnity Licensee for) any transfer, documentary, sales use, stamp, registration, value added, goods and services tax, harmonized sales tax and any provincial sales tax or other similar tax (each an "Indirect Tax") that is imposed with respect to the transactions, payments or the related transfer of rights or other property pursuant to the terms of this Agreement. Licensee shall be entitled to offset any Indirect Taxes borne by it from amounts otherwise owed to Licensor under this Agreement.
Section 8.6 Separate Sale. Each shipment of Product to the Licensee will constitute a separate sale, obligating the Licensee to pay therefor, whether said shipment is in whole or only partial fulfillment of any order or confirmation issued in connection therewith.
ARTICLE IX
TERM AND TERMINATION
Section 9.1 Term. The provisions of this Agreement will commence on the date hereof and will expire on the ten (10) year anniversary of the Effective Date (the "Initial Term") and may be extended upon mutual written agreement of the Parties hereto (the "Extended Term" and together with the Initial Term, the "Term"), unless earlier terminated in accordance with this Article IX.
Section 9.2 Termination.
(a) Either the Licensor, on the one hand, or the Licensee, on the other hand, as applicable, will have the right to terminate this Agreement with immediate effect (except as otherwise stated below) upon written notice to the other upon the occurrence of the following:
(i) the Licensor, on the one hand, or the Licensee, on the other hand, files a petition in bankruptcy, or enters into an agreement with its creditors, or applies for or consents to the appointment of a receiver or trustee, or makes an assignment for the benefit of creditors, or becomes subject to involuntary proceedings under any bankruptcy or insolvency Law that remains undismissed within ninety (90) days after the filing thereof; or
(ii) the Licensor, on the one hand, or the Licensee, on the other hand, fails to cure any material breach of any of the terms and conditions hereof within the time period specified in any prior written notice (which will be at least sixty (60) days) delivered to the non-compliant Party by the other Party. Notwithstanding the foregoing, if the non-compliant Party disputes in good faith during the applicable initial sixty (60) days cure period the existence or materiality of the alleged breach senior officers of each Party shall attempt in good faith to resolve such dispute by negotiation and consultation between themselves for a period of thirty (30) days which thirty day (30) period shall begin no later than the sixtieth (60th) day following receipt by the non-compliant Party of such written notice of material breach; if the senior officers cannot resolve such dispute within such time period, each Party shall be free to pursue any and all available remedies.
(b) Licensee will have the right to terminate this Agreement:
(i) for any reason or no reason, upon one-hundred twenty (120) days' written notice to Licensor,
(ii) upon thirty (30) days' notice in the event of a failure by Licensor to supply at least eighty (80%) of Product set forth in a Firm Order for four (4) consecutive Firm Orders (except in the case of Force Majeure), provided such Firm Orders are placed and accepted in accordance with Sections 5.2(a), unless such shortfall is cured pursuant to Section 8.3(c), or
(iii) in accordance with Section 3.1(c).
(c) Beginning on the six (6) year anniversary of the Effective Date, if (i) Licensor (or its applicable Affiliate) provides notice to Licensee that it has determined to stop selling the DRL Product in the Territory, or (ii) a material adverse change in the market conditions occurs such that the commercialization opportunity for the Licensed Products substantially decreases (as determined by Licensor in its good faith and after consultation with Licensee), Licensor will have the right to terminate this Agreement, upon three hundred sixty-five (365) days' written notice to Licensee (the "Notice Period"), provided, however, that if Licensor or its Affiliate continues to sell the DRL Product beyond the Notice Period, Licensee shall be permitted to sell the Product for as long as the DRL Product is being sold, provided further, that notwithstanding the foregoing, Licensor's obligation to Manufacture Product shall cease at the end of the Notice Period.
Section 9.3 Effects of Termination.
(a) If this Agreement is terminated pursuant to Section 9.2(a), 9.2(b) or 10.1:
(i) The Licensee acknowledges and agrees that except in the case of termination by Licensor for breach of Licensee in accordance with Section 9.2(a)(ii), or by Licensee pursuant to Section 9.2(b)(iii), upon Licensee's request, the Licensor will be obligated to fulfill all Firm Orders that were accepted prior to the effective date of termination (and placed in accordance with this Agreement), and shall supply any Products ordered by the Licensee pursuant to such accepted Firm Order, and Licensee agrees to pay Licensor the applicable Supply Price for such Products. In addition, the Licensee shall reimburse the Licensor all payments owed for (i) such quantities of components, materials, APIs and work-in-progress in the Licensor's, its Affiliates' and third party manufacturers' possession that were purchased or manufactured for purposes of fulfilling the Firm Order Period of the most recent Forecast and (ii) any additional safety stock of Product or its components held by Licensor pursuant to the terms of this Agreement, in each case of (i) and (ii), that are not reasonably allocable to or usable for other activities being carried out by the Licensor or its Affiliates, which amount shall be payable no later than thirty (30) days after receipt by the Licensee of an invoice setting forth such costs. For clarity, Licensee shall have the right to sell or have sold any Products supplied by Licensor pursuant to this subsection (a) for up to nine (9) months after termination of this Agreement (and the license grant to Licensee under Section 2.1 shall be deemed to be extended accordingly), except in the case of termination of this Agreement for material breach by Licensee or expiration of the Term of this Agreement (which, for clarity, shall exclude early termination of the Agreement). Any Products sold following termination shall remain subject to the terms and conditions of this Agreement, including as related to Milestone Payments and Royalty Payments.
(ii) Notwithstanding anything to the contrary provided herein or elsewhere, if Licensor terminates this Agreement pursuant to Section 9.2(a)(ii) or Licensee terminates this Agreement pursuant to Section 9.2(b)(iii), then Licensor will be entitled to cancel any Firm Order then outstanding and will not be obligated to supply any Products ordered by the Licensee pursuant to such Firm Order. Upon such termination referred to above Licensee shall cease selling Product immediately.
(b) If this Agreement is terminated pursuant to Section 9.2(c), upon receipt by Licensor of a ROFR Election Notice (defined below) in accordance with Section 9.3(b)(i), Licensor shall, and hereby does, grant to Licensee during the Notice Period and for two (2) years thereafter (collectively, the "Offer Period") a right of first refusal to obtain a license under the Product [***] and any other intellectual property rights controlled by Licensor to Commercialize the Licensed Product under a trade name owned by Licensee (including the Licensee Trade Name) or Third Party (which shall not include the DRL Product or the Licensed Product under the trade name [***] or any other DRL Trademark, the "ROFR Product"), in the Territory, on the same terms and conditions as those offered by Licensor to a Third Party (the "Licensed Product ROFR"), as detailed in this Section 9.3(b).
(i) In the event Licensor (A) intends to grant a Third Party a license under the Product [***] to Commercialize the ROFR Product, or (B) receives a bona fide offer from a Third Party to make, have made or Commercialize the ROFR Product in the Territory (as evidenced in each case of (A) and (B) by a term sheet or substantially equivalent written offer) then prior to entering into a definitive agreement consistent with such terms, Licensor shall promptly deliver to Licensee a written notice ("ROFR Notice") setting forth the terms contained in such offer (without identifying the Third Party), and shall include in such notice any material information or documents (regulatory, technical or otherwise) as reasonably necessary and consistent with the type of information made available to the Third Party relating to such offer for Licensee to evaluate the offer ("License Offer"), and upon Licensee's written request, which shall be delivered to Licensor no later than fifteen (15) days following of Licensee's receipt of the ROFR Notice (a "ROFR Election Notice"), the Parties shall negotiate in good faith a license agreement consistent with such terms set forth in the License Offer.
(ii) If, despite good faith negotiations pursuant to subsection (i) above, the Parties fail to either (A) reach an agreement on material terms (which, for clarity, shall be satisfied by agreement on the material aspects of a term sheet, and shall not require entry into a definitive agreement) within (60) days or (B) enter into a definitive agreement within ninety (90) days, after Licensor delivers the ROFR Notice (or such longer period as agreed by the Parties in writing) (the "License ROFR Period"), then Licensor shall be free to enter into a license with respect to the ROFR Products in the Territory on terms and conditions that are no more favorable to the Third Party, in the aggregate, than the terms and conditions set forth in the License Offer.
(c) If this Agreement is terminated pursuant to Section 9.2(c), upon receipt by Licensor of a ROFR Election Notice in accordance with 9.3(c)(i), Licensor shall, and hereby does, grant to Licensee for the Offer Period a right of first refusal to acquire the Product [***], on the same terms and conditions as those offered by Licensor to a Third Party (the "Product [***] ROFR"), as detailed in this Section 9.3(c).
(i) In the event Licensor (A) intends to sell, license, assign or otherwise transfer, the Product [***] to a Third Party, or (B) receives a bona fide offer from a Third Party regarding a sale, assignment or other transfer, of the Product [***] to such Third Party (as evidenced in each case of (A) and (B) by a term sheet or substantially equivalent written offer), then prior to entering into a definitive agreement consistent with such terms, Licensor shall promptly deliver to Licensee a ROFR Notice setting forth the terms contained in such offer (without identifying the Third Party), and shall include in such notice any material information or documents (regulatory, technical or otherwise) as reasonably necessary and consistent with the type of information made available to the Third Party relating to such offer for Licensee to evaluate the offer ("Product [***] Offer"), and upon Licensee's delivery to Licensor of a ROFR Election Notice (which shall be a written request be delivered to Licensor no later than fifteen (15) days following of Licensee's receipt of the ROFR Notice), the Parties shall negotiate in good faith an agreement consistent with such terms set forth in the Product [***] Offer.
(ii) If, despite good faith negotiations pursuant to subsection (i) above, the Parties fail to either (A) reach an agreement on material terms (which, for clarity, shall be satisfied by agreement on the material aspects of a term sheet, and shall not require entry into a definitive agreement) with respect to the Product [***] within sixty (60) days or (B) enter into a definitive agreement with respect to the Product [***] within ninety (90) days after Licensor delivers the applicable ROFR Notice (or such longer period as agreed by the Parties in writing) (the "Product [***] ROFR Period"), then Licensor shall be free to sell, assign or otherwise transfer the Product [***] on terms and conditions that are no more favorable to the Third Party, in the aggregate, than the terms and conditions set forth in the Product [***] Offer.
(d) Following (i) termination under Sections 9.2(a) or 9.2(b) (subject to the expiration of any inventory sell-off period, as further described in Section 9.3(a)), (ii) termination under Section 9.2(c) (but only after the expiration of the Offer Period, if the Parties have not reached agreement on material terms or entered into a definitive agreement within the relevant timeframe set forth in Section 9.3(b)(ii) or Section 9.3(c)(ii), as applicable) or (iii) expiration of this Agreement, Licensor shall either at its option or upon request of Licensee, take such actions necessary to deregister or withdraw the Licensee Trade Name as an eligible trade name under the Product [***].
(e) Termination or expiration of this Agreement for any reason will not relieve the Parties of any obligation accruing prior to such termination or expiration (including in respect of any Firm Orders). The rights and obligations of the Parties under Sections 2.5 (solely for the period specified therein), 3.4(b) (solely for the period specified therein), 3.4(c) (solely for the period specified therein), 4.4, 4.8(g), 6.3, 7.4, 7.5, 8.4, 8.5, 9.3, 13.1 (solely with respect to the last sentence thereof) and 13.2 (solely with respect to the last sentence thereof) and Article XI, Article XII and Article XIV of this Agreement, and any other provision of the Agreement (including any Exhibit or Schedule) necessary to effectuate the intent of the foregoing, will survive the expiration or termination of this Agreement.
(f) In the event of termination of this Agreement for any reason other than pursuant to a termination by Licensee pursuant to Section 9.2(b)(iii), all Milestone Payments pursuant to Section 3.1(a)(i)-(vi) that have not been paid (whether payable or not payable) as of such termination date shall immediately become due and payable and shall be paid to Licensor within fifteen (15) days of such termination.
ARTICLE X
FORCE MAJEURE
Section 10.1 Force Majeure. Neither Party will be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term or provision of this Agreement (other than the payment of money) to the extent such failure or delay will be caused (directly or indirectly) by a circumstance beyond the reasonable control of the affected Party, including, without limitation, (a) fire, flood, epidemic, pandemic, accident, explosion, terrorism, sabotage, strike, or any labor disturbance (regardless of the reasonableness of the demands of labor); civil commotions; riots; invasions; wars (present or future); acts, restraints, requisitions, regulations, or directions of any Governmental Entity, except where such acts, restraints, requisitions, regulations or directions are the result of a Party's violation of Government Rule; (b) voluntary or mandatory compliance by the Licensor with any request for material represented to be for purposes of (directly or indirectly) producing articles for national defense or national defense facilities; (c) shortage of labor, fuel, power, or raw materials, inability to obtain supplies, failures of normal sources of supplies, or inability to obtain or delays of transportation facilities, in all cases of this subsection (c), as a result of one of one or more the events described in subsections (a) or (b), or a circumstance beyond the reasonable control of the affected Party; or (d) any act of God (each a "Force Majeure"). Any Party asserting its inability to perform any obligation hereunder for any such contingency shall promptly notify the other Party of the existence of any such contingency and shall use Commercially Reasonable Efforts to mitigate such contingency and re-commence its performance of such obligation as soon as commercially practicable. Subject to this Section 10.1, if the Licensor is unable to supply the Licensee with its requirements of Products by reason of Force Majeure, Force Majeure shall excuse the Licensor's performance until the Force Majeure has ceased and for a reasonable period of time thereafter, to allow the Licensor to restore itself to the position it was in with respect to the Products immediately prior to the Force Majeure; provided that, commencing upon the date of receipt of such notification from Licensor, Licensee shall no longer be bound by the exclusivity provisions in Section 2.5 and the provisions of Section 5.2(h) shall thereafter apply, mutatis mutandis. The Parties acknowledge and agree that in respect of any Firm Orders for the Products the delivery of which was during such Force Majeure period, the Parties shall discuss in good faith the requirements of Licensee and delivery of such Products. Neither Party shall suffer penalty or incur any liability for its inability to perform hereunder by reason of Force Majeure. If a Party fails to perform any of its obligations under this Agreement by reason of Force Majeure and such non-performance continues for a period of one hundred and twenty (120) days from the first occurrence of the event of Force Majeure, the other Party may terminate this Agreement by providing written notice to that effect to the non-performing Party, and the effects of termination set forth in Section 9.3(a) shall thereafter apply.
ARTICLE XI
CONFIDENTIALITY
Section 11.1 Non-disclosure and Non-use Obligation. Each Party or its Affiliates may, from time to time, prior to or after the date hereof, disclose to the other Party or its Affiliates under this Agreement, Confidential Information (defined below). Each Party (the "receiving Party") agrees that it will not, and will cause its Affiliates, and will cause its or their employees, agents, contractors or sublicensees (collectively, "Representatives"), not to, use for any purpose other than as necessary to perform its obligations or exercise its rights under this Agreement, and will not disclose to anyone in any manner whatsoever, any Confidential Information of the other Party (the "disclosing Party"), including, without limitation, information relating in any way to the products, processes, and services of the disclosing Party or its Representatives, which becomes known to the receiving Party on or prior to the date of the termination or expiration of this Agreement. The obligations of this Section 11.1 will not apply to information that the receiving Party can demonstrate: (i) is rightfully known to the receiving Party as shown by written records prior to its disclosure by the disclosing Party or its Representatives; (ii) that becomes public information or is generally available to the public other than by an unauthorized act or omission of the disclosing Party or its Affiliates or its or their Representatives; or (iii) that is received by the receiving Party from Third Parties who are in rightful possession of such information and who are lawfully entitled to disclose such information and did not receive such information from the disclosing Party or its Affiliates or its or their Representatives. For clarity, the existence of and terms of this Agreement shall be deemed the Confidential Information of both Parties and may not be disclosed to any other Party without the prior express written consent of the other Party hereto (not to be unreasonably withheld). The term "Confidential Information" means any technical, business or other information provided by or on behalf of the disclosing Party to the other Party or its Affiliates in connection with this Agreement, whether prior to, on or after the Effective Date, including information relating to and the terms of this Agreement, information relating to the Licensed Product (including the Regulatory Documentation), or the scientific, regulatory or business affairs or other activities of either Party, including trade secrets.
Section 11.2 Effects of Termination. Upon the termination or expiration of this Agreement, each Party will return to the other Party (or, at such other Party's request, destroy) (with written confirmation thereof) all documents that include Confidential Information of the other Party or its Affiliates, or its or their Representatives, including all copies of such documents or extracts therefrom, if any, and will make no further use of such information; provided that, each Party will be entitled to keep one (1) copy of such Confidential Information in its legal files solely for the purpose of enabling it to comply with the provisions of this Agreement, or as required by applicable Law.
Section 11.3 Authorized Disclosures. Notwithstanding the obligations set forth in Section 11.1, the receiving Party may disclose Confidential Information of the disclosing Party to the extent such disclosure is reasonably necessary in the following instances:
(a) complying with a lawfully issued governmental order or any other requirement of applicable Law to produce or disclose Confidential Information of the other Party; provided that the receiving Party shall have complied with the requirements of this Section 11.1. With respect to any such governmental order or requirement of applicable Law, the receiving Party shall first notify the disclosing Party of such order or requirement of applicable Law so that the disclosing Party may seek to quash such order or to obtain an appropriate protective order requiring that the Confidential Information that is the subject of such order or requirement of applicable Law be held in confidence or, if disclosed, be used only for the purposes for which such order was issued or such requirement of applicable Law covers. The receiving Party shall reasonably cooperate with the disclosing Party in any such proceeding. With respect to any such order that is not quashed or any other requirement of applicable Law to disclose Confidential Information of the disclosing Party (which shall include any requirement of the disclosing Party to file this Agreement with the Securities Exchange Commission or any other Governmental Entity), the receiving Party shall first notify the disclosing Party in writing and shall provide the other Party with at least five (5) Business Days to request redactions thereof prior to making such filing or disclosure and the Parties shall use commercially reasonable efforts to procure confidential treatment of the Agreement or relevant provisions thereof, at the disclosing Party's reasonable cost; provided, further, that the receiving Party shall furnish only that portion of such Confidential Information that the receiving Party is advised by counsel is legally required to be disclosed. Notwithstanding the foregoing, for clarity, the Parties agree that each Party shall seek confidential treatment of Exhibit A, A-1 and A-2, which shall be at the disclosing Party's cost and expense.
(b) to (i) the receiving Party's (or its Affiliates') Representatives, directors, consultants, attorneys, independent accountants or financial advisors who, in each case, have a need to know such Confidential Information in order for the receiving Party to exercise its rights or perform its obligations under this Agreement, or (ii) to actual or potential investors, investment bankers, lenders, other financing sources or acquirors in connection with potential investment, acquisition, collaboration, merger, public offering, due diligence or similar investigations or in confidential financing documents, provided that, in each case, that any such person is bound by legally enforceable obligations of confidentiality and non-use consistent with the terms hereof. Notwithstanding the foregoing, (A) Licensee shall not disclose to any Persons set forth in subsection (ii) above any information disclosed or made available pursuant to Section 5.2(h)(iv) or relating to the customers, manufacturing costs, volume of sales or market share of Licensor; and (B) Licensor shall not disclose to any Persons set forth in subsection (ii) above any information disclosed or made available pursuant to Section 3.4, or relating to the customers, volume of sales or market share of Licensee.
Section 11.4 Public Announcements. Each Party shall have the right to make a public announcement, press release or other public disclosure of the subject matter of this Agreement; provided that, such Party making such public announcement, press release or other public disclosure shall give reasonable prior advance notice of the proposed text of such announcement to the other Party for its prior review and approval. Each Party shall provide its comments, if any, within five (5) Business Days after receiving the other Party's proposed announcement for review. If either Party desires to make a subsequent public announcement, press release or other public disclosure concerning the subject matter of this Agreement or any activities hereunder, such Party shall give reasonable prior advance notice of the proposed text of such announcement to the other Party for its prior review and approval, except that in the case of a press release or governmental filing required by applicable Law, the disclosing Party shall provide the other Party with such advance notice as it reasonably can and shall use reasonable good faith efforts to consult with the other party prior to the issuance of any public announcement, release or disclosure. Each such public disclosure shall contain appropriate references to the other Party if so requested. A Party commenting on such a proposed disclosure shall provide its comments, if any, within five (5) Business Days after receiving the proposed disclosure for review. With respect to any disclosures required by Law, neither Party shall be required to seek the permission of the other Party to repeat any information that has already been publicly disclosed by such Party, or by the other Party, in accordance with this Section 11.4. Neither Party shall issue a press release or other public announcement relating to this Agreement without the other Party's prior written consent, except as permitted pursuant to this Section 11.4. Notwithstanding the above, if required by Law or if it is Licensor's customary practice to list the Product on its website, Licensor may disclose on its website that the other Party is the exclusive commercial partner of such Party with respect to the Product and may use the other Party's approved name and logo in conjunction with such disclosure. Except as set forth in the immediately preceding sentence, each Party shall be required to obtain the written approval of the other Party (not to be unreasonably withheld or delayed) prior to using the other Party's name, logo or similar identifiers, or to otherwise reference the other Party's Licensed Product in any way, in each case, in any of its marketing materials or on its website. Notwithstanding the foregoing, Licensee hereby acknowledges and agrees that [***].
Section 11.5 Equitable Relief. Each Party acknowledges that its breach of this Article XI may cause irreparable harm to the other Party, which cannot be reasonably or adequately compensated in damages in an action at law. By reasons thereof, each Party agrees that the other Party shall be entitled, in addition to any other remedies it may have under this Agreement or otherwise, to preliminary and permanent injunctive and other equitable relief to prevent or curtail any actual or threatened breach of the obligations relating to Confidential Information set forth in this Article XI by the other Party.
ARTICLE XII
INDEMNIFICATION
Section 12.1 By the Licensor. From and after the Effective Date, the Licensor will indemnify, defend and hold harmless, and pay and reimburse, the Licensee and its Affiliates and their respective officers, directors, Representatives, advisors and shareholders (the "Licensee Indemnitees") from and against any and all losses, damages, liabilities, expenses and costs, taxes (including penalties and interest), including reasonable legal expense and attorneys' fees (collectively, "Losses") resulting from any claim by a Third Party to the extent and only to the extent attributable to: (i) the Licensor's or any Licensor Indemnitee's gross negligence, willful misconduct or breach of any of its representations and warranties, covenants, agreements or obligations contained in this Agreement; (ii) any manufacture or commercialization of the DRL Product conducted by or on behalf of Licensor prior to or after the Effective Date (including, for clarity, any intellectual property infringement claims arising therefrom); or (iii) any intellectual property infringement claims arising from Licensor's Manufacture of the Product; except in each case of (i)-(iii), to the extent such claim arises from a circumstance for which Licensee is obligated to indemnify Licensor pursuant to Section 12.2.
Section 12.2 By the Licensee. From and after the Effective Date, the Licensee will indemnify, defend and hold harmless, and pay and reimburse, the Licensor and its Affiliates and their respective officers, directors, Representatives, advisors and shareholders (the "Licensor Indemnitees") from and against any and all Losses resulting from any claim by a Third Party to the extent and only to the extent attributable to: (i) the Licensee's or any Licensee Indemnitee's gross negligence, willful misconduct or breach of any of its representations and warranties, covenants, agreements or obligations contained in this Agreement; (ii) intellectual property infringement claims relating to any Licensee Trademarks; (iii) the content of the Modified Product Labeling; (iv) the sale of any Product by Licensee or its Affiliates from and after the Effective Date or (v) the registration or association of the trade name Accutane with the Licensed Product or the sale by any other Person of any products under the trade name/ name Accutane (or containing the name Accutane) prior to the Effective Date, which shall include, but not be limited to, any Third Party claims or Losses attributable to any products sold under the name Accutane regardless of the Person that sold such product, except in each case of (i)-(v), to the extent such claim arises from a circumstance for which Licensor is obligated to indemnify Licensee pursuant to Section 12.1.
Section 12.3 Procedures. If Licensee, Licensor or their respective Affiliates (in each case an "Indemnified Party"), receive any written claim which such Indemnified Party believes is the subject of indemnity hereunder by another Party hereto (an "Indemnifying Party"), the Indemnified Party shall, as soon as reasonably practicable after forming such belief, give notice thereof to the Indemnifying Party, provided that the failure to give timely notice to the Indemnifying Party as contemplated hereby shall not release the Indemnifying Party from any liability to the Indemnified Party unless the Indemnifying Party demonstrates that the defense of such claim is materially prejudiced by such failure. The Indemnifying Party shall have the right, by prompt written notice to the Indemnified Party to assume the defense of such claim at its cost, with counsel reasonably satisfactory to the Indemnified Party, provided, however, that Licensor shall assume the defense of any claims of patent infringement related to the Licensed Products. If the Indemnifying Party does not so assume the defense of such claim or, having done so, does not diligently pursue such defense, the Indemnified Party may assume the defense, with counsel of its choice, but at the cost of the Indemnifying Party. If the Indemnifying Party so assumes the defense, it shall have absolute control of the litigation; provided that the Indemnified Party may, nevertheless, participate therein through counsel of its choice and at its cost. The involved Party not assuming the defense of any such claim shall render all reasonable assistance to the Party assuming such defense, and out-of-pocket costs of such assistance shall be for the account of the Indemnifying Party. No such claim shall be settled other than by the Party defending the same, and then only with the consent of the other Party, which consent shall not be unreasonably withheld; provided that the Indemnified Party shall have no obligation to consent to any settlement of any such claim which (i) imposes on the Indemnified Party any liability or obligation which cannot be assumed or performed in full by the Indemnifying Party, (ii) does not unconditionally release the Indemnified Party, (iii) requires a statement as to or an admission of fault, culpability or failure to act by or on behalf of Indemnified Party or (iv) imposes any restrictions on the conduct of business by the Indemnified Party.
Section 12.4 Insurance. At all times from the Effective Date through the termination or expiration of this Agreement (and solely with respect to product liability insurance, for three (3) years after such termination or expiration), each of the Licensee and the Licensor will maintain general liability insurance in the amount of not less than USD $5,000,000 per occurrence and USD $5,000,000 in aggregate and product liability insurance (or self-insurance), which is reasonable and customary in the USA pharmaceutical industry for companies of comparable size, provided that in no event shall the product liability insurance amounts be less than USD $5,000,000 per occurrence and USD $5,000,000 in the aggregate limit of liability per year. Notwithstanding the foregoing, Licensee shall not be required to obtain product liability insurance until all Licensee Regulatory Approvals have been obtained. Each of the Licensee and the Licensor shall add the other Party as additional insured in their general liability and product liability policy and provide written proof of such insurance to the other Party upon request.
Section 12.5 Product Liability. Neither the Licensor nor any of its Affiliates shall have any liability arising out of any injury to any individuals or property as a result of the ownership, possession, or use of any Product manufactured, sold, leased, or delivered by Licensor, and Licensee shall be solely responsible for any liabilities arising out of any injury to any individuals or property with respect to the Products, in each case, except to the extent such liability arises from a manufacturing defect which was not detectable by Licensee. Each Party agrees to take reasonable measures to mitigate such product liability and shall reasonably cooperate with the other Party in doing so.
Section 12.6 Limitations.
(a) IN NO EVENT SHALL EITHER PARTY BE LIABLE BY REASON OF ANY BREACH OF ANY REPRESENTATION, WARRANTY, CONDITION OR OTHER TERM OF THIS AGREEMENT OR ANY DUTY OF COMMON LAW, FOR ANY CONSEQUENTIAL, SPECIAL, INDIRECT OR INCIDENTAL OR PUNITIVE LOSS OR DAMAGE (WHETHER FOR LOSS OF CURRENT OR FUTURE PROFITS, LOSS OF ENTERPRISE VALUE OR OTHERWISE) AND EACH PARTY AGREES THAT IT SHALL NOT MAKE ANY SUCH CLAIM; PROVIDED, HOWEVER, THAT THE FOREGOING DOES NOT LIMIT ANY OF THE OBLIGATIONS OR LIABILITY OF EITHER PARTY OR ITS AFFILIATES UNDER SECTIONS 12.1 AND 12.2 WITH RESPECT TO CLAIMS OF UNRELATED THIRD PARTIES OR LIABILITY ARISING FROM FRAUD OR WILLFUL MISCONDUCT OF A PARTY OR ITS AFFILIATES OR CONTRACTORS, OR DAMAGES ARISING FROM A BREACH OF CONFIDENTIALITY UNDER SECTION 11.
(b) Notwithstanding any other provision of this Agreement, in the event that the Licensee asserts or claims that the Licensor has breached any of its obligations hereunder, the Licensor's maximum liability under or in connection with such claim herein shall be limited to the repayment of (i) [***] and (ii) [***] ([***]%) (except that if such obligation of Licensor to indemnify Licensee hereunder is due to a manufacturing defect caused by Licensor that results in personal injury or death to a user, in such event the cap shall be [***] ([***]%) percent) of the [***]; provided, however, that the foregoing shall not limit any liability arising from a breach of Article XI, intentional fraud, gross negligence or willful misconduct of Licensor or its Affiliates or its or their employees, agents or contractors.
(c) The Parties expressly agree, that notwithstanding anything to the contrary provided herein or elsewhere, Licensor shall not be responsible for and shall not be required to indemnify or repay Licensee for any Inability to Supply Charges.
ARTICLE XIII
INTELLECTUAL PROPERTY RIGHTS
Section 13.1 License from Licensee. The Licensee hereby grants to the Licensor (and its Affiliates and its and their Representatives) for the Term of this Agreement, a royalty-free, non-exclusive, non-transferable, right and license under the Licensee Trademarks, to the extent necessary to carry out Licensor's obligations under this Agreement; provided, however that nothing herein contained shall give or be deemed to give or shall be intended to give the Licensor any right, title, interest or claim in or to the Licensee Trademarks. Licensor agrees that any goodwill associated with its, its Affiliates or their respective Representatives' use of the Licensee Trademarks shall inure solely to the benefit of Licensee.
Section 13.2 License from DRL. In the event that any trade names ([***]), corporate names or the like owned, licensed or controlled by DRL or any of its Affiliates is required by applicable Law to be used in the Product Labeling (collectively, the "DRL Trade Names"), Licensor hereby grants to Licensee (and its Affiliates and its and their Representatives) for the Term of this Agreement, a royalty-free, non-exclusive, non-transferable, right and license under the DRL Trade Names, solely to the extent necessary to carry out Licensee's obligations under this Agreement; provided, however that nothing herein contained shall give or be deemed to give or shall be intended to give the Licensee any right, title, interest or claim in or to the DRL Trade Names. Licensee agrees that any goodwill associated with its, its Affiliates or their respective Representatives' use of the DRL Trade Names shall inure solely to the benefit of Licensor.
ARTICLE XIV
MISCELLANEOUS
Section 14.1 Assignment.
(a) Neither Party may assign its rights or obligations under this Agreement without the prior written consent of the other Party (not to be unreasonably withheld, conditioned or delayed); provided, however, that after the Effective Date Licensor may assign its rights and obligations under this Agreement, without the prior written consent of the Licensee, to an Affiliate or in connection with a Change of Control of Licensor or the sale of the Licensed Product or all or substantially all of the assets relating to the Licensed Product.
(b) Notwithstanding the foregoing, after the Effective Date and upon at least fifteen (15) Business Day prior notice, Licensee may assign its rights and obligations under this Agreement, without the prior written consent of the Licensor, to an Affiliate of Licensee or in connection with a Change of Control of Licensee, provided that:
(i) Licensee may not assign any rights or obligations to a Direct Competitor without the prior written consent of Licensor (which consent shall be within Licensor's sole discretion);
(ii) Upon or at any time following an assignment in connection with a Change of Control of Licensee, upon notice by Licensor, (A) the "Wholesaler Limit" shall automatically reduce to fifteen (15%) percent and the references in Section 2.2 to "twenty-five (25%) percent" and "thirty (30%) percent" shall automatically be updated to read "fifteen (15%) percent" and "twenty (20%) percent", respectively; and (B) Section 5.2(h) shall be deleted from this Agreement in its entirety, provided that if a Secondary Supplier is qualified or in the process of being qualified under the Product [***], Licensor shall have the sole right to terminate such Secondary Supplier and withdraw such Secondary Supplier from the Product [***].
(c) As a condition to any assignment by Licensee, Licensee shall pay Licensor any remaining unpaid Milestone Payments pursuant to Section 3.1(a)(i)-(vi) that have not been paid, whether payable or not payable, prior to any such assignment hereof. Any permitted assignee or successor-in-interest will assume all obligations of its assignor under this Agreement.
(d) No assignment will relieve either Party of its responsibility for the performance of any obligation. Any permitted assignee shall assume all obligations of its assignor under this Agreement in writing. This Agreement will be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns. Any attempted assignment in violation of this Agreement shall be void ab initio.
Section 14.2 Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable by any Law or public policy, the remaining provisions of this Agreement will nevertheless remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom as long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either Party. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the Parties will negotiate reasonably and in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.
Section 14.3 Notices. All notices and other communications required or permitted to be given or made pursuant to this Agreement shall be in writing signed by the sender and shall be deemed duly given (a) on the date delivered, if personally delivered, (b) the date of transmission, if such notice or communication is delivered via email (with return receipt), (c) on the date sent by telecopier with automatic confirmation by the transmitting machine showing the proper number of pages were transmitted without error, (d) on the Business Day after being sent by Federal Express or another recognized overnight mail service which utilizes a written form of receipt for next day or next Business Day delivery or (e) two (2) Business Days after mailing, if mailed by United States postage-prepaid certified or registered mail, return receipt requested, in each case addressed to the applicable Party at the address set forth below; provided that a Party may change its address for receiving notice by the proper giving of notice hereunder:
(a) if to the Licensee, to:
Journey Medical Corporation
9237 East Via De Ventura Blvd., Suite 105
Scottsdale, AZ 85258, USA
Attn: President & CEO
E-mail: cmaraoui@jmcderm.com
[***]
With a copy (which shall not constitute notice) to:
Journey Medical Corporation
2 Gansevoort Street, 9th Floor
New York, NY 10014
Attn: General Counsel
E-mail: SBerry@fortressbiotech.com
(b) if to the Licensor, to:
Dr. Reddy’s Laboratories Ltd.
[***]
with a copy (which shall not constitute notice) to:
Dr. Reddy’s Laboratories Ltd.
[***]
And
Dr. Reddy’s Laboratories Ltd.
[***]
It is understood and agreed that ordinary course business communications necessary between the Parties in performing their duties, in due course, under the terms of this Agreement, including the placement of orders and the delivery of Forecasts, may be delivered by e-mail (with return receipt requested).
Section 14.4 Governing Law. This Agreement and its negotiation, execution, performance or non-performance, interpretation, termination, construction and all claims or causes of action (whether in contract, in tort, at Law or otherwise) that may be based upon, arise out of, or relate to this Agreement, or the transactions contemplated hereby (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in connection with this Agreement or as an inducement to enter this Agreement), shall be exclusively governed by, and construed in accordance with, the Laws of the State of New York regardless of Laws that might otherwise govern under any applicable conflict of laws principles.
Section 14.5 Jurisdiction, Venue, Service of Process, WAIVER OF JURY TRIAL
(a) Any legal proceeding based upon, arising out of, or related to this Agreement and its negotiation, execution, performance, non-performance, interpretation, termination, construction or the transactions contemplated hereby (a "Legal Proceeding") shall be heard and determined in the courts in the County of New York in the State of New York. The Parties hereto hereby irrevocably submit to the exclusive jurisdiction and venue of such courts in any such Legal Proceeding and irrevocably and unconditionally waive the defense of an inconvenient forum, or lack of jurisdiction to the maintenance of any such Legal Proceeding. The consents to jurisdiction and venue set forth herein shall not constitute general consents to service of process in the State of New York and shall have no effect for any purpose except as provided in this Section 14.5 and shall not be deemed to confer rights on any Person other than the Parties hereto. Each Party hereto agrees that the service of process upon such Party in any Legal Proceeding arising out of or relating to this Agreement shall be effective if notice is given by overnight courier at the address set forth in Section 14.3. Each of the Parties also agrees that any final, non-appealable judgment against a Party in connection with any Legal Proceeding arising out of or relating to this Agreement shall be conclusive and binding on such Party and that such award or judgment may be enforced in any court of competent jurisdiction, either within or outside of the United States. A certified or exemplified copy of such award or judgment shall be conclusive evidence of the fact and amount of such award or judgment.
(b) THE LICENSOR AND THE LICENSEE HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
Section 14.6 Entire Agreement. This Agreement and the attached Exhibits and Schedules, constitute the entire agreement between the Parties with respect to the subject matter hereof and all prior agreements with respect hereto are superseded. Each Party confirms that no representations, warranties, covenants or understandings of any kind, nature or description whatsoever are being made or relied upon by any Party, except such as are as specifically set forth herein. No amendment or modifications hereof will be binding upon the Parties unless set forth in a writing specified to be an explicit amendment to this Agreement duly executed by authorized representatives of each of the Parties. The Parties recognize that, during the Term of this Agreement, a purchase order, acknowledgement form or similar routine document (collectively "Forms") may be used to implement or administer provisions of this Agreement. Therefore, the Parties agree that the terms of this Agreement, as it may be amended, will prevail in the event of any conflict between this Agreement and the printed provision of such Forms, or typed provisions of Forms that add to, vary, modify or are in conflict with the provisions of this Agreement with respect to the Products sold during the Term of this Agreement.
Section 14.7 Headings; Interpretation. The headings used in this Agreement are intended for convenience only and will not be considered part of the written understanding among the Parties and will not affect the construction of this Agreement. Except where the context expressly states otherwise, any use of the term "days" in this Agreement shall be deemed to mean calendar days and to the extent a deadline measured in calendar days falls on day other than a Business Day, the next Business Day shall be the applicable deadline.
Section 14.8 Independent Contractors. It is expressly agreed that the Licensor, on the one hand, and the Licensee, on the other hand, will be independent contractors and that neither the relationship among the Parties nor this Agreement will be construed as creating a partnership, joint venture or agency. Neither the Licensor, on the one hand, nor the Licensee, on the other hand, will have the authority to make any statements, representations or commitments of any kind, or to take any action or to incur any liability or obligation which will be binding on the other, without the prior consent of the other Party to do so. All persons employed by a Party will be employees of such Party and not of the other Party and all costs and obligations incurred by reason of any such employment will be for the account and expense of such Party. The Parties (and any successor, assignee, transferee, or Affiliate of a Party) shall not treat or report the relationship between the Parties arising under this Agreement as a partnership for United States tax purposes, without the prior written consent of the other Party unless required by Law.
Section 14.9 Waiver. The waiver by either Party of any right hereunder or the failure to perform or of a breach by the other Party will not be deemed a waiver of any other right hereunder or of any other or subsequent breach or failure by said other Party whether of a similar nature or otherwise.
Section 14.10 Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, and all of which together will constitute one and the same instrument.
Section 14.11 Performance by Affiliates. Each Party may perform some or all of its obligations under this Agreement through its Affiliates, provided, however, that such Party shall remain responsible and be guarantor of the performance by its Affiliates and shall cause its Affiliates to comply with the provisions of this Agreement in connection with such performance.
Section 14.12 No Benefit to Third Parties. The representations, warranties, covenants and agreements set forth in this Agreement are for the sole benefit of the Parties and their successors and permitted assigns, and nothing herein, express or implied, is intended to or will confer upon any person or entity any legal or equitable rights, benefits or remedies, other than to the extent set forth in Sections 12.1 and 12.2.
[signature page follows]
WITNESS WHEREOF, the Parties hereto have caused this Agreement to be signed by their respective representatives thereunto duly authorized, all as of the Effective Date.
DR. REDDY'S LABORATORIES LTD. | ||
By: | /s/ Erez Israeli | |
Name: | Erez Israeli | |
Title: | Chief Executive Officer |
JOURNEY MEDICAL CORPORATION | ||
By: | /s/ Claude Maraoui | |
Name: | Claude Maraoui | |
Title: | President & CEO |
Exhibit 10.8
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
LICENSE AND SUPPLY AGREEMENT
This License and Supply Agreement ("Agreement"), dated as of March 10, 2015 (the "Effective Date"), is made by and between Journey Medical Corporation, a Delaware corporation ("Journey"), and Blu Caribe, Inc., a Puerto Rican corporation ("Blu").
ARTICLE 1
DEFINITIONS
As used throughout this Agreement and any exhibits, schedules or attachments hereto, each of the following terms will have the respective meaning set forth below:
"Accounting Standards" shall mean U.S. generally accepted accounting principles, consistently applied throughout the organization of a party.
"Act" means the United States Federal Food, Drug, and Cosmetic Act as amended from time to time.
"Affiliate" means, with respect to a party, any other business entity that directly or indirectly controls, is controlled by, or is under common control with, such party. A business entity or party will be regarded as in control of another business entity if it owns directly or indirectly (i) in the case of corporate entities, more than fifty percent (50%) of the equity securities in the subject entity entitled to vote in the election of directors, and (ii) in the case of an entity that is not a corporation, more than fifty percent (50%) of the equity securities or other ownership interests in the subject entity with the power to direct the management and policies of such entity by any means whatsoever or entitled to elect the corresponding management authority.
"ANDA" means an abbreviated new drug application pursuant to 21 U.S.C. § 355(j) et seq., and the regulations promulgated thereunder, as such application may be amended or supplemented from time to time.
"Applicable Law" means all applicable provisions of constitutions, statutes, laws, rules, treaties, regulations, guidelines and orders of all governmental authorities and all applicable orders, rules and decrees of courts in the Territory.
"Blu ANDA" means the abbreviated new drug application No. 062269 filed with the FDA and all supplements and amendments thereto.
"Blu Indemnified Parties" has the meaning given in Section 12.2.
"Blu Net Profit" means Blu Net Sales less Cost of Blu Royalty Product less Distribution Costs incurred by Blu during the respective Contract Quarter.
"Blu Net Sales". means the gross invoice price from sales of the Blu Royalty Product in the Territory by Blu or its Affiliates, less:
1
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
(a) | returns, return reserves, and discounts, including discounts made by means of rebates, to direct or indirect customers, including patient rebate cards, wholesaler fees and chargebacks directly related to the sales of the Blu Royalty Product (and including rebates or other payments required to be paid to governmental entities in connection with sales of such product pursuant to the Omnibus Budget Reconciliation Act of 1990 and similar other Federal or state legislation or programs, including for damaged goods, returns, recalls, rebates, savings cards or rejections); |
(b) | applicable taxes (to the extent borne by Blu and separately stated on the invoice and included in the gross invoice price), other than income taxes; |
(c) | sales credits customary in the industry and accrued in accordance with applicable Accounting Standards, including price protection, shelf stock adjustments, other price adjustments, pre-procurement charges by customers (backorder charges), and other similar charges; and |
(d) | any other specifically identifiable costs or charges included in the gross invoice price for the Blu Royalty Product customarily deducted in the pharmaceutical industry, including, without limitation, shipping, and insurance. |
Blu Net Sales shall be determined in accordance with Accounting Standards, consistent with Blu's books and records applicable in the Territory. Sales of Blu Royalty Product between Blu and any of its Affiliates for resale shall be excluded from the computation of Blu Net Sales, but the subsequent resale of Blu Royalty Product to an Third Party shall be included within the computation of Blu Net Sales.
"Blu Royalty Product" means generic Doxycycline Hyclate 50 mg tablets that are the subject of the Blu ANDA that do not contain any branding, including, without limitation, trademarks, logos, or brand names.
"Blu 100mg Product" means generic Doxycycline Hyclate 100 mg tablets that are the subject of the Blu ANDA that do not contain any branding, including, without limitation, trademarks, logos, or brand names.
"Business Day" means any day other than a Saturday, Sunday or legal holiday on which banks in New York, New York are closed.
"cGMP" means current Good Manufacturing Practices, as set forth in the United States Code of Federal Regulations (21 CFR part 210 & Part 211).
"Commercially Reasonable" means, with respect to the efforts to be expended or considerations to be undertaken by a party related to any objective, activity or decision to be undertaken hereunder, reasonable, good faith efforts to accomplish a similar objective, activity or decision under similar circumstances. Such efforts will be similar to those efforts, considerations and resources commonly used by a party for a similar product owned by it or to which it has rights, which product is at a similar stage in its product life and is of similar market potential taking into account the competitiveness of alternative products sold by third parties in the marketplace, the regulatory status, market conditions and the profitability of the product.
2
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
"Convicted Entity" means a corporation, partnership or association that has been convicted of a criminal offense that falls within the ambit of 21 U.S.C. § 1320a — 7(a), but has not yet been excluded, debarred, suspended or otherwise declared ineligible.
"Convicted Individual" means an individual who has been convicted of a criminal offense that falls within the ambit of 21 U.S.C. § 1320a — 7(a), but has not yet been excluded, debarred, suspended or otherwise declared ineligible.
"Cost of Blu Royalty Product" shall mean an amount equal to [***] ([***] %) of the fully absorbed costs to manufacture a Blu Royalty Product, consisting of raw and packaging materials, labor and allocated overhead, based on the full absorption costing allocation method to manufacturing a Blu Royalty Product, in each case determined and recorded in accordance with Accounting Standards. Cost of Blu Royalty Product as of the Effective Date is set forth in Schedule B.
"Cost of Journey Product" shall mean an amount equal to [***] ([***] %) of the fully absorbed costs to manufacture a Journey Product, consisting of raw and packaging materials, labor and allocated overhead, based on the full absorption costing allocation method to manufacturing a Journey Product, in each case determined and recorded in accordance with Accounting Standards. Cost of Journey Royalty Product as of the Effective Date is set forth in Schedule B.
"Damages" has the meaning given in Section 12.1.
"Data Package" means the technical manufacturing and quality information contained within the Blu ANDA and specifications and control documents that provide for the technical and regulatory transfer of data to a third party manufacturer of Journey Product to assure supply of the Journey Products. The information required in the Data Package is listed in Schedule D.
"Debarred Entity" means a corporation, partnership or association that has been debarred by the FDA pursuant to 21 U.S.C. § 335a (a) or (b) from submitting or assisting in the submission of any abbreviated drug application, or a subsidiary or Affiliate of a Debarred Entity.
"Debarred Individual" means an individual who has been debarred by the FDA pursuant to 21 U.S.C. § 335 (a) or (b) from providing services in any capacity to a person that has an approved or pending drug product application.
"Detail" means a face-to-face contact by a sales representative with a healthcare professional during which time a promotional message involving a Journey Product is presented to the healthcare professional in the first position. The sales representative will, as is commercially reasonable inquire, investigate, promote, request, or identify where a prescriber may prescribe Journey Product. Sales aids, product samples, co-pay cards, and various other marketing materials or promotions may be utilized when commercially reasonable.
3
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
"Distribution Costs" means total costs incurred by a party for customary distribution expenses (e.g., insurance, transportation and freight outbound charges, VAT tax and duties).
"Excluded Entity" means an entity (i) that has been excluded, debarred, suspended or is otherwise ineligible to participate in federal health care programs such as Medicare or Medicaid by the Office of the Inspector General ("OIG/HHS") of the Department of Health and Human Services, or (ii) that has been excluded, debarred, suspended or is otherwise ineligible to participate in federal procurement and non-procurement programs, including those produced by the United States General Services Administration ("GSA").
"Excluded Individual" means an individual who has been excluded, debarred, suspended or is otherwise ineligible to participate in (i) federal health care programs such as Medicare or Medicaid by the OIG/HHS, or (ii) federal procurement and non-procurement programs, including those produced by the GSA.
"FDA" means the U.S. Food and Drug Administration, and any successor or replacement agency.
"Force Majeure Event" has the meaning given in Article 8.
"Initial Forecast" has the meaning given in Section 4.3.
"Journey Marketing Costs" means total costs incurred by Journey for customary selling, promoting and marketing Journey Product within the Territory, including, without limitation all (i) sales force costs, (sales team expenses, sales compensation, promotional budgets, training, equipment relating to sales and engaging customers, sample tracking, and FDA required methods including Sunshine Act and PDMA compliance, (ii) expenses regarding sales force targeting, for example: sales force automation, territory alignment, prescription data, and call and detail tracking, (iii) expenses regarding marketing tactical programs to enhance product uptake, for example: sales aid development, copay cards, samples, and other communications to reach and influence, including all support provided to the sales team. Journey Marketing Costs shall be documented in accordance with Accounting Standards.
"Journey Net Profit" means Journey Net Sales less (i) Cost of Journey Product, (ii) Distribution Costs incurred by Journey during the respective quarter, and (iii) Journey Marketing Costs, subject to limits set forth in section 5.3(d) incurred by Journey in the respective Quarter.
"Journey Net Sales" means the gross invoice price from sales of the Journey Product in the Territory by Journey or its Affiliates, less:
(a) | returns, return reserves, and discounts, including discounts made by means of rebates, to direct or indirect customers, including patient rebate cards, wholesaler fees and chargebacks directly related to the sales of the Journey Product (and including rebates or other payments required to be paid to governmental entities in connection with sales of such product pursuant to the Omnibus Budget Reconciliation Act of 1990 and similar other Federal or state legislation or programs, including for damaged goods, returns, recalls, rebates, savings cards or rejections); |
4
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
(b) | applicable taxes (to the extent borne by Journey and separately stated on the invoice and included in the gross invoice price), other than income taxes; |
(c) | sales credits customary in the industry and accrued in accordance with applicable Accounting Standards, including verifiable credits taken for price protection, shelf stock adjustments, other price adjustments, pre-procurement charges by customers (backorder charges limited to only those charges directly resulting from a supply interruption by Blu); and |
(d) | any other specifically identifiable costs or charges included in the gross invoice price for the Journey Product customarily deducted in the pharmaceutical industry, including, without limitation, shipping, and insurance. |
Journey Net Sales shall be determined in accordance with Accounting Standards, consistent with Journey's books and records applicable in the Territory. Sales of Journey Product between Journey and any of its Affiliates for resale shall be excluded from the computation of Journey Net Sales, but the subsequent resale of Journey Product to an Third Party shall be included within the computation of Journey Net Sales.
"Journey Product" means branded Doxycycline Hyclate 50 mg tablets and 100 mg tablets covered by the Blu ANDA, including samples, for sale to the human market.
"Latent Defect" means any instance where the Journey Product fails to conform to the Specifications for such Journey Product and such failure would not be discoverable upon reasonable physical inspection of such Journey Product or other testing customarily conducted by Journey or its designee upon receipt by Journey in accordance with its standard operating procedures.
"Launch Quantities" has the meaning set forth in Section 4.3(b).
"NDC Number" shall mean a unique 3-segment number that identifies the labeler/vendor, the product and the trade package size.
"Phase 1" shall mean the time period prior to a Third Party Launch.
"Phase 2" shall mean the time period beginning immediately after Phase 1 and ending 2 years afterwards.
5
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
"Phase 3" shall mean the time period commencing upon the expiration of Phase 2 and containing until the termination of the Agreement.
"Product Intellectual Property Rights" means all patent rights, know-how and other intellectual property rights owned or controlled by Blu or its Affiliates covering the manufacture, use or sale of Journey Products.
"Journey Indemnified Parties" has the meaning given in Section 12.1.
"Specifications" means the specifications for the design, composition, manufacture, packaging, branding, labeling, and quality control of the Journey Product as set forth in Schedule A hereto.
"Territory" means the United States of America, its commonwealths, territories and possessions, including the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, the Marshall Islands, and Guam.
"Third Party" shall mean any entity other than Blu, Journey and their respective Affiliates.
"Third Party Launch" means the commencement by a Third Party that is not an Affiliate of Blu of commercial sales of generic Doxycycline 1-lyclate 50 mg tablets in the Territory intended for human use where such sales are not under the Blu ANDA.
ARTICLE 2
RIGHT TO USE
2.1 | Grant of Rights. |
(a) Exclusive Rights. Blu hereby appoints Journey as the exclusive (except as set forth in Section 2.1(b) below) distributor of the Journey Products, with the right to market, promote, distribute, offer to sell and sell the Journey Products, in the Territory under the Blu ANDA. For clarity, the foregoing exclusivity shall prohibit Blu and its Affiliates from directly or indirectly distributing, marketing, selling or accepting orders for the sale of Journey Product and, in the Territory, and from supplying or licensing any Third Party to do each and all of the foregoing, except as set forth in Section 2.1(b) below.
(b) Nonexclusive Rights. Notwithstanding Section 2.1(a), Blu shall retain the right to market, promote, distribute, offer to sell and sell the Blu 100 mg Product in the Territory under the Blu ANDA. Further, Blu shall retain the exclusive rights to market the 50 mg Product for animal use in the Territory.
(c) Use of Affiliates. Notwithstanding anything to the contrary contained herein, Journey may discharge any obligations and exercise any right hereunder, or performance hereunder, through any of its Affiliates, provided that Journey shall remain responsible in all cases for compliance with this Agreement by such Affiliates.
6
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
2.2 | Restrictions. Except as provided in Section 2.1(b) and Section 2.3, neither Blu nor its Affiliates shall, directly or indirectly during the Term, manufacture, market, promote, distribute, offer to sell or sell a product containing Doxycycline Hyclate in the Territory, including, without limitation Blu Royalty Products. |
2.3 | Blu Royalty Products. Upon Journey's written approval following a Third Party Launch (which approval will not be unreasonably withheld following a Third Party Launch), the restrictions set forth in Section 2.2 shall terminate solely with respect to Blu Royalty Products. |
2.4 | Right of First Negotiation. |
(a) During the Term, in the event that Blu desires to enter into an agreement with a Third Party with respect to the sale or other disposition of the Blu ANDA , Blu will notify Journey of the same (a "Application Notice"). If Journey would like to negotiate an Agreement to acquire the Blu ANDA in the Territory, it shall notify Blu in writing of such request within fifteen (15) days after its receipt of an Application Notice (the "Notice Period"). Blu shall, for a period of thirty (30) days following receipt of such notification from Journey (the "Negotiation Period") enter into good faith negotiations with Journey with respect to the acquisition of the Blu ANDA.
(b) If Journey (i) does not request to pursue such an agreement within the Notice Period, then Blu will be free to enter into an agreement with a Third Party with respect thereto or (ii) does request that the Parties negotiate such an agreement regarding the Blu ANDA within the Notice Period, but the Parties do not conclude an agreement within the Negotiation Period, then Blu shall be free to enter into an agreement with a Third Party but only if (x) this Agreement is assigned to such Third Party, (y) such Third Party agrees in writing (in a form and substance approved in writing by Journey) to assume all of Blu's obligations and liabilities hereunder and (z) Blu guarantees in writing (in a faun and substance approved in writing by Journey) the performance of this Agreement by such Third Party. Any assignment of the Blue ANDA in violation of this Agreement shall be void ab initio.
2.5 | ANDA Rights. Blu shall retain all right, title and interest in and to the Blu ANDA during the term of this Agreement. During the term of this Agreement, Blu shall not assign or transfer the Blu ANDA to any Third Party. |
ARTICLE 3
SALES AND MARKETING ACTIVITIES
3.1 | Commercial Efforts. Journey will use Commercially Reasonable efforts to market and sell the Journey Products. Until a Third Party Launch occurs, Journey will conduct at least [***] Details with the Journey Products in P1 position during each year of this Agreement. Upon a Third Party Launch, the foregoing obligation to conduct minimum details shall terminate. Efforts of Affiliates shall be deemed efforts of Journey. Within 30 days after the last day of each calendar quarter, Journey will provide Blu with a quarterly report of Details that summarizes the number of Details conducted during the respective calendar quarter. The Details will be logged into a computer database that will record all interactions and capture prescriber signatures for samples. Details will be recorded within a reasonable time period of their occurrence. |
7
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
3.2 | Journey Pricing. Journey will have independent, sole discretion to determine the pricing; terms of sale, marketing, and selling decisions for the Journey Products without any consultation with, input from, or prior notice to Blu. |
3.3 | Rebate Processing. |
(a) Journey will be solely responsible for all federal, state and local government and private purchasing, pricing or reimbursement programs with respect to its sales of the Journey Product (including, without limitation, co-pay cards), including taking all necessary and proper steps to execute agreements and file other appropriate reports and other documents with governmental and private entities and Journey will be solely responsible for payment and processing of all rebates, whether required by contract or local, state or federal law, for its sales of the Journey Product.
(b) To the extent Blu is required by Applicable Law to refer to Journey Product sales made by Journey in Blu's government price reports, Journey will provide Blu with aggregate sales figures for the Journey Product sales made by Journey. This information will be contained in the Journey Revenue Share Report provided to Blu pursuant to Section 5.3(c). Blu shall use any data or information relating to pricing that Journey provides under this Section 3.3 or otherwise for the limited purpose of complying with price reporting to regulatory authorities that is required by Applicable Laws and for no other purpose. Blu shall not use any such data or information in connection with its sales, marketing or contract operations.
ARTICLE 4
SUPPLY AND MANUFACTURE
4.1 | Bin Supply Obligations. Subject to the provisions of this Article 4, Blu will supply to Journey one hundred percent (100%) of Journey's purchase order requests for the Journey Product. Blu will supply the Journey Product in the dosage forms and unit types set forth on Schedule A. |
4.2 | Journey Purchase Obligations. Except as set forth below and in Section 4.11, Journey and its Affiliates shall purchase 100% of their requirements of Journey Product from Blu, provided, however, that, commencing upon a Supply Interruption and continuing thereafter until the termination of this Agreement, Journey may at any time purchase from a Backup Manufacturer the percent of its requirements from a Backup Manufacturer that are required by such Backup Manufacturer (as documented in an agreement between the Backup Manufacturer and Journey to qualify and maintain such Backup Manufacturer as a manufacturer of Journey Product. For each tablet of Journey Product ordered and received by Journey from a Backup Manufacturer other than during a Supply Interruption, Journey will pay Blu [***] ($[***]) (the "Overhead Compensation Payment"). The Overhead Compensation Payment will be paid by Journey on a calendar quarter basis within sixty (60) days following the last day of each calendar quarter in which Overhead Compensation Payment accrues. For the avoidance of doubt, no Overhead Compensation Payment is due with respect to Journey Product ordered by Journey during a Supply Interruption. |
8
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
4.3 | Journey Initial Forecast; Launch Quantities. |
(a) Within thirty (30) days after the Effective Date, Journey will deliver to Blu a forecast for all Journey Product required for the twelve (12) month period commencing on April 1, 2015, excluding Launch Quantities (the "Initial Forecast"). The Initial Forecast will be non-binding upon the parties.
(b) In addition to Journey Product supplied to Blu pursuant to purchase orders submitted by Journey hereunder, Journey hereby orders, and Blu hereby agrees to supply to Journey, before July 31, 2015 between [***] tablets and [***] tablets of Journey Product (50 mg strength) of Journey Product (which will be provided in [***] ([***]) batches); ("Launch Quantities"). Such Journey Product shall be (i) bottled (i.e., breakdown of trade sizes and sample sizes) as instructed by Journey in writing within thirty (30) days of the Effective Date and (ii) shipped to a destination identified by Journey in writing.
4.4 | Ongoing Forecasts. On the fifteenth day of the second month of each calendar quarter (commencing with May 15, 2015), Journey shall provide Blu a good faith 12-month rolling forecast of anticipated orders of Journey Product to be placed during each month of such period (each, a "Forecast"). Each Forecast will specify, on a month-by-month basis during the 12-month period covered by the particular Forecast, the quantity of Journey Product required during such period. The first quarter (consecutive three month period ending in March, June, September or December) of each such Forecast shall be a binding commitment by Journey to place purchase orders for the forecasted quantity of Journey Product (the "Binding Purchase Commitment"). Each such Forecast shall otherwise be non-binding, except as provided below, but shall reflect Journey's good faith expectation (at the time of submitting the Forecast) of the orders of Finished Product and Finished MIT and projected delivery dates during the 12-month period. |
4.5 | Orders. Journey shall order Journey Product by submitting written purchase orders to Blu specifying (i) the quantity of Journey Product ordered, and (ii) the desired delivery date for such Journey Product, which shall be no earlier than 60 days from submission of purchase order. Journey shall not submit orders more frequently than once every three (3) months without prior agreement from Blu, which agreement will not be unreasonably withheld or delayed. Journey shall submit its purchase order for the binding portion of each Forecast to Blu at least 60 days in advance of the desired delivery date. All purchase orders that do not exceed the forecasted quantity of Journey Product specified in the binding portion of a Forecast or the Initial Forecast shall be deemed accepted by Blu upon receipt. Any purchase order submitted by Journey to Blu shall reference this Agreement and shall be governed exclusively by the terms contained herein. The parties hereby agree that the terms and conditions of this Agreement shall supersede any term or condition in any purchase order, confirmation or other document, furnished by Journey or Blu that is in any way inconsistent with these terms and conditions. Not later than 7 days after receipt of a purchase order, Blu shall confirm its receipt of the purchase order in writing. For any purchase order that exceeds the forecasted quantity specified in the binding portion of a Forecast or the Initial Forecast, the portion of the order not in excess of such quantity shall be deemed accepted by Blu and Blu shall notify Journey whether or not Btu will be able to fulfill the excess portion of such purchase order (or part thereof) and the expected delivery date for fulfillment, provided that in all events, Blu shall use Commercially Reasonable efforts to fulfill the order with respect to such excess portion as soon as reasonably practicable. Blu shall supply to Journey the forecasted quantity in the binding portion of the applicable Forecast or the Initial Forecast by the delivery date set forth in the respective order and shall use Commercially Reasonable efforts to supply to Journey any quantity in excess of such forecasted quantity as soon as reasonably practicable. |
9
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
4.6 | Shipping. All Journey Products shall be supplied in finished product containers, F.O.B., point of origin and risk of loss and title to the Journey Product shall pass to Journey upon shipment of the Journey Product from Blu's facility located in Dorado, PR. Until so shipped, Blu shall ensure that the Journey Product is handled and stored in accordance with the Specifications, cGMP, and all Applicable Laws. Each shipment of Journey Product will be accompanied by a certificate of compliance confirming that the Journey Product has been manufactured in accordance with this Agreement and the Blu ANDA. Any deviations and investigations related to the Journey Product will be documented by Blu in accordance with the Blu ANDA and the Quality Agreement. |
4.7 | Quality Agreement. On the Effective Date, the parties are entering into a Quality Agreement in substantially the form attached hereto as Exhibit A, setting forth the specific responsibilities, procedures and guidelines for batch release, quality control testing, quality assurance review, acceptance testing and other quality-related aspects of the manufacture and release of Journey Product, as such agreement may be amended from time to time by mutual written agreement of the parties (the "Quality Agreement"). Each party agrees to perform the responsibilities assigned to such party under the Quality Agreement in accordance with the terms and conditions of the Quality Agreement. In case of any conflict between the provisions of this Agreement and those of the Quality Agreement, the Quality Agreement shall prevail as to any quality-related matter, and this Agreement shall prevail as to all other matters. |
10
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
4.8 | Quality Audits. Blu shall maintain all quality control documentation and acceptance test results for Journey Product supplied hereunder for a period and in a manner consistent the Quality Agreement, the Blu ANDA, cGMP and Applicable Law. Journey may periodically review such documentation and results, and, as set forth in the Quality Agreement, audit and verify the adherence of Blu to the quality control procedures and standards set forth in the Quality Agreement or prescribed by Applicable Law or cGMP. |
4.9 | Acceptance/Rejection. Except as set forth in this Agreement, Journey Products may not be returned to Blu. Journey (or its authorized representative) shall perform a reasonable and customary visual inspection of all Journey Product that is reasonably discernible upon such visual inspection not to (i) conform to Specifications, Blu ANDA, Applicable Laws and cGMP or (ii) have at least twenty-two months of shelf life remaining at the time of receipt (unless otherwise agree to in writing by Journey) (collectively, the "Journey Product Requirements"); (in each case, "Non-Conforming Product") within 10 days of receipt of Journey Product by Journey's distributor. Notwithstanding the foregoing, Journey may reject Journey Product after such period following discovery of latent defects in such Journey Product that could not reasonably have been discovered by a reasonable and customary visual inspection, provided that Journey provides to Blu notice of Non-Conforming Journey Product within two (2) days following discovery of such latent defect. If any Journey Product is found to be Non-Conforming Product and is reported by Journey to Blu in the above time frame, then Blu shall, at Journey's request and option (to be exercised by Journey promptly), either: (a) replace such Non-Conforming Product at no additional charge to Journey; (b) refund to Journey the amount paid (if already paid) to Blu for such Non-Conforming Product or cancel the applicable purchase order if not paid; or (c) credit Journey's account in an amount equal to the amount paid for such Non-Conforming Product, and in any case ((a), (b) or (c)) Blu shall reimburse all shipping charges for the Non-Conforming Product from the destination of the original shipment, subject to receipt of invoice. Blu shall reimburse Journey for the reasonable costs incurred by Journey in properly disposing of or shipping to Blu (as instructed by Blu) such Non-Conforming Product, subject to receipt of invoice. |
4.10 | Dispute Regarding Rejection. If the parties disagree as to whether a particular delivery of Journey Product contains Non-Conforming Product, and cannot resolve such disagreement within 60 days, the parties shall appoint an independent testing laboratory or other appropriate expert mutually acceptable to the parties (the "Testing Laboratory") to (a) review data that are in question or (b) to oversee the evaluation and testing of a sample of Journey Product at the Testing Laboratory. The Testing Laboratory will conduct testing in accordance with the methods established for testing as set forth in the applicable Specifications. The party whose position in the dispute was not supported by the Testing Laboratory's findings shall bear the costs of the Testing Laboratory. |
11
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
4.11 | Supply Continuity. |
(a) In the event Blu determines that it will not be able to supply Journey Products to Journey in material satisfaction of the most recent orders and/or Forecasts, Blu shall promptly notify Journey in writing of such determination, which notice shall provide Journey with the details on the extent of the expected shortfall of supply, the causes of such inability to supply, and Blu's proposed solution to the problem.
(b) In the event Journey reasonably believes that Blu will be unable to meet Journey's forecasts for a Journey Product for more than thirty (30) days (a "Supply Interruption"), then Journey shall have the right, upon thirty (30) days written notice to Blu ("Manufacturing Notice"), to manufacture or have manufactured by a Backup Manufacturer (as defined below) the Journey Products unless Journey has, during such thirty (30) day period (the "Assurance Period"), received reasonable evidence of Blu's ability to meet such forecasts and reasonably determined that Blu will be able to meet such forecasts ("Supply Continuity Assurance Confirmation"). Without limiting the generality of the foregoing, a Supply Interruption shall be deemed to occur if:
(i) | Blu, with respect to any order of Journey Product, fails to supply, on a timely basis, at least 90% of Journey Product under such order conforming to the Journey Product Requirements; |
(ii) | a Force Majeure Event affecting the performance of Blu specified in Article 8 shall continue for more than sixty (60) days; or |
(iii) | any facility involved in manufacturing-related activities regarding the Journey Product (including, without limitation, packaging, labeling, testing, storing and release) is prohibited from, or materially adversely affected in its ability to, produce, store, or otherwise be in involved in the Manufacture or provision of such Journey Product to Journey under this. Supply Agreement by Regulatory Authorities or due to a failure to comply with Applicable Laws or cGMP. |
(c) Notwithstanding anything to the contrary herein, Journey shall at any time during the Term be entitled to qualify itself, its Affiliates and/or one or more Third Parties ("Backup Manufacturers"), to manufacture Journey Products for the purpose of such Backup Manufacturers supplying Journey with Journey Product upon a Supply Interruption. Blu acknowledges that the manufacture of Journey Product by a Backup Manufacturer shall not be a violation of this Agreement or any rights of Blu or its Affiliates.
(d) Subject to Blu's right to reject a Backup Manufacturer as described below, upon Journey's written request at any time (the "Backup Manufacturer Request"), Blu shall promptly (i) file (within thirty (30) days of Blu's receipt from Journey of all information reasonably necessary to file) with the FDA a supplement to the Blu ANDA and any other documents necessary to designate, qualify, authorize and obtain FDA approval of, Backup Manufacturers identified by Journey in the Backup Manufacturer Request to manufacture Journey Product and (ii) take any other actions reasonably requested by Journey to (x) accomplish such designation, qualification, authorization or approval and (y) obtain approvals necessary for Blu to manufacture or have manufactured Journey Product. Blu shall not take any action that would result in the termination of, or otherwise adversely affect, such designation and authorization. Journey shall reimburse Blu for its reasonable, documented out-of-pocket third party costs incurred in performing its obligations under this Section 4.11(d). If Blu, within seven (7) days of a receipt of a Backup Manufacturer Request, reasonably determines that a Backup Manufacturer identified therein (i) will not be able to manufacture Product in compliance with the Product Requirements, (ii) is at such time a manufacturer of doxycycline or a product which directly competes with Doxycycline, or (iii) reasonably unsuitable from a compliance or risk standpoint, then it may reject such Backup Manufacturer by providing to Journey written notice of the same during such seven (7) day period, which notice shall include reasonably detailed reasons for such rejection.
12
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
(e) Within thirty (30) days of the Effective Date, Blu shall deliver to Journey (and/or any Backup Manufacturer designated thereby), copies of the Data Package and any other information, including technical information, that is owned or controlled by, or in the possession of, Blu or any Affiliate thereof, that is reasonably necessary or useful to permit a Backup Manufacturer to manufacture Journey Product, including but not limited to information regarding acquiring raw materials from Blu's sources of such raw materials (the "Transferred Know-How"). Blu shall promptly provide any other information requested by Journey from time to time during the Term that is reasonably necessary or useful to permit a Backup Manufacturer to manufacture Journey Product. Blu shall provide Journey or any Third Party designee thereof reasonable assistance, at Journey's request, with respect to understanding and implementing such Transferred Know-How.
(f) Blu hereby grants Journey a license, until the expiration of the then-current Term to and under all Product Intellectual Property Rights, Transferred Know-How and the Blu ANDA (including a right to reference the Blu ANDA) to (i) use, make and have made Journey Products worldwide for Qualification Purposes-and (ii) sell, offer for sale and import such Journey Products in the Territory. "Qualification Purposes" means (x) qualifying as a manufacturer of Journey Products and (y) maintaining qualification as a manufacturer of Journey Products.
(g) If there is no Supply Assurance Continuity Confirmation during the Assurance Period, then, effective upon the expiration of the Assurance Period: (i) Blu hereby grants Journey, until the expiration of the then-current Term, a license under and to all Product Intellectual Property Rights, Transferred Know-How and the Blu ANDA (including a right to reference the Blu ANDA) to (x) use, make and have made Journey Products worldwide and (y) sell, offer for sale and import such Journey Products in the Territory and (ii) all of Journey's obligations under Sections 4.1-4.4 shall terminate, except the obligation to make the Overhead Compensation Payment in Section 4.2. For the avoidance of doubt, the obligations set forth in Section 5.3 shall remain in full force and effect.
13
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
(h) In the event a Supply Interruption occurs and Journey reasonably determines that (i) Blu has resolved the issues that caused the Supply Interruption and (ii) Blu will be able to supply, in compliance with this Agreement, Journey's requirements of Journey Products for a continuous period of twelve (12) months, then (x) the respective Supply Interruption shall be deemed to have ended, (y) Journey shall again be subject to the requirements of Sections 4.1-4.4 and (z) the license set forth in Section 4.11(g) shall no longer be in effect.
ARTICLE 5
CONSIDERATION
5.1 | Fees. |
(a) Upon the execution of this Agreement, Journey will pay Blu a refundable fee in the amount of One Million Two Hundred Fifty Thousand Dollars ($1,250,000) (the "Initial Fee"). In the event Journey does not receive before July 31, 2015 one hundred percent (100%) of the Launch Quantities in compliance with the Product Requirements, (i) Blu shall refund to Journey the full Initial Fee on or before August 15, 2015 and (ii) until Journey receives such refund in full, Journey is hereby granted a perpetual, irrevocable, fully-paid exclusive right and license under the Blu ANDA and all patent rights, know-how and other intellectual property rights owned or controlled by Blu and its Affiliates to make, have made, use, sell, offer for sale, import and otherwise commercially exploit Journey Products. Notwithstanding anything to the contrary herein, the foregoing license shall survive the termination of this Agreement.
(b) If Journey receives confirmation from Blu, on or before July 31, 2015, that at least [***] tablets of the Launch Quantities are on Blu's loading dock and ready for shipment to Journey or its designee, then Journey shall pay Blu [***] Dollars ($[***]) within 5 days of such confirmation.
5.2 | Purchase Price. |
(a) The price to be paid by Journey for each Journey Product hereunder (the "Price") shall be equal to Cost of Journey Product as of the Effective Date, as adjusted below. At least sixty (60) days prior to each annual anniversary of the Effective Date, the parties shall review the then-current Cost of Journey Product and the parties shall, in good faith, amend the nice by a mutually agreed upon proportionate amount prior to such anniversary to reflect (i) any documented, verifiable decreases or increases in the cost of materials used to manufacture the Journey Product as compared to such costs included in the Cost of Journey Product used as the basis for the then-current Price and (ii) any documented, verifiable decreases, or up to [***]% of any documented, verifiable increases, in labor and allocated overhead used to manufacture Journey Product (based on the full absorption cost allocation method to determine such portion of the cost of manufacturing a Journey Product) as compared to such overhead amount included in the Cost of Journey Product used as the basis for the current Price, provided that (1) any such change in Price shall not be effective until such anniversary.
14
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
(b) Blu shall invoice Journey for the Price of the Journey Product promptly after delivery of such Journey Product. The Price shall be due and payable by Journey to Blu within thirty (30) days after invoice date of the Product to Journey.
(c) Blu shall keep complete, true and accurate books of accounts and records for the purpose of determining Cost of Journey Product ("Cost Records"). Such books and records shall be kept for such period of time no less than three years following the end of the calendar year to which they pertain.
(d) Blu shall use commercially reasonable efforts to minimize the Cost of Journey Product. Such efforts on the part of Blu shall include, but not be limited to, (i) adopting any changes to manufacturing processes, or any other aspect of the manufacturing and supply of Journey Product hereunder proposed by Journey with the intent or having the effect of reducing the Cost of Journey Product, (ii) continually developing and implementing process improvements intended to increase manufacturing efficiencies and decrease manufacturing costs, (iii) obtaining raw materials at the lowest possible price, and (iv) otherwise seeking reductions in its cost to manufacture, handle, store, and otherwise supply Journey Product hereunder.
5.3 | Revenue Sharing. |
(a) Journey Revenue Sharing. Journey shall pay Blu the following amounts (the "Journey Revenue Share")
(i) | With respect to the 100 mg form of the Journey Product, Journey shall pay Blu an amount equal to [***] % of Journey Net Sales. |
(ii) | With respect to the 50 mg form of the Journey Product, Journey shall pay Blu an amount equal to [***] % of Journey Net Profit with respect to Net Sales occurring during Phase 1 and Phase 2. |
(iii) | With respect to Journey Net Sales of the 50 mg —form of the Journey Product occurring during Phase 3, Journey shall pay Blu an amount equal to [***] % of Journey Net Sales. |
(b) Blu Revenue Sharing. Blu shall pay Journey a revenue share (the "Blu Revenue Share") equal to [***] % of Blu Net Sales with respect to Blu Net Sales occurring during Phase 1 and Phase 2. No payments shall be due with respect to Blu Net Sales occurring during Phase 3.
(c) Payment Terms. Amount payable under Section 5.3 that have accrued during a particular Calendar Quarter shall be paid, on a calendar quarter basis, within 45 days after the end of each calendar quarter during which the payment obligation accrued. Within 45 days after the end of each calendar quarter during which Journey Net Sales have occurred, Journey shall deliver to Blu together with the applicable Journey Revenue Share, a written report summarizing the calculation of such Journey Revenue Share (the "Journey Revenue Share Report"). An example of the Journey Revenue Share Report is attached hereto as Exhibit B. Blu acknowledges that such example is solely for illustrative purposes and that Journey is not bound in any respect by such example. Within 45 days after the end of each calendar quarter during which Btu Net Sales have occurred, Blu shall deliver to Journey together with the applicable Blu Revenue Share, a written report summarizing the calculation of such Blu Revenue Share. Each such report shall be deemed "Confidential Information" of the party providing such report subject to the obligations of Article 10 of this Agreement. For three (3) years after the occurrence of Journey Net Sales, Journey shall keep complete and accurate records of such Journey Net Sales in sufficient detail to confirm the accuracy of the Journey Revenue Share and the calculation thereof. For three (3) years after the occurrence of Blu Net Sales, Blu shall, in accordance with the Accounting Standards, keep complete and accurate records of such Blu Net Sales in sufficient detail to confirm the accuracy of the Blu Revenue Share and the calculation thereof.
15
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
(d) Journey Net Profit Cost Limits. Within ninety (90) days following the last day of each calendar year in' which Journey pays Blu a Journey Revenue Share pursuant to Section 5.3(a)(ii) (the "Journey Net Profit Share"), Journey shall determine the aggregate Journey Marketing Costs deducted in such calendar year ("Aggregate Annual Marketing Costs"). If the Aggregate Annual Marketing Costs in any such calendar year exceeds the following amounts, as applicable: (i) during the first calendar year of this Agreement, the greater of $[***] or [***] % of Journey Net Sales during such calendar year, (ii) in the second calendar year of this Agreement, the greater of $[***] or [***] % of Net Sales during such calendar year, (iii) in the third calendar year of this Agreement, the greater of $[***] or [***] % of Net Sales during such calendar year, or (iv) in each calendar year thereafter, the greater of $[***] or [***] % of Net Sales during such calendar year (each of items (i), (ii), (iii) and (iv), a "Cost Cap"), then (x) Journey shall recalculate the Journey Net Profit Share for such calendar year (the "Adjusted Journey Net Profit Share"), provided that the Journey Marketing Costs deducted from Journey Net Profit in such calendar year shall not exceed the applicable Cost Cap , and (y) Journey shall, within ninety (90) days following the last day of such calendar year, pay Blu the difference between the Adjusted Journey Net Profit Share and the Journey Net Profit Share actually paid to Blu for such calendar year. Journey shall, in accordance with the Accounting Standards, keep complete, true and accurate books of accounts and records for the purpose of determining Journey Net Profit Share. Such books and records shall be kept for such period of time no less than three years following the end of the calendar year to which they pertain.
5.4 | Audit Rights. |
(a) During the term of this Agreement and for a period of 60 days thereafter upon not less than 30 days' prior written notice, Journey shall permit an independent, certified public accountant of national recognition (for the purposes of this Section 5.4, the "Auditor") selected by Blu and reasonably acceptable to Journey, which acceptance shall not be unreasonably conditioned, withheld or delayed, to audit or inspect those books or records of Journey that relate to the Journey Revenue Share for the sole purpose of verifying such payments.
(b) During the term of this Agreement and for a period of 60 days thereafter upon not less than 30 days' prior written notice, Blu shall permit an Auditor selected by Journey and reasonably acceptable to Blu, which acceptance shall not be unreasonably conditioned, withheld or delayed, to audit or inspect (i) those books or records of Blu that relate to the Blu Revenue Share for the sole purpose of verifying such payments and (ii) the Cost Records for the sole purpose of verifying the Cost of Journey Products.
16
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
5.5 | Payment Dispute. In the event Journey disputes a payment due to Blu hereunder in good faith, Journey shall pay the undisputed portion during the time period required herein and the parties shall work together in good faith to resolve such dispute. |
ARTICLE 6
TERM & TERMINATION
6.1 | Term. The term of this Agreement will commence on the Effective Date, and subject to the terms of this Article 6, will continue for ten (10) years thereafter (the "Initial Term"). Upon the expiration of the Initial Term, the term of this Agreement shall automatically renew for additional three (3) year periods (each, a "Renewal Term" and, together with the Initial Term, the "Term") until such time as a period gives the other party notice of termination at least one hundred eight (180) days prior to the expiration of the Initial Term or the then current Renewal Term. |
6.2 | Termination by Blu. This Agreement may be terminated by Blu: |
(a) If Journey shall be in breach of any material obligation hereunder and has not cured such breach within ninety (90) days after receipt of a notice from Blu requesting the correction of such breach (unless such breach is by its nature not susceptible of being cured or the giving of such notice would be futile or impracticable, in which event no notice shall be necessary). Such termination shall be effective upon the occurrence of such breach or, if a right to cure exists, upon failure of Journey to cure such breach within the specified time period. For the avoidance of doubt, a breach of the Binding Purchase Commitment shall be deemed a breach of a material obligation;
(b) Upon the filing or institution of any bankruptcy, reorganization, liquidation or receivership proceedings by Journey, or upon the failure by Journey for more than ninety (90) days to discharge or obtain the dismissal of any such actions filed against it. Such termination shall be effective upon receipt of notice from Blu.
6.3 | Termination by Journey. This Agreement may be terminated by Journey: |
(a) if Blu shall be in breach of any material obligation hereunder (other than a payment obligation), and has not cured such breach within ninety (90) days after receipt of a notice from Blu requesting the correction of such breach (unless such breach is by its nature not susceptible of being cured or the giving of such notice would be futile or impracticable, in which event no notice shall be necessary). Such termination shall be effective upon the occurrence of such breach or, if a right to cure exists, upon failure of Blu to cure such breach within the specified time period;
17
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
(b) upon the filing or institution of any bankruptcy, reorganization, liquidation or receivership proceedings by Blu, or upon the failure by Blu for more than ninety (90) days to discharge or obtain the dismissal of any such actions filed against it. Such termination shall be effective upon receipt of notice from Journey;
(c) upon a breach by Blu of Section 2.4 or 2.5; or
(d) if (i) Journey does not receive confirmation from Blu of the availability for shipment of the Launch Quantities in compliance with the Product Requirements before July 31, 2015 or (ii) if such Launch Quantities are not available at such time.
6.4 | Effect of Expiration or Termination. |
(a) Upon expiration or termination of this Agreement, Journey and its Affiliates shall immediately cease all sales, marketing and distribution of the Journey Product except that Journey and its Affiliates shall have the right to market, distribute, offer to sell and sell the remaining Journey Product then on hand in their inventory as of the date of such expiration, consistent with Journey's existing practices, which shall not be commercially unreasonable.
(b) Upon termination of this Agreement by Journey pursuant to Section 6.3, Journey shall have the option, in its sole discretion, to cancel all or any portion of any then outstanding purchase orders.
(c) Termination of this Agreement for any reason will not release either party hereto from any liability which at such time has already accrued or which thereafter accrues from a breach or default prior to such expiration or termination, nor affect in any way the survival of any other right, duty or obligation of either party hereto which is expressly stated elsewhere in this Agreement to survive such termination.
ARTICLE 7
REGULATORY MATTERS
7.1 | Facility Licenses. Blu shall obtain and maintain, or cause to be obtained and maintained, for the facility(ies) at which Journey Product is manufactured, labeled, packaged, tested or stored, all permits, licenses and approvals (including facilities licenses) required for the manufacture and supply of Journey in compliance with this Agreement. In the event Blu subcontracts any of its obligations hereunder, Blu shall be responsible for the subcontractors compliance with the terms and conditions of this Agreement, and Blu shall be responsible for the performance of such subcontractors. |
18
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
7.2 | FDA Communications. Journey and Blu agree, to promptly notify the other party in the event they receive any communication or notice from FDA with respect to the Journey Product or Doxycycline Hyclate and each party will promptly provide a copy of such communications to the other. The parties will cooperate in good faith in responding to any such FDA inquiry or in making any report to FDA with respect to the Journey Product. Journey will have the responsibility in the Territory for complying with all regulatory requirements and other matters which relate solely to Journey's acting as a distributor of the Journey Product in the Territory. All other regulatory reporting matters (including adverse event and product complaint reporting) will be Blu's responsibility for the Journey Product. |
7.3 | Labeling and Packaging. |
(a) Journey shall obtain NDC Numbers for the Journey Product and shall distribute and sell only the Journey Product bearing the applicable NDC Numbers. Blu shall promptly submit to the FDA and DailyMed the Journey Product label under the Blu ANDA . Journey is responsible for other drug listing of their private label Journey Product.
(b) All Journey Products will be private labeled by Blu with the names and trademarks chosen by Journey (the "Journey Product Marks"). As part of the manufacture of Journey Products, Blu shall package and label the Journey Products in accordance with the Specifications. Except as required to fulfill contractual obligations hereunder, Blu shall not apply any trademarks, trade names, logos or other branding items to packaging and labeling for the Products other than (i) Journey Product Marks and (ii) the Blu trademarks set forth in the Specifications. Journey hereby grants Blu a nonexclusive license to use the Journey Product Marks to package and label the Journey Products in accordance with the Specifications. Blu shall not use the Journey Product Marks for any other purpose. Journey shall retain all right, title and interest in and to the Journey Product Marks. All use of the Journey Product Marks shall inure to the benefit of Journey. During the Term and thereafter, Blu shall not in any event (i) register or, any trademark which is confusingly similar to the Journey Product Marks or Journey or (ii) use the Journey Product Marks in any manner whatsoever which may jeopardize the significance, distinctiveness or validity thereof. Blu hereby recognizes the validity of the Journey Product Marks and the registrations thereof, and will not, during the Term or thereafter, contest the validity thereof During the Term and thereafter, Journey shall not in any event (i) register or, any trademark which is confusingly similar to the Blu Product Marks or Blu or (ii) use the Blu Product Marks in any manner whatsoever which may jeopardize the significance, distinctiveness or validity thereof. Journey hereby recognizes the validity of the Blu Product Marks and the registrations thereof, and will not, during the Term or thereafter, contest the validity thereof.
7.4 | Recalls. Blu and Journey will each notify the other party promptly, and in any event within twenty-four (24) hours, if any batch of Journey Product is the subject of a recall or market withdrawal, and the parties will reasonably cooperate in the handling and disposition of such recall or market withdrawal; provided, however, in the event of a disagreement as to any matters related to such recall or market withdrawal, other than the determination of who will bear the costs as set forth in the immediately following sentence, Blu will have the final authority with respect to any product recall relating to the Journey Product. Blu will bear the cost of all recall or market withdrawals of Journey Product. Journey will maintain records of all sales of Journey Product and all customers sufficient to adequately administer a recall or market withdrawal for the longer of one (1) year after termination or expiration of this Agreement or the period required by Applicable Law or cGMP. Blu will be responsible for administering the physical aspects of any recalls or market withdrawals with respect to the Journey Product. Blu will provide Journey Product to Journey at Bill's expense to replace the recalled Journey Product. |
19
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
7.5 | Complaints. Journey and Blu will each notify the other of any product complaints made by customers that will or could cause an FDA "field alert" to be issued, within twenty-four (24) hours of the decision to file a field alert and will thereafter reasonably cooperate with each other relative to any investigation or inquiry that may be initiated by FDA with respect thereto. For purposes of clarification, the parties acknowledge that the foregoing complaint handling procedures will only apply to complaints which implicate the manufacturing, packaging, testing or storage of the Journey Product. |
7.6 | Inspection by Journey. Blu agrees that Journey and its respective agents (but no more than a total of three persons per inspection) shall have the right, pursuant to a reasonable confidentiality agreement with Blu, no more than once per calendar year (unless any such inspection reveals a material compliance issue, in which event Journey and its respective agents shall have the right to conduct such additional inspections during such calendar year as necessary to verify that such issue has been remedied), upon reasonable prior notice to Blu and during business hours, to inspect the portion of the facility where Journey Product is manufactured or stored as well as to observe the manufacturing of the foregoing, including inspection of (a) the raw materials used in the manufacture of the foregoing, (b) the holding facilities for such raw materials, (c) the equipment used in the manufacture of the foregoing, and (d) all material records reasonably relating to such manufacturing and the manufacturing facility, to the extent they relate to Journey Product. Following such inspection, Journey shall discuss its observations and conclusions with Blu. If the parties shall mutually agree that any corrective actions by Blu are necessary, Blu shall use 'Commercially Reasonable Efforts to implement such agreed corrective actions as soon as practicable. |
7.7 | FDA Inspections. In the event Blu's or Blu's Contract Manufacturer's manufacturing, packaging, testing or storage facility (or facilities) producing Journey Product is/are inspected by representatives of any federal agency in connection with Blu's or Blu's Contract Manufacturer's manufacture of the Journey Product, Blu will notify Journey within twenty four hours upon learning of such inspection, and will supply Journey with complete copies of any correspondence or communications or portions thereof which relate to the Journey Product. |
20
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
7.8 | Inquiries from Health Care Professionals. Blu shall provide reasonable assistance to Journey in its preparation and filing with appropriate regulatory agencies (both federal and state agencies) related to reimbursement and health care insurance' filings required for the marketing and distribution of Journey Product in the Territory by Journey. Blu and Journey will work together in good faith to develop such necessary regulatory strategies, which may be required for purposes of this Agreement. In addition, Blu will provide Journey with copies (in electronic format if available) of those materials, which Blu uses to respond to inquiries regarding applicable products from consumers and health care professionals. |
ARTICLE 8
FORCE MAJEURE
If either party is prevented from performing any of its obligations hereunder (except for any financial payments due hereunder) due to any cause that is beyond the non-performing party's reasonable control and could not have been avoided through the use of Commercially Reasonable efforts, including fire, explosion, flood, or other acts of God; acts, regulations, or laws of any government; court injunction or other court order; war, terrorist act or civil commotion; strike, lock-out or labor disturbances; or failure of public utilities or common carriers (each, a "Force Majeure Event"), such non-performing party will not be liable for breach of this Agreement with respect to such non-performance to the extent any such non-performance is due to a Force Majeure Event. Such non-performance will be excused for as long as such event will be continuing, provided that the non-performing party gives written notice to the other party of the Force Majeure Event within three (3) Business Days. Such non-performing party will exercise all reasonable efforts to eliminate the Force Majeure Event and to resume performance of its affected obligations as soon as practicable.
ARTICLE 9
INSURANCE
Each party shall procure and maintain at its cost insurance, including product liability insurance, adequate to cover its obligations hereunder and which are consistent with normal business practices of comparable companies with respect to similar obligations and liabilities, at all times during the Term. Each party will, on request, provide to the other party evidence of such insurance coverage. Upon execution of the agreement Journey will provide Blu with evidence of limits on premise liability, personal injury, advertising injury and Products Liability. Products Liability limits will be at a minimum of $[***]. Furthermore Journey will provide Blu with a certificate of insurance naming Blu as additional insured and must specifically list the Journey Product. Upon execution of the agreement Btu will provide Journey with evidence of limits on premise liability, personal injury, advertising injury and Products Liability. Products Liability limits will be at a minimum of $[***]. Furthermore Blu will provide Journey with a certificate of insurance naming Journey as additional insured and must specifically list the Journey Product.
21
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
ARTICLE 10
CONFIDENTIALITY
10.1 | Generally. Except to the extent expressly authorized by this Agreement or otherwise agreed in writing by the parties, each party agrees that, during the Term and for five (5) years thereafter, such party (the "Receiving Party") shall keep confidential and shall not publish or 'otherwise disclose and shall not use for any purpose other than as expressly provided for in this Agreement any information furnished to it by the other party (the "Disclosing Party") pursuant to this Agreement (collectively, "Confidential Information"). The Receiving Party may use such Confidential Information only to the extent required to accomplish the purposes of this Agreement. The Receiving Party will use at least the same standard of care as it uses to protect proprietary or confidential information of its own to ensure that its employees, agents, consultants and other representatives do not disclose or make any unauthorized use of the Confidential Information. The Receiving Party will promptly notify the Disclosing Party upon discovery of any unauthorized use or disclosure of the Confidential Information. |
10.2 | Exceptions. Confidential Information shall not include any information which the Receiving Party can prove by competent evidence: (a) is now, or hereafter becomes, through no act or failure to act on the part of the Receiving Party, generally known or available; (b) is known by the Receiving Party at the time of receiving such information, as evidenced by its records; (c) is hereafter furnished to the Receiving Party by a Third Party, as a matter of right and without restriction on disclosure; or (d) is independently discovered or developed by the Receiving Party without the use of Information provided by the Disclosing Party. |
10.3 | Authorized Disclosure. Each Receiving Party may disclose Confidential Information of the Disclosing Party as expressly permitted by this Agreement (including as reasonably necessary for the Receiving Party's performance of its obligations under this Agreement), or if and to the extent such disclosure is reasonably necessary in the following instances: |
(a) complying with applicable court orders, applicable laws, rules or regulations, or the listing rules of any exchange on which the Receiving Party's or its Affiliate's securities are traded;
(b) enforcing the Receiving Party's rights under this Agreement;
(c) in the case of Journey, manufacturing, or having manufactured, the Product upon a Supply Interruption; provided that any such Receiving Party agrees to be bound by terms of confidentiality and non-use comparable in scope to those set forth in this Article 10;
(d) disclosure to the Receiving Party's Affiliates and to the Receiving Party's and its Affiliates' employees, consultants, contractors or agents who have a need to know such information in order for the Receiving Party to exercise its rights or fulfill its obligations under this Agreement, provided, in each case, that any such Affiliate, employee, consultant, contractor or agent agrees to be bound by teams of confidentiality and non-use comparable in scope to those set forth in this Article 10;
22
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
(e) disclosure to Third Parties in connection with due diligence or similar investigations by such Third Parties, and disclosure to potential Third Party investors in confidential financing documents, provided, in each case, that any such Third Party agrees to be bound by obligations of confidentiality and non-use comparable in scope to those set forth in this Article 10, provided that the duration of such obligations may be shorter than the duration of those set forth in this Article 10.
Notwithstanding the foregoing, in the event the Receiving Party is required to make a disclosure of the Disclosing Party's Confidential Information pursuant to Section 10.3, Section 10.5 or Section 10.6, it will, except where impracticable, give reasonable advance notice to the Disclosing Party of such disclosure and use efforts to secure confidential treatment of such information at least as diligent as the Receiving Party would use to protect its own confidential information, but in no event less than reasonable efforts. In any event, the Receiving Party agrees to take all reasonable action to avoid disclosure of Confidential Information hereunder.
10.4 | Press Releases. Except as required by applicable securities laws or the listing rules of any stock exchange on which securities issued by a party or its Affiliates are traded, neither party shall make any public announcement concerning this Agreement or the terms or subject matter hereof without the prior written consent of the other, which shall not be unreasonably withheld or delayed. In the event of a required public announcement, to the extent practicable under the circumstances, the party making such announcement shall use Commercially Reasonable efforts to provide the other party with a copy of the proposed text of such announcement sufficiently in advance of the scheduled release to afford such other party a reasonable opportunity to review and comment upon the proposed text, unless the proposed text is substantially the same as that used in any prior public disclosure, press release or public statement made in accordance with this Section 10.4. |
10.5 | Filing of this Agreement. The parties shall coordinate in advance with each other in connection with the filing of this Agreement (including redaction of certain provisions of this Agreement) with any securities authority or with any stock exchange on which securities issued by a party or its Affiliate are traded, and each party will use reasonable efforts to seek confidential treatment for the terms proposed to be redacted; provided that each party will ultimately retain control over what information to disclose to any securities authority or stock exchange, as the case may be, and provided further that the parties will use their reasonable efforts to file redacted versions with any governing bodies which are consistent with redacted versions previously filed with any other governing bodies. Other than such obligation, neither party (nor any of its Affiliates) will be obligated to consult with or obtain approval from the other party with respect to any filings to any securities authority or stock exchange. |
23
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
10.6 | Use of Name. Neither party shall use the name, insignia, symbol, trademark, trade name or logotype of the other party (or any abbreviation or adaptation thereof) in any publication, press release or marketing and promotional material without the prior written approval of such other party in each instance, which approval shall not be unreasonably conditioned, withheld or delayed. The restrictions imposed by this Section 10.6 shall not prohibit either party from making any disclosure (a) identifying the other party as a counterparty to this Agreement to its investors, lenders or other financing sources, (b) that is required by Applicable Law or the requirements of a national securities exchange or another similar regulatory body (provided, that any such disclosure shall be governed by this Article 10), (c) that is necessary for the performance by of its obligations or exercise of its rights as contemplated by this Agreement or (d) with respect to which written consent has previously been obtained. |
ARTICLE 11
REPRESENTATIONS AND WARRANTIES
11.1 | Mutual Representations and Warranties. Each party hereby represents and warrants to the other that, as of the Effective Date: (a) it is duly organized and validly existing under the laws of its jurisdiction of incorporation or formation, and has full corporate or other power and authority to enter into this Agreement and to carry out the provisions hereof; (b) it is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder, and the person or persons executing this Agreement on its behalf has been duly authorized to do so by all requisite corporate or partnership action; and (c) this Agreement is legally binding upon it, enforceable in accordance with its terms, and does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any Applicable Laws or regulation of any court, governmental body or administrative or other agency having jurisdiction over it. |
11.2 | Blu Representations and Warranties. Blu represents, warrants and covenants to Journey that: |
(a) all Journey Product: (i) at the time of delivery, will conform to the applicable Product Requirements; (ii) will have been manufactured, tested, packaged and released in accordance with cGMP, Applicable Laws and Blu's obligations under the Quality Agreement; and (iii) will not be adulterated or misbranded or otherwise defective within the meaning of the ACT or any other Applicable Laws;
(b) Blu has the full right, power and authority to grant to Journey the rights and licenses granted to Journey hereunder;
24
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
(c) Blu has not granted, and it shall not grant during the Term, to any Third Party any license or other right to distribute branded 50mg tablets and/or 100mg tablets of Doxycycline Hyclate for human use;
(d) the Blu ANDA has been approved by the FDA;
(e) Blu will maintain the Blu ANDA in effect during the Term and will not take any action that will adversely affect the Blu ANDA or Journey's rights to market, promote, sell and distribute the Journey Product thereunder;
(f) Blu solely owns all right, title and interest in and to the Blu ANDA;
(g) Blu (i) is not a party to any legal action, suit or proceeding relating to the Journey Product or, except as set forth in Schedule C, Blu ANDA; and (ii) has not received any written communication from any Third Party (including the FDA or any other regulatory or governmental authority) threatening any action, suit or proceeding relating to the Blu ANDA or Journey Product;
(h) Blu has and will convey to Journey good title to Journey Products free and clear of any security interests, liens, or other encumbrances of any kind or character; and
(i) Blu shall comply with all applicable laws, consent decrees, and regulations of any Federal, state, or other governmental authority.
11.3 | Journey Representations and Warranties. Journey represents, warrants and covenants to Blu that: |
(a) Journey has the full right, power and authority to enter into this Agreement;
(b) Journey (i) is not a party to any legal action, suit or proceeding impacting its ability to sell the Journey Product; and (ii) has not received any written communication from any Third Party (including the FDA or any other regulatory or governmental authority) threatening any action, suit or proceeding impacting its ability to sell the Journey Product;
(c) Journey shall comply with all applicable laws, consent decrees, and regulations of any Federal, state, or other governmental authority.
(d) Journey will use Commercially Reasonable efforts to market and sell the Journey Products.
25
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
11.4 | Debarment. The parties each hereby represent and warrant to the best of their knowledge after reasonable investigation, that neither it, nor any of its employees or agents who will participate in the performance of this Agreement, have been, are currently, or are the subject of a proceeding that could lead to their or such employees or agents becoming, as applicable, a Debarred Entity, Debarred Individual, Excluded Entity, Excluded Individual, Convicted Entity, or Convicted Individual. The parties further covenant, represent and warrant that, if during the Term of this Agreement it becomes aware that, it, or any of its employees or agents participating in the performance of their obligations hereunder, become or are the subject of a proceeding that could lead that party, employee or agent becoming, as applicable, a Debarred Entity, Debarred Individual, Excluded Entity, Excluded Individual, Convicted Entity or Convicted Individual, then it will immediately notify the other party. In the event of such a notice, the parties will promptly discuss necessary measures to avoid such a circumstance from affecting a party's performance under this Agreement |
11.5 | LIMITATION OF LIABILITY. EXCEPT FOR (1) LIABILITY FOR BREACH OF ARTICLE 7, (ii) LIABILITY FOR A BREACH BY BLU OR ITS AFFILIATES OF SECTION 2.2 AND (iii) ANY DAMAGES ARISING FROM A PARTY'S WILLFUL MISCONDUCT, NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, EXEMPLARY, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR OTHER INDIRECT DAMAGES, INCLUDING LOST REVENUE AND LOST PROFITS, WHETHER BASED UPON WARRANTY, CONTRACT, TORT, STRICT LIABILITY OR OTHER LEGAL THEORY, IN CONNECTION WITH THIS AGREEMENT; provided, however, that this Section 11.5 shall not be construed to limit either party's indemnification obligations under Article 12. |
ARTICLE 12
INDEMNIFICATION
12.1 | Indemnification by Blu. Blu will indemnify and hold harmless Journey, its Affiliates, and each of their respective current or former directors, officers, employees, agents and representatives (the "Journey Indemnified Parties") from and against any and all damages, liabilities, claims, costs, charges, judgments and expenses (including all reasonable attorneys' fees and expenses) (collectively "Damages") from third parties that may be sustained, suffered or incurred by the Journey Indemnified Parties, arising from or in connection with (i) the breach by Blu of any warranty, representation, covenant or agreement made by Blu in this Agreement, or (ii) the intentional misconduct or gross negligence of any Blu Indemnified Party in connection with this Agreement or the Journey Product, or (iii) a breach of Blu's responsibilities pursuant to the Quality Agreement, or (iv) Blu or any of Blu's Affiliates' infringement of the intellectual property rights of a Third Party, except, in the case of clauses (i)-(iv) immediately above, for Damages for which Journey has an obligation to indemnify the Blu Indemnified Parties pursuant to Section 12.2 as to which Damages each of Blu and Journey shall indemnify the other party to the extent of its respective liability for such Damages. |
26
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
12.2 | Indemnification by Journey. Journey will indemnify and hold harmless Blu, its Affiliates, and each of their respective current or former directors, officers, employees, agents and representatives (the "Blu Indemnified Parties") from and against any and all Damages from third parties that may be sustained, suffered or incurred by the Blu Indemnified Parties, arising from or in connection with (i) the breach by Journey of any warranty, representation, covenant or agreement made by Journey in this Agreement; (ii) Journey's or its distributors' promotion, marketing, manner of distribution and commercialization of the Journey Products, except to the extent that any of the foregoing arises out of or results from the breach of this Agreement by Blu or the negligence or willful misconduct of Blu; (iii) the intentional misconduct or gross negligence of any Journey Indemnified Party in connection with this Agreement or the Journey Product, or (iv) a breach of Journey's responsibilities pursuant to the Quality Agreement, except, in the case of clauses (i)-(iv) immediately above, for Damages for which Blu has an obligation to indemnify the Journey Indemnified Parties pursuant to Section 12.1 as to which Damages each of Journey and Blu shall indemnify the other party to the extent of its respective liability for such Damages. |
12.3 | Claims. Each Blu Indemnified Party and Journey Indemnified Party ("Indemnified Party") agrees to give the indemnifying party prompt written notice of any matter upon which such Indemnified Party intends to base a claim for indemnification (an "Indemnity Claim") under this Article 12. In the event that an Indemnity Claim is brought or made against both parties, then each party will have the right to be represented by counsel at its own expense. Notwithstanding the foregoing, in the event that such Indemnity Claim relates solely to causes covered by Section 12.1 hereof, then Blu will assume full control of the defense of such Indemnity Claim including without limitation the settlement thereof All expenses of such suit, claim or proceeding, including the settlement and the payment of any damages thereof, will be borne solely by Blu. Notwithstanding the foregoing, in the event that such Indemnity Claim relates solely to causes covered by Section 12.2 hereof, then Journey will assume full control of the defense of such Indemnity Claim including without limitation the settlement thereof. All expenses of such suit, claim or proceeding, including the settlement and the payment of any damages thereof, will be borne solely by Journey. The Indemnified Party will make available to the indemnifying party and its counsel, at all reasonable times during normal business hours, all books and records of the other party relating to such suit, claim or proceeding, and each party will render to the other party such assistance as it may reasonably require in order to ensure proper and adequate defense of any such suit, claim or proceeding. The indemnifying party will obtain the written consent of the Indemnified Party prior to settling, ceasing to defend or otherwise disposing of any Indemnity Claim if as a result thereof the Indemnified Party would become subject to injunctive or other equitable relief or the business of the Indemnified Party would be adversely affected in any manner whatsoever. |
27
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
ARTICLE 13
INFORMAL DISPUTE RESOLUTION; EXCLUSIVE JURISDICTION
13.1 | Informal Dispute Resolution. Unless otherwise expressly provided for herein, any claim or controversy between the parties arising out of or relating to the execution, interpretation and performance of this Agreement (including the validity, scope and enforceability of this provision) will be identified in writing and presented to the other party. Within twenty (20) days after delivery of such notice of dispute, the President of Blu and the President of Journey (or another executive of a party or an Affiliate designated by a party's respective President) (the "Designated Officers") will meet (either in person or via telephone conference) at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute in good faith. All reasonable requests for information made by one party to another will be honored. All negotiations pursuant to this clause are confidential and will be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. If such Designated Officers cannot resolve such dispute within ten (10) days after such initial meeting, then each party reserves its right to any and all remedies available under law or equity with respect to any other dispute. Notwithstanding anything to the contrary herein, each party may seek immediate or other equitable relief against the other party at any time to enforce their proprietary rights in confidential information or other intellectual property rights. |
13.2 | Exclusive Jurisdiction and Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflict of law principles thereof. Each of the parties hereto irrevocably consents to the sole and exclusive jurisdiction and venue of the state and federal courts located in Delaware in all matters arising out of this Agreement and expressly waives all objections to jurisdiction and venue in such state and federal courts. The parties agree that service of process upon them in any such action may be made if delivered in person, by courier service, by telegram, by facsimile, by first class mail, or by any other way permissible under applicable laws and shall be deemed effectively given upon receipt. The parties agree that, with respect to any action arising out of this Agreement, A RIGHT TO TRIAL BY JURY IS HEREBY WAIVED. |
ARTICLE 14
MISCELLANEOUS
14.1 | Amendment. The parties may add additional products to this Agreement from time to time. The parties will prepare a Schedule and attach the new Schedule as an amendment to the Agreement, signed and dated by both parties. No modification, change or amendment to this Agreement will be effective unless in writing signed by each of the parties hereto. |
28
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
14.2 | Relationship of the Parties. The relationship of Journey and Blu established by this Agreement is that of independent contractors, and nothing contained herein will be construed to (1) give either party any right or authority to create or assume any obligation of any kind on behalf of the other, or (ii) constitute the parties as partners, joint venturers, co-owners, or otherwise as participants in a joint or common undertaking. |
14.3 | Third Party Rights. Nothing in this Agreement will be deemed to create any Third Party beneficiary rights in or on behalf of any other person. |
14.4 | Entire Agreement. It is the mutual desire and intent of the parties to provide certainty as to their respective future rights and remedies against each other by defining the extent of their mutual undertakings as provided herein. The parties have, in this Agreement (including the Schedules and Exhibits hereto), and the Quality Agreement referred to herein, incorporated all representations, warranties, covenants, commitments and understandings on which they have relied in entering into this Agreement, and, except as provided for herein, neither party makes any covenant or other commitment to the other concerning its future action. Accordingly, this Agreement and the Schedules and Exhibits hereto and the Quality Agreement referred to herein (i) constitute the entire agreement and understanding between the parties with respect to the subject matter hereof and there are no promises, representations, conditions, provisions or teens related thereto other than those set forth in this Agreement; and (ii) supersedes all previous understandings, agreements and representations between the parties, written or oral. |
14.5 | Headings and Examples. The Article and Section headings contained in this Agreement and any examples attached hereto are for reference purposes only and will not affect in any way the meaning and interpretation of this Agreement. |
14.6 | Notices. All notices and other communications hereunder will be in writing, will be delivered personally, or sent by national overnight delivery service or postage pre-paid registered or certified U.S. mail, and will be deemed given: when delivered, if by personal delivery or overnight delivery service; or if so sent by U.S. mail, five (5) Business Days after deposit in the mail, and will be addressed: |
If to Journey: |
Journey Medical Corporation 9237 E. Via de Ventura Blvd Suite 135 Scottsdale AZ 85258 Attention: President
|
|
If to Blu: |
Blu Caribe, Inc. [***]
|
or to such other place as either party may designate by written notice to the other in accordance with the terms hereof.
29
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
14.7 | Failure to Exercise. The failure of either party to enforce at any time for any period any provision hereof will not be construed to be a waiver of such provision or of the right of such party thereafter to enforce each such provision, nor will any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. Remedies provided herein are cumulative and not exclusive of any remedies provided at law. |
14.8 | Assignment. This Agreement may not be assigned by either party without the prior written consent of the other, except that either party may assign its rights and/or obligations hereunder to any successor in interest by way of merger, acquisition or sale or transfer of all or substantially all of its business or assets to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties hereto and their respective permitted successors and assigns. |
14.9 | Severability. In the event that any one or more of the provisions (or any part thereof) contained in this Agreement or in any other instrument referred to herein, will, for any reason, be held to be invalid, illegal or unenforceable in any respect, the remaining provisions of this Agreement will remain in full force and effect. If any of the terms or provisions of this Agreement are in conflict with any applicable statute or rule of law, then such terms or provisions will be deemed inoperative to the extent that they may conflict therewith and will be deemed to be modified to conform with such statute or rule of law. In the event that the terms and conditions of this Agreement are materially altered as a result of this Section 14.9, the parties will renegotiate the terms and conditions of this Agreement to resolve any inequities. |
14.10 | Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. |
14.11 | Survival. Articles 1, 6, 10, 12, 13 and 14, Sections 5.4 and 11.5, and any other terms of this Agreement which by their nature would continue beyond the termination, cancellation, or expiration of this Agreement, will survive the termination of this Agreement in accordance with the respective terms thereof |
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CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
IN WITNESS WHEREOF, the Parties have caused this License and Supply Agreement to be executed and delivered by their respective duly authorized officers as of the day and year first above written.
JOURNEY MEDICAL CORPORATION | ||
By: | /s/ Claude Maraoui | |
Name: | Claude Maraoui | |
Title: | President & CEO | |
BLU CARIBE, INC. | ||
By: | /s/ Bill Luster | |
Name: | Bill Luster | |
Title: | President |
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Exhibit 10.9
FIRST AMENDMENT TO
LICENSE AND SUPPLY AGREEMENT
This First Amendment (the "Amendment") to that certain License and Supply Agreement, dated March 10, 2015, (the "Agreement") by and between JOURNEY MEDICAL CORPORATION, a corporation organized and existing under the laws of Delaware ("Journey") and BLU CARIBE, INC., a corporation organized and existing under the laws of Puerto Rico ("Blu"), is made effective as of August 26, 2015 (the "Amendment Effective Date"). Blu and Journey are each referred to individually as a "Party" and together as the "Parties."
NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the sufficiency of which is acknowledged by both Parties, the Parties agree as follows:
1. | Definitions. Unless otherwise defined in this Amendment, initially capitalized terms used herein shall have the meanings given to them in the Agreement. |
2. | Section 5.1. Section 5.1 of the Agreement is hereby amended to add the following new Section 5.1(c): |
(c) Upon or following Blu filing with the FDA a Prior Approval Supplement that (i) is for the 50mg version of the Journey Product and (ii) has been pre-approved in writing by Blu ("PAS"), Journey will pay to the FDA on behalf of Blu the respective filing fee in the amount of $[***] (the "Filing Payment"). The Filing Payment will be creditable against Journey Revenue Share payments due to Blu under this Agreement."
3. | No Other Modifications. Except as specifically set forth in this Amendment, the terms and conditions of the Agreement shall remain in full force and effect. No waiver of the performance of any obligation under this Amendment shall be effective unless it has been given in writing and signed by the Party giving such waiver. No provision of this Amendment may be amended or modified other than by a written document signed by authorized representatives of each Party. |
THIS AMENDMENT AND THE AGREEMENT AS AMENDED BY THIS AMENDMENT SET FORTH THE ENTIRE AGREEMENT AND UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND SUPERCEDES ALL PRIOR DISCUSSIONS, AGREEMENTS AND WRITINGS IN RELATION THERETO.
4. | Miscellaneous. This Amendment may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to any rules of conflict of laws. |
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IN WITNESS WHEREOF, the Parties intending to be bound have caused this Amendment to be executed by their duly authorized representatives.
JOURNEY MEDICAL CORPORATION | ||
By: | /s/ Claude Maraoui | |
Name: | Claude Maraoui | |
Title: | President & CEO | |
BLU CARIBE, INC. | ||
By: | /s/ Bill Luster | |
Name: | Bill Luster | |
Title: | President |
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Exhibit 10.10
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
ASSET PURCHASE AGREEMENT
By and between
JOURNEY MEDICAL CORPORATION
and
SUN PHARMACEUTICAL INDUSTRIES, INC.
Dated: August 31, 2018
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the “Agreement”), dated August 31, 2018 (“Effective Date”), is entered into by and between Journey Medical Corporation, a Delaware corporation having its principal place of business at 9237 Via De Ventura Suite 135, Scottsdale, AZ 85258 (the “Buyer”) and Sun Pharmaceutical Industries, Inc, a Michigan corporation, located at [***] (the “Seller”). Buyer and Seller are referred to herein individually as a “Party” and collectively as the “Parties”.
WHEREAS, Seller owns and possesses the Transferred Assets (as defined herein).
WHEREAS, Seller desires to sell, transfer and assign to Buyer, and Buyer desires to purchase from Seller all of Seller’s right, title and interest in the Transferred Assets (as defined herein) with respect to the Territory upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and intending to be legally bound hereby, the Parties hereto agree as follows:
ARTICLE
1
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth below:
1.1 “Action or Proceeding” means any action, suit, proceeding, arbitration, court order, inquiry, hearing, assessment with respect to fines or penalties or litigation (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Authority.
1.2 “Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person from time to time. For purposes of this definition, the term “control” (including the terms “controlled by” and “under common control with”) means (a) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract relating to voting rights or corporate governance, or otherwise or (b) the ownership, directly or indirectly, of more than 50% of the voting securities or other ownership interest of such Person (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity).
1.3 “Ancillary Agreements” means, other than this Agreement, all other agreements, certificates and documents signed and delivered by any party in connection with this Agreement or the transactions contemplated hereby.
1.4 “Assumed Liabilities” shall have the meaning set forth in Section 2.6.
1.5 “Business Day” means a day other than a Saturday, Sunday, bank or other public holiday in the State of New York, USA.
1.6 “Claim Notice” shall have the meaning set forth in Section 7.3(a).
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1.7 “Closing” shall have the meaning set forth in Section 3.1.
1.8 “Closing Date” shall have the meaning set forth in Section 3.1.
1.9 “Commercially Reasonable Efforts” shall mean the diligent, good faith efforts, consistent with general practices and standards in the pharmaceutical industry with those used in the pharmaceutical industry of similar size and with similar resources of Buyer as of the date hereof, taking into account all scientific, commercial and other relevant factors, would normally use to accomplish a similar objective for its product having similar technical and regulatory factors (including safety and efficacy), similar expected and actual time and cost to commercialize, similar commercial and profit potential, competitive landscape, a similar proprietary position and strategic value, and that is at a similar stage in its product life cycle as the applicable Product, in each case based on existing and reasonably anticipated future conditions. Commercially Reasonable Efforts shall be determined on a market-by-market basis for the Product.
1.10 “Consent” means any consent, approval, authorization, waiver, permit, grant, franchise, concession, agreement, license, exemption or order of, registration, certificate, declaration or filing with, or report or notice to, any Person, including any Governmental Authority.
1.11 “Disclosure Schedules” means the disclosure schedule delivered by the Seller to the Buyer simultaneously with the execution of this Agreement and attached herewith as Schedule 1.11.
1.12 “Encumbrance” means any charge, equitable interest, hypothecation, lien, mortgage, pledge, security interest or other encumbrance of any kind known to the Seller prior to the Effective Date.
1.13 “Excluded Liabilities” shall have the meaning set forth in Section 2.6.
1.14 “FDA” means the United States Food and Drug Administration and any successor agency thereto.
1.15 “FDA Act” means the U.S. Federal Food, Drug and Cosmetic Act, as amended, and the rules and regulations promulgated thereunder.
1.16 “GAAP” means general accounting principles in United States of America.
1.17 “Governmental Authority” means any court, tribunal, governmental agency, commission, authority, department, ministry, official or other instrumentality of any state or federal government or any country (including any political subdivision thereof) or association of countries, including, without limitation, the FDA.
1.18 “Indemnified Party” shall have the meaning set forth in Section 7.3(a).
1.19 “Indemnifying Party” shall have the meaning set forth in Section 7.3(a).
1.20 “Indemnity Claims” shall have the meaning set forth in Section 7.3(a).
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1.21 “Intellectual Property” means, (a) all trademarks, service marks, trade dress, logos, trade names, and corporate names solely and exclusively related to the distribution of the Product in the Territory as listed in Schedule 1.21(a), together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith; and (b) the domain name, www.exelderm.com and the digital graphics files supporting such site.
1.22 “Inventory” means all stock of Product that are solely maintained, held, or stored by or on behalf of the Seller as on the Closing Date for the sale, distribution and commercialization in the Territory.
1.23 “Inventory Amount” shall have the meaning set forth in Section 4.2.
1.24 “Inventory Statement” shall have the meaning set forth in Section 4.2.
1.25 “Knowledge” means (a) in the case of Seller, the actual knowledge of the applicable Persons set forth on Schedule 1.25, and (b) in the case of Buyer, the actual knowledge of the Buyer.
1.26 “Laws” means any federal, state, local, foreign or multinational laws, statutes, ordinances, regulations, rules, standards, codes, orders, writs, injunctions, decrees, arbitration awards, agency or regulatory requirements or licenses or permits of any kind whatsoever of any Governmental Authority, all as amended from time to time
1.27 “Legal Requirement” means any statute, law, ordinance, regulation, order or rule of any Governmental Authority.
1.28 “Liabilities” shall mean, collectively, any debt, obligation, duty, guaranty, claim, loss, damage, deficiency, cost, expense, fees, commitment, obligation, responsibility, or liability of any nature (including such debt, obligation, duty, liability, or the like, that is primary or secondary, direct, absolute or contingent, or known or unknown) regardless of whether such debt, obligation, duty, liability, or the like, would be required to be disclosed on a balance sheet, and regardless of whether such debt, obligation, duty, liability, or the like, is immediately due and payable.
1.29 “Losses” shall mean any and all losses, damages, obligations, liabilities, Taxes, fines, fees, costs, expenses, lost profits, diminution in value, penalties, interest, awards, judgments, claims, demands, actions, suits and settlements of any kind, including attorneys’ and consultants’ fees and expenses and other costs and expenses.
1.30 “Marketing Collateral” shall mean the materials solely and exclusively related to the Product as set forth in Schedule 1.30.
1.31 “NDA” the New Drug Application (as defined in and regulated under the FDA Act), including all applications therefor, and all amendments, modifications, supplements and updates thereto.
1.32 “Net Sales” means for any period, the aggregate gross amounts invoiced by Buyer, its Affiliates or distributors for sales of the Product in bona fide, arms- length transactions in the
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Territory for use in the Territory, less following deductions allowed or accrued by using GAAP to the extent separately invoices or displayed in the invoice:
(a) credits or allowances actually granted for damaged Product, returns, rejections, withdrawals or recall of Product or failure to supply, chargebacks, price adjustments and billing errors or on account of retroactive price reductions affecting the Product;
(b) governmental rebates, patient vouchers or coupons granted to managed health care organizations; pharmacy benefit managers; federal, state/provincial, local and other governments, their agencies and purchasers and reimbursers;
(c) normal and customary trade, cash and quantity discounts, allowances and credits; and
(d) sales taxes, VAT and other taxes and duties applied to the sale of Product to the extent included in the gross amount invoiced.
1.33 “Notice Period” shall have the meaning set forth in Section 7.3(b).
1.34 “Permitted Encumbrance” means (i) any Encumbrance for Taxes, assessments and other governmental charges that are not yet due and payable, (ii) with respect to licenses, permits or contracts, any restrictions, obligations, limitations or other Encumbrances contained in such license, permit or contract or existing at Law or under the regulatory regime pursuant to which such permit or license is granted that do not materially impair the current use of the Product, or (iii) with respect to the NDA, any restrictions, obligations, limitations or other Encumbrances contained in such NDA or existing at Law or under the regulatory regime pursuant to which such NDA is granted that do not materially impair the current use of the Product.
1.35 “Person” means any individual, corporation, general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, or other entity or Governmental Authority.
1.36 “Product” means Exelderm (Cream & Solution) 1% sulconazole nitrate.
1.37 “Purchase Price” shall have the meaning set forth in Section 4.1.
1.38 “Royalty” or “Royalties” shall have the meaning set forth in Section 4.3.
1.39 “Royalty Term” means the time period commencing on the Effective Date and ending on December 1st, 2023 during which the Royalty is payable by the Buyer to the Seller.
1.40 “Tax” or “Taxes” means any taxes or similar assessments of any kind whatsoever including, but not limited to income, franchise, trade, capital, withholding, payroll, unemployment insurance, social security, gross receipts, sales and use, value added, excise, real property and personal property taxes, together with all interest, penalties and additions imposed with respect to any such taxes.
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1.41 “Territory” means the United States of America and all of its territories and possessions.
1.42 “Third Party” means any Person other than a Party or any of their respective Affiliates.
1.43 “Transferred Assets” shall have the meaning set forth in Section 2.1.
1.44 “Upfront Payment” shall have the meaning set forth in Section 4.1.
ARTICLE
2
PURCHASE AND SALE OF THE TRANSFERRED ASSETS
2.1 Transfer of Assets. Upon the terms and subject to the conditions set forth herein, Seller hereby sells, conveys, transfers, assigns and delivers to Buyer, and Buyer hereby purchases from Seller all of Seller’s right, title and interest in and to the following assets with respect to the Territory to the extent existing and controlled by the Seller (collectively, the “Transferred Assets”), free and clear of all Encumbrances (except Permitted Encumbrances):
(a) the Product NDA;
(b) the Inventory; and
(c) all Intellectual Property related to the Product.
2.2 The Parties hereby agree and acknowledge that the Product NDA and the Intellectual Property related to the Product shall be transferred by the Seller to the Buyer on the Closing Date and the Inventory shall be transferred by the Seller to the Buyer in accordance with Section 4.2 below.
2.3 License to Marketing Collaterals. Solely to the extent necessary for Buyer to market the Product in the Territory, Seller hereby grants to Buyer a limited, non-exclusive, non-transferable and royalty free license to Seller’s rights in the Marketing Collaterals. Upon the terms and subject to the conditions set forth herein, after the Closing, Seller shall promptly deliver to Buyer the Marketing Collaterals. For the avoidance of doubt, nothing herein shall be construed as a grant or license of any rights to any Sun trademark, service mark, trade dress, logo, trade name or corporate name similar or related thereto other than those specifically set forth in Schedule 1.21(a).
2.4 The Buyer acknowledges and agrees that Seller may retain for archival purposes and for purposes of complying with the applicable Laws and for legal and regulatory purposes as sellers of pharmaceutical products, one copy of all or any part of the documentation that Seller delivers to the Buyer pursuant to this Section 2.1.
2.5 Other than the Transferred Assets set forth in Section 2.1, the Buyer expressly understands and agrees that it is not purchasing or acquiring, and the Seller is not selling or assigning, any other assets or properties of the Company not specifically related to the Product, including but not limited to Seller’s trademarks, trade dress, logos, corporate designs, and the like that are incorporated in the Marketing Collateral and in the digital graphics files forming part of the Intellectual Property, and all such other assets and properties shall be excluded from the Transferred Assets.
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2.6 Liability. From and after the Closing Date, Buyer shall assume, be responsible for and pay, perform and discharge when due, and, if necessary, reimburse Seller for all matters and Liabilities (including intellectual property infringement or misappropriation claims or actions or any other claims or actions brought by any Third Party) within the Territory arising out of or relating to the Product and the Transferred Assets for the period after the Closing Date (“Assumed Liabilities”). For avoidance of doubt, with respect to the Inventory, the Buyer shall assume the Assumed Liabilities from and after the date of transfer of Inventory under Section 4.2. It is hereby clarified that Buyer shall not assume and be responsible for the Liabilities arising out of or in connection with the use and ownership of the Transferred Assets which have resulted from any acts or omissions of the Seller for the period prior to the Closing Date (and with respect to the Inventory, prior to the date of transfer of the Inventory under Section 4.2) (“Excluded Liabilities”).
ARTICLE
3
CLOSING & CONDITIONS PRECEDENT
3.1 Closing. The consummation of the purchase and sale of the Transferred Assets contemplated hereby (the “Closing”) will take place on the date of receipt of the Upfront Payment by the Seller pursuant to Section 4.1(i) or, if all the conditions set forth in Sections 3.2(a) and 3.2(b) are not then satisfied or waived, the first such Business Day thereafter on which they are waived or satisfied, and “Closing Date” shall mean the date upon which Closing occurs.
3.2 Conditions to Closing.
(a) Conditions to the Seller’s Obligations. The obligation of the Seller to consummate the transactions contemplated by this Agreement at Closing is subject to the fulfillment of each of the following conditions (any or all of which may be waived in writing in whole or in part by the Seller):
(i) Representations. The representations and warranties of Buyer made in Section 5 of this Agreement shall be true and correct as of the Closing Date. Buyer shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Buyer by the time of the Closing. Buyer shall have delivered to Seller a certificate dated the Closing Date and signed by an authorized officer of Buyer to the effect that the conditions specified in this Section 3.2(a) are satisfied.
(ii) Consents. The Buyer shall have received all Consents as required in order to assign to the Buyer all rights of the Seller to the Transferred Assets; and
(iii) No Order. There shall not be in effect on the Closing Date any judgment, order, decree, ruling or charge restraining, enjoining or otherwise prohibiting or making illegal the consummation of the transactions contemplated by this Agreement.
(b) Conditions to the Buyer’s Obligations. The obligation of the Buyer to consummate the transactions contemplated by this Agreement at Closing is subject to the fulfillment of each of the following conditions (any or all of which may be waived in writing in whole or in part by the Buyer):
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(i) Representations. The representations and warranties of Seller made in Section 5 of this Agreement shall be true and correct as of the Closing Date. Seller shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Seller by the time of the Closing. Seller shall have delivered to Buyer a certificate dated the Closing Date and signed by an authorized officer of Seller to the effect that the conditions specified in this Section 3.2(b) are satisfied.
(ii) Consents. The Seller shall have received all Consents as required in order to assign to the Buyer all rights of the Seller to the Transferred Assets; and
(iii) No Order. There shall not be in effect on the Closing Date any judgment, order, decree, ruling or charge restraining, enjoining or otherwise prohibiting or making illegal the consummation of the transactions contemplated by this Agreement.
3.3 Closing Deliverables. At the Closing, the following shall be delivered:
(a) Buyer shall deliver to the Seller
(i) by wire transfer to a bank account designated in writing by Seller in US Dollars, immediately available funds in an amount equal to the sum of the Upfront Payment; and
(ii) the certificate required to be delivered by Buyer under Section 3.2(a) duly executed by an authorized officer of Buyer.
(b) Seller shall deliver to the Buyer the certificate required to be delivered by Seller under Section 3.2(b) duly executed by an authorized officer of Seller.
ARTICLE
4
PRICE & TERMS
4.1 Purchase Price. As consideration for the Transferred Assets, Buyer shall pay to the Seller a non-refundable and non-creditable payment of: (i) One Million and Two Hundred Thousand U.S. Dollars (U.S. $1,200,000) within sixty (60) days from the Effective Date (“Upfront Payment”), (ii) the one-time milestone payment of Four Hundred Thousand U.S. Dollars (U.S. $400,000) within forty-five (45) days following the achievement of the Net Sales of the Product for the calendar year being equal to or more than [***] U.S. Dollars (U.S. $[***]); (iii) Inventory Amount as set forth in Section 4.2 below and (iii) Royalty, as set forth in Section 4.3 below (collectively, with (i), (ii) and (iii) “Purchase Price”). The Buyer will pay the Purchase Price to the Company by wire transfer of federal funds pursuant to written instructions delivered by the Seller to the Buyer.
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4.2 Inventory. Seller shall prepare a statement for the Inventory it will possess on the Effective Date (“Inventory Statement”) and provide such statement to the Buyer at least two (2) Business Days prior to the Effective Date. In consideration of the Seller transferring the Inventory to the Buyer, Buyer shall pay to Seller an amount equivalent to the value of the total quantity of Inventory mentioned in the Inventory Statement (i.e. USD per unit multiplied by total quantity of the Inventory) (“Inventory Amount”). Buyer shall pay the Inventory Amount within ten (10) Business Days from the date of receipt of the Inventory Statement. For clarity, Seller is not required to invoice Buyer for the payment of the Inventory Amount. Seller shall deliver the Inventory as per Ex-Works (Incoterms 2010) Cranbury, New Jersey. Parties hereby agree and acknowledge that the Inventory will be sold by Buyer with the existing label, however Buyer shall make commercially reasonable efforts to change the labelling as soon as practicable. Seller shall reasonably assist the Buyer in handling any customer complaints/queries. Notwithstanding anything contained herein, Buyer hereby agrees and acknowledges that it shall be solely responsible and liable for any and all claims or actions arising out of or in connection with the handling, storing, marketing, promoting, distributing and selling of the Inventory. Seller shall make the Inventory available to Buyer within two (2) Business Days following the Effective Date.
4.3 Royalty. During the Royalty Term, the Buyer shall pay to Seller quarterly a royalty of [***]% of the Net Sales of the Product in the Territory (the “Royalty”), payable within forty-five (45) days following the end of the applicable calendar quarter. In the event the Net Sales of the Product is equal to or more than [***] U.S. Dollars (U.S. $[***]) in a fiscal year, thereafter the Royalty shall become [***]% of Net Sales. The Buyer agrees to use Commercially Reasonable Efforts to commercialize the Product in a manner which will generate maximum Net Sales in the Territory.
4.4 Audit Right. Upon not less than five (5) Business Days’ written notice, Seller shall have the right to audit the books and records of Buyer to the extent relating to Net Sales for the purposes of determining the correctness of Buyer’s computation and payment of the Royalty. Such audit shall be conducted during normal business hours by an accountant selected by Seller. All costs and expenses for conducting the audit shall be borne by the Seller, except that if the audit report shows that the Royalties were underpaid or overpaid by more than two percent (2%), then all costs and expenses for conducting the audit shall be borne by Buyer. Payment of any underpaid or overpaid Royalties, along with the costs and expenses for conducting the audit, shall be paid with or deducted from the immediately following Royalty payment, as applicable. The right to audit under this Section by the Seller shall survive termination or expiration of this Agreement by a period of one (1) year therefrom.
4.5 Taxes and Fees. Buyer shall be responsible for and pay all Taxes imposed in connection with the transactions provided for in this Agreement (excluding any income tax and capital gains tax on Seller), including without limitation sales taxes, value added taxes, transfer taxes and recording fees, if any, imposed upon the transfer of the Transferred Assets, and any withholding taxes.
4.6 Late Payment. The Company shall be entitled to charge [***]% interest per annum on any amounts overdue, from the due date for payment until receipt by the Company of the full amount, without prejudice to any other right or remedy of the Company.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 Seller’s Warranties. Except as set forth on the Disclosure Schedule, as on the Effective Date, Seller represents and warrants to Buyer as follows:
(a) Organization and Authority. Seller is validly existing and in good standing under the applicable Laws, with full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been, and upon execution of each of the Ancillary Agreements, such Ancillary Agreements will have been, duly and validly authorized, executed and delivered by, and constitute the legal, valid and binding obligations of Seller enforceable in accordance with their terms.
(b) Title. Seller owns and has good and valid title to the Transferred Assets, free and clear of all Encumbrances. There are no adverse claims of ownership to the Transferred Assets and, to the Seller’s Knowledge, Seller has not received written notice that any individual or entity has asserted a claim of ownership or right of possession or use in or to any of the Transferred Assets. At Closing, Buyer will acquire from Seller good and valid title to the Transferred Assets.
(c) Litigation; Legal Compliance.
(i) There is no material Action or Proceeding pending or, to Seller’s Knowledge, threatened, with respect to the Transferred Assets, that affects or, if successful, would affect the validity of this Agreement or any action taken or to be taken by the Seller in connection herewith, or which individually or in the aggregate, would materially impair the ability of Seller to perform its obligations hereunder or to consummate the transactions contemplated by this Agreement or the Ancillary Agreements.
(ii) Neither Seller nor any officer, employee, agent, contractor or distributor of Seller has committed or been convicted of any crime or engaged in any conduct for which debarment is mandated by 21 U.S.C. § 335a(a) or any similar law or authorized by 21 U.S.C. § 335a(b) or any similar applicable law. Neither Seller nor any officer, employee, agent, contractor or distributor of Seller has been convicted of any crime or engaged in any conduct for which such person could be excluded from participating in federal health care programs under Section 1128 of the Social Security Act of 1935, as amended, or any similar law. No claims, actions, proceedings or investigations that could reasonably be expected to result in a debarment or exclusion are pending or threatened against Seller or any of its directors, officers, employees or agents. Seller has never been: (i) debarred or (ii) convicted of a crime for which a person can be debarred under Section 306(a) of the Generic Drug Enforcement Act of 1992 (Section 306 (a) or (b)), and Seller has never been and, to Seller’s Knowledge, none of its employees, Affiliates or agents has ever been: (i) threatened to be debarred or (ii) indicted for a crime or otherwise engaged in conduct for which a person can be debarred, under Section 306(a) or (b) of the Generic Drug Enforcement Act of 1992.
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(iii) Seller has provided to Buyer copies of all written communications to or from any Governmental Authority and associated with the Product, including, without limitation, any written communication to or from the FDA.
(iv) The Seller possesses all material registrations, rights of reference, approvals, licenses, consents, agreements, permits and other authorizations from Governmental Authorities, required by applicable provisions of Laws.
(d) No Conflicts. Neither the execution and the delivery of this Agreement or the Ancillary Agreements, nor the consummation of the transactions contemplated hereby and thereby, will (i) violate any material Legal Requirement to which Seller is, or its assets or properties are, subject, (ii) contravene, conflict with or result in a breach or violation of any provision of the charter or bylaws of Seller.
(e) Brokers and Finders. Seller has not employed any broker, finder, consultant or intermediary in connection with the transactions contemplated by this Agreement who would be entitled to a broker’s, finder’s or similar fee or commission in connection therewith or upon the consummation thereof.
(f) Inventory. The Inventory is (a) free from any material defect or deficiency, (b) is in good and usable condition for sale and (c) meets in all material respects all of the applicable requirements and specifications.
(g) Intellectual Property.
(i) Seller exclusively owns the Intellectual Property free and clear of all Liens. The Intellectual Property will, immediately subsequent to the Closing, be transferred to, and controlled by Buyer on substantially the same terms with which Seller, immediately prior to the Closing, owned and controlled such Intellectual Property. To Seller’s Knowledge, (i) Seller has not and is not infringing, misappropriating or otherwise violating (including with respect to the discovery, development, clinical testing, manufacture, distribution, advertising, use, exploitation or sale by Seller of the Product) the rights of any other Person with regard to Seller’s possession or use of any Intellectual Property for its sale of the Product as presently conducted. To Seller’s Knowledge, no other Person has or is infringing, misappropriating or otherwise violating the Intellectual Property. No claims against Seller are pending or, to Seller’s Knowledge, threatened with regard to (i) the control or use of any of the Intellectual Property; or (ii) the validity or enforceability of any Intellectual Property.
(ii) Schedule 1.21(a) sets forth, as of the date hereof, a complete and accurate list of all Intellectual Property owned by Seller related to the Product that is being transferred to Buyer. To Seller’s Knowledge, all Intellectual Property owned by Seller that is related to the Product has been duly registered or filed with or issued by each appropriate Governmental Authority in the jurisdiction indicated in Schedule 1.21(a), all related necessary affidavits of continuing use have been (or, with respect to licenses, to Seller’s Knowledge have been) timely filed, and all related necessary maintenance fees have been (or, with respect to licenses, to Seller’s Knowledge have been) timely paid to continue all such rights in effect.
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(iii) No Other Representation or Warranties. Except for the representations and warranties contained in this Section 5.1, Seller makes no other express or implied warranty, and Seller hereby disclaims any such warranty or any representation whether by Seller or its respective officers, directors, employees, agents or representatives or any other Person, as to the condition (financial or otherwise), value or quality of the Product or the Transferred Assets, notwithstanding the delivery or disclosure to Buyer or any of its officers, directors, employees, agents or representatives or any other Person of any documentation or other information by Seller or any of its officers, directors, employees, agents or representatives or any other Person with respect to any one or more of the foregoing.
5.2 Buyer’s Warranties. Buyer hereby represents and warrants to Seller, as of the date hereof and as of the Closing Date, as follows:
(a) Organization and Authority of Buyer. Buyer is validly existing and is in good standing under the Applicable Laws of the State of Delaware, with full power and authority to enter into this Agreement and perform its obligations hereunder. This Agreement has been, and upon execution of each of the Ancillary Agreements, such Ancillary Agreements will have been duly and validly authorized, executed and delivered by, and constitute the legal, valid and binding obligations of Buyer, enforceable in accordance with their respective terms.
(b) Litigation. There are no material Actions or Proceedings pending, or to Buyer’s Knowledge, threatened, that questions the validity of this Agreement or any action taken or to be taken by the Buyer in connection herewith, or which individually or in the aggregate, would materially impair the ability of Buyer to perform its obligations hereunder or to consummate the transactions contemplated by this Agreement or the Ancillary Agreements.
(c) The Buyer possesses all material registrations, rights of reference, approvals, licenses, consents, agreements, permits and other authorizations from Governmental Authorities, required by applicable provisions of Laws.
(d) The Buyer has and will have at Closing cash available sufficient to enable it to consummate the transactions contemplated by this Agreement.
(e) No Conflicts. Neither the execution and the delivery of this Agreement nor the Ancillary Agreements, nor the consummation of the transactions contemplated hereby and thereby, will (i) violate any material Legal Requirement to which Buyer is, or its assets or properties are, subject, (ii) contravene, conflict with or result in a breach or violation of any provision of the charter or bylaws of Buyer, or (iii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Buyer is a party or by which it is bound or to which any of its assets is subject. Buyer does not need to give any material notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Authority or any other Person in order to consummate the transactions contemplated by this Agreement or the Ancillary Agreements. There is no proceeding pending or, to the Knowledge of Buyer, threatened against Buyer that challenges, or may have the effect of preventing, delaying, making illegal or otherwise interfering with the transactions contemplated by this Agreement or the Ancillary Agreements.
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(f) Independent Investigation. The Buyer has conducted its own independent investigation, due diligence, review and analysis of the business, operations, assets (including Contracts), liabilities, results of operations, financial condition, software, technology and prospects of the business related to the Product, which investigation, review and analysis were undertaken by the Buyer and its Affiliates and representatives.
(g) Brokers and Finders. Buyer has not employed any broker, finder, consultant or intermediary in connection with the transactions contemplated by this Agreement who would be entitled to a broker’s, finder’s or similar fee or commission in connection therewith or upon the consummation thereof.
5.3 Non-Reliance. The Buyer agrees and acknowledges that the Buyer has relied solely on the representations and warranties set forth in Section 5.1 and except for the representations and warranties expressly set forth in Section 5.1, as modified by the Disclosure Schedule and any certificate delivered by or on behalf the Seller hereunder, neither the Seller nor any of its shareholders, trustees, Affiliates or representatives or any other Person, has made or is making any other representations or warranties, promises, covenants, agreements or guaranties, statutory, common law or otherwise, of any nature, oral or written, past, present or future, including any other representations or warranties, express or implied, with respect to, and the Buyer have not relied upon, the accuracy or completeness of any other information, provided, or made available by, the Seller or any of its representatives, with respect to, or in connection with, the negotiation, execution or delivery of this Agreement or the transactions contemplated hereby.
ARTICLE 6
COVENANTS
6.1 Obligations of the Parties Prior to Closing. Seller will not prior to the Closing Date (a) incur any material liability outside the ordinary course of business with respect to the Transferred Assets, or (b) create any Encumbrance on any of the Transferred Assets.
6.2 Non-Competition. The Parties hereto agree and acknowledge that the provisions of this Agreement shall not be construed to limit or restrict in any manner the rights of Seller or any of its Affiliates to develop, manufacture, use, sell or commercialize in any manner the Product in a generic or other formulation, either in the Territory or outside of the Territory; provided, however, that for a period of five (5) years commencing on the Closing Date, Seller shall not manufacture or commercialize any product containing the same active ingredient and in the same dosage and form as that of the Product in the Territory.
6.3 Use of the Transferred Assets. The Buyer agrees and acknowledges that Seller is not assigning, licensing or conveying any rights to the Buyer outside the Territory.
6.4 Standards of Quality. The Buyer agrees to comply with applicable Laws and regulations in the Territory in the marketing, sale, and distribution of Product.
6.5 Reasonable Efforts of the Parties. Seller and Buyer shall each use its respective Commercially Reasonable Efforts to cause all of the conditions to the obligations of the other to consummate the transactions contemplated hereby to be met as soon as practicable after the date of this Agreement and to do, or cause to be done, all things necessary to consummate the transactions contemplated hereby.
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6.6 Registrations and Filings. (a) Without prejudice to applicable Legal Requirement in the Territory that may exclude this possibility, from and after the Closing, Buyer shall take the lead in coordinating the NDA transfers. Buyer shall file, or shall cause its Affiliate or designee to file, or, if required by applicable Legal Requirement, Seller, its Affiliate or designee shall file, applications for the transfer of the NDA in the Territory. (b) For the avoidance of doubt, Seller does not warrant and shall not be responsible for the successful transfer, maintenance or renewal of the NDA after the Closing Date and shall not be obligated to launch the Product in the Territory where it has not been launched before Closing.
6.7 Prescription Drug User Fee Act. Following the Effective Date, Buyer shall assume and have responsibility for fees or charges associated with the Product due and payable to the FDA after the Effective Date pursuant to the Prescription Drug User Fee Act, and any reauthorization thereto. Seller shall retain full responsibility and liability for all fees or charges due and payable to the FDA on or prior to the Effective Date.
6.8 Confidentiality.
(a) Seller undertakes with Buyer, and Buyer undertakes with Seller to keep confidential (except as expressly provided in this Agreement) at all times after the date of this Agreement, and not directly or indirectly reveal, disclose or use for its own or any other purposes, any confidential information received or obtained as a result of entering into or performing, or supplied by or on behalf of a Party in the negotiations leading to, this Agreement and which relates to: (i) the negotiations relating to this Agreement; or (ii) the subject matter and/or provisions of this Agreement, subject to Section 6.8(b) below.
(b) The prohibition in Section 6.8(a) does not apply if: (i) the information was in the public domain before it was furnished to the relevant Party or, after it was furnished to that Party, entered the public domain otherwise than as a result of a breach by that Party of this Section 6.8 or any written or confidentiality agreement under which such Party is bound; (ii) disclosure is necessary in order to comply with applicable legislation, regulatory requirements, legal process, or stock exchange rules, provided that any such information disclosable pursuant to this Section 6.8(b) shall be disclosed only to the extent required by Legal Requirements and (unless such consultation is prohibited by Legal Requirements or is not reasonably practicable) only after consultation with Buyer or Seller (as the case may be) or (iii) Buyer is contemplating the sale, assignment, conveyance or other transfer to a Third Party of all or substantially all of its rights, title and interest in and to the Product, provided that Buyer shall have entered into a confidentiality agreement with such Third Party no less restrictive than this Section 6.8.
6.9 Further Assurances. Seller and Buyer, agree that subsequent to the Closing Date, at the request of the other Party, they will execute and deliver, or cause to be delivered, to the other Party, such further instruments and take such other action as may be reasonably necessary to carry out the transactions contemplated by this Agreement.
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6.10 Costs and Expenses. Except as otherwise expressly provided herein, the Parties shall bear their own respective expenses (including, but not limited to, all compensation and expenses of counsel, financial advisors, consultants and independent accountants) incurred in connection with the preparation and execution of this Agreement and consummation of the transactions contemplated hereby, including assistance reasonably requested in consummating such transactions.
ARTICLE 7
INDEMNIFICATION AND INSURANCE
7.1 Indemnification by Seller. From and after the Closing Date, Seller shall defend, indemnify and hold harmless Buyer, its Affiliates, officers, directors, employees, and agents, against and in respect of any and all Losses, resulting or arising from or otherwise relating to:
(a) any breach by Seller of any covenant, representation or warranty of Seller contained in this Agreement or any Ancillary Agreements;
(b) any Liabilities resulting from the acts and omissions of the Seller prior to the Closing Date.
7.2 Indemnification by Buyer. From and after the Closing Date, Buyer shall indemnify and hold harmless Seller, its Affiliates, officers, directors, employees, and agents, against and in respect of any and all Losses resulting or arising from or otherwise relating to:
(a) any breach by Buyer of any covenant, representation or warranty contained in this Agreement or any Ancillary Agreements;
(b) Any Assumed Liabilities;
(c) use of the Marketing Collateral(s) by the Buyer after the Closing Date; and
(d) any negligent or intentional act committed by the Buyer or its employees or agents that caused injury to a person or damage to property, or failed to comply with any applicable law, statute, regulation or ordinance.
7.3 Method of Asserting Claims.
(a) All claims for indemnification (“Indemnity Claims”) by any indemnified Party or a Party with respect to any other claim under or with respect to this Agreement or any Ancillary Agreements (the “Indemnified Party”) hereunder shall be asserted and resolved as set forth in this Section 7.3. In the event that any written claim or demand for which a Party (the “Indemnifying Party”) would be liable to any Indemnified Party hereunder is asserted against or sought to be collected from any Indemnified Party by a Third Party, such Indemnified Party shall promptly, but in no event more than ten (10) days following such Indemnified Party’s receipt of such claim or demand, notify the Indemnifying Party of such claim or demand and the amount or the estimated amount thereof to the extent then feasible (the “Claim Notice”). All indemnity claims by any Indemnified Party that do not involve Third Party claims shall be communicated via a Claim Notice to the other Party promptly following discovery of such claim.
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(b) The Indemnifying Party shall have fifteen (15) days from the delivery or mailing of the Claim Notice (the “Notice Period”) to notify the Indemnified Party whether or not it desires to defend the Indemnified Party against such claim or demand. An election to assume the defense of such claim or demand shall not be deemed to be an admission that the Indemnifying Party is liable to the Indemnified Party in respect of such claim or demand. All costs and expenses incurred by the Indemnifying Party in defending such claim or demand shall be a liability of, and shall be paid by, the Indemnifying Party; provided, however, that the amount of such expenses shall be a liability of the Indemnifying Party hereunder, subject to the limitations set forth in this Article 8. In the event, however, that the Indemnifying Party declines or fails to assume the defense of the claim within such fifteen (15)-day period, the Indemnified Party may assume the defense thereof and the reasonable fees and disbursements of counsel for the Indemnified Party shall be deemed Losses hereunder, subject to the limitations set forth in this Article 8.
(c) In the event that it is ultimately determined that the Indemnifying Party is not obligated to indemnify, defend or hold the Indemnified Party harmless from and against any Third Party claim, the Indemnified Party shall reimburse the Indemnifying Party for any and all costs and expenses (including without limitation, attorney’s fees and court costs) actually incurred by the Indemnifying Party in its defense of the Third Party claim. In the event that the Indemnifying Party notifies the Indemnified Party within the Notice Period that it desires to defend the Indemnified Party against such claim or demand, the Indemnifying Party shall have the right to defend the Indemnified Party by appropriate proceedings. If any Indemnified Party desires to participate in, but not control, any such defense or settlement, it may do so at its sole cost and expense.
(d) The Indemnified Party shall not settle a claim or demand without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld, conditioned or delayed. The Indemnifying Party may settle any claim or demand for monetary damages; it being understood that the Indemnifying Party shall not, without the prior written consent of the Indemnified Party (which shall not be unreasonably withheld, conditioned or delayed) settle, compromise or offer to settle or compromise any such claim or demand on a basis which would result in the imposition of a consent order, injunction or decree that would substantially restrict the future activity or conduct of the Indemnified Party or any subsidiary or Affiliate thereof.
(e) To the extent the Indemnifying Party shall control or participate in the defense or settlement of any Third Party claim or demand, the Indemnified Party will give the Indemnifying Party and its counsel access to, during normal business hours, the relevant business records and other documents, and shall permit them to consult with the employees and counsel of the Indemnified Party.
(f) The controlling party, in either case, shall select counsel, contractors, experts and consultants of recognized standing and competence, shall take reasonable steps necessary in the investigation, defense or settlement thereof, and shall diligently and promptly pursue the resolution thereof.
(g) Any notice of a claim by reason of any of the warranties or covenants contained in this Agreement shall state specifically the warranty or covenant with respect to which the claim is made, the facts giving rise to an alleged basis for the claim, and the amount of the liability asserted against the Indemnifying Party by reason of the claim.
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7.4 Survival. The covenants and agreements of the Parties shall survive without limitation as to time, and the period during which a claim for indemnification may be asserted in connection therewith shall continue for the applicable statute of limitations.
7.5 DAMAGES LIMITATION. NOTWITHSTANDING ANYTHING TO THE CONTRARY ELSEWHERE IN THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, NO PARTY, DIRECTOR, OFFICER, EMPLOYEE, AFFILIATE OR ADVISOR OF ANY OF THE FOREGOING, SHALL, IN ANY EVENT, BE LIABLE TO ANY OTHER PERSON, EITHER IN CONTRACT, TORT OR OTHERWISE, FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES OR ANY DAMAGES ASSOCIATED WITH ANY LOST PROFITS OR LOST OPPORTUNITIES OF SUCH OTHER PERSON (INCLUDING LOSS OF FUTURE REVENUE, INCOME OR PROFITS, DIMINUTION OF VALUE OR LOSS OF BUSINESS REPUTATION) RELATING TO THE BREACH OR ALLEGED BREACH OF THIS AGREEMENT, WHETHER OR NOT THE POSSIBILITY OF SUCH DAMAGES HAS BEEN DISCLOSED TO THE OTHER PARTY IN ADVANCE OR COULD HAVE BEEN REASONABLY FORESEEN BY SUCH OTHER PARTY.
7.6 Limitation of Liability. Notwithstanding the foregoing, except for actions grounded in fraud, the maximum amount of indemnifiable Losses which may be recovered cumulatively from the Seller arising out of or resulting from the causes set forth in Section 7.1 shall be an amount equal to [***].
7.7 Cooperation. The Parties shall cooperate with each other with respect to resolving any claim or liability with respect to which one Party is obligated to indemnify another Party hereunder, including by making Commercially Reasonably Efforts to mitigate or resolve any such claim or liability.
7.8 Manufacturing. Seller shall introduce Buyer to the current manufacturer of the Product, and shall reasonably cooperate with Buyer with respect to transitioning manufacturing services to Buyer. Seller shall not manufacture the Product following the date hereof, including any orders of Product placed prior to the date hereof.
ARTICLE 8
MISCELLANEOUS
8.1 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) upon delivery by personal delivery, (b) upon delivery by a nationally-recognized overnight courier service, or (c) three days after mailing, if mailed, certified or registered mail (return receipt requested), postage prepaid, each to the other Party at the following address (or at such other address as shall be given in writing by any Party to the other in accordance with these provisions):
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If to the Buyer, to:
Journey Medical Corporation
9237 Via De Ventura Suite 135
Scottsdale, AZ 85258
With a copy to:
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail
Raleigh, NC 27604
Attn: David Mannheim, Esq.
(919) 781-4000, wmannheim@wyrick.com
If to the Seller to:
Sun Pharmaceutical Industries, Inc.
[***]
or to such other Person or address as any party shall specify by notice in writing to the other party. All such notices, requests, demands, waivers and communications shall be deemed to have been given (a) on the date on which so hand delivered and (b) on the third Business Day following the date on which so mailed, except for a notice of change of address, which shall be effective only upon receipt thereof.
8.2 Conflict; Construction of Documents. In the event of any conflict between the provisions of this Agreement and the provisions of any Ancillary Agreements, the provisions of this Agreement shall prevail.
8.3 Assignability; Successors and Assigns. Neither this Agreement nor any of the rights or obligations of the Parties hereunder may be assigned by any Party without the prior written consent of the other Party, provided that a Party may assign its rights and obligations under this Agreement, without the prior written consent of the other party, to an Affiliate or to a successor of the assigning party by reason of merger, sale of all or substantially all of its assets or any similar transaction. Any attempted assignment or delegation in contravention hereof shall be null and void. Subject to the foregoing, this Agreement and all rights and powers granted and obligations created hereby will bind and inure to the benefit of the Parties hereto and their respective successors and assigns.
8.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of law rules of such state and subject to Section 8.5, the courts in the State of New York shall have exclusive jurisdiction.
8.5 Dispute Resolution. In the event of any dispute arising out of or in connection with this Agreement, the dispute shall be settled by arbitration in accordance with American Arbitration Association and its rules which are deemed to be incorporated by reference to this section, for the time being in force. The arbitral tribunal shall consist of a sole arbitrator appointed in accordance with the said rules. The seat of arbitration shall be New York and the language of the arbitration shall be English. The award rendered by the sole arbitrator shall be final and binding and enforceable in any court of competent jurisdiction.
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8.6 Headings. The headings preceding the text of the Sections and subsections hereof are inserted solely for convenience of reference, and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect. All words used in this Agreement will be construed to be of such gender or number as the context may require.
8.7 Amendment and Waiver. The Parties may by mutual written agreement amend this Agreement in any respect, and any Party, as to such Party, may (a) extend the time for the performance of any of the obligations of any other Party, and (b) waive (i) any inaccuracies in warranties by any other Party, (ii) compliance by any other Party with any of the agreements contained herein and performance of any obligations by such other Party, and (iii) the fulfillment of any condition that is precedent to the performance by such Party of any of its obligations under this Agreement. To be effective, any such amendment or waiver must be in writing and be signed by both Parties.
8.8 Entire Agreement. This Agreement, together with the Ancillary Agreements, shall constitute the entire understanding and agreement between the Parties to it in relation to the subject matter of this Agreement and shall together supersede all previous agreements between the Parties in relation to the same subject matter. It is further agreed that neither Party has entered into this Agreement in reliance upon any warranty or undertaking of the other Party which is not expressly set out or referred to in this Agreement.
8.9 Press Release. Neither Party shall issue any press release, trade announcement or make any other public announcement with regard to the transactions contemplated by this Agreement without the other Party’s prior written consent, which shall not be unreasonably withheld. This restriction shall not apply to announcements required by any Government Authority. However, in such event the Parties shall, to the extent reasonably practicable, coordinate the wording of any such announcements. To the extent any Party is required to file a copy of this Agreement or any Ancillary Agreement as an exhibit to any filings with, or otherwise publicly disclose the terms hereof or thereof to, the Governmental Entity, the Parties will coordinate in advance on the form of redacted version of this Agreement or applicable Ancillary Agreement or the terms to be so filed or disclosed and permit the other Party to provide comments and take such comments into account in good faith prior to making such filing.
8.10 No Third Party Beneficiary Rights. This Agreement is not intended to and shall not be construed to give any Person or entity other than the Parties signatory hereto any interest or rights (including, without limitation, any Third Party beneficiary rights) with respect to or in connection with any agreement or provision contained herein or contemplated hereby.
8.11 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be reasonably necessary or appropriate in order to carry out the purposes and intent of this Agreement.
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8.12 Severability. Each of the agreements, undertakings, covenants, warranties, indemnities and other obligations of the Parties entered pursuant to this Agreement are considered reasonable by the Parties hereto. If any provision of this Agreement, an Ancillary Agreement, or any part thereof is held void or unenforceable or in conflict with the laws of any relevant jurisdiction, the Parties hereto shall negotiate in good faith to modify this Agreement or Ancillary Agreement, as applicable, so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
8.13 Relationship. The relationship between the parties is that of independent contractor. Nothing in this Agreement shall be construed as creating a relationship of a joint venture, partners, employer-employee, or agent. Neither party has the authority to create any obligations for the other, or to bind the other to any representation or document.
8.14 Counterparts. This Agreement may be executed in two counterparts, each of which shall for all purposes be deemed to be an original and both of which shall, when taken together, constitute one instrument.
(Signatures appear on the following page)
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the Effective Date.
JOURNEY MEDICAL CORPORATION | |||
By: | /s/ Claude Maraoui | ||
Name: Claude Maraoui | |||
Title: President &CEO | |||
SUN PHARMACEUTICAL INDUSTRIES, INC. | |||
By: | /s/ Abhay Gandhi | ||
Name: Abhay Gandhi | |||
Title: CEO — North America |
Signature Page to Asset Purchase Agreement
Page 1 of 1
Exhibit 10.11
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
AMENDMENT 1 TO ASSET PURCHASE AGREEMENT
This AMENDMENT 1 TO ASSET PURCHASE AGREEMENT ("Amendment 1") is entered into on this 5th day of September, 2018 ("Amendment 1 Effective Date") by and between Journey Medical Corporation, a Delaware corporation having its principal place of business at 9237 Via De Ventura Suite 135, Scottsdale, AZ 85258 (the "Buyer") and Sun Pharmaceutical Industries, Inc, a Michigan corporation, located at [***] (the "Seller"). Buyer and Seller are referred to herein individually as a "Party" and collectively as the "Parties".
WHEREAS, Buyer and Seller entered into an Asset Purchase Agreement dated 31st August, 2018 (the "Agreement").
WHEREAS, the Parties wish to amend and supplement certain of the terms and conditions of the Agreement under this Amendment 1 as recorded herein.
WHEREAS, this Amendment 1 forms part of and is to be read with the Agreement as from the Amendment 1 Effective Date.
NOW, THEREFORE, the Parties agree as follows:
1 AMENDMENTS
The Parties hereby amend the Agreement as follows:
1.1 Section 6.7 of the Agreement shall be deleted and replaced by the following:
"Prescription Drug User Fee Act. Following the Effective Date, Buyer shall assume and have responsibility for fees or charges associated with the Product due and payable to the FDA after the Effective Date pursuant to the Prescription Drug User Fee, and any reauthorization thereto ("PDUFA Fees"). Seller shall retain full responsibility and liability for the PDUFA Fees due and payable on or prior to the Effective Date. In the event the Seller makes payment of any PDUFA Fees after the Effective Date, the Buyer shall reimburse the PDUFA Fees to the Seller within thirty (30) Business Days from the date of receipt of invoice raised by the Seller."
2 GENERAL
2.1 As of the Amendment 1 Effective Date, this Amendment 1 shall be read together with and shall be deemed to be incorporated in the Agreement and shall be governed by the terms, conditions and definitions set forth in the Agreement, as if such terms were fully set forth herein.
2.2 Except as expressly amended hereby, the terms and conditions of the Agreement shall continue in full force and effect and are hereby confirmed and ratified.
2.3 If there is inconsistency between the provisions of the Agreement and this Amendment 1, the provisions of the Amendment 1 shall prevail.
Page 1 of 2
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment 1 as on the date first mentioned above.
Journey Medical Corporation | ||
By: | /s/ Claude Maraoui | |
Name: | ||
Title: | ||
Sun Pharmaceutical Industries | ||
By: | /s/ Abhay Gandhi | |
Name: | ||
Title: |
Page 2 of 2
Exhibit 10.12
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE
EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED
INFORMATION HAS BEEN MARKED WITH “[***].
ASSET PURCHASE AGREEMENT
By and between
JOURNEY MEDICAL CORPORATION
and
SUN PHARMACEUTICAL INDUSTRIES, INC.
Dated: July 22nd, 2019
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the “Agreement”), dated July 22nd, 2019 (the “Effective Date”), is entered into by and between Journey Medical Corporation, a Delaware corporation having its principal place of business at 9237 Via De Ventura Suite 105, Scottsdale, AZ 85258 (the “Buyer”), and Sun Pharmaceutical Industries, Inc, a Michigan corporation, located at [***] (the “Seller”). Buyer and Seller are referred to herein individually as a “Party” and collectively as the “Parties”.
WHEREAS, Seller owns and possesses the Transferred Assets (as defined herein).
WHEREAS, Seller desires to sell, transfer and assign to Buyer, and Buyer desires to purchase from Seller, all of Seller’s right, title and interest in the Transferred Assets (as defined herein) with respect to the Territory upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and intending to be legally bound hereby, the Parties hereto agree as follows:
Article
1
DEFINITIONS
1.a. Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:
1.1 “Action or Proceeding” means any action, claim, charge, complaint, cause of action, demand, suit, proceeding, arbitration, audit, notice of violation, citation, summons, subpoena, court order, inquiry, hearing, assessment with respect to fines, or investigation, of any nature, civil, criminal, administrative, regulatory or otherwise, whether formal or informal, whether public or private and whether at law or in equity.
1.2 “Additional Payments” shall have the meaning set forth in Section 4.1(b).
1.3 “Affiliate(s)” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person from time to time. For purposes of this definition, the term “control” (including the terms “controlled by” and “under common control with”) means (a) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract relating to voting rights or corporate governance, or otherwise or (b) the ownership, directly or indirectly, of more than 50% of the voting securities or other ownership interest of such Person (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity). For the avoidance of doubt and notwithstanding the foregoing provisions of this Section 1.3, Sun Pharmaceutical Industries Ltd. will be considered an Affiliate of Seller for all purposes of this Agreement.
1.4 “Agreement” means this Asset Purchase Agreement, together with the Schedules and Exhibits attached hereto, as the same is amended and/or supplemented from time to time in accordance with the terms hereof.
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1.5 “Ancillary Agreements” means, other than this Agreement, the Supply Agreement, the Novation Agreement and all other agreements, certificates and documents signed and delivered by any party in connection with this Agreement or the Transactions.
1.6 “Assumed Liabilities” shall have the meaning set forth in Section 2.7.
1.7 “Business Day” means a day other than a Saturday, Sunday, bank or other public holiday in the State of New York, USA.
1.8 “CDA” means the Confidentiality Agreement by and between Buyer and Seller entered into on September 06, 2017.
1.9 “Claim Notice” shall have the meaning set forth in Section 7.3(a).
1.10 “Closing” shall have the meaning set forth in Section 3.1.
1.11 “Closing Date” shall have the meaning set forth in Section 3.1.
1.12 “Commercially Reasonable Efforts” shall mean the diligent, good faith efforts, consistent with general practices and standards in the pharmaceutical industry with those used in the pharmaceutical industry of similar size and with similar resources of Buyer, taking into account all scientific, commercial and other relevant factors, would normally use to accomplish a similar objective for its product having similar technical and regulatory factors (including safety and efficacy), similar expected and actual time and cost to commercialize, similar commercial and profit potential, competitive landscape, a similar proprietary position and strategic value, and that is at a similar stage in its product life cycle as the applicable Product, in each case based on existing and reasonably anticipated future conditions. Commercially Reasonable Efforts shall be determined on a market-by-market basis for the Product.
1.13 “Confidential Information” means any confidential or proprietary information of a Party, including, but not limited to, any information related to any compound, research project, work in process, future development, scientific, engineering, manufacturing, marketing, business plan, financial or personnel matter relating to such Party, its present or future research, products, services, sales, suppliers, customers, employees, investors, or business, whether in oral, written, graphic or electronic form. Notwithstanding the foregoing, (i) Confidential Information does not include any information that the receiving Party can prove by competent written evidence: (a) is now or hereafter becomes generally known or available through no unlawful act or failure to act on the part of the receiving Party; (b) is known by the receiving Party at the time of receiving such information as evidenced by the receiving Party’s records; (c) is hereafter furnished to the receiving Party by a third party as a matter of right and without restriction on disclosure; (d) is independently developed by the receiving Party as evidenced by the receiving Party’s records, without knowledge, aid, application or use of the Confidential Information of the disclosing Party; or (e) is the subject of a written permission to disclose provided by the disclosing Party, and (ii) all Confidential Information of Seller related to the Product and the Transferred Assets shall, upon the transfer of the Transferred Assets (as applicable) pursuant to the teens of this Agreement, be deemed to the Confidential Information of Buyer, and Seller shall be deemed the receiving Party, and Buyer the disclosing Party, with respect thereto.
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1.14 “Consent” means any consent, approval, authorization, waiver, permit, grant, franchise, concession, agreement, license, exemption or order of, registration, certificate, declaration or filing with, or report or notice to, any Person, including any Governmental Authority.
1.15 “Contract” means any contract, lease, arrangement, indenture, note, bond, mortgage, guarantee, loan, instrument, commitment or other agreement (including any lease for personal or real property and any employment agreement), written or oral (including any amendments, supplements, restatements, extensions and other modifications thereto), of Seller or any Affiliate thereof, to which Seller or any Affiliate thereof is a party or by which Seller or any Affiliate thereof, the Transferred Assets, or any assets or properties of Seller or any Affiliate thereof are bound and that are in effect as of the date of this Agreement.
1.16 “Effective Date” has the meaning set forth in the preamble.
1.17 “Encumbrance” means any claim, charge, equitable interest, hypothecation, lien, mortgage, pledge, security interest, license, adverse claim of ownership or use, reversion, violation, option, restriction on transfer, defect of title, covenant, restriction, rights of others, or any other encumbrance of any kind, whether imposed by agreement, understanding, Law, equity or otherwise.
1.18 “Excluded Liabilities” shall have the meaning set forth in Section 2.8.
1.19 “FDA” means the United States Food and Drug Administration and any successor agency thereto.
1.20 “FDA Act” means the U.S. Federal Food, Drug and Cosmetic Act, as amended, and the rules and regulations promulgated thereunder.
1.21 “GAAP” means general accounting principles as in effect in United States of America.
1.22 “Governmental Authority” means (a) any federal, state, regional, county, city, municipal or local government, whether foreign or domestic and (b) any governmental or quasi-governmental authority of any nature, including any regulatory or administrative agency, commission, department, board, bureau, court, tribunal, arbitrator, arbitral body, agency, ministry, branch, official entity or other administrative or regulatory body obtaining authority from any of the foregoing, and (c) any supra-national organization, state, county, city or other political subdivision.
1.23 “Governmental Order” means any order, writ, judgment, citation, injunction, decree, ruling, charge, stipulation, determination or award entered by any Governmental Authority.
1.24 “Indemnified Party” shall have the meaning set forth in Section 7.3(a).
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1.25 “Indemnifying Party” shall have the meaning set forth in Section 7.3(a).
1.26 “Indemnity Claims” shall have the meaning set forth in Section 7.3(a).
1.27 “Intellectual Property” means, (a) all trademarks, service marks, trade dress, logos, and trade names solely and exclusively related to the marketing, distribution, advertising and sale of the Product, which are listed on Schedule 1.27(a), together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith (the “Assigned Trademarks”); and (b) the domain names listed on Schedule 1.27(b) and the digital graphics files supporting such site (the “Assigned Domain Names”).
1.28 “Inventory” means all stock of Product that are solely maintained, held, or stored by or on behalf of the Seller or any Affiliate thereof as of the Effective Date for sale, distribution and commercialization in the Territory.
1.29 “Inventory Amount” shall have the meaning set forth in Section 4.2.
1.30 “Inventory Statement” shall have the meaning set forth in Section 4.2.
1.31 “Knowledge” means (a) in the case of Seller, (i) for purposes of Section 5.1(g)(i) and (ii), the actual knowledge of the applicable Persons set forth on Schedule 1.31(a) after reasonable investigation of the subject matter set forth in Section 5.1(g)(i) and inquiry of their direct reports, and (ii) for all other purposes, the actual knowledge of the applicable Persons set forth on Schedule 1.31(b), and (b) in the case of Buyer, the actual knowledge of the applicable Persons set forth on Schedule 1.31(c).
1.32 “Law” or “Laws” means any federal, state, local, foreign or multinational constitutions, treaties, laws, statutes, ordinances, regulations, rules, standards, codes, Governmental Orders, writs, injunctions, decrees, arbitration awards, agency or regulatory requirements or licenses or permits of any kind whatsoever of any Governmental Authority, all as amended from time to time.
1.33 “Liabilities” shall mean, collectively, any debt, obligation, duty, guaranty, claim, loss, damage, deficiency, cost, expense, fees, commitment, obligation, responsibility, or liability of any nature, whether primary, secondary, or direct, whether absolute, contingent, fixed or otherwise, whether asserted or unasserted, whether accrued or unaccrued, whether liquidated or unliquidated, whether due or to become due, and whether known or unknown.
1.34 “Losses” shall mean any and all losses, damages, obligations, Liabilities, Taxes, fines, fees, costs, expenses, penalties, interest, awards, judgments, claims, demands, actions, suits and settlements of any kind (whether, in any case, absolute, accrued, conditional or otherwise), including attorneys’ and consultants’ fees and expenses and other costs and expenses.
1.35 “Marketing Collateral” shall mean the materials solely and exclusively related to the Product as set forth in Schedule 1.35.
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1.36 “Net Sales” means for any period, the aggregate gross amounts invoiced by Buyer, its Affiliates or distributors for sales of the Product in bona fide, arms-length transactions in the Territory for use in the Territory, less the following deductions allowed or accrued by using GAAP to the extent separately invoiced or displayed in the invoice:
(a) credits or allowances actually granted for damaged Product, returns, rejections, withdrawals or recall of Product or failure to supply, chargebacks, price adjustments and billing errors or on account of retroactive price reductions affecting the Product;
(b) governmental rebates, patient vouchers or coupons granted to managed health care organizations; pharmacy benefit managers; and Governmental Authorities and their agencies, purchasers and reimbursers;
(c) normal and customary trade, cash and quantity discounts, allowances and credits; and
(d) Taxes applied to the sale, import, or export of Product to the extent included in the gross amount invoiced.
1.37 “Notice Period” shall have the meaning set forth in Section 7.3(b).
1.38 “Permitted Encumbrance” means (a) any Encumbrance for Taxes, assessments and other governmental charges that are not yet due and payable, (b) with respect to licenses, permits or Contracts included in the Transferred Assets, if any, any restrictions, obligations, limitations or other Encumbrances contained in such license, permit or Contract or existing at Law or under the regulatory regime pursuant to which such permit or license is granted that do not materially impair the current use of the Product, or (iii) with respect to the NDA, any restrictions, obligations, limitations or other Encumbrances contained in such NDA or existing at Law or under the regulatory regime pursuant to which such NDA is granted that do not materially impair the current use of the Product.
1.39 “Payers” shall have the meaning set forth in Section 6.9(c).
1.40 “Person” means any individual, corporation, general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, or any other entity or Governmental Authority.
1.41 “Product” means Ximino (minocycline hydrochloride) extended release capsules (all mg strengths) as described in the Product NDA.
1.42 “Product NDA” the New Drug Application (as defined in and regulated under the FDA Act) identified as number 201922 including all applications therefor, and all amendments, modifications, supplements, submissions, and updates with respect thereto.
1.43 “Purchase Price” shall have the meaning set forth in Section 4.1.
1.44 “[***]” shall have the meaning set for in [***]
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1.45 “Representative(s)” means, with respect to any Party to this Agreement, its Affiliates such Party’s and its Affiliates’ directors, officers, members, managers, attorneys, accountants, representatives and other agents.
1.46 “Royalty” or “Royalties” shall have the meaning set forth in Section 4.3.
1.47 “Royalty Term” means the time period commencing on the Effective Date and ending on December 31, 2022.
1.48 “Supply Agreement” shall have the meaning set for in Section 6.5(a).
1.49 “Tax” or “Taxes” means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, customs, severance, stamp, occupation, premium, windfall profit, environmental, capital stock, franchise, profits, inventory, withholding, social security (or similar), unemployment, disability, real property, personal property, ad valorem, sales, use, transfer, registration, value-added, alternative or add on minimum, estimated or other tax levy, duty, tariff, impost, fee or similar charge of any kind whatsoever imposed by any Governmental Authority, including any interest, penalty, fine or addition thereto or imposed in connection therewith, whether disputed or not.
1.50 “Territory” means the United States of America and, for the sake of clarity, the Commonwealth of Puerto Rico for purposes of indirect sales of the Product, including, without limitation, transportation of the Product to a customer’s warehouse located in Puerto Rico at the direction of such customer located outside of the Commonwealth of Puerto Rico.
1.51 “Third Party” means any Person other than a Party or any of their respective Affiliates.
1.52 “Transactions” shall have the meaning set forth in Section 3.2(a).
1.53 “Transferred Assets” shall have the meaning set forth in Section 2.1.
1.54 “Upfront Payment” shall have the meaning set forth in Section 4.1(a).
1.55 “[***]” means [***].
1.b. Interpretation. Unless the context otherwise requires, the terms defined in this Article 1 shall have the meanings herein specified for all purposes of this Agreement, applicable to both the singular and plural forms of any of the terms defined herein. When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Any reference to any contract or other document or instrument or to any Law is to it as amended and supplemented from time to time through the Effective Date (and in the case of any Law, to any successor provisions, and to any rules and regulations promulgated thereunder, in effect as of the date of this Agreement), unless the context requires otherwise.
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Article
2
PURCHASE AND SALE OF THE TRANSFERRED ASSETS
2.1 Transfer of Assets. Upon the terms and subject to the conditions set forth herein, Seller hereby sells, conveys, transfers, assigns and delivers to Buyer, and Buyer hereby purchases from Seller, all of Seller’s right, title and interest in and to the following assets with respect to the Territory (collectively, the “Transferred Assets”), free and clear of all Encumbrances (except Permitted Encumbrances):
(a) the Product NDA;
(b) the Inventory;
(c) [***]; and
(d) all Intellectual Property.
2.2 Timing of Transfer of Transferred Assets. The Parties hereby agree and acknowledge that (a) [***] and the Intellectual Property shall be transferred by Seller to Buyer on the Effective Date, (b) the Inventory shall be transferred by Seller to Buyer in accordance with Section 4.2 below, and (c) the Product NDA shall be transferred by Seller to Buyer on the Closing Date.
2.3 License to Marketing Collaterals. Solely to the extent necessary for Buyer to market the Product in the Territory, Seller hereby grants to Buyer a limited, exclusive, non-transferable and royalty free license to Seller’s rights in the Marketing Collaterals. Upon the terms and subject to the conditions set forth herein, after the Effective Date, Seller shall promptly deliver to Buyer the Marketing Collaterals. For the avoidance of doubt, nothing herein shall be construed as a grant or license of any rights to any Seller trademark, service mark, trade dress, logo, trade name or corporate name similar or related thereto other than those specifically included in the Transferred Assets.
2.4 Record Retention by Seller. The Buyer acknowledges and agrees that Seller may retain, solely for archival purposes and for purposes of complying with applicable Laws and for legal and regulatory purposes as sellers of pharmaceutical products, one copy of all or any part of the documentation that Seller delivers to Buyer pursuant to Section 2.1.
2.5 Other Assets Excluded. Other than the Transferred Assets set forth in Section 2.1, Buyer expressly understands and agrees that it is not purchasing or acquiring, and Seller is not selling or assigning, any other assets or properties of Seller not specifically related to the Product, including but not limited to Seller’s trademarks, trade dress, logos, corporate designs, and the like that are incorporated in the Marketing Collateral and in the digital graphics files forming part of the Intellectual Property, and all such other assets and properties shall be excluded from the Transferred Assets.
2.6 [***]. [***]
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2.7 Assumption of Certain Liabilities. Upon the terms and subject to the conditions set forth herein, Buyer shall assume, be responsible for and pay, and perform and discharge when due, the following Liabilities of Seller (collectively, the “Assumed Liabilities”): (a) from and after the Effective Date, all of the Liabilities of Seller that arise out of or are related to the Product, [***], and the Intellectual Property that arise out of, are in connection with or relate to events, circumstances and conditions first occurring or existing on or after the Effective Date, subject in the case of the [***] to any claims by Buyer against Seller pursuant to Section 7.1(d); (b) Liabilities related to the Inventory pursuant to Section 4.2 following the date of transfer; and (c) from and after the Closing Date, all of the Liabilities of Seller that arise out of or are related to the Product NDA that arise out of, are in connection with or relate to events, circumstances and conditions first occurring or existing on or after the Closing Date.
2.8 Non-Assumption of Other Liabilities. Other than the Assumed Liabilities, neither Buyer nor any of its Affiliates assume or in any way undertake to pay, perform, satisfy or discharge any Liability or other obligation whatsoever of Seller, including, without limitation, any and all Liabilities for Taxes, trade accounts payable and employee benefits occurring prior to the Effective Date (the “Excluded Liabilities”). For the avoidance of doubt, the Excluded Liabilities include any and all Liabilities and Actions or Proceedings directly or indirectly involving personal injury or bodily harm arising out of, in connection with or related to events, circumstances and conditions occurring or existing before the Effective Date. Seller will promptly pay and discharge all Excluded Liabilities in the ordinary course of business.
Article
3
CLOSING & CONDITIONS PRECEDENT
3.1 Closing. The consummation of the purchase and sale of the Transferred Assets and the Assumption of the Assumed Liabilities contemplated hereby (the “Closing”) will take place on the date of receipt of the Upfront Payment by the Seller pursuant to Section 4.1(a) or, if all the conditions set forth in Sections 3.2(a) and 3.2(b) are not then satisfied or waived, the first such Business Day thereafter on which they are waived or satisfied (the “Closing Date”). The Closing shall be effective as of 12:01 AM Eastern Time on the Closing Date.
3.2 Conditions to Closing.
(a) General Conditions. The obligation of the Parties to consummate the transactions contemplated by this Agreement (the “Transactions”) at the Closing is subject to the fulfillment of each of the following conditions prior to or at the Closing (any or all of which may be waived in writing in whole or in part by both Parties):
(i) No Actions or Proceedings. No Action or Proceeding has been instituted or threatened prior to or on the Closing Date before any Governmental Authority pertaining to the Transactions, the result of which could prevent or make illegal the consummation of the Transactions.
(ii) No Governmental Order. There is not in force any Governmental Order by or before any Governmental Authority of competent jurisdiction restraining, enjoining, prohibiting, invalidating or otherwise preventing the consummation of the Transactions.
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(b) Conditions to Seller’s Obligations. The obligation of Seller to consummate the Transactions at the Closing is subject to the fulfillment of each of the following conditions prior to or at the Closing (any or all of which may be waived in writing in whole or in part by Seller):
(i) True Representations and Warranties. The representations and warranties of Buyer made in Article 5 of this Agreement shall be true and correct as of the Effective Date. Buyer shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Buyer by the time of the Closing.
(ii) Delivery of Documents. Buyer has executed and delivered all documents, certificates, instruments and schedules required under Sections 3.3(a) and 3.4(a) to Seller; and
(iii) Officer’s Certificate. Buyer shall have delivered to Seller a certificate dated as of the Closing Date and signed by an authorized officer of Buyer to the effect that the conditions specified in Sections 3.2(b)(i) and (ii) have been satisfied by Buyer.
(c) Conditions to Buyer’s Obligations. The obligation of Buyer to consummate the Transactions at the Closing is subject to the fulfillment of each of the following conditions prior to or at the Closing (any or all of which may be waived in writing in whole or in part by the Buyer):
(i) True Representations and Warranties. The representations and warranties of Seller made in Article 5 of this Agreement shall be true and correct as of the Effective Date. Seller shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Seller by the time of the Closing.
(ii) Consents. Seller shall have received and delivered to Buyer all Consents as required in order to assign and transfer to Buyer the Transferred Assets;
(iii) Delivery of Documents. Seller has executed (if applicable) and delivered all documents, certificates, instruments and schedules required under Sections 3.3(b) and 3.4(b) to Buyer; and
(iv) Transfer of Certain Assets. Seller shall have delivered to Buyer documentation evidencing that Seller is the owner of the Product NDA and all Intellectual Property and has good and marketable title to the same, free and clear of all Encumbrances except Permitted Encumbrances.
(v) Officer’s Certificate. Seller shall have delivered to Buyer a certificate dated as of the Closing Date and signed by an authorized officer of Seller to the effect that the conditions specified in Sections 3.2(c)(i) through (iii) have been satisfied by Seller.
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3.3 Effective Date Deliverables. On or prior to the Effective Date, the following shall be delivered:
(a) Buyer shall deliver to Seller a domain name assignment, substantially in the form of Exhibit D attached hereto (the “Domain Name Assignment”), executed by Buyer, effecting the assignment and transfer to Buyer of the Assigned Domain Names.
(b) Seller shall deliver to Buyer:
(i) a copy of the Domain Name Assignment executed by Seller; and
(ii) a Consent, duly executed by Valeant, (1) consenting to the assignment of the [***] to Buyer and (2) waiving Valeant’s right of first offer under Section 3.5 of the [***] subject to Buyer assuming all the obligations of the Seller under the [***].
3.4 Closing Deliverables. At the Closing, the following shall be delivered:
(a) Buyer shall deliver to Seller:
(i) a letter to the FDA, substantially in the form of Exhibit B attached hereto (the “Buyer FDA Letter”), executed by Buyer, accepting the transfer of the Product NDA to Buyer; and
(ii) a trademark assignment, substantially in the form of Exhibit C attached hereto (the “Trademark Assignment”), executed by Buyer, effecting the assignment and transfer to Buyer of the Assigned Trademarks; and
(iii) the certificate required to be delivered by Buyer under Section 3.2(b)(iii).
(b) Seller shall deliver to Buyer:
(i) a letter to the FDA, substantially in the form of Exhibit E attached hereto (the “Seller FDA Letter”), executed by Seller, informing FDA of the transfer of the Product NDA to Buyer; and
(ii) a copy of the Trademark Name Assignment executed by Seller;
(iii) the certificate required to be delivered by Seller under Section 3.2(c)(iv).
Article
4
PRICE & TERMS
4.1 Purchase Price. As consideration for the Transferred Assets, Buyer shall pay to Seller the following (together, the “Purchase Price”), each such payment to be paid in U.S. Dollars by wire transfer of immediately available funds to a bank account designated in writing by Seller to the Buyer:
(a) A non-refundable and non-creditable payment of Two Million and Four Hundred Thousand U.S. Dollars (U.S. $2,400,000) within sixty (60) days from the Effective Date (“Upfront Payment”).
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(b) Additional payments, totaling $7,000,000 in the aggregate, of the amounts set forth below on the dates set forth below (collectively “Additional Payments”):
(i) Two Million U.S. Dollars (U.S. $2,000,000) on the second anniversary of the Effective Date;
(ii) Two Million U.S. Dollars (U.S. $2,000,000) on the third anniversary of the Effective Date;
(iii) One Million Five Hundred Thousand U.S. Dollars (U.S. $1,500,000) on the fourth anniversary of the Effective Date; and
(iv) One Million Five Hundred Thousand U.S. Dollars (U.S. $1,500,000) on the fifth anniversary of the Effective Date.
(c) The Inventory Amount as set forth in Section 4.2 below.
(d) The Royalty, as set forth in Section 4.3 below.
4.2 Inventory. Seller shall prepare a statement for the Inventory it will possess on the Effective Date and Seller’s cost of such Inventory (“Inventory Statement”) and provide such statement to the Buyer at least ten (10) Business Days prior to the Effective Date. In consideration of Seller transferring the Inventory to Buyer, Buyer shall pay to Seller an amount equivalent to the value of the total quantity, which shall be equal to Seller’s cost, of Inventory set forth on the Inventory Statement (i.e. USD per unit multiplied by total quantity of the Inventory) (the “Inventory Amount”). Buyer shall pay the Inventory Amount within twenty (20) Business Days from the date of receipt of the Inventory Statement. For clarity, Seller is not required to invoice Buyer for the payment of the Inventory Amount. Seller shall deliver the Inventory as per Ex-Works (Incoterms 2010) Cranbury, New Jersey. The Parties hereby agree and acknowledge that the Inventory will be sold by Buyer with the existing label, however Buyer shall make Commercially Reasonable Efforts to change the labelling as soon as practicable. Seller shall reasonably assist Buyer in handling any customer complaints/queries. Notwithstanding anything contained herein, Buyer hereby agrees and acknowledges that it shall be solely responsible and liable for any and all claims or actions arising out of or in connection with the handling, storing, marketing, promoting, distributing and selling of the Inventory. Seller shall make the Inventory available to Buyer within two (2) Business Days following the Effective Date.
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4.3 Royalty. For each calendar year during the Royalty Term, Buyer shall pay to Seller a royalty on the Net Sales of the Product (the “Royalty”) in accordance with the following (which, for the avoidance of doubt, will be in addition to any other royalties required to be paid by Buyer to any Third Parties on the sale of Product, including but not limited to royalties required to be paid pursuant to the [***]):
(a) [***] ([***]%) of Net Sales of the Product in the Territory in a particular calendar year for all Net Sales up to and including [***] U.S. Dollars (U.S. $[***]); and also
(b) [***] ([***]%) of all Net Sales of the Product in the Territory in excess of the Net Sales of [***] U.S. Dollars (U.S. $[***]) in a particular calendar year.
For example, if there is U.S. $[***] of Net Sales of the Product in a particular calendar year, Buyer shall owe Seller U.S. $[***] for such Net Sales under this Section 4.3.
Buyer shall make payments to Seller of the Royalty quarterly during the Royalty Term, with such Royalty payments due and payable within sixty (60) days following the end of each applicable calendar quarter during the Royalty Term. For the purpose of payment of the Royalty in any calendar quarter under this Section 4.3, the Royalty shall be paid by Buyer at the rate of [***] percent ([***]%) of Net Sales. At the end of each calendar year, the Parties shall determine the correctness of the computation and payment of the Royalty in such prior calendar year and any excess Royalty (for Net Sales of the Product in the Territory in excess of [***] U.S. Dollars (U.S. $[***])) shall be paid by Buyer to Seller in accordance with Section 4.3(b). Such excess Royalty shall be payable within thirty (30) Business Days from the end of the relevant calendar year.
4.4 Audit Right. Upon not less than five (5) Business Days’ written notice and no more than once per calendar year (except in the event of a discrepancy in the calculation of Net Sales in excess of two percent (2%) in such audit), Seller shall have the right to audit the books and records of Buyer to the extent relating to Net Sales solely for the purposes of determining the correctness of Buyer’s computation and payment of the Royalty. Such audit shall be conducted during normal business hours by an accountant selected by Seller. All costs and expenses for conducting the audit shall be borne by the Seller, except that if the audit report shows that the Royalties were underpaid or overpaid by five percent (5%) or more, then all costs and expenses for conducting the audit shall be borne by Buyer. Payment of any underpaid or overpaid Royalties, along with the costs and expenses for conducting the audit, shall be paid with or deducted from the immediately following Royalty payment, as applicable. The right to audit under this Section 4.4 by the Seller shall survive termination or expiration of this Agreement by a period of one (1) year therefrom.
4.5 Submission of FDA Letters. Buyer shall send the Buyer FDA Letter to the FDA, and Seller shall send the Seller FDA Letter to the FDA, within ten (10) Business Days of Closing.
4.6 Late Payment. Seller shall be entitled to charge simple interest at the rate of [***] ([***]%) per annum, based on a three hundred and sixty-five (365) day year, on any amounts overdue from the due date for payment until receipt by Seller of the full amount, without prejudice to any other right or remedy of Seller.
Article
5
REPRESENTATIONS AND WARRANTIES
5.1 Seller’s Warranties. Except as set forth on the Disclosure Schedule delivered by Seller to Buyer, as of the Effective Date, Seller represents and warrants to Buyer as follows:
(a) Organization and Authority. Seller is a corporation, validly existing and in good standing under the Laws of the State of Michigan, with full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement and the Transactions have been, and upon execution of each of the Ancillary Agreements, such Ancillary Agreements will have been, duly and validly authorized, executed and delivered by, and constitute the legal, valid and binding obligations of Seller enforceable in accordance with their terms.
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(b) Title. Seller owns, and has good and marketable title to, the Transferred Assets, free and clear of all Encumbrances except Permitted Encumbrances. There are no adverse claims of ownership to the Transferred Assets and, to the Seller’s Knowledge, Seller has not received written notice that any Person has asserted a claim of ownership or right of possession or use in or to any of the Transferred Assets. (i) As of the Effective Date, Buyer will acquire from Seller good and marketable title to the Transferred Assets, other than the Inventory and the Product NDA, (ii) upon the transfer of the Inventory to Buyer pursuant to Section 4.2, Buyer will acquire from Seller good and marketable title to the Inventory, and (iii) at Closing, Buyer will acquire from Seller good and marketable title to the Product NDA.
(c) Litigation; Legal Compliance.
(i) There is no material Action or Proceeding pending or, to Seller’s Knowledge, threatened (1) with respect to the Transferred Assets, (2) that affects or, if successful, would affect the validity of this Agreement or any action taken or to be taken by Seller in connection herewith, or (3) which individually or in the aggregate, would materially impair the ability of Seller to perform its obligations hereunder or to consummate the Transactions.
(ii) Neither Seller nor any director, officer, employee, agent, contractor or distributor of Seller has committed or been convicted of any crime or engaged in any conduct for which debarment is mandated by 21 U.S.C. § 335a(a) or any similar law or authorized by 21 U.S.C. § 335a(b) or any similar applicable Law. Neither Seller nor any director, officer, employee, agent, contractor or distributor of Seller has been convicted of any crime or engaged in any conduct for which such person could be excluded from participating in federal health care programs under Section 1128 of the Social Security Act of 1935, as amended, or any similar law. No Actions or Proceedings that could reasonably be expected to result in a debarment or exclusion are pending or threatened against Seller or any of its directors, officers, employees or agents. Seller has never been: (1) debarred or (2) convicted of a crime for which a person can be debarred under Section 306(a) of the Generic Drug Enforcement Act of 1992 (Section 306 (a) or (b)), and Seller has never been and, to Seller’s Knowledge, none of its Representatives has ever been: (1) threatened to be debarred or (2) indicted for a crime or otherwise engaged in conduct for which a person can be debarred, under Section 306(a) or (b) of the Generic Drug Enforcement Act of 1992.
(iii) Seller has provided to Buyer copies of all written communications to or from any Governmental Authority and associated with the Product, including, without limitation, any written communication to or from the FDA. Neither Seller nor any Affiliate owns, controls, or is aware of any filing, submission, or correspondence with, or grant of any approval or clearance by any Governmental Authority with respect to the Product other than the Product NDA.
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(iv) Seller possesses all material registrations, rights of reference, approvals, licenses, consents, agreements, permits and other authorizations from Governmental Authorities required by applicable provisions of Laws.
(v) The Product has not been sold, nor has it been the subject of any applications, filings, or submissions for approval for marketing or sale for human use, in any country other than the United States of America.
(vi) To Seller’s Knowledge, the patents associated with the Product and listed in the FDA Publication entitled “Approved Drug Products with Therapeutic Equivalence Evaluations”, commonly known as the Orange Book, have been listed in compliance with applicable Laws, including all applicable FDA regulations, and consistent with such Laws each such patent listed therein contains at least one claim covering the approved method of using the Product or the drug product (as such terms are used in the applicable regulations). Each of the patents associated with the Product and currently listed in the Orange Book also include at least one claim that can be listed against the strengths of the Product that have been approved but are currently not marketed in the United States.
(d) No Conflicts. Neither the execution, delivery or performance by Seller of this Agreement or the Ancillary Agreements, nor the consummation of the Transactions, will (i) contravene or violate any Law to which Seller is, or its assets or properties are, subject or bound, (ii) contravene, conflict with or result in a breach or violation of any provision of the charter or bylaws of Seller; (iii) require the Consent of any Person (except for any Consents obtained at or prior to the Effective Date); or (iv) contravene in any material respect, result in any material breach of or constitute a default in any material respect (or which with the giving of notice or lapse of time, or both, would become such a default) under, give rise to any right of termination, material amendment, material modification, acceleration or cancellation of any material obligation or loss of any material benefit under, or result in the creation of any Encumbrance on any of the assets of Seller (including the Transferred Assets), pursuant to or under, (1) any Law or Governmental Order applicable to Seller or (2) any Contract to which Seller is a party or by which Seller or its assets is bound or subject.
(e) Brokers and Finders. Seller has not employed any broker, finder, investment banker, financial advisor, consultant or intermediary in connection with the Transactions who would be entitled to a broker’s, finder’s or similar fee or commission in connection therewith or upon the consummation thereof
(f) Inventory. The Inventory is (a) free from any material defect or deficiency, (b) is in good and usable condition for sale and (c) complies with applicable Laws in all material respects.
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(g) Intellectual Property.
(i) Seller exclusively owns the Intellectual Property free and clear of all Encumbrances except Permitted Encumbrances. The Intellectual Property will, as of the Effective Date, be transferred to, and controlled by, Buyer on substantially the same terms with which Seller, immediately prior to the Effective Date, owned and controlled such Intellectual Property. To the best of Seller’s Knowledge, neither Seller nor any of its Affiliates have or are infringing, misappropriating or otherwise violating (including with respect to the discovery, development, clinical testing, manufacture, distribution, advertising, use, exploitation or sale by Seller or its Affiliates of the Product) the rights of any other Person with regard to Seller’s or its Affiliates’ possession or use of any Intellectual Property or the sale, marketing, promotion, manufacture, or use of the Product in Seller’s or its Affiliates’ Product-related business as presently conducted, and, Seller owns or controls any intellectual property rights being transferred pursuant to this Agreement, other than those intellectual property rights to which rights are granted to Seller (or, following the Effective Date, Buyer) under [***]. To Seller’s Knowledge, no other Person has or is infringing, misappropriating or otherwise violating any Intellectual Property. No claims against Seller or any of its Affiliates are pending or, to Seller’s Knowledge, threatened with regard to (i) Seller’s or any of its Affiliates’ control or use of any of the Intellectual Property; (ii) the validity, re-examination or enforceability of any Intellectual Property, or (iii) Seller’s or any of its Affiliates’ manufacture, use, sale, promotion, marketing, or other commercialization of the Product.
(ii) Schedules 1.28(a) and 1.28(b), set forth, as of the date hereof, a complete and accurate list of all Intellectual Property that is owned by Seller or any Affiliate thereof related to the Product (or its manufacture or use). The Intellectual Property has been duly registered or filed with or issued by each appropriate Governmental Authority in the jurisdiction indicated in Schedules 1.28(a), and 1.28(b), and, if applicable, all related necessary affidavits of continuing use have been (or, with respect to licenses, to Sellers’ Knowledge have been) timely filed, and all related necessary maintenance fees have been (or, with respect to licenses, to Sellers’ Knowledge have been) timely paid to continue all such rights in effect.
(h) [***].
(i) [***].
(ii) [***].
(iii) [***].
(iv) [***].
(i) Sufficiency of Transferred Assets. The Transferred Assets constitute all of the assets necessary to sell, offer for sale, distribute and/or otherwise commercialize the Product as each such activity is currently conducted by Seller and are sufficient to permit Buyer to sell, offer for sale, distribute and/or otherwise commercialize the Product from and immediately after the Closing in substantially the same manner as such activities are currently conducted by Seller.
(j) Absence of Changes. Since March 6, 2019, Seller has not (i) incurred any material Liability outside the ordinary course of business with respect to the Transferred Assets, or (ii) created, caused to be created, or consented to or allowed to be created, any Encumbrance on any of the Transferred Assets.
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(k) No Other Representation or Warranties. Except for the representations and warranties contained in this Section 5.1, Seller makes no other express or implied warranty, and Seller hereby disclaims any such warranty or any representation whether by Seller or its respective Representatives or any other Person, as to the condition (financial or otherwise), value or quality of the Product or the Transferred Assets, notwithstanding the delivery or disclosure to Buyer or any of its Representatives or any other Person of any documentation or other information by Seller or any of its Representatives or any other Person with respect to any one or more of the foregoing.
5.2 Buyer’s Warranties. Buyer hereby represents and warrants to Seller, as of the Effective Date, as follows:
(a) Organization and Authority of Buyer. Buyer is a corporation, validly existing and in good standing under the Laws of the State of Delaware, with full power and authority to enter into this Agreement and perform its obligations hereunder. This Agreement has been, and upon execution of each of the Ancillary Agreements, such Ancillary Agreements will have been duly and validly authorized, executed and delivered by, and constitute the legal, valid and binding obligations of Buyer, enforceable in accordance with their respective terms.
(b) Litigation. There are no material Actions or Proceedings pending or, to Buyer’s Knowledge, threatened that question the validity of this Agreement or any action taken or to be taken by Buyer in connection herewith, or which individually or in the aggregate, would materially impair the ability of Buyer to perform its obligations hereunder or to consummate the Transactions.
(c) Legal Compliance. Buyer possesses all material registrations, rights of reference, approvals, licenses, consents, agreements, permits and other authorizations from Governmental Authorities required by applicable Laws.
(d) The Buyer has and will have at Closing, and during the Term of this Agreement, cash available sufficient to pay the Upfront Payment and Additional Payments.
(e) No Conflicts. Neither the execution and the delivery of this Agreement nor the Ancillary Agreements, nor the consummation of the Transactions, will (i) violate Law to which Buyer is, or its assets or properties are, subject, (ii) contravene, conflict with or result in a breach or violation of any provision of the charter or bylaws of Buyer, or (iii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any Contract to which Buyer is a party or by which it is bound or to which any of its assets is subject. Buyer does not need to obtain the Consent of any Person (other than any Consents obtained prior to or at the Effective Date) in order to consummate the Transactions. There is no Action or Proceeding pending or, to the Knowledge of Buyer, threatened against Buyer that challenges, or may have the effect of preventing, delaying, making illegal or otherwise interfering with the Transactions.
(f) Independent Investigation. Buyer has conducted its own independent investigation, due diligence, review and analysis of the business, operations, assets, liabilities, results of operations, financial condition, software, technology and prospects of the business related to the Product, which investigation, review and analysis were undertaken by Buyer and its Representatives.
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(g) Brokers and Finders. Buyer has not employed any broker, finder, investment banker, financial advisor, consultant or intermediary in connection with the Transactions who would be entitled to a broker’s, finder’s or similar fee or commission in connection therewith or upon the consummation thereof
(h) Non-Reliance. Buyer agrees and acknowledges that (i) Buyer has relied solely on the representations and warranties set forth in Section 5.1 and (ii) except for the representations and warranties expressly set forth in Section 5.1, as modified by the Disclosure Schedule, neither Seller nor any of its shareholders, trustees or Representatives or any other Person, has made or is making any other representations or warranties, promises, covenants, agreements or guaranties, statutory, common law or otherwise, of any nature, oral or written, past, present or future.
Article
6
COVENANTS
6.1 Non-Competition. The Parties hereto agree and acknowledge that the provisions of this Agreement shall not be construed to limit or restrict in any manner the rights of Seller or any of its Affiliates to develop, manufacture, use, sell or commercialize in any manner the Product in a generic or other formulation, either in the Territory or outside of the Territory; provided, however, that for a period of eight (8) years commencing on the Effective Date, Seller covenants and agrees not to manufacture or commercialize any product (other than the Product pursuant to the Supply Agreement) containing the same active ingredient and in the same dosage and form as that of the Product. Should any part or provision of this Section 6.1 be held invalid, void, or unenforceable in any court of competent jurisdiction, such invalidity, voidness, or unenforceability will not render invalid, void, or unenforceable any other part or provision of this Agreement. The Parties further agree that if any portion of this Section 6.1 is found to be invalid or unenforceable by a court of competent jurisdiction because its duration, territory, or other provisions are deemed to be invalid or unreasonable in scope, the invalid or unreasonable terms will be replaced by terms that are valid and enforceable and that come closest to expressing the intention of such invalid or unenforceable terms, and any court of competent jurisdiction shall enforce this Section 6.1 as so modified to the maximum extent allowed by Law.
6.2 Use of the Transferred Assets. The Buyer agrees and acknowledges that Seller is not assigning, licensing or conveying any rights to the Buyer outside the Territory.
6.3 Standards of Quality. Buyer agrees to comply with applicable Laws in the Territory related to the marketing, sale, and distribution of Product.
6.4 Post-Effective Date Agreements. For the period commencing on the Effective Date and ending at the Closing, Seller covenants and agrees with Buyer as follows with respect to the Product NDA:
(a) the Product NDA will be maintained in full force and effect;
(b) no amendment or other modification to the Product NDA will be made without prior written approval of Buyer;
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(c) Seller will not authorize any Third Party to sell any products under the Product NDA;
(d) Seller will not authorize any Third Party to make reference to the Product NDA, file any new drug application or other application for marketing authorization that makes reference to the Product NDA, or launch any authorized generic under the Product NDA;
(e) Seller will maintain the confidentiality of any confidential sections of the Product NDA;
(f) Seller will comply with all applicable FDA regulations and applicable Law in connection with any matters related to the Product NDA;
(g) Seller will promptly notify Buyer of any correspondence from FDA or any other Governmental Authority concerning the Product NDA;
(h) Seller will not file any submission or deliver any correspondence concerning the Product NDA to FDA or any other Government Authority without the written consent of Buyer;
(i) Seller will not assign or otherwise modify or transfer title of the Product NDA except as expressly provided for herein or approved in writing by Buyer;
(j) Seller will not create, cause to be created, or consent to or allow to be created, any Encumbrance over the Product NDA; and
(k) Seller will not take any other action that would or could reasonably be expected to inhibit or delay transfer of the Product NDA to Buyer pursuant to Section 3.4(a).
Notwithstanding anything contained herein, the Seller shall not be held responsible for occurrence of any event with respect to the Product NDA due to the acts or omissions of the Buyer.
6.5 Post-Closing Agreements.
(a) Within forty-five (45) Business Days from the Closing Date, the Parties shall enter into a mutually agreeable supply agreement (the “Supply Agreement”) for Seller to manufacture and supply the Product to Buyer. The Seller agrees to provide reasonable support to Buyer in the technology transfer of Product until expiration of such Supply Agreement. The Supply Agreement will contain the following terms and conditions:
(i) the cost to Buyer will be Seller’s manufacturing cost plus [***] ([***]%) margin plus a mutually agreed upon annual administrative fee; and
(ii) the term of the Supply Agreement will be through December 31, 2023.
(b) From and after the Closing for a period ending six (6) months after the Closing Date, Buyer agrees to cooperate with Seller in the good faith negotiation of the Novation Agreement with [***]. Buyer further covenants and agrees not to unreasonably withhold its consent or signature to the Novation Agreement, provided, however, that Buyer withholding its consent or signature to the Novation Agreement because the terms and conditions of the final, negotiated Novation Agreement materially deviates from the form attached in Exhibit A which, either (i) increases Buyer’s obligations under the [***] or (ii) decreases Buyer’s rights and privileges under the [***], will not be considered unreasonable.
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6.6 Registrations and Filings. (a) Without prejudice to applicable Laws that may exclude this possibility, from and after the Closing, Buyer shall take the lead in coordinating the NDA transfers. Buyer shall file, or shall cause its Affiliates or designees to file, or, if required by applicable Law, Seller, its Affiliates or designees shall file, applications for the transfer of the NDA in the Territory. (b) For the avoidance of doubt, Seller does not warrant and shall not be responsible for the successful transfer, maintenance or renewal of the NDA after the Closing Date and shall not be obligated to launch the Product in the Territory where it has not been launched before Closing.
6.7 Prescription Drug User Fee Act. From and after the Closing Date, Buyer shall assume and have responsibility for fees or charges associated with the Product first due and payable to the FDA after March 6, 2019, pursuant to the Prescription Drug User Fee Act, and any reauthorization thereto. Seller shall retain full responsibility and liability for all fees or charges first due and payable to the FDA on or prior to the March 6, 2019.
6.8 Confidentiality.
(a) Seller undertakes with Buyer, and Buyer undertakes with Seller, to keep confidential (except as expressly provided in this Agreement) at all times after the date of this Agreement, and not directly or indirectly reveal, disclose or use for its own or any other purposes, any Confidential Information received or obtained as a result of entering into or performing, or supplied by or on behalf of a Party in the negotiations leading to, this Agreement and which relates to: (i) the negotiations relating to this Agreement; or (ii) the subject matter and/or provisions of this Agreement, subject to Section 6.8(b) below.
(b) The prohibition in Section 6.8(a) does not apply if: (i) the information was in the public domain before it was furnished to the relevant Party or, after it was furnished to that Party, entered the public domain otherwise than as a result of a breach by that Party of this Section 6.8 or any written or confidentiality agreement under which such Party is bound; (ii) disclosure is necessary in order to comply with applicable Laws, provided that any such information disclosable pursuant to this Section 6.8(b) shall be disclosed only to the extent required by such Laws and (unless such consultation is prohibited by such Laws or is not reasonably practicable) only after consultation with Buyer or Seller (as the case may be) or (iii) Buyer is contemplating the sale, assignment, conveyance or other transfer to a Third Party of all or substantially all of its rights, title and interest in and to the Product and/or the Transferred Assets, provided that Buyer shall have entered into a confidentiality agreement with such Third Party no less restrictive than this Section 6.8.
(c) The provisions of the CDA are hereby incorporated herein and shall remain binding and in full force and effect; provided, however, that all obligations of Buyer under the CDA with respect to each of the Transferred Assets shall terminate as of the date of transfer of such Transferred Asset to Buyer pursuant to the terms of this Agreement. Except as otherwise provided herein or in the Ancillary Agreements, Seller shall, and shall cause its Representatives to, treat after the date hereof as strictly confidential all nonpublic, confidential or proprietary information concerning the Transferred Assets, and Seller shall not, after the date hereof, use such information to the detriment of the Buyer.
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(d) The Parties further agree that release of any Confidential Information, whether directly or indirectly, would cause irreparable injury to the non-disclosing Party and that the Party whose Confidential Information has been or is being disclosed in violation of this Section 6.8 will, in addition to any other rights and remedies the non-disclosing Party may have at law or in equity, will be entitled to seek an injunction enjoining and restraining the non-disclosing Party from violating or threatening to breach this Section 6.8.
6.9 Commercial Transition (Including Handling of Rebates, Returns, Chargebacks and Price Adjustments).
(a) DSA Fees. Buyer will pay directly to wholesalers all DSA fee invoices received after the date the Inventory is transferred to Buyer pursuant to Section 4.2.
(b) Product Returns. Buyer will pay all wholesaler and retail channel invoices for returned Product received after the date the Inventory is transferred to Buyer pursuant to Section 4.2.
(c) Commercial Payer and Government Utilization rebates. Seller will pay directly to both commercial payers and Governmental Authorities listed on Exhibit F (collectively, the “Payers”) all Product rebate invoices and chargebacks received through August 31, 2019. Seller will pay directly to the Payers all invoices and chargebacks received between September 1, 2019 and December 31, 2019, but will submit quarterly invoices to Buyer for reimbursement of such invoices and chargebacks. After December 31, 2019, Seller will not process or pay any Payer invoices for rebates or chargebacks.
(d) Patient Coupons/Co Pay Cards. Seller will continue its co-pay program under its business rules and pay directly all co-pay claims received through August 31, 2019. Seller will not process or pay invoices for any co-pay claims after August 31, 2019.
6.10 Further Assurances. Each Party agrees that subsequent to the Closing Date, at the request of the other Party, it will execute and deliver, or cause to be delivered, to the other Party, such further instruments and take such other action as may be reasonably necessary to carry out the transactions contemplated by this Agreement.
6.11 Costs and Expenses. Except as otherwise expressly provided herein, the Parties shall bear their own respective expenses (including, but not limited to, all compensation and expenses of counsel, financial advisors, consultants and independent accountants) incurred in connection with the preparation and execution of this Agreement and consummation of the Transactions, including assistance reasonably requested in consummating the Transactions.
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6.12 Tax Matters.
(a) Transfer Taxes. Buyer shall be responsible for and pay all federal, state and local sales, documentary and other transfer Taxes, if any, due as a result of the purchase, sale or transfer of the Transferred Assets in accordance herewith whether imposed by law on Seller or Buyer.
(b) Tax Prorations. Seller will timely pay all Taxes arising out of the ownership, use and sale of the Transferred Assets with respect to transactions or events occurring or periods (or portions thereof) ending on the day prior to the Effective Date. Buyer will timely pay all Taxes arising out of the ownership of the Transferred Assets with respect to transactions or events occurring or periods (or portions thereof) beginning on or after the Effective Date, other than as set forth in Section 6.12(a) above. In the case of any Taxes that are imposed on a periodic basis and are payable for a taxable period that includes (but does not end on) the day prior to the Effective Date, the portion of such Tax which relates to the portion of such taxable period ending on the day prior to the Effective Date will (i) in the case of any personal property, real property or similar ad valorem taxes, be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on the day prior to the Effective Date and the denominator of which is the number of days in the entire taxable period, and (ii) in the case of any other Taxes, shall be deemed equal to the amount which would be payable if the relevant taxable period ended on the day prior to the Effective Date.
Article
7
INDEMNIFICATION AND INSURANCE
7.1 Indemnification by Seller. From and after the Effective Date, Seller shall defend, indemnify and hold harmless Buyer and its Representatives from, against and in respect of any and all Losses resulting or arising from or otherwise relating to:
(a) any breach by Seller of any representation or warranty of Seller contained in this Agreement or any Ancillary Agreement;
(b) any breach by Seller of, or failure by Seller to perform, carry out or otherwise fulfill or comply with, any of the covenants, agreements, undertakings or obligations of Buyer contained in this Agreement or any Ancillary Agreement;
(c) any Excluded Liabilities;
(d) any Liabilities of Seller arising out of or in connection with any breaches or defaults by Seller under the [***] arising prior to the Effective Date; and
(e) any Taxes of Seller not otherwise the responsibility of Buyer pursuant to this Agreement.
7.2 Indemnification by Buyer. From and after the Effective Date, Buyer shall indemnify and hold harmless Seller and its Representatives from, against and in respect of any and all Losses resulting or arising from or otherwise relating to:
(a) any breach by Buyer of any representation or warranty of Buyer contained in this Agreement or any Ancillary Agreement;
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(b) any breach by Buyer of, or failure by Buyer to perform, carry out or otherwise fulfill or comply with, any of the covenants, agreements, undertakings or obligations of Buyer contained in this Agreement or any Ancillary Agreement;
(c) any Assumed Liabilities;
(d) use of the Marketing Collateral(s) by Buyer after the Effective Date; and
(e) any Taxes of Buyer not otherwise the responsibility of Seller pursuant to this Agreement.
7.3 Method of Asserting Claims.
(a) All claims for indemnification under or with respect to this Agreement or any Ancillary Agreements (“Indemnity Claims”) made by a Party or its Representatives hereunder (the “Indemnified Party”) shall be asserted and resolved as set forth in this Section 7.3. In the event that any written claim or demand for which a Party (the “Indemnifying Party”) would be liable to any Indemnified Party hereunder is asserted against or sought to be collected from any Indemnified Party by a Third Party, such Indemnified Party shall promptly, but in no event more than thirty (30) days following such Indemnified Party’s receipt of such claim or demand, notify the Indemnifying Party of such claim or demand and the amount or the estimated amount thereof to the extent then feasible (the “Claim Notice”). All indemnity claims by any Indemnified Party that do not involve Third Party claims shall be communicated via a Claim Notice to the other Party promptly following discovery of such claim. The failure or delay of the Indemnified Party to provide any such Claim Notice does not release the Indemnifying Party from any of its obligations under this Article 7 unless (and then solely to the extent that) the Indemnifying Party is prejudiced by such delay.
(b) The Indemnifying Party shall have fifteen (15) days from the delivery or mailing of the Claim Notice (the “Notice Period”) to notify the Indemnified Party whether or not it accepts the Indemnity Claim set forth in the Claim Notice and, in the case of a Third Party claim, whether or not it desires to defend the Indemnified Party against such claim or demand. An election to assume the defense of such claim or demand shall not be deemed to be an admission that the Indemnifying Party is liable to the Indemnified Party in respect of such claim or demand. All costs and expenses incurred by the Indemnifying Party in defending such claim or demand shall be a liability of, and shall be paid by, the Indemnifying Party; provided, however, that the amount of such expenses shall be a liability of the Indemnifying Party hereunder, subject to the limitations set forth in this Article 7. In the event, however, that the Indemnifying Party declines or fails to assume the defense of the claim within such fifteen (15)-day period, the Indemnified Party may assume the defense thereof and the reasonable fees and disbursements of counsel for the Indemnified Party shall be deemed Losses hereunder if the Indemnifying Party is ultimately determined to be liable for the Losses that are the subject of the Indemnity Claim set forth in the Claim Notice pursuant to this Agreement, subject to the limitations set forth in this Article 7.
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(c) In the event that it is ultimately determined that the Indemnifying Party is not obligated to indemnify, defend or hold the Indemnified Party harmless from and against any Third Party claim, the Indemnified Party shall reimburse the Indemnifying Party for any and all costs and expenses (including without limitation, attorney’s fees and court costs) actually incurred by the Indemnifying Party in its defense of the Third Party claim. In the event that the Indemnifying Party notifies the Indemnified Party within the Notice Period that it desires to defend the Indemnified Party against such claim or demand, the Indemnifying Party shall have the right to defend the Indemnified Party by appropriate proceedings. If any Indemnified Party desires to participate in, but not control, any such defense or settlement, it may do so at its sole cost and expense.
(d) The Indemnified Party shall not settle a claim or demand without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld, conditioned or delayed. The Indemnifying Party may settle any claim or demand solely for monetary damages; it being understood that the Indemnifying Party shall not, without the prior written consent of the Indemnified Party (which shall not be unreasonably withheld, conditioned or delayed) settle, compromise or offer to settle or compromise any such claim or demand on a basis which would result in the imposition of a consent order, injunction or decree that would substantially restrict the future activity or conduct of the Indemnified Party or any subsidiary or Affiliate thereof.
(e) To the extent the Indemnifying Party shall control or participate in the defense or settlement of any Third Party claim or demand, the Indemnified Party will give the Indemnifying Party and its counsel access to, during normal business hours, the relevant business records and other documents, and shall permit them to consult with the employees and counsel of the Indemnified Party.
(f) The controlling party, in either case, shall select counsel, contractors, experts and consultants of recognized standing and competence, shall take reasonable steps necessary in the investigation, defense or settlement thereof, and shall diligently and promptly pursue the resolution thereof.
(g) Any notice of a claim by reason of any of the warranties or covenants contained in this Agreement shall state specifically the warranty or covenant with respect to which the claim is made, the facts giving rise to an alleged basis for the claim, and the amount of the liability asserted against the Indemnifying Party by reason of the claim.
7.4 Survival. The representations, warranties, covenants and agreements of the Parties contained herein shall survive without limitation as to time, and the period during which a claim for indemnification may be asserted in connection therewith shall continue for the applicable statute of limitations.
7.5 DAMAGES LIMITATION. NOTWITHSTANDING ANYTHING TO THE CONTRARY ELSEWHERE IN THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, NO PARTY OR ITS REPRESENTATIVES SHALL, IN ANY EVENT, BE LIABLE TO ANY OTHER PERSON, EITHER IN CONTRACT, TORT OR OTHERWISE, FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES OR ANY DAMAGES ASSOCIATED WITH ANY LOST PROFITS OR LOST OPPORTUNITIES OF SUCH OTHER PERSON (INCLUDING LOSS OF FUTURE REVENUE, INCOME OR PROFITS, DIMINUTION OF VALUE OR LOSS OF BUSINESS REPUTATION) RELATING TO THE BREACH OR ALLEGED BREACH OF THIS AGREEMENT, WHETHER OR NOT THE POSSIBILITY OF SUCH DAMAGES HAS BEEN DISCLOSED TO THE OTHER PARTY IN ADVANCE OR COULD HAVE BEEN REASONABLY FORESEEN BY SUCH OTHER PARTY.
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7.6 Limitation of Liability of Seller. Notwithstanding the foregoing, except for Losses directly or indirectly related to, incurred in connection with or as a result of fraud, intentional misconduct or willful breach, the maximum amount of indemnifiable Losses which may be recovered cumulatively from Seller arising out of or resulting from the indemnity obligations set forth in Section 7.1(a) shall be an amount equal to [***].
7.7 Cooperation. The Parties shall cooperate with each other with respect to resolving any claim or liability with respect to which one Party is obligated to indemnify the other Party hereunder, including by making Commercially Reasonably Efforts to mitigate or resolve any such claim or liability.
Article
8
RESERVED
8.1 Right to Terminate for Breach. Either Party may terminate this Agreement immediately by written notice to the other Party if the other Party materially breaches any terms and conditions and covenants under this Agreement, including default of payment obligations, which breach remains uncured for thirty (30) Business Days measured from the date written notice of such breach is given to the breaching Party, which notice shall specify the nature of the breach and demand its cure.
8.2 Post Termination. In the event of termination of this Agreement under Section 8.1, the Transferred Assets (including without limitation, any Confidential Information) shall be returned to the Seller without any demur, delay or protest; provided, however, that: (i) any such return of the Transferred Assets will be first subject to the acceptance by [***] of such transfer and Buyer’s compliance with any requirements of the [***] with respect to such transfer; and (ii) Buyer will not be liable for any delay or refusal by [***] to accept such transfer, provided that Buyer has employed reasonable efforts to secure such transfer back to Seller in a prompt manner. Buyer shall perform all required measures at having the return to the Seller the Product NDA, including, without limitation, approval of all necessary filing of all relevant documents with the Government Authority in the Territory in order to transfer the Product NDA to the Seller. In the event that the Buyer fails to return the Transferred Assets to the Seller, the Seller shall have the right to seek appropriate remedies as may be available with the Seller under law or equity.
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Article
9
MISCELLANEOUS
9.1 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) upon delivery by personal delivery, (b) upon delivery by a nationally-recognized overnight courier service, or (c) three days after mailing, if mailed, certified or registered mail (return receipt requested), postage prepaid, each to the other Party at the following address (or at such other address as shall be given in writing by any Party to the other in accordance with these provisions; provided, however, that a notice of change of address shall be effective only upon receipt thereof):
If to the Buyer, to:
Journey Medical Corporation
9237 Via De Ventura Suite 105
Scottsdale, AZ 85258
Attn: Claude Maraoui (President and CEO)
[***]
With a copy to:
[***]
If to the Seller to:
Sun Pharmaceutical Industries, Inc.
[***]
or to such other Person or address as any Party shall specify by notice in writing to the other Party.
9.2 Conflict; Construction of Documents. In the event of any conflict between the provisions of this Agreement and the provisions of any Ancillary Agreements, the provisions of this Agreement shall prevail.
9.3 Assignability; Successors and Assigns. Neither this Agreement nor any of the rights or obligations of the Parties hereunder may be assigned by any Party without the prior written consent of the other Party, provided that a Party may assign its rights and obligations under this Agreement, without the prior written consent of the other Party, to an Affiliate or to a successor of the assigning Party by reason of merger, sale of all or substantially all of its assets or any similar transaction. Any attempted assignment or delegation in contravention hereof shall be null and void. Subject to the foregoing, this Agreement and all rights and powers granted and obligations created hereby will bind and inure to the benefit of the Parties hereto and their respective successors and assigns.
9.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of law rules of such state and subject to Section 9.5, the courts in the State of New York shall have exclusive jurisdiction.
9.5 Dispute Resolution. In the event of any dispute arising out of or in connection with this Agreement, the dispute shall be settled by arbitration in accordance with American Arbitration Association and its rules which are deemed to be incorporated by reference to this section, for the time being in force. The arbitral tribunal shall consist of a sole arbitrator appointed in accordance with the said rules. The seat of arbitration shall be New York and the language of the arbitration shall be English. The award rendered by the sole arbitrator shall be final and binding and enforceable in any court of competent jurisdiction.
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9.6 Headings. The headings preceding the text of the Sections and subsections hereof are inserted solely for convenience of reference, and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect. All words used in this Agreement will be construed to be of such gender or number as the context may require.
9.7 Amendment and Waiver. The Parties may, by mutual written agreement, amend this Agreement in any respect, and any Party, as to such Party, may (a) extend the time for the performance of any of the obligations of any other Party, and (b) waive (i) any inaccuracies in warranties by any other Party, (ii) compliance by any other Party with any of the agreements contained herein and performance of any obligations by such other Party, and (iii) the fulfillment of any condition that is precedent to the performance by such Party of any of its obligations under this Agreement. To be effective, any such amendment or waiver must be in writing and be signed by both Parties.
9.8 Entire Agreement. This Agreement, together with the Ancillary Agreements, shall constitute the entire understanding and agreement between the Parties in relation to the subject matter of this Agreement and shall together supersede all previous agreements between the Parties in relation to the same subject matter. It is further agreed that neither Party has entered into this Agreement in reliance upon any warranty or undertaking of the other Party which is not expressly set out or referred to in this Agreement.
9.9 Incorporation of Schedules. All Exhibits and Schedules attached hereto and referred to herein are hereby incorporated herein and made a part of this Agreement for all purposes as if fully set forth herein.
9.10 Press Release. Neither Party shall issue any press release, trade announcement or make any other public announcement with regard to the Transactions without the other Party’s prior written consent, which shall not be unreasonably withheld. This restriction shall not apply to announcements required by any Government Authority. However, in such event the Parties shall, to the extent reasonably practicable, coordinate the wording of any such announcements. To the extent any Party is required to file a copy of this Agreement or any Ancillary Agreement as an exhibit to any filings with, or otherwise publicly disclose the terms hereof or thereof to, the Governmental Authority, the Parties will coordinate in advance on the form of redacted version of this Agreement or applicable Ancillary Agreement or the terms to be so filed or disclosed and permit the other Party to provide comments and take such comments into account in good faith prior to making such filing.
9.11 No Third Party Beneficiary Rights. This Agreement is not intended to and shall not be construed to give any other Person any interest or rights (including, without limitation, any Third Party beneficiary rights) with respect to or in connection with any agreement or provision contained herein or contemplated hereby.
9.12 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be reasonably necessary or appropriate in order to carry out the purposes and intent of this Agreement.
27
9.13 Severability. Each of the agreements, undertakings, covenants, warranties, indemnities and other obligations of the Parties entered pursuant to this Agreement are considered reasonable by the Parties hereto. If any provision of this Agreement, an Ancillary Agreement, or any part thereof is held void or unenforceable or in conflict with the laws of any relevant jurisdiction, the Parties hereto shall negotiate in good faith to modify this Agreement or Ancillary Agreement, as applicable, so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
9.14 Relationship. Nothing in this Agreement shall be construed as creating a relationship of a joint venture, partners, employer-employee, or agent. Neither Party has the authority to create any obligations for the other or to bind the other to any representation or document.
9.15 Counterparts. This Agreement may be executed in two counterparts, each of which shall for all purposes be deemed to be an original and both of which shall, when taken together, constitute one instrument. Delivery of an executed counterpart of this Agreement by facsimile, email in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document has the same effect as delivery of an executed original of this Agreement.
(Signatures appear on the following page)
28
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the Effective Date.
JOURNEY MEDICAL CORPORATION | |||
By: | /s/ Claude Maraoui | ||
Name: Claude Maraoui | |||
Title: President & CEO | |||
SUN PHARMACEUTICAL INDUSTRIES, INC. | |||
By: | /s/ Abhay Gandhi | ||
Name: Abhay Gandhi | |||
Title: CEO — North America |
Exhibit 10.13
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
ASSET PURCHASE AGREEMENT
By and between
JOURNEY MEDICAL CORPORATION
and
SUN PHARMACEUTICAL INDUSTRIES, INC.
Dated: December 18, 2020
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the “Agreement”), dated December 18, 2020 (“Effective Date”), is entered into by and between Journey Medical Corporation, a Delaware corporation having its principal place of business at 9237 Via De Ventura Suite 105, Scottsdale, AZ 85258 (the “Buyer”) and Sun Pharmaceutical Industries, Inc, a Delaware corporation, located at [***] (the “Seller”). Buyer and Seller are referred to herein individually as a “Party” and collectively as the “Parties”.
WHEREAS, Seller owns and possesses the Transferred Assets (as defined herein).
WHEREAS, Seller desires to sell, transfer and assign to Buyer, and Buyer desires to purchase from Seller all of Seller’s right, title and interest in the Transferred Assets (as defined herein) with respect to the Territory upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and intending to be legally bound hereby, the Parties hereto agree as follows:
Article
1
DEFINITIONS
1.a. As used in this Agreement, the following terms shall have the meanings set forth below:
1.1 “Action or Proceeding” means any action, suit, proceeding, arbitration, court order, inquiry, hearing, assessment with respect to fines or penalties or litigation (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Authority.
1.2 “Additional Payments” shall have the meaning set for in Section 4.1(c).
1.3 “Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person from time to time. For purposes of this definition, the term “control” (including the terms “controlled by” and “under common control with”) means (a) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract relating to voting rights or corporate governance, or otherwise or (b) the ownership, directly or indirectly, of more than 50% of the voting securities or other ownership interest of such Person (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity).
1.4 “Ancillary Agreements” means, other than this Agreement, all other agreements, certificates and documents signed and delivered by any party in connection with this Agreement or the Transactions contemplated hereby.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
1.5 “Assumed Liabilities” shall have the meaning set forth in Section 2.6.
1.6 “Business Day” means a day other than a Saturday, Sunday, bank or other public holiday in the State of New York, USA.
1.7 “CDA” means the Confidentiality Agreement by and between Buyer and Seller entered into on September 06, 2018.
1.8 “Claim Notice” shall have the meaning set forth in Section 7.3(a).
1.9 “Closing” shall have the meaning set forth in Section 3.1.
1.10 “Closing Date” shall have the meaning set forth in Section 3.1.
1.11 “Commercially Reasonable Efforts” shall mean the diligent, good faith efforts, consistent with general practices and standards in the pharmaceutical industry with those used in the pharmaceutical industry of similar size and with similar resources of Buyer, taking into account all scientific, commercial and other relevant factors, would normally use to accomplish a similar objective for its product having similar technical and regulatory factors (including safety and efficacy), similar expected and actual time and cost to commercialize, similar commercial and profit potential, competitive landscape, a similar proprietary position and strategic value, and that is at a similar stage in its product life cycle as the applicable Product, in each case based on existing and reasonably anticipated future conditions. Commercially Reasonable Efforts shall be determined on a market-by-market basis for the Product.
1.12 “Confidential Information” means Confidential Information as defined in the CDA.
1.13 “Consent” means any consent, approval, authorization, waiver, permit, grant, franchise, concession, agreement, license, exemption or order of, registration, certificate, declaration or filing with, or report or notice to, any Person, including any Governmental Authority.
1.14 “Disclosure Schedule” means the disclosure schedule delivered by Seller to Buyer simultaneously with the execution of this Agreement and attached herewith as Schedule 1.14.
1.15 “Encumbrance” means any charge, equitable interest, hypothecation, lien, mortgage, pledge, security interest or other encumbrance of any kind known to Seller prior to the Effective Date.
1.16 “Excluded Liabilities” shall have the meaning set forth in Section 2.7.
1.17 “FDA” means the United States Food and Drug Administration and any successor agency thereto.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
1.18 “FDA Act” means the U.S. Federal Food, Drug and Cosmetic Act, as amended, and the rules and regulations promulgated thereunder.
1.19 “GAAP” means general accounting principles in United States of America.
1.20 “Governmental Authority” means (a) any federal, state, regional, county, city, municipal or local government, whether foreign or domestic and (b) any governmental or quasi-governmental authority of any nature, including any regulatory or administrative agency, commission, department, board, bureau, court, tribunal, arbitrator, arbitral body, agency, ministry, branch, official entity or other administrative or regulatory body obtaining authority from any of the foregoing, and (c) any supra-national organization, state, county, city or other political subdivision.
1.21 “Governmental Order” means any order, writ, judgment, citation, injunction, decree, ruling, charge, stipulation, determination or award entered by any Governmental Authority.
1.22 “Indemnified Party” shall have the meaning set forth in Section 7.3(a).
1.23 “Indemnifying Party” shall have the meaning set forth in Section 7.3(a). 1.24
1.24 “Indemnity Claims” shall have the meaning set forth in Section 7.3(a).
1.25 “Intellectual Property” means, (a) all trademarks, service marks, trade dress, logos, and trade names solely and exclusively related to the marketing, distribution, advertising and sale of the Product, which are listed on Schedule 1.25(a), together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith (the “Assigned Trademarks”); (b) the domain names listed on Schedule 1.25(b) and the digital graphics files supporting such site (the “Assigned Domain Names”); and (c) all Know-How owned or controlled by Seller of any Affiliate thereof solely and exclusively relating to, or necessary for, the manufacture, use, sale, import, development, or commercialization of the Product.
1.26 “Knowledge” means (a) in the case of Seller, the actual knowledge of the applicable Persons set forth on Schedule 1.26(a), and (b) in the case of Buyer, the actual knowledge of Buyer set forth on Schedule 1.26(b).
1.27 “Know-How” means all technical, scientific and other know-how and information, trade secrets, knowledge, technology, inventions, methods, processes, formulas, instructions, technical assistance, designs, drawings, assembly procedures, computer programs, specifications, data, results, and other material, manufacturing procedures, test procedures and purification and isolation techniques (whether or not, in each case, confidential, proprietary or patentable), in written, electronic or any other form.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
1.28 “Laws” means any federal, state, local, foreign or multinational laws, statutes, ordinances, regulations, rules, standards, codes, Governmental Orders, writs, injunctions, decrees, arbitration awards, agency or regulatory requirements or licenses or permits of any kind whatsoever of any Governmental Authority, all as amended from time to time.
1.29 “Liabilities” shall mean, collectively, any debt, obligation, duty, guaranty, claim, loss, damage, deficiency, cost, expense, fees, commitment, obligation, responsibility, or liability of any nature (including such debt, obligation, duty, liability, or the like, that is primary or secondary, direct, absolute or contingent, fixed or otherwise, whether asserted or unasserted, whether accrued or accrued, whether liquidated or unliquidated, whether due or to become due, or known or unknown) regardless of whether such debt, obligation, duty, liability, or the like, would be required to be disclosed on a balance sheet, and regardless of whether such debt, obligation, duty, liability, or the like, is immediately due and payable.
1.30 “Losses” shall mean any and all losses, damages, obligations, liabilities, Taxes, fines, fees, costs, expenses, lost profits, diminution in value, penalties, interest, awards, judgments, claims, demands, actions, suits and settlements of any kind, including attorneys’ and consultants’ fees and expenses and other costs and expenses.
1.31 “Manufacturing and Packaging Assets” shall mean the materials solely and exclusively related to the Product as set forth in Schedule 1.31.
1.32 “Marketing Collateral” shall mean the materials solely and exclusively related to the Product as set forth in Schedule 1.32.
1.33 “Notice Period” shall have the meaning set forth in Section 7.3(b). 1.34
1.34 “Payer” shall have the meaning set forth in Section 6.9.
1.35 “Permitted Encumbrance” means (i) any Encumbrance for Taxes, assessments and other governmental charges that are not yet due and payable, (ii) with respect to licenses, permits or contracts, any restrictions, obligations, limitations or other Encumbrance contained in such license, permit or contract or existing at Law or under the regulatory regime pursuant to which such permit or license is granted that do not materially impair the current use or sale of the Product, or (iii) with respect to the NDA, any restrictions, obligations, limitations or other Encumbrance contained in such NDA or existing at Law or under the regulatory regime pursuant to which such NDA is granted that do not materially impair the current use or sale of the Product.
1.36 “Person” means any individual, corporation, general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, or other entity or Governmental Authority.
1.37 “Product” means [***] as described in the Product NDA.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
1.38 “Product NDA” the New Drug Applications (as defined in and regulated under the FDA Act) identified as [***] and [***] including all applications therefor, and all amendments, modifications, supplements, submissions, and updates with respect thereto.
1.39 “Purchase Price” shall have the meaning set forth in Section 4.1.
1.40 “Tax” or “Taxes” means any taxes or similar assessments of any kind whatsoever including, but not limited to income, franchise, trade, capital, withholding, payroll, unemployment insurance, social security, gross receipts, sales and use, value added, excise, real property and personal property taxes, together with all interest, penalties and additions imposed with respect to any such taxes.
1.41 “Territory” means the entire world.
1.42 “Third Party” means any Person other than a Party or any of their respective Affiliates.
1.43 “Transferred Assets” shall have the meaning set forth in Section 2.1.
1.44 “Transactions” shall have the meaning set forth in Section 3.2(a).
1.45 “United States” means the United States of America and, for the sake of clarity, the Commonwealth of Puerto Rico.
1.46 “Upfront Payment” shall have the meaning set forth in Section 4.1(b).
1.b. Interpretation. Unless the context otherwise requires, the terms defined in this Article 1 shall have the meanings herein specified for all purposes of this Agreement, applicable to both the singular and plural forms of any of the terms defined herein. When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Any reference to any contract or other document or instrument or to any Law is to it as amended and supplemented from time to time through the date of the Closing (and in the case of any Law, to any successor provisions, and to any rules and regulations promulgated thereunder, in effect as of the date of this Agreement), unless the context requires otherwise.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
Article
2
PURCHASE AND SALE OF THE TRANSFERRED ASSETS
2.1 Transfer of Assets. Upon the terms and subject to the conditions set forth herein, in accordance with Section 2.2, Seller hereby sells, conveys, transfers, assigns and delivers to Buyer on an as-is basis, and Buyer hereby purchases from Seller all of Seller’s right, title and interest in and to the following assets with respect to the Territory to the extent existing and controlled by Seller (collectively, the “Transferred Assets”), free and clear of all Encumbrances (except Permitted Encumbrances):
(a) the Product NDA;
(b) all Intellectual Property and Manufacturing and Packaging Assets.
2.2 Timing of Transfer of Transferred Asset. The Parties hereby agree and acknowledge that (a) the Intellectual Property and shall be transferred by Seller to Buyer on the Effective Date, (b) the Manufacturing and Packaging Assets as set forth on Schedule 1.31 shall be transferred by Seller to Buyer within ten (10) Business Days of the Effective Date, and (c) the Product NDA shall be transferred by Seller to Buyer on the Closing Date.
2.3 License to Marketing Collateral. Solely to the extent necessary for Buyer to market the Product in the Territory, Seller hereby grants to Buyer a limited, non-exclusive, non-transferable and royalty free license to Seller’s rights in the Marketing Collateral. Upon the terms and subject to the conditions set forth herein, on the Effective Date, Seller shall promptly deliver to Buyer the Marketing Collateral. For the avoidance of doubt, nothing herein shall be construed as a grant or license of any rights to any Seller trademark, service mark, trade dress, logo, trade name or corporate name similar or related thereto other than those specifically included in the Transferred Assets.
2.4 Record Retention by Seller. Buyer acknowledges and agrees that Seller may retain for archival purposes and for purposes of complying with the applicable Laws and for legal and regulatory purposes as sellers of pharmaceutical products, one copy of all or any part of the documentation that Seller delivers to Buyer pursuant to Section 2.1.
2.5 Other Assets Excluded. Other than the Transferred Assets set forth in Section 2.1, Buyer expressly understands and agrees that it is not purchasing or acquiring, and Seller is not selling or assigning, any other assets or properties of Seller not specifically related to the Product, including but not limited to Seller’s trademarks, trade dress, logos, corporate designs, and the like that are incorporated in the Marketing Collateral and in the digital graphics files forming part of the Intellectual Property, and all such other assets and properties shall be excluded from the Transferred Assets.
2.6 Assumption of Liabilities. Upon the terms and subject to the conditions set forth herein, from and after the Effective Date, Buyer shall assume, be responsible for and pay, and perform and discharge when due, the following Liabilities of Seller (collectively, the “Assumed Liabilities”): (a) all of the Liabilities of Seller that arise out of or are related to the Product and the Intellectual Property and the Transferred Assets for period after the Effective Date, including any commercial and governmental rebates and chargebacks, patient vouchers or coupons granted to managed healthcare organizations, pharmacy benefit managers and Governmental Authorities and their agencies, purchasers and customers; and (b) all of the Liabilities of Seller that arise out of or are related to the Product NDA.
2.7 Non-Assumption of Liabilities. Other than the Assumed Liabilities, neither Buyer nor any of its Affiliates assume or in any way undertake to pay, perform, satisfy or discharge any Liability or other obligation whatsoever of Seller, including, without limitation, any and all Liabilities for Taxes, trade accounts payable and employee benefits occurring prior to the Effective Date (the “Excluded Liabilities”). For the avoidance of doubt, the Excluded Liabilities include any and all Liabilities and Actions or Proceedings directly or indirectly involving personal injury or bodily harm arising out of, in connection with or related to events, circumstances and conditions occurring or existing before the Effective Date. Seller will promptly pay and discharge all Excluded Liabilities in the ordinary course of business.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
Article
3
CLOSING & CONDITIONS PRECEDENT
3.1 Closing. The consummation of the purchase and sale of the Transferred Assets contemplated hereby (the “Closing”) will take place on the date of receipt of the Upfront Payment by Seller pursuant to Section 4.1(b) or, if all the conditions set forth in Sections 3.2 are not then satisfied or waived, the first such Business Day thereafter on which they are waived or satisfied (the “Closing Date”). The Closing shall be effective as of 12:01 AM Eastern Standard Time on the Closing Date.
3.2 Conditions to Closing.
(a) General Conditions. The obligation of the Parties to consummate the transactions contemplated by this Agreement (the “Transactions”) at the Closing is subject to the fulfillment of each of the following conditions prior to or at the Closing (any or all of which may be waived in writing in whole or in part by both Parties):
(i) No Actions or Proceedings. No Action or Proceeding has been instituted or threatened prior to or on the Closing Date before any Governmental Authority pertaining to the Transactions, the result of which could prevent or make illegal the consummation of the Transactions.
(ii) No Governmental Order. There is not in force any Governmental Order by or before any Governmental Authority of competent jurisdiction restraining, enjoining, prohibiting, invalidating or otherwise preventing the consummation of the Transactions.
(b) Conditions to Seller’s Obligations. The obligation of Seller to consummate the Transactions at the Closing is subject to the fulfillment of each of the following conditions prior to or at the Closing (any or all of which may be waived in writing in whole or in part by Seller):
(i) True Representations and Warranties. The representations and warranties of Buyer made in Article 5 of this Agreement shall be true and correct as of the Closing Date. Buyer shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Buyer by the time of the Closing.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
(ii) Delivery of Documents. Buyer has executed and delivered all documents, certificates, instruments and schedules required under Section 3.2(b) to Seller;
(iii) Officer’s Certificate. Buyer shall have delivered to Seller a certificate dated as of the Closing Date and signed by an authorized officer of Buyer to the effect that the conditions specified in Sections 3.2(b)(i) and (ii) have been satisfied by Buyer; and
(c) Conditions to Buyer’s Obligations. The obligation of Buyer to consummate the Transactions at the Closing is subject to the fulfillment of each of the following conditions prior to or at the Closing (any or all of which may be waived in writing in whole or in part by Buyer):
(i) True Representations and Warranties. The representations and warranties of Seller made in Article 5 of this Agreement shall be true and correct as of the Closing Date. Seller shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Seller by the time of the Closing.
(ii) Consents. Seller shall have received and delivered to Buyer all Consents as required in order to assign and transfer to Buyer the Transferred Assets;
(iii) Delivery of Documents. Seller has executed (if applicable) and delivered all documents, certificates, instruments and schedules required under Section 3.2(c) to Buyer; and
(iv) Officer’s Certificate. Seller shall have delivered to Buyer a certificate dated as of the Closing Date and signed by an authorized officer of Seller to the effect that the conditions specified in Sections 3.2(c)(i) through (iii) have been satisfied by Seller.
3.3 Closing Deliverables. At the Closing, the following shall be delivered:
(a) Buyer shall deliver to Seller:
(i) a letter to the FDA, substantially in the form of Exhibit A attached hereto (the "Buyer FDA Letter"), executed by Buyer, accepting the transfer of the Product NDA to Buyer;
(ii) a trademark assignment, substantially in the form of Exhibit B attached hereto (the "Trademark Assignment"), executed by Buyer, effecting the assignment and transfer to Buyer of the Assigned Trademarks;
(iii) a domain name assignment, substantially in the form of Exhibit C attached hereto (the "Domain Assignment"), executed by Buyer, effecting the assignment and transfer to Buyer of the Assigned Domain Names; and
(iv) the certificate required to be delivered by Buyer under Section 3.2(b) duly executed by an authorized officer of Buyer.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
(b) Seller shall deliver to Buyer:
(i) a letter to the FDA, substantially in the form of Exhibit E attached hereto (the "Seller FDA Letter"), executed by Seller, informing FDA of the transfer of the Product NDA to Buyer;
(ii) A copy of the Trademark Assignment executed by Seller;
(iii) A copy of the Domain Name Assignment executed by Seller; and
(iv) the certificate required to be delivered by Seller under Section 3.2(c) duly executed by an authorized officer of Seller.
Article
4
PRICE & TERMS
4.1 Purchase Price. As consideration for the Transferred Assets, Buyer shall pay to Seller the following (together, the “Purchase Price”) by wire transfer of federal funds pursuant to written instructions delivered by Seller to Buyer:
(a) Two Hundred Thousand U.S. Dollars (U.S. $200,000) upon execution of the non-binding term sheet between Buyer and Seller, which the Buyer has paid to the Seller;
(b) One Million Eight Hundred Thousand U.S. Dollars (U.S. $1,800,000) by January 1, 2021 (“Upfront Payment”);
(c) Additional payments, totaling Two Million U.S. Dollars ($2,000,000) of the amounts set forth below on the dates set forth below (collectively “Additional Payments”):
(i) Five Hundred Thousand U.S. Dollars (U.S. $500,000) by April 1, 2021;
(ii) Five Hundred Thousand U.S. Dollars (U.S. $500,000) by July 1, 2021; and
(iii) One Million U.S. Dollars (U.S. $1,000,000) by [***].
4.2 Submission of FDA Letter. Buyer shall send Buyer FDA Letter to the FDA, and Seller shall send Seller FDA Letter to the FDA, within ten (10) Business Days after Closing.
4.3 Taxes. Buyer shall be responsible for and pay all Taxes imposed in connection with the transactions provided for in this Agreement (excluding any income tax and capital gains tax on Seller), including without limitation sales taxes, value added taxes, transfer taxes and recording fees, if any, imposed upon the transfer of the Transferred Assets, and any withholding taxes.
4.4 Late Payment. Seller shall be entitled to charge simple interest at the rate of [***] percent ([***]%) per annum, based on a three hundred and sixty-five (365) day year, on any amounts overdue, from the due date for payment until receipt by Seller of the full amount, without prejudice to any other right or remedy of Seller.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
Article
5
REPRESENTATIONS AND WARRANTIES
5.1 Seller’s Warranties. Except as set forth on the Disclosure Schedule, as on the Effective Date and through Closing, Seller represents and warrants to Buyer as follows:
(a) Organization and Authority. Seller is validly existing and in good standing under the Laws of the State of Delaware, with full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been, and upon execution of each of the Ancillary Agreements, such Ancillary Agreements will have been, duly and validly authorized, executed and delivered by, and constitute the legal, valid and binding obligations of Seller enforceable in accordance with their terms.
(b) Title. Seller owns and has good and marketable title to the Transferred Assets, free and clear of all Encumbrances except Permitted Encumbrance. There are no adverse claims of ownership to the Transferred Assets and, to Seller’s Knowledge, Seller has not received written notice that any individual or entity has asserted a claim of ownership or right of possession or use in or to any of the Transferred Assets. (i) As of the Effective Date, Buyer will acquire from Seller good and marketable title to the Transferred Assets other than the Product NDA, and (ii) at Closing, Buyer will acquire from Seller good and marketable title to the Product NDA.
(c) Litigation; Legal Compliance.
(i) There is no material Action or Proceeding pending or, to Seller’s Knowledge, threatened, with respect to the Transferred Assets, that affects or, if successful, would affect the validity of this Agreement or any action taken or to be taken by Seller in connection herewith, or which individually or in the aggregate, would materially impair the ability of Seller to perform its obligations hereunder or to consummate the Transactions contemplated by this Agreement or the Ancillary Agreements.
(ii) Neither Seller nor any officer, employee, agent, contractor or distributor of Seller has committed or been convicted of any crime or engaged in any conduct for which debarment is mandated by 21 U.S.C. § 335a(a) or any similar law or authorized by 21 U.S.C. § 335a(b) or any similar applicable Law. Neither Seller nor any officer, employee, agent, contractor or distributor of Seller has been convicted of any crime or engaged in any conduct for which such person could be excluded from participating in federal health care programs under Section 1128 of the Social Security Act of 1935, as amended, or any similar law. No Actions or Proceedings that could reasonably be expected to result in a debarment or exclusion are pending or threatened against Seller or any of its directors, officers, employees or agents. Seller has never been: (i) debarred or (ii) convicted of a crime for which a person can be debarred under Section 306(a) of the Generic Drug Enforcement Act of 1992 (Section 306 (a) or (b)), and Seller has never been and, to Seller’s Knowledge, none of its employees, Affiliates or agents has ever been: (i) threatened to be debarred or (ii) indicted for a crime or otherwise engaged in conduct for which a person can be debarred, under Section 306(a) or (b) of the Generic Drug Enforcement Act of 1992.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
(iii) Seller has provided to Buyer copies of all written communications to or from any Governmental Authority and associated with the Product, including, without limitation, any written communication to or from the FDA.
(iv) Seller possesses all material registrations, rights of reference, approvals, licenses, consents, agreements, permits and other authorizations from Governmental Authorities, required by applicable provisions of Laws.
(d) No Conflicts. Neither the execution and the delivery of this Agreement or the Ancillary Agreements, nor the consummation of the Transactions contemplated hereby and thereby, will (i) violate any material applicable Laws to which Seller is, or its assets or properties are, subject, (ii) contravene, conflict with or result in a breach or violation of any provision of the charter or bylaws of Seller.
(e) Brokers and Finders. Seller has not employed any broker, finder, consultant or intermediary in connection with the Transactions contemplated by this Agreement who would be entitled to a broker’s, finder’s or similar fee or commission in connection therewith or upon the consummation thereof.
(f) Intellectual Property.
(i) Seller exclusively owns the Intellectual Property free and clear of all Encumbrances except Permitted Encumbrances. The Intellectual Property will, as of the Effective Date, be transferred to, and controlled by Buyer on substantially the same terms with which Seller, immediately prior to the Effective Date, owned and controlled such Intellectual Property. To Seller’s Knowledge, (i) Seller has not and is not infringing, misappropriating or otherwise violating (including with respect to the discovery, development, clinical testing, manufacture, distribution, advertising, use, exploitation or sale by Seller of the Product) the rights of any other Person with regard to Seller’s possession or use of any Intellectual Property for its sale of the Product as presently conducted. To Seller’s Knowledge, no other Person has or is infringing, misappropriating or otherwise violating the Intellectual Property. No claims against Seller are pending or, to Seller’s Knowledge, threatened with regard to (i) the control or use of any of the Intellectual Property; or (ii) the validity or enforceability of any Intellectual Property.
(ii) Schedule 1.25 sets forth, as of the date hereof, a complete and accurate list of all Intellectual Property owned by Seller related to the Product that is being transferred to Buyer. To Seller’s Knowledge, all Intellectual Property owned by Seller that is related to the Product has been duly registered or filed with or issued by each appropriate Governmental Authority in the jurisdiction indicated in Schedule 1.25, all related necessary affidavits of continuing use have been (or, with respect to licenses, to Seller’s Knowledge have been) timely filed, and all related necessary maintenance fees have been (or, with respect to licenses, to Seller’s Knowledge have been) timely paid to continue all such rights in effect.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
(iii) No Other Representation or Warranties. Except for the representations and warranties contained in this Section 5.1, Seller makes no other express or implied warranty, and Seller hereby disclaims any such warranty or any representation whether by Seller or its respective officers, directors, employees, agents or representatives or any other Person, as to the condition (financial or otherwise), value or quality of the Product or the Transferred Assets, notwithstanding the delivery or disclosure to Buyer or any of its officers, directors, employees, agents or representatives or any other Person of any documentation or other information by Seller or any of its officers, directors, employees, agents or representatives or any other Person with respect to any one or more of the foregoing.
5.2 Buyer’s Warranties. Buyer hereby represents and warrants to Seller, as of the Effective Date and through the Closing Date, as follows:
(a) Organization and Authority of Buyer. Buyer is validly existing and is in good standing under the Laws of the State of Delaware, with full power and authority to enter into this Agreement and perform its obligations hereunder. This Agreement has been, and upon execution of each of the Ancillary Agreements, such Ancillary Agreements will have been duly and validly authorized, executed and delivered by, and constitute the legal, valid and binding obligations of Buyer, enforceable in accordance with their respective terms.
(b) Litigation. There are no material Actions or Proceedings pending, or to Buyer’s Knowledge, threatened or anticipated, that questions the validity of this Agreement or any action taken or to be taken by Buyer in connection herewith, or which individually or in the aggregate, would materially impair the ability of Buyer to perform its obligations hereunder or to consummate the Transactions contemplated by this Agreement or the Ancillary Agreements.
(c) Legal Compliance. Buyer possesses all material registrations, rights of reference, approvals, licenses, consents, agreements, permits and other authorizations from Governmental Authorities, required by applicable provisions of Laws.
(d) Buyer has and will have at Closing cash, and during the Term of this Agreement, cash available sufficient to pay the Upfront Payment and Additional Payments.
(e) No Conflicts. Neither the execution and the delivery of this Agreement nor the Ancillary Agreements, nor the consummation of the Transactions contemplated hereby and thereby, will (i) violate any material applicable Laws to which Buyer is, or its assets or properties are, subject, (ii) contravene, conflict with or result in a breach or violation of any provision of the charter or bylaws of Buyer, or (iii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Buyer is a party or by which it is bound or to which any of its assets is subject. Buyer does not need to give any material notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Authority or any other Person in order to consummate the Transactions contemplated by this Agreement or the Ancillary Agreements. There is no proceeding pending or, to the Knowledge of Buyer, threatened against Buyer that challenges, or may have the effect of preventing, delaying, making illegal or otherwise interfering with the Transactions contemplated by this Agreement or the Ancillary Agreements.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
(f) Independent Investigation. Buyer has conducted its own independent investigation, due diligence, review and analysis of the business, operations, assets (including contracts), liabilities, results of operations, financial condition, software, technology and prospects of the business related to the Product, which investigation, review and analysis were undertaken by Buyer and its Affiliates and representatives.
(g) Brokers and Finders. Buyer has not employed any broker, finder, consultant or intermediary in connection with the Transactions contemplated by this Agreement who would be entitled to a broker’s, finder’s or similar fee or commission in connection therewith or upon the consummation thereof.
5.3 Non-Reliance. Buyer agrees and acknowledges that Buyer has relied solely on the representations and warranties set forth in Section 5.1 and except for the representations and warranties expressly set forth in Section 5.1, as modified by the Disclosure Schedule and any certificate delivered by or on behalf of Seller hereunder, neither Seller nor any of its shareholders, trustees, Affiliates or representatives or any other Person, has made or is making any other representations or warranties, promises, covenants, agreements or guaranties, statutory, common law or otherwise, of any nature, oral or written, past, present or future, including any other representations or warranties, express or implied, with respect to, and Buyer have not relied upon, the accuracy or completeness of any other information, provided, or made available by, Seller or any of its representatives, with respect to, or in connection with, the negotiation, execution or delivery of this Agreement or the Transactions contemplated hereby.
Article
6
COVENANTS
6.1 Obligations of the Parties Prior to Closing. Seller will not prior to the Closing Date (a) incur any material liability outside the ordinary course of business with respect to the Transferred Assets, or (b) create any Encumbrance on any of the Transferred Assets.
6.2 Non-Competition. The Parties hereto agree and acknowledge that the provisions of this Agreement shall not be construed to limit or restrict in any manner the rights of Seller or any of its Affiliates to develop, manufacture, use, sell or commercialize in any manner the Product in a generic or other formulation, either in the Territory or outside of the Territory; provided, however, that for a period of ten (10) years commencing on the Effective Date, Seller shall not manufacture or commercialize any product containing the same active ingredient and in the same dosage and form as that of the Product. Should any part or provision of this Section 6.2 be held invalid, void, or unenforceable in any court of competent jurisdiction, such invalidity, voidness, or unenforceability will not render invalid, void, or unenforceable any other part or provision of this Agreement. The Parties further agree that if any portion of this Section 6.2 is found to be invalid or unenforceable by a court of competent jurisdiction because its duration, territory, or other provisions are deemed to be invalid or unreasonable in scope, the invalid or unreasonable terms will be replaced by terms that are valid and enforceable and that come closest to expressing the intention of such invalid or unenforceable terms, and any court of competent jurisdiction shall enforce this Section 6.2 as so modified to the maximum extent allowed by Law.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
6.3 Standards of Quality. Buyer agrees to comply with applicable Laws in the Territory in the marketing, sale, and distribution of Product.
6.4 Post-Effective Date Agreements. For the period commencing on the Effective Date and ending at the Closing, Seller covenants and agrees with Buyer as follows with respect to the Product NDA:
(a) the Product NDA will be maintained in full force and effect;
(b) no amendment or other modification to the Product NDA will be made without prior written approval of Buyer;
(c) Seller will not authorize any Third Party to sell any products under the Product NDA;
(d) Seller will not authorize any Third Party to make reference to the Product NDA, file any new drug application or other application for marketing authorization that makes reference to the Product NDA, or launch any authorized generic under the Product NDA;
(e) Seller will maintain the confidentiality of any confidential sections of the Product NDA;
(f) Seller will comply with all applicable FDA regulations and applicable Law in connection with any matters related to the Product NDA;
(g) Seller will promptly notify Buyer of any correspondence from FDA or any other Governmental Authority concerning the Product NDA;
(h) Seller will not file any submission or deliver any correspondence concerning the Product NDA to FDA or any other Government Authority without the written consent of Buyer;
(i) Seller will not assign or otherwise modify or transfer title of the Product NDA except as expressly provided for herein or approved in writing by Buyer;
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
(j) Seller will not create, cause to be created, or consent to or allow to be created, any Encumbrance over the Product NDA; and
(k) Seller will not take any other action that would or could reasonably be expected to inhibit or delay transfer of the Product NDA to Buyer pursuant to Section 3.3(b).
Notwithstanding anything contained herein, Seller shall not be held responsible for occurrence of any event with respect to the Product NDA due to the acts or omissions of Buyer.
6.5 Reasonable Efforts of the Parties. Seller and Buyer shall each use its respective Commercially Reasonable Efforts to cause all of the conditions to the obligations of the other to consummate the Transactions contemplated hereby to be met as soon as practicable after the date of this Agreement and to do, or cause to be done, all things necessary to consummate the Transactions contemplated hereby.
6.6 Registrations and Filings. (a) Without prejudice to applicable Laws in the Territory that may exclude this possibility, from and after the Closing, Buyer shall take the lead in coordinating the Product NDA transfers. Buyer shall file, or shall cause its Affiliate or designee to file, or, if required by applicable Laws, Seller, its Affiliate or designee shall file, applications for the transfer of the Product NDA in the Territory. (b) For the avoidance of doubt, Seller does not warrant and shall not be responsible for the successful transfer, maintenance or renewal of the Product NDA after the Closing Date and shall not be obligated to launch the Product in the Territory where it has not been launched before Closing.
6.7 Prescription Drug User Fee Act. Following the Effective Date, Buyer shall assume and have responsibility for fees or charges associated with the Product due and payable to the FDA after the Effective Date pursuant to the Prescription Drug User Fee Act, and any reauthorization thereto. Seller shall retain full responsibility and liability for all fees or charges due and payable to the FDA on or prior to the Effective Date.
6.8 Confidentiality.
(a) Seller undertakes with Buyer, and Buyer undertakes with Seller to keep confidential (except as expressly provided in this Agreement) at all times after the date of this Agreement, and not directly or indirectly reveal, disclose or use for its own or any other purposes, any Confidential Information received or obtained as a result of entering into or performing, or supplied by or on behalf of a Party in the negotiations leading to, this Agreement and which relates to: (i) the negotiations relating to this Agreement; or (ii) the subject matter and/or provisions of this Agreement, subject to Section 6.8(b) below.
(b) The prohibition in Section 6.8(a) does not apply if: (i) the information was in the public domain before it was furnished to the relevant Party or, after it was furnished to that Party, entered the public domain otherwise than as a result of a breach by that Party of this Section 6.8 or any written or confidentiality agreement under which such Party is bound; (ii) disclosure is necessary in order to comply with applicable legislation, regulatory requirements, legal process, or stock exchange rules, provided that any such information disclosable pursuant to this Section 6.8(b) shall be disclosed only to the extent required by Laws and (unless such consultation is prohibited by Laws or is not reasonably practicable) only after consultation with Buyer or Seller (as the case may be) or (iii) Buyer is contemplating the sale, assignment, conveyance or other transfer to a Third Party of all or substantially all of its rights, title and interest in and to the Product, provided that Buyer shall have entered into a confidentiality agreement with such Third Party no less restrictive than this Section 6.8.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
(c) The provisions of the CDA are hereby incorporated herein and shall remain binding and in full force and effect; provided, however, that all obligations of Buyer under the CDA with respect to each of the Transferred Assets shall terminate as of the date of transfer of such Transferred Asset to Buyer pursuant to the terms of this Agreement. Except as otherwise provided herein or in the Ancillary Agreements, Seller shall, and shall cause its Representatives to, treat after the date hereof as strictly confidential all nonpublic, confidential or proprietary information concerning the Transferred Assets, and Seller shall not, after the date hereof, use such information to the detriment of the Buyer.
(d) The Parties further agree that release of any Confidential Information, whether directly or indirectly, would cause irreparable injury to the non-disclosing Party and that the Party whose Confidential Information has been or is being disclosed in violation of this Section 6.8 will, in addition to any other rights and remedies the non-disclosing Party may have at law or in equity, will be entitled to seek an injunction enjoining and restraining the non-disclosing Party from violating or threatening to breach this Section 6.8.
6.9 Commercial Payer and Government Utilization Rebates. After the Closing Date, Seller will notify all commercial payers and Governmental Authorities listed on Exhibit D (collectively, the “Payers”) about the Transactions contemplated by this Agreement and instruct the Payers to send all invoices and chargebacks to Buyer after the Closing Date. Seller will assist with Buyer and facilitate the administration of those Product rebate invoices and chargebacks received by Seller, if any, within three (3) months after the Closing Date. Seller shall notify all Payers to remove Product from each respective agreement, effective as of the Closing Date..
6.10 Further Assurances. Seller and Buyer, agree that subsequent to the Closing Date, at the request of the other Party, they will execute and deliver, or cause to be delivered, to the other Party, such further instruments and take such other action as may be reasonably necessary to carry out the Transactions contemplated by this Agreement.
6.11 Costs and Expenses. Except as otherwise expressly provided herein, the Parties shall bear their own respective expenses (including, but not limited to, all compensation and expenses of counsel, financial advisors, consultants and independent accountants) incurred in connection with the preparation and execution of this Agreement and consummation of the Transactions contemplated hereby, including assistance reasonably requested in consummating such Transactions.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
Article 7
INDEMNIFICATION AND INSURANCE
7.1 Indemnification by Seller. From and after the Closing Date, Seller shall defend, indemnify and hold harmless Buyer, its Affiliates, officers, directors, employees, and agents, against and in respect of any and all Losses, resulting or arising from or otherwise relating to:
(a) any breach by Seller of any covenant, representation or warranty of Seller contained in this Agreement or any Ancillary Agreements; and
(b) any Excluded Liabilities.
7.2 Indemnification by Buyer. From and after the Closing Date, Buyer shall indemnify and hold harmless Seller, its Affiliates, officers, directors, employees, and agents, against and in respect of any and all Losses resulting or arising from or otherwise relating to:
(a) any breach by Buyer of any covenant, representation or warranty contained in this Agreement or any Ancillary Agreements;
(b) Any Assumed Liabilities;
(c) use of the Marketing Collateral by Buyer after the Closing Date; and
(d) any negligent or intentional act committed by Buyer or its employees or agents that caused injury to a person or damage to property, or failed to comply with any applicable law, statute, regulation or ordinance.
7.3 Method of Asserting Claims.
(a) All claims for indemnification (“Indemnity Claims”) by any indemnified Party or a Party with respect to any other claim under or with respect to this Agreement or any Ancillary Agreements (the “Indemnified Party”) hereunder shall be asserted and resolved as set forth in this Section 7.3. In the event that any written claim or demand for which a Party (the “Indemnifying Party”) would be liable to any Indemnified Party hereunder is asserted against or sought to be collected from any Indemnified Party by a Third Party, such Indemnified Party shall promptly, but in no event more than ten (10) days following such Indemnified Party’s receipt of such claim or demand, notify the Indemnifying Party of such claim or demand and the amount or the estimated amount thereof to the extent then feasible (the “Claim Notice”). All indemnity claims by any Indemnified Party that do not involve Third Party claims shall be communicated via a Claim Notice to the other Party promptly following discovery of such claim.
(b) The Indemnifying Party shall have fifteen (15) days from the delivery or mailing of the Claim Notice (the “Notice Period”) to notify the Indemnified Party whether or not it desires to defend the Indemnified Party against such claim or demand. An election to assume the defense of such claim or demand shall not be deemed to be an admission that the Indemnifying Party is liable to the Indemnified Party in respect of such claim or demand. All costs and expenses incurred by the Indemnifying Party in defending such claim or demand shall be a liability of, and shall be paid by, the Indemnifying Party; provided, however, that the amount of such expenses shall be a liability of the Indemnifying Party hereunder, subject to the limitations set forth in this Article 8. In the event, however, that the Indemnifying Party declines or fails to assume the defense of the claim within such fifteen (15)-day period, the Indemnified Party may assume the defense thereof and the reasonable fees and disbursements of counsel for the Indemnified Party shall be deemed Losses hereunder, subject to the limitations set forth in this Article 8.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
(c) In the event that it is ultimately determined that the Indemnifying Party is not obligated to indemnify, defend or hold the Indemnified Party harmless from and against any Third Party claim, the Indemnified Party shall reimburse the Indemnifying Party for any and all costs and expenses (including without limitation, attorney’s fees and court costs) actually incurred by the Indemnifying Party in its defense of the Third Party claim. In the event that the Indemnifying Party notifies the Indemnified Party within the Notice Period that it desires to defend the Indemnified Party against such claim or demand, the Indemnifying Party shall have the right to defend the Indemnified Party by appropriate proceedings. If any Indemnified Party desires to participate in, but not control, any such defense or settlement, it may do so at its sole cost and expense.
(d) The Indemnified Party shall not settle a claim or demand without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld, conditioned or delayed. The Indemnifying Party may settle any claim or demand for monetary damages; it being understood that the Indemnifying Party shall not, without the prior written consent of the Indemnified Party (which shall not be unreasonably withheld, conditioned or delayed) settle, compromise or offer to settle or compromise any such claim or demand on a basis which would result in the imposition of a consent order, injunction or decree that would substantially restrict the future activity or conduct of the Indemnified Party or any subsidiary or Affiliate thereof.
(e) To the extent the Indemnifying Party shall control or participate in the defense or settlement of any Third Party claim or demand, the Indemnified Party will give the Indemnifying Party and its counsel access to, during normal business hours, the relevant business records and other documents, and shall permit them to consult with the employees and counsel of the Indemnified Party.
(f) The controlling party, in either case, shall select counsel, contractors, experts and consultants of recognized standing and competence, shall take reasonable steps necessary in the investigation, defense or settlement thereof, and shall diligently and promptly pursue the resolution thereof.
(g) Any notice of a claim by reason of any of the warranties or covenants contained in this Agreement shall state specifically the warranty or covenant with respect to which the claim is made, the facts giving rise to an alleged basis for the claim, and the amount of the liability asserted against the Indemnifying Party by reason of the claim.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
7.4 Survival. The covenants and agreements of the Parties shall survive without limitation as to time, and the period during which a claim for indemnification may be asserted in connection therewith shall continue for the applicable statute of limitations.
7.5 DAMAGES LIMITATION. NOTWITHSTANDING ANYTHING TO THE CONTRARY ELSEWHERE IN THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, NO PARTY, DIRECTOR, OFFICER, EMPLOYEE, AFFILIATE OR ADVISOR OF ANY OF THE FOREGOING, SHALL, IN ANY EVENT, BE LIABLE TO ANY OTHER PERSON, EITHER IN CONTRACT, TORT OR OTHERWISE, FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES OR ANY DAMAGES ASSOCIATED WITH ANY LOST PROFITS OR LOST OPPORTUNITIES OF SUCH OTHER PERSON (INCLUDING LOSS OF FUTURE REVENUE, INCOME OR PROFITS, DIMINUTION OF VALUE OR LOSS OF BUSINESS REPUTATION) RELATING TO THE BREACH OR ALLEGED BREACH OF THIS AGREEMENT, WHETHER OR NOT THE POSSIBILITY OF SUCH DAMAGES HAS BEEN DISCLOSED TO THE OTHER PARTY IN ADVANCE OR COULD HAVE BEEN REASONABLY FORESEEN BY SUCH OTHER PARTY.
7.6 Limitation of Liability of Seller. Notwithstanding the foregoing, except for Losses directly or indirectly related to, incurred in connection with or as a result of fraud, intentional misconduct or willful breach, the maximum amount of indemnifiable Losses which may be recovered cumulatively from Seller arising out of or resulting from the indemnity obligations set forth in Section 7.1(a) shall be an amount equal to [***].
7.7 Cooperation. The Parties shall cooperate with each other with respect to resolving any claim or liability with respect to which one Party is obligated to indemnify another Party hereunder, including by making Commercially Reasonably Efforts to mitigate or resolve any such claim or liability.
7.8 Manufacturing. Seller shall reasonably cooperate with Buyer with respect to transitioning manufacturing services to Buyer. In case of a third party manufacturer, the Seller will reasonable support such third party manufacturer with respect to the transitioning manufacturing services. Seller shall not manufacture or have manufactured the Product following the date hereof, including any orders of Product placed prior to the date hereof.
Article
8
TERMINATION
8.1 Right to Terminate for Breach. Prior to the Closing, either Party may terminate this Agreement immediately by written notice to the other Party if the other Party materially breaches any terms and conditions and covenants under this Agreement, including default of payment obligations, or a failure to execute the Trademark Transfer Agreement (in consistent with the form under Exhibit B) and the Domain Name Transfer Agreement (in consistent with the form under Exhibit C) on the Effective Date, which breach remains uncured for thirty (30) Business Days measured from the date written notice of such breach is given to the breaching Party, which notice shall specify the nature of the breach and demand its cure.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
8.2 Post Termination. In the event of termination of this Agreement under Section 8.1, (i) the Transferred Assets (including without limitation, any Confidential Information) shall be returned to the Seller without any demur, delay or protest; and (ii) subject to Section 8.2 (i) and those obligations that shall survive the termination (such as confidentiality obligations), Buyer shall be relieved of any further obligations to Seller pursuant to this Agreement and shall have the right to seek appropriate remedies as may be available to the Buyer under law or equity. Buyer shall perform all required measures at having the return to the Seller the Intellectual Property. In the event that the Buyer fails to return the Transferred Assets to the Seller, the Seller shall have the right to seek appropriate remedies as may be available with the Seller under law or equity.
8.3 Buyer Breach after Closing. In the event that the Buyer materially breaches post-Closing covenants under this Agreement, which breach remains uncured for thirty (30) Business Days measured from the date written notice of such breach is given to the breaching Party, which notice shall specify the nature of the breach and demand its cure, including, without limitation, the Additional Payments under Section 4.1(c), the Buyer shall return the Product NDA (including without limitation, approval of all necessary filing of all relevant documents with the Government Authority in the Territory in order to transfer the Product NDA to the Seller) to the Seller without consideration or refund of any payment that was received by the Seller prior to the return.
Article
9
MISCELLANEOUS
9.1 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) upon delivery by personal delivery, (b) upon delivery by a nationally-recognized overnight courier service, or (c) three days after mailing, if mailed, certified or registered mail (return receipt requested), postage prepaid, each to the other Party at the following address (or at such other address as shall be given in writing by any Party to the other in accordance with these provisions):
If to Buyer, to:
Journey Medical Corporation
9237 Via De Ventura Suite 105
Scottsdale, AZ 85258
[***] (President and CEO)
[***]
With a copy to:
Journey Medical Corporation
9237 Via De Ventura Suite 105
Scottsdale, AZ 85258
[***] (General Counsel)
[***]
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
If to Seller to:
Sun Pharmaceutical Industries, Inc.
[***]
With a copy to:
Sun Pharmaceutical Industries, Inc.
[***]
or to such other Person or address as any party shall specify by notice in writing to the other party. All such notices, requests, demands, waivers and communications shall be deemed to have been given (a) on the date on which so hand delivered and (b) on the third Business Day following the date on which so mailed, except for a notice of change of address, which shall be effective only upon receipt thereof.
9.2 Conflict; Construction of Documents. In the event of any conflict between the provisions of this Agreement and the provisions of any Ancillary Agreements, the provisions of this Agreement shall prevail.
9.3 Assignability; Successors and Assigns. Neither this Agreement nor any of the rights or obligations of the Parties hereunder may be assigned by any Party without the prior written consent of the other Party, provided that a Party may assign its rights and obligations under this Agreement, without the prior written consent of the other party, to an Affiliate or to a successor of the assigning party by reason of merger, sale of all or substantially all of its assets or any similar transaction. Any attempted assignment or delegation in contravention hereof shall be null and void. Subject to the foregoing, this Agreement and all rights and powers granted and obligations created hereby will bind and inure to the benefit of the Parties hereto and their respective successors and assigns.
9.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of law rules of such state and subject to Section 9.5, the courts in the State of New York shall have exclusive jurisdiction.
9.5 Dispute Resolution. In the event of any dispute arising out of or in connection with this Agreement, the dispute shall be settled by arbitration in accordance with American Arbitration Association and its rules which are deemed to be incorporated by reference to this section, for the time being in force. The arbitral tribunal shall consist of a sole arbitrator appointed in accordance with the said rules. The seat of arbitration shall be New York and the language of the arbitration shall be English. The award rendered by the sole arbitrator shall be final and binding and enforceable in any court of competent jurisdiction.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
9.6 Headings. The headings preceding the text of the Sections and subsections hereof are inserted solely for convenience of reference, and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect. All words used in this Agreement will be construed to be of such gender or number as the context may require.
9.7 Amendment and Waiver. The Parties may by mutual written agreement amend this Agreement in any respect, and any Party, as to such Party, may (a) extend the time for the performance of any of the obligations of any other Party, and (b) waive (i) any inaccuracies in warranties by any other Party, (ii) compliance by any other Party with any of the agreements contained herein and performance of any obligations by such other Party, and (iii) the fulfillment of any condition that is precedent to the performance by such Party of any of its obligations under this Agreement. To be effective, any such amendment or waiver must be in writing and be signed by both Parties.
9.8 Entire Agreement. This Agreement, together with the Ancillary Agreements, shall constitute the entire understanding and agreement between the Parties to it in relation to the subject matter of this Agreement and shall together supersede all previous agreements between the Parties in relation to the same subject matter. It is further agreed that neither Party has entered into this Agreement in reliance upon any warranty or undertaking of the other Party which is not expressly set out or referred to in this Agreement.
9.9 Incorporation of Schedules. All Exhibits and Schedules attached hereto and referred to herein are hereby incorporated herein and made a part of this Agreement for all purposes as if fully set forth herein.
9.10 Press Release. Neither Party shall issue any press release, trade announcement or make any other public announcement with regard to the Transactions contemplated by this Agreement without the other Party’s prior written consent, which shall not be unreasonably withheld. This restriction shall not apply to announcements required by any Government Authority. However, in such event the Parties shall, to the extent reasonably practicable, coordinate the wording of any such announcements. To the extent any Party is required to file a copy of this Agreement or any Ancillary Agreement as an exhibit to any filings with, or otherwise publicly disclose the terms hereof or thereof to, the Governmental Authority, the Parties will coordinate in advance on the form of redacted version of this Agreement or applicable Ancillary Agreement or the terms to be so filed or disclosed and permit the other Party to provide comments and take such comments into account in good faith prior to making such filing.
9.11 No Third Party Beneficiary Rights. This Agreement is not intended to and shall not be construed to give any Person or entity other than the Parties signatory hereto any interest or rights (including, without limitation, any Third Party beneficiary rights) with respect to or in connection with any agreement or provision contained herein or contemplated hereby.
9.12 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be reasonably necessary or appropriate in order to carry out the purposes and intent of this Agreement.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
9.13 Severability. Each of the agreements, undertakings, covenants, warranties, indemnities and other obligations of the Parties entered pursuant to this Agreement are considered reasonable by the Parties hereto. If any provision of this Agreement, an Ancillary Agreement, or any part thereof is held void or unenforceable or in conflict with the laws of any relevant jurisdiction, the Parties hereto shall negotiate in good faith to modify this Agreement or Ancillary Agreement, as applicable, so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the Transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
9.14 Relationship. The relationship between the parties is that of independent contractor. Nothing in this Agreement shall be construed as creating a relationship of a joint venture, partners, employer-employee, or agent. Neither party has the authority to create any obligations for the other, or to bind the other to any representation or document.
9.15 Counterparts. This Agreement may be executed in two counterparts, each of which shall for all purposes be deemed to be an original and both of which shall, when taken together, constitute one instrument. Delivery of an executed counterpart of this Agreement by facsimile, email in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document has the same effect as delivery of an executed original of this Agreement.
(Signatures appear on the following page)
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN MARKED WITH “[***].
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement of the Effective Date.
JOURNEY MEDICAL CORPORATION | |
By: | /s/ Claude Maraoui |
Name: Claude Maraoui | |
Title: President and CEO | |
SUN PHARMACEUTICAL INDUSTRIES, INC. | |
By: | /s/ Abhay Gandhi |
Name: Abhay Ganddhi | |
Title: CEO- North America |
Marketing Collateral | Schedule 1.32 1 |
Exhibit 10.14
CERTAIN IDENTIFIED INFORMATION
HAS BEEN EXCLUDED FROM THE EXHIBIT
BECAUSE IT BOTH (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY
HARMFUL IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION HAS BEEN
MARKED WITH “[***].
ASSIGNMENT, LICENSE, AND COLLABORATION AGREEMENT
by and among
DR. REDDY’S LABORATORIES LTD.
and
JOURNEY MEDICAL CORPORATION
entered into as of
June 29, 2021
Table of Contents
Page | ||
ARTICLE 1 DEFINITIONS | 5 | |
ARTICLE 2 LICENSES AND RIGHTS OF REFERENCE | 21 | |
2.1 | Grants prior to Transfer Date | 21 |
2.2 | Grants after Transfer Date | 22 |
2.3 | Covenant not to Sue | 23 |
2.4 | No Implied Licenses | 23 |
ARTICLE 3 GOVERNANCE | 23 | |
3.1 | Joint Development Committee | 23 |
3.2 | Decision Making | 25 |
3.3 | Good Faith | 25 |
3.4 | Scope of Governance | 25 |
3.5 | Alliance Managers | 25 |
ARTICLE 4 DEVELOPMENT | 26 | |
4.1 | Development Diligence and Responsibilities | 26 |
4.2 | Development Costs | 27 |
4.3 | Supply of the Product and Technology Transfer | 30 |
4.4 | Regulatory Matters prior to the Transfer Date | 31 |
4.5 | Development Records | 31 |
ARTICLE 5 ASSET ASSIGNMENT | 32 | |
5.1 | Asset Assignment; Know-How Transfer | 32 |
5.2 | Assigned Assets | 32 |
5.3 | Assumed Liabilities | 32 |
5.4 | Retained Rights | 32 |
ARTICLE 6 DEVELOPMENT AND COMMERCIALIZATION BY JOURNEY | 33 | |
6.1 | Diligence | 33 |
6.2 | Responsibility for Development and Commercialization in the Territory | 33 |
6.3 | Cross-Territorial Restrictions | 33 |
6.4 | Development, Manufacturing and Commercialization Updates | 34 |
6.5 | Regulatory Matters after the Transfer Date | 34 |
ARTICLE 7 COMPENSATION | 36 | |
7.1 | Upfront Payment | 36 |
7.2 | Development Milestone Payments | 36 |
7.3 | Milestone for An Initial Non-Rosacea Indication | 37 |
7.4 | Launch Milestone Payments | 37 |
7.5 | Net Sales Milestone Payments | 38 |
7.6 | Revenue Based Payments | 39 |
7.7 | Protection Against Patent License Stacking | 40 |
7.8 | Acquisition Consideration | 40 |
7.9 | IPO / Uplisting Consideration | 41 |
7.10 | Foreign Exchange | 42 |
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7.11 | Payment Method; Late Payments | 42 |
7.12 | Records | 42 |
7.13 | Audits | 42 |
7.14 | Taxes | 43 |
7.15 | No Joint Venture | 43 |
ARTICLE 8 INTELLECTUAL PROPERTY MATTERS | 43 | |
8.1 | Ownership of Existing Know-How and Patents | 43 |
8.2 | Ownership of Product IP | 43 |
8.3 | Ownership of Journey Improvements | 43 |
8.4 | Inventorship | 44 |
8.5 | Addition of Patents to the Licenses Granted to Journey; Information Inquiry | 44 |
8.6 | Prosecution of Patents | 44 |
8.7 | Review and Disclosure of Patent Filings | 46 |
8.8 | Patent and Know-How Enforcement in the Territory | 47 |
8.9 | Infringement of Third Party Claim | 50 |
8.10 | Invoices | 50 |
8.11 | Trademarks | 50 |
8.12 | Domain Names | 50 |
ARTICLE 9 REPRESENTATIONS AND WARRANTIES; COVENANTS | 50 | |
9.1 | Mutual Representations and Warranties | 50 |
9.2 | Fundamental Representations and Warranties of DRL | 51 |
9.3 | Additional Representations and Warranties of DRL | 52 |
9.4 | Additional Representations and Warranties of Journey | 53 |
9.5 | Additional Specific Covenants | 53 |
9.6 | Non-Competition | 54 |
9.7 | No Parallel Importation | 54 |
9.8 | No Other Representations or Warranties | 55 |
ARTICLE 10 INDEMNIFICATION | 55 | |
10.1 | Survival of Representations, Warranties and Covenants | 55 |
10.2 | Indemnification by DRL | 55 |
10.3 | Indemnification by Journey | 55 |
10.4 | Indemnification Procedures | 55 |
10.5 | Limitation of Liability | 56 |
10.6 | Insurance | 56 |
ARTICLE 11 CONFIDENTIALITY | 56 | |
11.1 | Confidentiality | 56 |
11.2 | Authorized Disclosure | 57 |
11.3 | Technical Publication | 58 |
11.4 | Publicity; Terms of Agreement | 58 |
11.5 | Prior Confidentiality Agreements | 58 |
11.6 | Destruction of Confidential Information | 58 |
11.7 | Unauthorized Use | 58 |
11.8 | Exclusive Property | 58 |
ARTICLE 12 TERM AND TERMINATION | 59 | |
12.1 | Term | 59 |
12.2 | Termination for Bankruptcy | 59 |
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12.3 | Termination for Material Breach | 59 |
12.4 | Termination for Failure to Pay Second Installment | 59 |
12.5 | Termination for Cessation of Development | 59 |
12.6 | Termination for Patent Challenge | 60 |
12.7 | Termination for Failure to Develop the Product in the European Union | 60 |
12.8 | No Other Termination after Transfer Date | 60 |
12.9 | Effect of Expiration or Termination | 60 |
12.10 | Rights in Bankruptcy | 62 |
12.11 | Survival | 62 |
ARTICLE 13 DISPUTE RESOLUTION | 62 | |
13.1 | Referral of Disputes to Parties Executive Officers; Arbitration | 62 |
13.2 | Equitable Relief | 63 |
13.3 | Governing Law | 63 |
13.4 | Waiver of Jury Trial | 63 |
13.5 | Patent and Trademark Disputes | 63 |
ARTICLE 14 MISCELLANEOUS | 63 | |
14.1 | Entire Agreement; Conflict; Amendment | 63 |
14.2 | Licenses and Permits | 63 |
14.3 | Force Majeure | 63 |
14.4 | Notices | 64 |
14.5 | No Strict Construction; Interpretation; Headings | 64 |
14.6 | Assignment | 65 |
14.7 | Performance by Affiliates and/or Sublicensees | 65 |
14.8 | Further Assurances and Actions | 65 |
14.9 | No Third Party Beneficiaries | 65 |
14.10 | Severability | 65 |
14.11 | No Waiver | 65 |
14.12 | Relationship of the Parties | 66 |
14.13 | English Language | 66 |
14.14 | Counterparts | 66 |
14.15 | Expenses | 66 |
14.16 | Acknowledgments and Representations | 66 |
iii
Exhibits
Exhibit A | Assignment Agreements |
Exhibit B | Draft Development Plan |
Exhibit C | FTE Rate Card |
Exhibit D | Product Patents |
Exhibit E | Development Costs Estimate |
Exhibit F | Key Supply Terms |
Exhibit G | Form of Press Release |
Exhibit H | Arbitration |
Exhibit I | FTE Cost Estimates |
iv
ASSIGNMENT, LICENSE, AND COLLABORATION AGREEMENT
This ASSIGNMENT, LICENSE, AND COLLABORATION AGREEMENT (this “Agreement”) is entered into as of June 29, 2021 (the “Effective Date”) by and between DR. REDDY’S LABORATORIES, LTD, a company organized under the laws of India having a registered office at [***] (“DRL”) and JOURNEY MEDICAL CORPORATION, a corporation organized under the laws of Delaware, having a place of business at 9237 East Via De Ventura Blvd., Suite 105, Scottsdale, AZ 85258, USA (“Journey”). DRL and Journey are sometimes referred to individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, DRL Controls (as defined below) the Product IP (as defined below), and has the right to Exploit (as defined below) the Product (as defined below) in all countries and/or other jurisdictions worldwide;
WHEREAS, DRL desires to transfer, convey, sell, and assign, and Journey desires to accept, all right, title, and interest in and to all the Assigned Assets (as defined below) subject to the terms and conditions herein;
WHEREAS, DRL will, subject to the terms and conditions herein, continue to own the Assigned Assets up to the Transfer Date (as defined below), whereupon the Assigned Assets will be transferred to Journey on the Transfer Date;
WHEREAS, to enable Journey to Exploit the Product prior to and after the transfer, conveyance, sale, and assignment of the Assigned Assets, Journey desires to obtain from DRL, and DRL desires to grant to Journey certain licenses to Exploit the Product in the Field (as defined below) in the Territory (as defined below) pursuant to the terms and conditions set forth in this Agreement; and
NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, covenants and conditions contained in this Agreement, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
“Acceptance” means, with respect to an NDA (as defined below), receipt of written notice from the FDA indicating that such NDA has been accepted for filing and further FDA review.
“Accounting Standards” means (a) with respect to Journey, U.S. Generally Accepted Accounting Principles, and (b) with respect to DRL, IFRS, in each case, as then current at the relevant time and as consistently applied by the applicable Party.
“Acquiror” means a Third Party successor to the business of Journey pursuant to an Acquisition Event.
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“Acquisition Event” means (a) the sale of all or substantially all the assets of Journey to which this Agreement relates to a Third Party, (b) the sale of all or substantially all the assets of Journey to a Third Party, (c) a merger (including a reverse triangular merger), consolidation, share exchange, or other similar transaction involving Journey and any Third Party which results in the holders of the outstanding voting securities of Journey, or any Affiliate that controls such party directly or indirectly, immediately before such merger, consolidation, share exchange, or other similar transaction, ceasing to hold more than fifty percent (50%) of the combined voting power of the surviving or continuing entity immediately after such merger, consolidation, share exchange, or other similar transaction, (d) the acquisition by a Third Party, or a group of Third Parties acting in concert, of more than fifty percent (50%) of the outstanding voting equity securities of Journey. For the purpose of this definition of Acquisition Event, (i) the term “group” includes any group acting for the purpose of acquiring, holding, or disposing of securities within the meaning of the relevant laws of the country or jurisdiction of the relevant party (e.g., with respect to the U.S., Section 13(d) and 14(d) of the United States Securities Exchange Act of 1934 and Rule 13d-5(b)(1) under the said Act) and (ii) the foregoing clauses do not include any sale or transfer solely to an Affiliate of the applicable party, or (e) any transfer of the license granted by DRL to Journey pursuant to Section 2.1(a) to a Third Party. For the avoidance of doubt, an Uplisting shall not be considered an Acquisition Event.
“Acquisition Product Value” means (a) with respect to clause (a) of “Acquisition Event”, the consideration actually paid by Acquiror to Journey for such assets, whether structured as a lump-sum payment, earn-out, profit share, or other payment structure, and (b) with respect to all other Acquisition Events, the consideration allocated to the assets related to this Agreement that are actually paid by Acquiror to Journey, whether structured as a lump-sum payment, earn-out, profit share, or other payment structure, (i) as agreed to by the Parties in writing, or (ii) as determined by an independent certified appraiser that has experience in the valuation of assets similar to the assets of Journey included in such Acquisition Event.
“Additional Costs” has the meaning set forth in Section 4.2(a).
“Affiliate” means, with respect to either Party, any Person that directly or indirectly through one (1) or more intermediaries controls, is controlled by or is under common control with such Party, for so long as such control exists; for purposes of this definition, “control” (including, with correlative meaning, the terms “controlled by” or “under common control with”) means (a) the possession, directly or indirectly, of the power to direct the management or policies of a Person, whether through the ownership of voting securities, by contract relating to voting rights or corporate governance, or otherwise; or (b) the ownership, directly or indirectly, of at least fifty percent (50%) or more of the voting securities or other ownership interest of a Person (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity). The Parties acknowledge that in the case of certain entities organized under the laws of certain countries and/or other jurisdictions outside of the United States, the maximum percentage ownership permitted by law for a foreign investor may be less than fifty percent (50%), and that in such case such lower percentage shall be substituted in the preceding sentence, provided that such foreign investor has the power to direct the management or policies of such entity.
“Agreement” has the meaning set forth in the introductory paragraph.
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“Alliance Manager” has the meaning set forth in Section 3.5(a).
“Annual FTE Costs” means the aggregate FTE Costs in any Development Period Year.
“Anti-Corruption Law Violation” means a violation of an Anti-Corruption Law in the Territory relating to the Product.
“Anti-Corruption Laws” means the U.S. Foreign Corrupt Practices Act, as amended, the UK Bribery Act 2010, as amended, and any other applicable anti-corruption laws, and laws for the prevention of fraud, racketeering, money laundering, or terrorism.
“AOP” has the meaning set forth in Section 14.12.
“Applicable Laws” means all applicable laws, statutes, rules, regulations, ordinances, and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city, or other political subdivision, domestic or foreign, anywhere in the world.
“Assigned Assets” has the meaning set forth in Section 5.2.
“Assignment Agreements” mean that certain (a) Bill of Sale and Assignment and Assumption Agreement, and (b) Patent Assignment Agreement, in each case (a) and (b), entered into by the Parties as of the Effective Date, but which will become automatically effective as of 11:59 PM Eastern Time on the Transfer Date, and each of which are attached hereto as Exhibits A1 and A2, respectively.
“Assumed Liabilities” has the meaning set forth in Section 5.3.
“Bankruptcy Code” means, as applicable, the U.S. Bankruptcy Code (in the United States of America), as amended from time to time, and the rules and regulations and guidelines promulgated thereunder, or any applicable bankruptcy laws of any other country, other jurisdiction or competent Governmental Authority, as amended from time to time, and the rules and regulations and guidelines promulgated thereunder.
“Breaching Party” has the meaning set forth in Section 12.3(a).
“Business Day” means any day other than (a) Saturday or Sunday, or (b) any day on which the commercial banks in New York City, United States and/or Mumbai, India are authorized or required to be closed under Applicable Law.
“Calendar Quarter” means each successive period of three (3) calendar months commencing on January 1, April 1, July 1, and October 1, except that the first Calendar Quarter of the Term commences on the Effective Date and ends on the day immediately before the first to occur of January 1, April 1, July 1 or October 1 after the Effective Date, and the last Calendar Quarter ends on the last day of the Term.
“Calendar Year” means each successive period of twelve (12) calendar months commencing on January 1 and ending on December 31, except that the first Calendar Year of the Term commences on the Effective Date and ends on December 31 of the year in which the Effective Date occurs, and the last Calendar Year of the Term commences on January 1 of the year in which the Term ends and ends on the last day of the Term.
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“Claims” has the meaning set forth in Section 10.2.
“Clinical Study” means any study conducted in humans (healthy volunteers or patients) according to a set protocol and meeting the requirements of GCP.
“Commercialization,” “Commercialize” or “Commercializing”, mean, with respect to a given product, all activities undertaken before or after obtaining Regulatory Approvals relating to the launch, promotion, detailing, branding, marketing, advertising, pricing, reimbursement, offering for sale, sale, and/or distribution of such product, including product support, life cycle management, patient support, customer support, the booking of sales, sampling, shipping, handling, warehousing, logistics management, and invoicing activities. “Commercialization” excludes any Development or Manufacture of such product.
“Commercially Reasonable Efforts” means, with respect to a Party and an obligation under this Agreement, such efforts that are consistent with the efforts and resources normally used by a comparable pharmaceutical company in the performance of such an obligation for a similar pharmaceutical product (including the Development, Manufacture, and/or Commercialization of a similar pharmaceutical product, as applicable, at a similar stage in its Development and/or Commercialization as the Product, and that has commercial and market potential similar to the Product) including the exercise of its prudent scientific and business judgment, taking into account any material issues related thereto, including, as applicable, any issues of intellectual property coverage, safety and/or efficacy, legal and/or compliance, stage of development, product profile, competitiveness of the marketplace, proprietary position, regulatory exclusivity (anticipated or approved), labeling, present and future market and commercial potential, the likelihood of receipt of regulatory approval, profitability (including pricing and reimbursement status achieved or likely to be achieved), the existence and developmental stages of alternative products and programs, cost of investment in pre-launch activities for the Product, and legal issues. “Commercially Reasonable” as applied to a Party fulfilling such Party’s obligation under this Agreement will be similarly construed.
“Competing Product” has the meaning set forth in Section 9.6(a).
“Confidential Information” of a Party means any and all Information of such Party or its Affiliates that is disclosed by or on behalf of such Party (or its Affiliates or representatives) to the other Party (or its Affiliates or representatives) under this Agreement, whether in oral, written, graphic, and/or electronic form, and whether prior to, on, and/or after the Effective Date, including the terms of this Agreement, any Information related to the Product developed by or on behalf of the disclosing Party or its Affiliates, and/or the scientific, regulatory or business affairs or other activities of either Party related to the Product. Without limiting the foregoing, the Development Plan, all Product Know-How, Journey Know-How, all Regulatory Materials, and all Revenue Percentage Reports shall be Journey’s Confidential Information and the DRL Background Know-How shall be DRL’s Confidential Information. The terms of this Agreement and shall be the Confidential Information of each Party.
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“Control” or “Controlled” means, with respect to any material, Information, Patent or other intellectual property right, that a Party (a) owns or (b) has a license or other right to such material, Information, or intellectual property right, and, in each case ((a) and (b)), has the ability to grant a Person access, a license, or a sublicense (as applicable) to the foregoing without violating the terms of any then-existing agreement or other arrangement with any Third Party.
“Cover” means, as used in relation to a Patent and a product or other invention, and in connection with a duty, obligation, or performance of a Party, that such Patent would be infringed by the manufacture, use, offer for sale, sale, or import of, or other Exploitation of, such product or invention by such Party, but for this Agreement.
“Default Notice” has the meaning set forth in Section 12.3(a).
“Develop” or “Development” means, with respect to a given product, all activities that are necessary or useful to obtain, support or maintain Regulatory Approval (other than to obtain any pricing or reimbursement approvals) of such product in any particular country or other jurisdiction in the Territory, including any such activities relating to preparing and conducting non-clinical studies and Clinical Studies and regulatory activities (e.g., preparing, filing and obtaining regulatory applications), and formulation development, process development, process qualification and validation, scale up, pre-clinical, non-clinical, clinical and/or commercial manufacture (including manufacture of pre-clinical, non-clinical or Clinical Study material). “Develop” or “Development” excludes the Commercialization and the Manufacture of such product.
“Development Contract” has the meaning set forth in Section 4.2(e).
“Development Costs” means the Journey Development Costs and the DRL Development Costs.
“Development Costs Estimate” has the meaning set forth in Section 4.2(a). “Development Costs Limit” has the meaning set forth in Section 4.2(c)(i).
“Development Period” means the period after Effective Date and before the Transfer Date in which DRL is Developing the Product under the Development Plan. For the avoidance of doubt, the Development Period may be longer or shorter than the three (3) Development Period Years provided for on Exhibit E.
“Development Period Year” means the twelve (12) month period beginning on the Effective Date and each twelve (12) month period thereafter during the Development Period. Unless the Development Period ends before the Transfer Date, the first (1st) Development Period Year will begin on the Effective Date and end on the day immediately prior to the first (1st) anniversary of the Effective Date and the second (2nd) Development Period Year will begin on the first (1st) anniversary of the Effective Date and end on the day immediately prior to the second (2nd) anniversary of the Effective Date. For the avoidance of doubt, the final Development Period Year may be shorter than twelve (12) months.
“Development Plan” means the written plan to be adopted by the JDC at the first JDC meeting, setting forth the activities to be performed by or on behalf of DRL to support the submission of the application seeking Product Regulatory Approval, which shall be finalized and approved by the JDC at the initial meeting of the JDC and include (a) the scope of activities to be performed by or on behalf of DRL, including a sub-microbial analysis, and (b) the budget estimate for such activities.
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“Dispute” has the meaning set forth in Section 13.1.
“Dollars” or “$” means U.S. dollars.
“Draft Development Plan” means the initial draft of the Development Plan attached hereto as Exhibit B.
“DRL” has the meaning set forth in the introductory paragraph.
“DRL Background IP” means the DRL Background Know-How and the DRL Background Patents.
“DRL Background Know-How” means all Information (whether or not such Information is Confidential Information, patentable or not patentable) and any rights therein or related thereto that is Controlled by DRL before or on the Effective Date or at any time during the Term, in each case, that is (a) generally not known, and (b) reasonably necessary or used by DRL to Exploit the Products but excluding any Product Know-How. As used in this definition, Information that is “reasonably necessary” includes Information that is Controlled by DRL and related to the Product that is necessary for Journey to avoid incurring substantial additional cost in Exploiting the Product (as such Product exists as of the Transfer Date) or that results in a substantial reduction to the value of the Assigned Assets (as such Assigned Assets exist as of the Transfer Date).
“DRL Background Patents” means any Patent Controlled by DRL in the Territory, issued or filed any time during the Term, that Covers a Product that Journey is Exploiting in the Territory, and that the Parties agree to add to the scope of the licenses granted to Journey under this Agreement in accordance with the provisions of Section 8.5.
“DRL Development Costs” means any costs and expenses that are incurred by or on behalf of DRL or any of its Affiliates in accordance with Accounting Standards, this Agreement, and the Development Plan, that are reasonably documented and allocable to the performance of activities under the Development Plan during the Development Period or any Wind Down Period, including all (a) costs and expenses related to non-clinical studies and Clinical Studies conducted under and in accordance with the Development Plan, process development, or otherwise pre-approved in writing by the JDC or Journey (to the extent not paid by Journey in accordance with Section 4.2(e)), (b) costs and expenses related to Manufacture of the clinical supply of the Product required under the Development Plan, (c) the FTE Costs, (d) Regulatory Costs incurred in accordance with the Development Plan or pre-approved by the JDC or Journey (to the extent not paid by Journey in accordance with Section 4.2(e)), (e) costs and expenses incurred by or on behalf of DRL under ARTICLE 8 for which Journey is responsible, and (f) other out-of-pocket costs (including travel costs and any consulting costs) under the Development Plan, including during any Wind Down Period.
“DRL Indemnitees” has the meaning set forth in Section 10.3.
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“DRL Territory” means Armenia, Azerbaijan, Belarus, Brazil, Georgia, India, Kazakhstan, Kyrgyzstan, Moldova, People’s Republic of China, Russia, Taiwan, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan.
“DRL Territory Trademarks” means any Trademark to be used by or on behalf of DRL or its Affiliates in the DRL Territory in connection with the Exploitation of the Product, any bioequivalent product, or any other product Covered by one or more Product Patents in the Territory and/or DRL Territory.
“Effective Date” has the meaning set forth in the introductory paragraph.
“Encumbrance” means any lien, security interest, pledge, mortgage, easement, hypothecation, reservation, conditional sale, prior assignment, or other encumbrance, claim, burden, and/or charge of any nature.
“European Union” means, at any particular time, all countries that are then officially recognized as member states of the European Union or members of the European Economic Area. For clarity, any event that first occurs in a county of the European Union that later ceases to be a member of the European Union will still be treated as an event that occurred in the European Union.
“European Union Approval Period” means seventy-two (72) months from the receipt of Product Regulatory Approval plus any period of delay that (a) is reasonably attributable to a Regulatory Authority imposed delay on Regulatory Approval or on Journey’s Development of the Product in the European Union and/or (b) required to conduct any additional Clinical Studies in the European Union beyond the Clinical Studies described in the Development Plan in order to obtain Regulatory Approval in the European Union, in each or both cases ((a) and/or (b)) during which Journey is exercising Commercially Reasonable Efforts to obtain Regulatory Approval of the Product in the European Union.
“Executive Officers” has the meaning set forth in Section 12.3(b).
“Exploit” or “Exploitation” means to make, have made, import, use, sell, or offer for sale, including to research, Develop, Commercialize, register, modify, enhance, improve, Manufacture, have Manufactured, hold or keep (whether for disposal or otherwise), formulate, optimize, have used, export, transport, distribute, promote, market, have sold, and/or otherwise dispose of, and/or otherwise exploit.
“FD&C Act” means the U.S. Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq., as amended from time to time, together with any rules, regulations and requirements promulgated thereunder (including all additions, supplements, extensions, and modifications thereto).
“FDA” means the U.S. Food and Drug Administration or any successor entity.
“Field” means all human and non-human diagnostic, prophylactic, and therapeutic uses.
“Financial Statements” has the meaning set forth in Section 4.2(h).
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“First Commercial Sale” means, with respect to a Product and a country in the Territory, the first sale of such Product by Journey or its Affiliate or Sublicensee for monetary value to a Third Party in such country after Regulatory Approval for such Product has been obtained in such country. For clarity, sales prior to receipt of Regulatory Approval for a Product, if any, such as so-called “treatment IND sales,” “named patient sales,” and “compassionate use sales,” shall not be construed as a First Commercial Sale with respect to such Product.
“First Installment” has the meaning set forth in Section 7.1.
“FTE” means an employee or contractor of DRL or its Affiliates identified in the Development Plan (by name or role) in connection with activities specified in the Development Plan.
“FTE Cost” means, with respect to each applicable FTE and Development Period Year during the Development Period and any Wind Down Period, the FTE Rate multiplied by the FTE Ratio. The “FTE Costs” means the sum of all applicable FTE Costs under the Development Plan.
“FTE Cost Limit” has the meaning set forth in Section 4.2(c).
“FTE Rate” means the rates set forth on Exhibit C attached hereto, increased annually by [***] percent ([***]%) for FTEs working in India and [***] percent ([***]%) otherwise effective on each anniversary of the Effective Date during the Development Period and any Wind Down Period.
“FTE Ratio” means, for each FTE and Development Period Year up to the Transfer Date, the lesser of either one hundred percent (100%) or the ratio obtained by dividing the time the FTE dedicated to activities under the Development divided by two thousand (2000) hours.
“Fundamental Representations and Warranties” has the meaning set forth in Section 9.2.
“Generic Product” means, with respect to the Product, any product that is approved in reliance, in whole or in part, on the prior approval (or on safety or efficacy data submitted in support of the prior approval) of such Product as determined by the applicable Regulatory Authority, including any product authorized for sale (i) in the U.S. pursuant to Section 505(j) of the FD&C Act (21 U.S.C. 355(j) or any similar or successor provision of U.S. law), (ii) in the European Union pursuant to a provision of Articles 10, 10a, or 10b of Parliament and Council Directive 2001/83/EC as amended (including an application under Article 6.1 of Parliament and Council Regulation (EC) No 726/2004 that relies for its content on any such provision), or (iii) in any other country or other jurisdiction pursuant to all equivalents of such provisions, including any amendments and successor statutes with respect to the subsections (i) through (iii) thereto. A product licensed or produced by Journey or any of its Affiliates or Sublicensees, under a Regulatory Approval for the Product (e.g., an authorized generic product) will not constitute a Generic Product.
“Good Clinical Practices” or “GCP” means Good Clinical Practice as promulgated by the FDA under and in accordance with the FD&C Act (Title 21 of the U.S. Code, Section 301 et seq.), Title 21, Parts 312 of the U.S. Code of Federal Regulations, and the guidelines and standards published by the FDA that relate thereto as may be amended from time-to-time, or any successors thereto. To the extent consistent with U.S. law, “GCP” also includes the practices and standards described in the Guidelines on Principles of Good Clinical Practice in Conduct of EU Clinical Trials as promulgated by the European Commission under European Directive 2001/20/EC and/or the ICH Harmonised Tripartite Guideline for Good Clinical Practice (ICH E6), and any analogous practices, standards guidelines, and/or regulations promulgated by any applicable Regulatory Authority in any country or other jurisdiction in the Territory, as each may be amended from time-to-time, or any successors thereto.
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“Good Laboratory Practices” or “GLP” means Good Laboratory Practices as promulgated by the FDA under and in accordance with the FD&C Act (Title 21 of the U.S. Code, Section 342 et seq), Title 21, Part 58 of the U.S. Code of Federal Regulations, and the guidelines and standards published by the FDA that relate thereto as may be amended from time-to-time, or any successors thereto. To the extent consistent with U.S. law, “GLP” also includes the principles of good laboratory practice as set out in Directives 2004/9/EC and/or 2004/10/EC (as supplemented by the OECD Principles of Good Laboratory Practices), all applicable national implementing legislation and guidelines, and/or all applicable equivalent regulatory requirements of a Regulatory Authority in any country or other jurisdiction in the Territory, as each may be amended from time-to-time, or any successors thereto.
“Good Manufacturing Practices” or “GMP” or “cGMP” means the applicable regulatory standards and requirements for current good manufacturing practices promulgated by the FDA under and in accordance with the FD&C Act (Title 21 of the U.S. Code, Section 301 et seq.), Title 21, Parts 210 and 211 of the U.S. Code of Federal Regulations, and the guidelines and standards published by the FDA relating thereto, as may be amended from time-to-time, or any successors thereto. To the extent consistent with U.S. law, “cGMP” also includes the practices and standards described in the Guide to Good Manufacturing Practices for Medicinal Products as promulgated by the European Commission under European Directive 2003/94/EC, similar standards, guidelines, and/or applicable equivalent regulatory requirements of a Regulatory Authority in any country or other jurisdiction in the Territory, as each may be amended from time-to-time, or any successors thereto.
“Government Official” means any Person employed by or acting on behalf of a Governmental Authority, government-controlled entity, or public international organization, including any employee of a government-owned and/or government-controlled corporation or agency and any arbitrator.
“Governmental Authority” means any multi-national, federal, state, local, municipal, provincial, regional, or other governmental authority of any nature (including any governmental division, prefecture, subdivision, department, agency, bureau, branch, office, commission, council, court, or other tribunal).
“Healthcare Laws” means all federal, state, and/or local laws, rules and regulations, including any rules, regulations, guidelines, and/or other requirements of any Governmental Authority, relating to the provision, administration, management or payment for health care or healthcare-related products, services or professionals, including, without limitation, (a) false claims laws (including 31 U.S.C. §§ 3729-3733, commonly referred to as the “Federal False Claims Act”); (b) false representations laws; (c) insurance fraud laws; (d) anti-kickback and all other provisions of the Medicare/Medicaid fraud and abuse laws (42 U.S.C. § 1320a-7 et seq.) and the regulations promulgated thereunder; (e) the physician self-referral provisions of the Stark Law (42 U.S.C. § 1395nn) and the regulations promulgated thereunder; (f) HIPAA; (g) state anti-kickback, physician self-referral, and privacy laws; (h) licensing, certificate of need, and certification requirements and related regulations; (i) corporate practice of medicine laws; (j) fee splitting laws, (k) laws governing the use, handling, control, storage, transportation, and maintenance of controlled substances, pharmaceuticals or drugs; (l) laws governing the operation of a laboratory and the use, handling, control, storage, transportation, and maintenance of laboratory specimens; and (m) any and all other laws administered or otherwise enforced by the U.S. Department of Health and Human Services, Office of Inspector General and/or other governing body.
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“HIPAA” means, collectively, (a) the Health Insurance Portability and Accountability Act of 1996, (b) the privacy standards adopted by the U.S. Department of Health and Human Services as they may be amended from time to time, (c) 45 C.F.R. parts 160 and 164, subparts A and E, (d) the security standards adopted by the U.S. Department of Health and Human Services as they may be amended from time to time, (e) 45 C.F.R. parts 160, 162, and 164, subpart C, and (f) the privacy provisions (Subtitle D) of the Health Information Technology for Economic and Clinical Health Act.
“ICH” means the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use.
“IFRS” means the International Financial Reporting Standards, the set of accounting standards and interpretations and the framework in force on the Effective Date and adopted by the European Union as issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC), as such accounting standards may be amended from time to time.
“IND” means Investigational New Drug Application Number 144994 submitted by DRL to FDA.
“Indemnified Party” has the meaning set forth in Section 10.4.
“Indemnifying Party” has the meaning set forth in Section 10.4.
“Indication” means a disorder or medical condition for which the Product is approved by a Regulatory Authority to diagnose, treat, prevent, cure, and/or mitigate in the indication section of the Product Labeling for the Product.
“Information” means any technical, scientific, and/or other data, in written, electronic, and/or other form, including results, approvals, technology, trade secrets, practices, techniques, methods, processes, inventions, ideas, drawings, study designs, protocols, assays, methods, developments, specifications, formulations, formulae, materials, compositions of matter of any type or kind (whether or not patentable), software, algorithms, marketing reports, expertise, technology, test data (including biological, chemical, pharmacological, toxicological, pharmaceutical, physical, analytical test data and data resulting from nonclinical and Clinical Studies), manufacturing data, quality control data, and safety data.
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“Infringement” has the meaning set forth in Section 8.8(a).
“Intellectual Property” has the meaning set forth in Section 12.10(a).
“JDC” has the meaning set forth in Section 3.1(a).
“Journey” has the meaning set forth in the introductory paragraph.
“Journey Development Costs” means any costs and expenses that are incurred by or on behalf of Journey or any of its Affiliates in accordance with Accounting Standards, this Agreement, and/or the Development Plan, other than DRL Development Costs.
“Journey Improvements” has the meaning set forth in Section 8.3.
“Journey Indemnitees” has the meaning set forth in Section 10.1.
“Journey Know-How” has the meaning set forth in Section 8.3.
“Journey Patents” has the meaning set forth in Section 8.3.
“Knowledge” means, the actual knowledge, after due inquiry, of G V S Sesha Kumar, Srinivas Sidgiddi, and D Mallikarjuna Rao.
“Losses” has the meaning set forth in Section 10.2.
“Manufacture” and “Manufacturing” means, with respect to a given product, all activities related to the production, manufacture, formulation, processing, filling, finishing, packaging, labeling, validation, handling and holding of any such product, or any intermediate thereof, including manufacture of Clinical Study material and related quality assurance and quality control testing. “Manufacture” excludes any Development or Commercialization of such product.
“Milestone Payments” means the milestone payments described the tables set forth in Sections 7.2, 7.3, 7.4, and 7.5, as applicable.
“NDA” means a New Drug Application (as defined in the FD&C Act) or any successor application or procedure filed with the FDA for the Product submitted to and/or approved by FDA.
“Net Sales” means, with respect to a product (including an authorized generic version of such product), the aggregate gross amount invoiced by Journey or its Affiliates, Sublicensees, or its Acquiror for the sales or other commercial distribution of Products, including to Third Party wholesalers and Third Party distributors, to each Third Party receiving Products in arm’s length transactions, less the following deductions from such total amounts that are actually incurred, allowed, accrued, and/or specifically allocated:
(a) | trade, quantity, and/or cash discounts in amounts reasonable or customary in the trade and to extent accrued or actually taken; |
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(b) | credits, refunds, allowances, volumes rebates, charge backs, direct and indirect rebates, distribution fees, reimbursements, or similar payments granted or given to wholesalers and/or other distributors, group purchasing organizations, hospital buying groups, managed care organizations, and/or pharmacy benefit management companies, or similar entities, or that are otherwise incurred in connection with any mandated rebate or discount programs imposed by any Governmental Authority, but only to the extent not previously deducted from gross sales; |
(c) | sales and/or excise taxes, customs duties, and/or any other governmental charges imposed upon the sale of such Product, to the extent they are included in the gross sales; |
(d) | allowances or credits given to customers on account of rejection, outdating, recalls, damaged goods, billing corrections, and/or sales returns of the Product; |
(e) | patient co-pay assistance benefits, rebates, and/or coupon or voucher redemptions specifically provided with respect to the Product; |
(f) | invoiced freight, postage, shipping, insurance, handling, and other transportation costs, to the extent they are included in the gross sales; rebates paid; and/or other price reductions provided in connection with sale of the Product to any Governmental Authority or regulatory authority in respect of any state or federal Medicare, Medicaid, or similar programs available under or required by Applicable Law; and any other customary adjustments related to products sold and reasonably allocated to the Product as a portion of the total products sold, in accordance with U.S. Generally Accepted Accounting Principles. |
(g) | The foregoing deductions from the gross amount invoiced shall be deducted only once and only to the extent not otherwise deducted from the gross amount invoiced. Net Sales with respect to sales of the Product and that are not made on an arm’s length basis or that are made for consideration other than cash shall be calculated based on the average per-unit Net Sales of the Product and without regard to such non-arm’s length or non-cash sales. “Net Sales” cannot be negative. All deductions provided above shall be based on accrual or actual basis without any retroactive adjustments relating to any previous years. |
(h) | Notwithstanding the foregoing, Net Sales shall not include amounts resulting from the sale or transfer of Product and (i) among Journey, its Affiliates or its or their permitted Sublicensees for subsequent re-sale, and/or (ii) provided at or below cost as samples or for charitable purposes. |
“New York Courts” has the meaning set forth in Section 13.1.
“Non-Breaching Party” has the meaning set forth in Section 12.3(a).
“Non-Enforcing Party” has the meaning set forth in Section 8.8(b)(iv).
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“Obligation” means any debt, liability, and/or obligation of any nature, whether secured, unsecured, recourse, nonrecourse, liquidated, unliquidated, accrued, absolute, fixed, contingent, ascertained, unascertained, known, unknown, and/or otherwise.
“Other Committees” has the meaning set forth in Section 3.1(b)(v).
“Party” and “Parties” has the meaning set forth in the introductory paragraph.
“Party Representatives” has the meaning set forth in Section 9.5(d)(iii).
“Patent Challenge” means a filing of a claim in a patent office or court of competent jurisdiction by Journey or an Affiliate or Sublicensee thereof, which includes in any way the assertion that any claim of any Product Patent and /or DRL Background Patent is invalid, unpatentable, or unenforceable, other than (i) statements made by or on behalf of Journey, any Affiliate thereof, or any Sublicensee in response to communications from patent offices in connection with the prosecution of patents or patent applications differentiating Journey’s, its Affiliates’, or any Sublicensees’ patents or patent applications from the applicable Product Patents or DRL Background Patent and not contesting the validity, enforceability, or patentability of any claim of a Product Patent or DRL Background Patent; (ii) statements made by Journey, any Affiliate thereof, or any Sublicensee in legal proceedings in defense of Journey’s, its Affiliates’, or any Sublicensees’ patents or patent applications, but only if an opposing party uses Product Patents or DRL Background Patent to challenge the validity, patentability, or enforceability of the defended patents or patent applications of Journey, any Affiliate thereof, or any Sublicensee, and provided that such statements are solely for the purpose of differentiating Journey’s, its Affiliates’, or Sublicensees’ patents or patent applications from the referenced Patents and not contesting the validity, enforceability, or patentability of the Patents; (iii) any defenses, counterclaims, and/or countersuits brought by Journey, an Affiliate of Journey, or a Sublicensee in response to a legal proceeding filed by or on behalf of DRL or any affiliate, licensee, sublicensee, or transferee thereof with respect to any Product Patent and/or DRL Background Patent and a product, method, or service, other than the Product; and (iv) as otherwise approved in writing by DRL, such approval not to be unreasonably delayed, conditioned, and/or withheld.
“Patents” means any and all (a) patent applications and issued patents, including, all national, regional, and international patent applications of any type including provisional applications; continuations; divisionals; continuations-in-part; continued prosecution applications; (b) patents that have issued or in the future issue from any patent applications, including utility models, petty patents and design patents and certificates of invention; (c) reissues, renewals, substitutions, additions, reexaminations, corrections, revivals and/or any similar modifications of any such patents; and (d) extensions (including pediatric exclusivity, patent term extension, and supplementary patent certificate extensions), and/or restorations of patents.
“PDF” has the meaning set forth in Section 14.14.
“Person” means an individual, a corporation, a partnership, an association, a trust, or other entity or organization, including a Governmental Authority or an agency thereof.
“Pharmacovigilance Agreement” has the meaning set forth in Section 6.5(g).
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“Phase 3 Clinical Study” means a Clinical Study of the Product that the FDA would accept as classified as a phase 3 study (including in accordance with 21 C.F.R. 312.21(c)).
“Prior CDA” has the meaning set forth in Section 11.5.
“Product” means a pharmaceutical product containing 10-40 mg of minocycline or a minocycline salt in a modified release oral solid dosage form formulation that is Covered by a Valid Claim of a Product Patent, a Journey Patent, and/or a DRL Background Patent.
“Product IP” means (a) all intellectual property rights in the Product Know-How in the Territory and (b) the Product Patents.
“Product Know-How” means all Information (whether or not such Information is Confidential Information, patentable or not patentable) Controlled by DRL before or on the Effective Date or at any time during the Term, in each case, that is (i) generally not known, (ii) solely and exclusively related to the Product, and (iii) reasonably necessary to Exploit the Product in the Territory. As used in this definition, Information that is “reasonably necessary” includes Information that is Controlled by DRL and solely and exclusively related to the Product that is necessary for Journey to avoid incurring substantial additional cost in Exploiting the Product (as such Product is contemplated in the Draft Development Plan) or that results in a substantial reduction to the value of the Assigned Assets (as such Assigned Assets exists as of the Transfer Date).
“Product Labeling” means, with respect to the Product: (a) the Regulatory Authority-approved full prescribing information for such Product for a country or other jurisdiction, including any required patient information; and (b) all labels and other written, printed, or graphic matter upon a container, wrapper, and/or any package insert utilized with or for such Product in such country or other jurisdiction.
“Product Patents” means (a) the Patents set forth on Exhibit D hereto; (b) any continuations, divisionals, or other patent applications that claim priority to any of the Patents in Exhibit D; (c) any patents issuing on any such patent applications (referenced in (a) or (b)); (d) any substitutions, reexaminations, registrations, corrections, additions, confirmation patents, revivals, and/or any similar modifications of any such patents (referenced in (c)); (e) any extensions (including pediatric exclusivity, patent term extension, and supplementary patent certificate extensions), and/or restorations of such patents (referenced in (c) or (d)), and (f) subject to the terms and conditions of this Agreement all rights in any such patent applications or patents (in (a)-(e)).
“Product Regulatory Approval” means the Regulatory Approval to Commercialize the Product in the United States.
“Product Regulatory Materials” means all Regulatory Materials developed by DRL or any of its Affiliates, solely, or jointly with Journey, in the execution of the Development Plan, and any Regulatory Materials developed by DRL and submitted to FDA in connection with Regulatory Authority approval for Products (which, for the avoidance of doubt, includes the 20 mg and 40 mg products described in the IND), including all Regulatory Materials that reference the IND and that were developed prior to the Transfer Date.
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“Product Trademarks” means the Trademark(s) to be used by or on behalf of Journey, its Affiliates, and/or Sublicensees in the Territory in connection with the Exploitation of the Products and any registrations thereof or any pending applications relating thereto in the Territory.
“Publication” has the meaning set forth in Section 11.3.
“Quality Agreement” has the meaning set forth in Section 4.3(a).
“Quarterly Development Cost Estimate” has the meaning set forth in Section 4.2(b).
“Recipients” has the meaning set forth in Section 11.1.
“Regulatory Approval” means, with respect to a particular country or other jurisdiction and product, a marketing authorization granted by the applicable Regulatory Authority in such country or other jurisdiction for such product, including, where applicable, (a) pricing or reimbursement approval in such country or other jurisdiction, (b) pre- and post-approval marketing authorizations (including any prerequisite Manufacturing approval or authorization related thereto) and (c) approval of Product Labeling. For clarity, in the United States, approval of the NDA constitutes Regulatory Approval in the United States.
“Regulatory Approval Application” means an application to the applicable Regulatory Authority for approval to Commercialize the Product in the Field in a particular country or other jurisdiction.
“Regulatory Authority” means, with respect to a particular country or other jurisdiction, any applicable Governmental Authority responsible for granting Regulatory Approvals of pharmaceutical products in such country or other jurisdiction.
“Regulatory Costs” means any and all out-of-pocket costs incurred by or on behalf of either Party after the Effective Date associated with preparing and filing any and all Regulatory Materials and communicating with any Regulatory Authorities, in each case, for purposes of obtaining, supporting, and/or maintaining Regulatory Approval for the Product in the Territory.
“Regulatory Materials” means Regulatory Approval Applications, investigational new drug applications (including the IND), clinical trial applications, submissions, notifications, communications, correspondence, registrations, Regulatory Approvals, or other filings made to, received from, or otherwise conducted with a Regulatory Authority to Exploit the Product in a particular country or other jurisdiction and all associated data and reports.
“Revenue Based Payments” has the meaning set forth in Section 7.6(a).
Revenue Generating Patents” means with respect to the Products and each country in the Territory, a Product Patent, Journey Patent, or DRL Background Patent includes a Valid Claim that Covers the composition of matter, method of use, method of formulation, and/or a method of administration of Products in such country.
“Revenue Percentage Rate” has the meaning set forth in Section 7.6(a).
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“Revenue Percentage Report” has the meaning set forth in Section 7.6(b).
“Revenue Percentage Term” means, with respect to each country in the Territory, the period commencing on the First Commercial Sale of a Product in such country or other jurisdiction and ending upon the expiration or invalidation date of the last Revenue Generating Patent in such country.
“Second Installment” has the meaning set forth in Section 7.1.
“Sublicensee” means any Person to which (a) a sublicense is granted by Journey with respect to a license granted by DRL to Journey under this Agreement, or (b) a license is granted by Journey with respect to an Assigned Asset. For clarity, distributors, wholesalers, and/or resellers of the Product shall not be considered Sublicensees.
“Successful” means a completed Phase 3 Clinical Study that achieves all applicable primary endpoints with statistical significance (as defined in the applicable Phase 3 Clinical Study protocol).
“Supply Agreement” has the meaning set forth in Section 4.3(a).
“Tax Treaty” means the Convention between the Government of the United States of America and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, together with a related Protocol, signed at New Delhi on September 12, 1989, as amended, modified, and/or supplemented from time to time (including, without limitation, and future protocols thereto), or any substitutions thereof.
“Term” has the meaning set forth in Section 12.1.
“Territory” means, collectively, all the countries and jurisdictions in the world other than the DRL Territory.
“Third Party” means any individual, corporation, partnership, limited liability company, trust, unincorporated association, Governmental Authority or other entity or body other than DRL or Journey or an Affiliate of either of them.
“Third Party Infringement Claim” has the meaning set forth in Section 8.9(a).
“Third Party Supplier” means any Third Party that Journey contracts with or otherwise appoints to Manufacture and supply the Product to Journey, its Affiliates, and/or its Sublicensees.
“Trademark” means any word, name, symbol, color, designation or device or any combination thereof that functions as a source identifier, including any trademark, trade dress, brand mark, service mark, trade name, brand name, logo, business symbol, and/or internet domain names, whether or not registered.
“Transfer Date” means the later of (a) date on which DRL has received all Milestone Payments in full owed by Journey pursuant to Section 7.1 and Section 7.2, and (b) the date on which DRL has been reimbursed in full for all DRL Development Costs that are not disputed in good faith by Journey.
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“United States” or “U.S.” means the United States of America, including all possessions and territories thereof.
“Upfront Payment” has the meaning set forth in Section 7.1.
“Uplisting” has the meaning set forth in Section 7.9(a).
“Valid Claim” means a claim of (a) any issued and unexpired patent whose validity, enforceability, or patentability has not been affected by any of the following: (i) revocation; or (ii) a holding, finding, or decision of invalidity, unenforceability, or non-patentability or (b) a pending patent application that is filed and prosecuted in good faith and no more than three (3) years have elapsed from its earliest priority date.
“Wind Down Period” means, in the event of a termination of this Agreement prior to the Transfer Date, the period of “winding down” during which DRL continues to conduct one or more Clinical Studies with respect to the Product pursuant to Section 12.9(d)(iii) or as required pursuant to DRL’s then-current policies or Applicable Law.
ARTICLE 2
LICENSES AND RIGHTS OF REFERENCE
2.1 Grants prior to Transfer Date.
(a) DRL License Grant to Journey. Subject to the terms and conditions of this Agreement, DRL hereby grants to Journey (i) a sublicensable, transferrable (subject to Section 14.6), exclusive (except as to DRL with regard to its performance of its obligations under the Development Plan) license under the Product IP, and (ii) a sublicensable, transferrable (subject to Section 14.6), non-exclusive license under the DRL Background IP, in each case ((i) and (ii)), for Journey to Exploit the Product in the Field in the Territory until the Transfer Date. Journey and its Affiliates shall have the right to sublicense the rights and obligations granted to it under this Section 2.1(a) to any Third Party (across multiple levels/tiers); provided that, in each such case, Journey shall be responsible for any such Third Party as if Journey were exercising such sublicensed rights itself under this Agreement.
(b) Journey License Grant to DRL. Subject to the terms and conditions of this Agreement, Journey hereby grants to DRL and its Affiliates (i) a royalty-free, non-transferable (subject to Section 14.6), sublicensable, non-exclusive license under the Journey Improvements solely for DRL to Develop the Products in accordance with the Development Plan, and (ii) a royalty-free, transferable, sublicensable, exclusive license under the Journey Improvements and Product Know-How for DRL to Exploit the Products in the Field in the DRL Territory until the Transfer Date. DRL and its Affiliates shall have the right to sublicense the rights and obligations granted to it under this Section 2.1(b) to any Third Party; provided that, in each such case, DRL shall be responsible for any such Third Party as if DRL were exercising such sublicensed rights itself under this Agreement.
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2.2 Grants after Transfer Date. On the Transfer Date, the following license grants will automatically become effective and be in full force:
(a) DRL License Grant to Journey. Subject to the terms and conditions of this Agreement, DRL hereby grants to Journey and its Affiliates a sublicensable, transferrable (subject to Section 14.6), and exclusive license under the DRL Background IP for Journey and its Affiliates and their respective Sublicensees to Exploit the Products in the Field in the Territory on and after the Transfer Date; provided that Journey may Manufacture, or have Manufactured, Develop, and/or have Developed, the Product anywhere in the world. Journey and its Affiliates shall have the right to sublicense the rights and obligations granted to it under this Section 2.2(a) to any Third Party and Journey will have the right to permit such Sublicensees to grant further sublicenses to their Sublicensees (through multiple levels); provided that, in each such case, Journey shall be responsible for any such Third Party as if Journey were exercising such sublicensed rights itself under this Agreement.
(b) Journey License Grant to DRL. Subject to the terms and conditions of this Agreement, Journey hereby grants to DRL and its Affiliates a royalty-free, sublicensable, transferable (subject to Section 14.6), irrevocable, and exclusive license under (i) the Journey Improvements and Product Know-How, and (ii) to the extent Journey or its Affiliates at any time after the Transfer Date Controls a Patent that Covers the Product in the DRL Territory, under any such Patents, to, in each case (i) and (ii), Exploit the Product in the Field in the DRL Territory on and after the Transfer Date; provided that DRL may Manufacture, or have Manufactured, Develop, and/or have Developed, the Product anywhere in the world. DRL and its Affiliates shall have the right to sublicense the rights and obligations granted to it under this Section 2.2(b) to any Third Party and DRL will have the right to permit such Sublicensees to grant further sublicenses to their Sublicensees (through multiple levels); provided that, in each such case, DRL shall be responsible for any such Third Party as if DRL were exercising such sublicensed rights itself under this Agreement.
(c) DRL Grant of Right of Reference to Journey. Subject to the terms and conditions of this Agreement, DRL hereby grants to Journey and its Affiliates a sublicensable, transferrable (subject to Section 14.6), exclusive (even as to DRL and its Affiliates), and irrevocable license and right of reference under all Regulatory Approvals and any other Regulatory Materials that DRL or its Affiliates Control with respect to the Product to enable Journey to Exploit the Product in the Field in the Territory on and after the Transfer Date. Journey and its Affiliates shall have the right to sublicense the rights and obligations granted to it under this Section 2.2(c) to any Third Party and to permit such Sublicensees to grant further sublicenses to their Sublicensees (through multiple levels); provided that, in each such case, Journey shall be responsible for any such Third Party as if Journey were exercising such sublicensed rights itself under this Agreement.
(d) Journey Grant of Right of Reference to DRL. Subject to the terms and conditions of this Agreement, Journey hereby grants to DRL and its Affiliates an irrevocable, royalty-free, sublicensable, transferrable (subject to Section 14.6), exclusive license and right of reference under all Regulatory Approvals and any other Regulatory Materials that Journey or its Affiliates Control with respect to the Product (including the Product Regulatory Approval) to enable DRL to Exploit the Products in the Field in the DRL Territory. DRL and its Affiliates shall have the right to sublicense the rights and obligations granted to it under this Section 2.2(d) to any Third Party and to permit such Sublicensees to grant further sublicenses to their Sublicensees (through multiple levels); provided that, in each such case, DRL shall be responsible for any such Third Party as if DRL were exercising such sublicensed rights itself under this Agreement.
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2.3 Covenant not to Sue. DRL on behalf of itself, its Affiliates, and their successors and assigns, hereby covenants not to initiate any judicial or administrative proceeding in the Territory against Journey, its Affiliates, Sublicensees, or any customer of any thereof, or the successors or assigns of any thereof, based on infringement of any Patent or any other intellectual property rights that are (a) Controlled by DRL at any time during the Term, and (b) are either (i) licensed to Journey pursuant to Section 2.1(a) and Section 2.2(a) and such Patent is being Exploited by Journey within the scope of such licenses, or (ii) not identified to Journey as a potential DRL Background Patent or potential Product Patent pursuant to Section 8.5.
2.4 No Implied Licenses. Except as explicitly set forth in this Agreement, neither Party will be deemed to have granted the other Party any license or other right to any intellectual property of such Party, whether by estoppel, implication, or otherwise.
ARTICLE 3
GOVERNANCE
3.1 Joint Development Committee.
(a) Formation and Responsibilities. Within thirty (30) days after the Effective Date, the Parties shall establish a joint development committee (the “JDC”) for the overall coordination and oversight of the Development of the Product until the Transfer Date. The JDC shall have review, discussion or comment responsibilities for certain matters as specified in Section 3.1(b). The JDC has only the powers expressly assigned to it in Section 3.1(b) and elsewhere in this Agreement. Notwithstanding anything to the contrary set forth in this Agreement, the JDC has no power to interpret, amend, modify, or waive compliance with this Agreement.
(b) Specific Responsibilities. The responsibilities of the JDC include the following matters:
(i) to review, discuss, finalize and approve the Development Plan at the initial meeting of the JDC;
(ii) to review, discuss and determine the allocation and status of activities undertaken by or on behalf of DRL as part of the Development Plan, including a review, discussion and determination of the estimated FTE Costs that may be incurred by DRL and the actual FTE Costs incurred by DRL, in the progress of Development under the Development Plan;
(iii) to review, discuss, and approve any amendments to the Development Plan, including any increases or decreases to the Development Costs Estimate in accordance with Sections 4.2(b) and 4.2(c);
(iv) to review, discuss, approve, and implement any amendment to the Development Plan to include a third (3rd) Phase 3 Clinical Study if such a third (3rd)Phase 3 Clinical Study is reasonably requested by Journey upon the completion of two (2) initial Phase 3 Clinical Studies where Journey reasonably determines one (1) of such Phase 3 Clinical Studies is not Successful;
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(v) to appoint any other operating committees (collectively, the “Other Committees”) from time to time during the Development Period as it deems fit, which will consist of equal numbers of officers or employees of each Party having sufficient seniority within the applicable Party to carry out the responsibilities of the applicable Other Committee;
(vi) to direct and oversee any Other Committees on all significant issues that fall within the purview of such committees; and
(vii) to perform such other functions as appropriate to further the purposes of this Agreement to the extent expressly set forth in this Agreement or determined by the Parties in writing.
(c) Members. Journey will appoint [***] ([***]) representatives to the JDC and DRL will appoint [***] ([***]) representatives to the JDC, each of whom will be an officer, employee, or other designee of such Party having sufficient relevant experience in Development-related matters and seniority and/or authority within or from the applicable Party to carry out the JDC’s responsibilities. Either Party may designate an individual other than an officer or employee of such Party as a representative of the JDC so long as such Party shall cause such designee to agree in writing to be bound by obligations of confidentiality and non-use no less restrictive than ARTICLE 11, and a Party shall be liable for any breach of any obligations herein by its designee. The JDC may change its size from time to time by agreement in writing of the Parties, and each Party may replace its representatives at any time upon written notice to the other Party. If a JDC representative from either Party is unable to attend or participate in a meeting of the JDC, then the Party who designated such representative may designate an appropriately qualified substitute representative for the meeting. DRL and Journey shall jointly appoint a representative either from Journey or DRL on the JDC to serve as the chairperson of the JDC. The role of the chairperson is to convene and preside at all meetings of the JDC and to ensure the preparation of meeting minutes, but the chairperson will have no additional powers or rights beyond those held by other JDC representatives.
(d) Meetings. After the Effective Date and prior to the Transfer Date, the JDC shall meet at least [***] ([***]) times per Calendar Year unless the Parties mutually agree in writing to a different frequency for such meetings and at such other times specified in this Agreement. The JDC will hold its initial meeting within thirty (30) days of the Effective Date, at which time the JDC will finalize and approve the Draft Development Plan. Either Party may also call a special meeting of the JDC (by videoconference or teleconference) upon at least fifteen (15) Business Days’ prior written notice to the other Party in accordance with Sections 4.2(b) and 4.2(c) and/or if such Party reasonably believes that a significant matter must be addressed before the next regularly scheduled meeting, and such Party shall provide the JDC materials reasonably adequate to enable an informed discussion by its members no later than ten (10) Business Days before the special meeting. The JDC may meet in person, by videoconference or by teleconference. Each Party shall pay for its own expenses relating to such meetings. As appropriate, other employee representatives of the Parties or their respective Affiliates may attend JDC meetings as non-voting observers or presenters. The chairperson of the JDC shall prepare reasonably detailed written minutes of all JDC meetings that reflect and include all material decisions made at such meetings. The JDC chairperson shall send draft meeting minutes to each member of the JDC for review and approval within twenty (20) Business Days after each JDC meeting.
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3.2 Decision Making.
(a) Decisions. The JDC shall take action in good faith by consensus of the representatives present at a meeting at which a quorum exists, with each Party having a single vote irrespective of the number of representatives of such Party in attendance, or by a written resolution signed by at least one (1) representative appointed by each Party. If the JDC cannot, or does not, reach consensus on an issue for which it is responsible, then such issue may be resolved in accordance with ARTICLE 13 at the request of either Party; provided, however, that following DRL’s receipt of the Second Installment from Journey, Journey shall have final decision-making authority over Development-related issues. The foregoing notwithstanding, in no event, shall Journey have final decision-making authority on matters relating to reimbursement of DRL Development Costs, FTE Rates, or FTE Costs.
(b) General. Nothing in this Agreement will be construed to limit a Party’s (i) compliance with Applicable Laws or reporting requirements to Regulatory Authorities or (ii) sole discretion with respect to pricing decisions with respect to any Product in the Field in its respective territory. Notwithstanding anything to the contrary set forth in this Agreement, neither Party nor any of their respective Affiliates will be required by the JDC or any Other Committee to take any action that is not in compliance with such Party’s ethical business practices and policies or that such Party reasonably believes is not in compliance with Applicable Laws.
3.3 Good Faith. In conducting themselves on the JDC or any Other Committees, all representatives of each Party shall consider reasonably and in good faith all input received from the other Party in carrying out its responsibilities set forth under Section 3.1(b) with the primary aim of the JDC and all actions of the Parties related to the Development Plan being to obtain Regulatory Approval for the Product, reasonably taking into account Journey’s expectation to Exploit the Product outside the United States in the Territory, consistent with (i) the Parties’ diligence obligations under Sections 4.1(a)(i) and 6.1, (ii) upholding patient safety, (iii) complying with Applicable Law, and (iv) each Party complying with its own applicable code of business ethics or similar ethical policies.
3.4 Scope of Governance. Without limiting the Parties’ obligations under ARTICLE 11, the Parties agree not to share or discuss at the JDC any strategic or commercially sensitive information beyond the scope contemplated by this Agreement.
3.5 Alliance Managers.
(a) Each of the Parties shall appoint a single employee to act as that Party’s “Alliance Manager.” The role of the Alliance Manager is to act as a point of contact between the Parties to assure a successful collaboration. The Alliance Managers may attend all JDC meetings and support the chairperson of the JDC in the discharge of their responsibilities. Alliance Managers shall be non-voting participants in such JDC meetings, unless they are also appointed members of the JDC; provided, however, that an Alliance Manager may bring any matter to the attention of the JDC if such Alliance Manager reasonably believes that such matter warrants such attention.
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(b) Each Party may change its designated Alliance Manager from time to time upon email notification to the other Party’s current Alliance Manager. Any Alliance Manager may designate a substitute to temporarily perform the functions of that Alliance Manager by written email notification to the other Party’s current Alliance Manager.
(c) Each Alliance Manager will also: (i) coordinate cooperative efforts and communications between the Parties; and (ii) take responsibility for ensuring that governance activities, such as the conduct of required JDC meetings and production of meeting minutes, occur as set forth in this Agreement, and that relevant action items resulting from such meetings are appropriately carried out or otherwise addressed.
ARTICLE 4
DEVELOPMENT
4.1 Development Diligence and Responsibilities.
(a) Development Diligence.
(i) DRL shall, either directly or by or with an Affiliate or a sublicensee, use Commercially Reasonable Efforts to Develop the Product in the Field and to obtain a Product Regulatory Approval for the Product in accordance with the Development Plan.
(ii) If DRL determines that further Development or submission or handling of the Product Regulatory Approval for the Product is not Commercially Reasonable, DRL will notify Journey in writing of such a determination and promptly provide Journey with the ability to assume responsibility for and control of such further Development or Regulatory Approval Application at Journey’s cost (subject to Section 4.1(a)(iv), including DRL promptly appointing Journey or its designee as DRL’s regulatory agent solely with respect to the IND and the initial NDA).
(iii) If unreasonable delay in Development of the Product during the Development Period occurs and such delay is substantially due to protracted inaction by DRL and not caused, directly or indirectly, by Journey, its Affiliates, its Sublicensees or any Third Party over which DRL has no control, Journey will have the right to assume the Development of the Product (subject to Section 4.1(a)(iv), including DRL promptly appointing Journey or its designee as DRL’s regulatory agent solely with respect to the IND and the initial NDA) upon either DRL written consent or resolution of any dispute concerning such delay or handling under ARTICLE 13.
(iv) In the event that Journey assumes Development of the Product prior to the Transfer Date in accordance with Section 4.1(a)(ii) or 4.1(a)(iii), (1) the obligations of DRL set forth in Sections 4.1(a)(i), 4.1(b), 4.4, and 4.5 shall become obligations of Journey, (2) DRL will appoint Journey or its designee as its “regulatory agent” for purposes of interacting with Regulatory Authorities solely with respect to the IND and the initial NDA; provided that (A) Journey will provide DRL with complete copies of any and all proposed drafts of all Regulatory Materials prior to submission to any Regulatory Authority, providing at least five (5) Business Days for DRL to review and comment thereon and (B) Journey will consider any comments provided by DRL within such five (5) Business Day period concerning such proposed submissions in good faith.
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(v) For clarity, at all times prior to the Transfer Date, (1) DRL shall own the Regulatory Approvals (including the IND and the initial NDA) and Regulatory Materials, and (2) any FTE Costs that DRL incurs during such period, solely to the extent such FTE Costs relate to carrying out DRL’s obligations under this Agreement, shall be DRL Development Costs.
(b) Development Responsibilities. DRL shall, either directly or by or with an Affiliate or a sublicensee conduct the activities under the Development Plan in a good scientific manner and comply in all material respects with Applicable Laws, including GMP, GCP and GLP, as applicable. In the event that DRL conducts the activities through or with a sublicensee, (i) DRL shall remain responsible for its obligations under this Section 4.1, and (ii) to the extent that a material portion of DRL’s obligations will be assigned to a sublicensee, DRL shall obtain Journey’s pre-approval of such sublicensee, not to be unreasonably withheld, conditioned or delayed. For clarity, Third Parties to any Development Contract are sublicensees of Journey, not sublicensees of DRL.
(c) Amendments to Development Plan. Either Party, directly or through its representatives on the JDC may propose amendments to the Development Plan from time to time as appropriate, including in light of changed circumstances. Such amendments shall be reviewed and approved in accordance with Section 3.2.
4.2 Development Costs.
(a) Estimated Development Costs. As of the Effective Date, estimated Development Costs (based on the Draft Development Plan) for the anticipated first (1st) three (3) Development Period Years are set forth on Exhibit E (collectively, the “Development Costs Estimate”). The Development Costs are subject to the “Notes and Assumptions” set forth in the Draft Development Plan and are expected to total amounts equal or less than the amounts presented in Exhibit E. The Development Plan includes a reasonable description of the anticipated Development Costs for the anticipated first (1st) three (3) Development Period Years. The Development Plan will include estimated FTE Costs and the Development Plan will list all FTEs (by title) with the associated FTE Rate and anticipated hours such FTE will dedicate to performing activities under the Development Plan in each applicable Development Period Year. The Annual FTE Costs based on the Draft Development Plan are expected to total to amounts equal or less than the amounts set forth on Exhibit I. If the JDC makes any changes to the Development Plan, or if any of the activities under the Development Plan are accelerated or delayed, the JDC will discuss in good faith whether Exhibit E and Exhibit I need to be amended by the Parties to reflect the then-current scope and timing of the activities set forth in the Development Plan. The Development Costs Estimate does not include any DRL Development Costs that may arise and that cannot reasonably be estimated by the Parties as of the Effective Date, including certain consultant costs and fees, intellectual property enforcement costs and as otherwise set forth in the “Notes and Assumptions” set forth in the Draft Development Plan (collectively, the “Additional Costs”). For clarity, the Development Cost Estimate only includes DRL’s technology transfer obligations under Section 4.3(c) and the cost to Journey, and does not include any other costs and expenses that may be incurred by or on behalf of Journey in connection with the technology transfer, which shall not be deemed “Development Costs”. Promptly upon becoming aware of anticipated Additional Costs, DRL will promptly present the anticipated Additional Costs to the JDC for review whenever such anticipated Additional Costs arise during the Development Period. Additional Costs will be subject to JDC approval. Journey shall be solely responsible for all Development Costs, including any approved Additional Costs, incurred under the terms and conditions of this Agreement.
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(b) Development Cost Planning and Special Meetings. At each JDC meeting, (i) each Party shall provide an update on current Development Costs incurred by or on behalf of each Party, and (ii) the JDC shall agree on an estimate of the Development Costs that may be incurred by or on behalf of each Party during the following Calendar Quarter (each a “Quarterly Development Cost Estimate”). In the event that either Party reasonably anticipates that the Quarterly Development Cost Estimate will be exceeded based on applicable activities to be performed under the Development Plan, the Party aware of such anticipated excess Development Costs shall promptly notify the other Party and the JDC will promptly meet to discuss such anticipated Development Costs in accordance with Section 3.1(d).
(c) Updated Development Costs Estimate and Development Costs Limits.
(i) The applicable Development Costs Estimate may increase or decrease during the Development Period, as determined by the JDC under Section 3.2(a) and Section 4.2(b). Each Party will use reasonable efforts to provide, to its knowledge and in good faith, accurate updates to the Development Costs to the JDC. Each Party shall provide reasonable updates to the JDC regarding any anticipated material increase or decrease in Development Costs during the Development Period of which such Party becomes aware. Journey will be responsible for any increase in Development Costs. If (1) an anticipated increase in Development Costs in a Development Period Year exceeds the applicable amount set forth in Exhibit E (as may be adjusted pursuant to this Section 4.1(c)) up to [***] ([***]%) in the first (1st) Development Period Year or by more than [***] ([***]%) in any Development Period Year thereafter (each a “Development Costs Limit”) or (2) the anticipated Annual FTE Costs exceeds the applicable amount set forth in Exhibit I (as may be adjusted pursuant to this Section 4.1(c)) by more than [***] ([***]%) in the first (1st) Development Period Year or by more than [***] ([***]%) in any Development Period Year thereafter (each a “FTE Cost Limit”), then, in either case (1) or (2), the JDC will promptly meet in accordance with Section 3.1(d) and in good faith review anticipated and ongoing activities under the Development Plan and associated Development Costs and discuss in good faith (x) measures to reduce the anticipated increase in Development Costs and/or Annual FTE Costs, and (y) any potential revision to the applicable Development Costs Limit and/or FTE Cost Limit.
(ii) Unless the JDC approves in a meeting or Journey first expressly approves otherwise in writing, DRL will (a) use Commercially Reasonable Efforts not to incur Development Costs (except FTE Costs, which is addressed by clause (b)) in any applicable Development Period Year in excess of the applicable Development Costs Limit and (b) not incur Annual FTE Costs in excess of the applicable FTE Cost Limit. If during the Development Period either Party identifies any reasonably practical opportunity to change the Development Plan or any aspect of carrying out the Development Plan that would result in lower Development Costs than the applicable Development Cost Estimate and that would not reasonably result in a risk of (w) delayed performance of the Development Plan, (x) a delay in Product Regulatory Approval, (y) increased risk of FDA rejection of the initial NDA, and/or (z) material limitation on Journey’s ability to Exploit the Product in the Territory, the JDC will promptly meet to discuss such opportunity and, if appropriate, adjust the Development Plan or applicable aspect of carrying out the Development Plan to so limit the applicable Development Costs. In no event will Journey be responsible for Development Costs that are greater than the actual Development Costs incurred in carrying out the Development Plan.
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(d) Cessation of Certain Activities due to Excess Development Costs. Notwithstanding anything to the contrary in this Agreement, in the event that (i) DRL is obligated to obtain approval from Journey to incur Development Costs or any additional cost in excess of the Development Cost Estimate and/or Development Costs Limit, and (ii) Journey (or the JDC as a result of the action or inaction of Journey representative(s) thereon) has not approved such Development Costs or increase to the Development Costs Estimate and/or Development Costs Limit, DRL shall not be deemed to be in breach of this Agreement and will not be liable to Journey for breach of this Agreement (including, for clarity, under Section 4.1(a)(i)) based on DRL not performing any of the proposed activities associated with any unapproved additional costs in excess of the Development Costs Estimate and/or Development Costs Limit.
(e) Development Contracts. Journey shall negotiate and enter into any contracts with contract research organizations, consultants, or other service providers specified in the Development Plan (each, a “Development Contract”). In carrying out the Development Plan, DRL may assist Journey with the identification of such contract research organizations, consultants, or other service providers and in obtaining initial proposals, bids, or draft agreements for Journey’s consideration. DRL will be primarily responsible to negotiate the non-financial terms and conditions of the Development Contracts (which will include provisions providing for confidentiality of Phase 3 Clinical Study data, compliance with Applicable Laws, and assignment of any inventions and other material intellectual property developed in the conduct of activities under such Development Contracts to Journey) and will assist Journey in Journey’s negotiation of the financial terms and conditions of the Development Contracts. Journey hereby agrees that it is solely responsible for the financial obligations under each Development Contract. All Information, studies and any other data produced under any Development Contract shall be Journey Know-How.
(f) Regulatory Costs. Journey shall be solely responsible for the payment of all Regulatory Costs and shall make timely payments to the applicable Regulatory Authorities on or before the date on which such payments are due. To the extent DRL becomes aware of any Regulatory Costs that are due and owing to any Regulatory Authority that are not in the Development Plan, DRL shall promptly notify Journey of such Regulatory Costs and Journey shall promptly make the applicable payments. DRL will use good faith efforts to ensure that the JDC is notified as soon as DRL is aware that incurring such Regulatory Costs is likely to be necessary to carry out the Development Plan.
(g) Payment of DRL Development Costs. DRL shall invoice Journey for all DRL Development Costs along with suitable documentation evidencing each applicable cost and Journey shall pay all undisputed DRL Development Costs within thirty (30) calendar days of receipt of an applicable invoice.
(h) Information Rights. Beginning on the Effective Date and ending on the Transfer Date, Journey shall provide DRL with unaudited balance sheets semi-annually (within thirty (30) days after June 30 and within thirty (30) days after December 31) (“Financial Statements”). All Financial Statements delivered to DRL shall be prepared in good faith consistent with the normal practices of Journey and/or its Affiliates, and, to Journey’s knowledge, be accurate.
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4.3 Supply of the Product and Technology Transfer.
(a) Commercial Supply. Within one hundred eighty (180) days of the Effective Date, the Parties shall in good faith negotiate a commercial supply agreement (the “Supply Agreement”) in accordance with the Key Supply Terms attached hereto as Exhibit F, which shall include an associated quality agreement (the “Quality Agreement”), pursuant to which DRL shall supply Journey with the Product.
(b) Clinical Supply. Manufacture of the clinical supply of the Product required under the Development Plan shall be procured by Journey from DRL on a purchase order-by-purchase order basis, DRL will supply clinical supply of the Product directly to the locations designated by the applicable contract research organization. In addition, Journey shall purchase from DRL the registration batches, stability batches, and any other Product supply reasonably necessary to carry out the Development Plan. DRL shall provide Journey with an invoice for all costs and expenses related to Manufacture of clinical supplies, registration batches, and such other supplies of the Product in accordance with Section 4.2(g).
(c) Technology Transfer. Journey will have the right as of the Transfer Date to source supply of the Product from Third Party Suppliers for Development and Exploitation in the Territory. Within four (4) months of any request from Journey that is made any time after the two (2) month anniversary of the Effective Date, DRL will provide the Information that is reasonably required to establish, qualify, and/or enable one (1) Third Party Supplier to supply the Product in the Territory to Journey, its Affiliates, or Sublicensees, and to include information concerning such Third Party Supplier in the NDA and/or other applicable Regulatory Materials to allow Journey to use such Third Party Supplier as of the Transfer Date as an alternative supplier to DRL; provided, however, that (i) Journey shall bear all costs, including reimbursement of DRL FTE costs, associated with such activities; and (ii) that such Third Party Supplier shall enter into a three-party confidentiality agreement with DRL and Journey, in a form reasonably acceptable to DRL. Throughout the Term, DRL will not supply Products to any Third Party in the Territory that intends to Commercialize Products in the Territory other than a Sublicensee of Journey or other Person that Journey authorizes to receive Product from DRL. Beginning on the Transfer Date, Journey will have the right to obtain part of its supply of the Product from Third Party Suppliers for Commercialization in the Territory, subject to any applicable minimum requirements included in the Key Supply Terms.
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4.4 Regulatory Matters prior to the Transfer Date.
(a) Clinical Trials; Regulatory Approvals. Subject to Section 4.1(a)(iv), DRL will be the “sponsor” of all Clinical Studies conducted by DRL under the Development Plan up to the Transfer Date. Subject to Section 4.1(a)(iv), as between the Parties, at any time prior to the Transfer Date, DRL shall have the primary responsibility to (i) prepare, obtain, and maintain the Regulatory Approvals and other submissions, and (ii) approve any communications with any Regulatory Authority, in each case, for the Product. DRL will provide Journey with complete copies of any and all proposed drafts of all Regulatory Materials prior to Regulatory Authority submission prior to the Transfer Date, providing at least five (5) Business Days for Journey to review and comment thereon. DRL will consider any comments provided by Journey within such five (5) Business Day period concerning such proposed submissions in good faith and DRL will adopt any Journey suggestion related thereto that would reasonably be determined to enhance the value of the Assigned Assets and/or increase the speed of approval of Product Regulatory Approval. Notwithstanding the foregoing, during NDA review time, DRL and Journey will work together in a reasonable timeframe to submit the responses to FDA queries or requests for information in FDA recommended timelines, which may be less than five (5) days. To the extent permitted under Applicable Laws, DRL will provide Journey with sufficient advance notice of any meetings with any Regulatory Authority prior to the Transfer Date. To the extent permitted under Applicable Laws and by FDA, DRL shall allow Journey to discuss with DRL, prepare for, and permit up to three (3) employees of Journey reasonably observe and/or participate in such meetings with Regulatory Authorities, provided that DRL will, as sponsor, have primary responsibility for the conduct of such meetings with Regulatory Authorities. On and after the Effective Date until the Transfer Date, DRL will provide to Journey complete copies of (i) any material correspondence DRL receives from any Regulatory Authority or other Governmental Authority related to the Product in the Territory, and (ii) any final submission that DRL makes to any Regulatory Authority relating to the Product in the Territory, in each case, within five (5) Business Days of such receipt or submission.
(b) Communication with Regulatory Authorities. Except as provided herein or otherwise agreed to by DRL in writing, prior to the Transfer Date, and subject to the provisions of Section 4.4(a), Journey shall not (i) own, obtain or maintain the IND or other Regulatory Approval with respect to the Product, or (ii) communicate with any Regulatory Authority regarding the Product (1) in writing, without DRL’s prior written approval of the form and content of such written communication, which approval will not be unreasonably conditioned, delayed, and/or withheld, or (2) orally (including in connection with any meeting, conference or discussion) other than with DRL’s prior written approval of the forum, form, and content of such oral communication, which approval will not be unreasonably conditioned, delayed, and/or withheld. At any time prior to the Transfer Date, if Journey receives any correspondence from any Regulatory Authority related to the Product, Journey shall provide a copy of such correspondence to DRL within ten (10) days of such receipt. DRL shall have the right to prepare any response to any Regulatory Authority with respect to such correspondence consistent with the provisions of Section 4.4(a). If at any time during the Term, DRL receives any correspondence from any Regulatory Authority in the Territory that (x) solely relates to the Product, or (y) that relates to the Product, in each case (x) and (y), DRL shall provide a complete and accurate copy of such correspondence to Journey within three (3) Business Days of receipt; provided that in the case of (y), DRL may redact any portion of such correspondence that is (A) confidential and/or proprietary to a Third Party, and/or (B) related to a product that is not the Product.
4.5 Development Records. Prior to the Transfer Date and for a period of three (3) years thereafter or for such longer period as may be required by Applicable Law, DRL shall maintain complete, current, and accurate records of all activities conducted by or on behalf of DRL under the Development Plan, that were conducted prior to the Effective Date in connection with clinical and/or nonclinical development of the Product, and/or that are otherwise related to any Regulatory Approval or Clinical Study that includes the Product. Copies of any all such records will be transferred to Journey on or promptly following the Transfer Date in accordance with ARTICLE 5.
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ARTICLE 5
ASSET ASSIGNMENT
5.1 Asset Assignment; Know-How Transfer. Effective as of the Transfer Date, pursuant to the Assignment Agreements, DRL assigns, sells, transfers, and conveys to Journey and Journey accepts from DRL all right, title and interest in and to, all of the Assigned Assets, free and clear of any Encumbrances. For the avoidance of doubt, the assignment, sale, transfer, and conveyance of the Assigned Assets will not occur until Journey has paid DRL (a) the Second Installment and all Milestone Payments in full owed by Journey pursuant to Section 7.2, and (b) all DRL Development Costs that are not disputed in good faith by Journey. In order to effectuate the Transfer Date, Journey shall provide written notice to DRL no less than two (2) Business Days prior to such Transfer Date, provided that the timing and/or form of such notice will have no effect on the assignment, sale, transfer, and conveyance of the Assigned Assets. If DRL has received all Milestone Payments in full owed by Journey pursuant to Section 7.1 and Section 7.2, and DRL has been reimbursed in full for all DRL Development Costs that are not disputed in good faith by Journey, the assignment, sale, transfer, and conveyance of the Assigned Assets will occur on, and the Transfer Date will be, the date specified by Journey in any such notice.
5.2 Assigned Assets. The “Assigned Assets” means collectively the following:
(a) The Product IP;
(b) The Product Regulatory Approval;
(c) The Product Regulatory Materials; and
(d) The Product Know-How.
Promptly following the Transfer Date, DRL shall make available to Journey all electronically held Assigned Assets. In the event that, where reasonably necessary, Journey requests original documents of the items set forth in Sections 5.2(b)-(c) that are not maintained electronically and such documents are in the possession of or readily accessible by DRL or its Affiliates, DRL shall, make available such original documents to Journey for pick-up at DRL’s facility, at Journey’s sole cost and expense, during normal business hours on a date mutually agreeable to the Parties following the Transfer Date.
5.3 Assumed Liabilities. As of the Transfer Date, Journey shall assume and pay, perform, or otherwise discharge, in accordance with their respective terms and subject to their respective conditions thereof, all Obligations that arise out of or are related to Journey’s ownership, operation or use of, or exercise of rights and performance under, the Assigned Assets or the Products after the Transfer Date (the “Assumed Liabilities”).
5.4 Retained Rights. DRL retains the right to Exploit the Product in the DRL Territory. For purposes of clarity, except as expressly set forth in this Agreement, neither Party receives any rights with respect to the Product from the other Party. Journey shall not, directly or indirectly, market, promote, sell, offer for sale, and/or distribute the Product outside the Territory and DRL shall not, directly or indirectly, market, promote, sell, offer for sale, and/or distribute the Product in the Territory, provided that (a) Journey may Manufacture or Develop the Product and/or have the Products Manufactured or Developed outside the Territory for sale within the Territory, and (b) DRL may Manufacture or Develop the Product and/or have the Products Manufactured or Developed outside the DRL Territory for sale within the DRL Territory.
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ARTICLE 6
DEVELOPMENT AND COMMERCIALIZATION BY JOURNEY
6.1 Diligence. Following Transfer Date, Journey shall, directly and/or by or with an Affiliate and/or a Sublicensee, use Commercially Reasonable Efforts to Develop and Commercialize the Product in the Field in the Territory; provided that Journey shall (x) launch the Product in the United States within six (6) months from the receipt of Product Regulatory Approval, and (y) initiate Development of the Product in the Field in the European Union within twenty-four (24) months from the receipt of Product Regulatory Approval.
6.2 Responsibility for Development and Commercialization in the Territory. Subject to the terms and conditions of this ARTICLE 6, Journey shall have sole control over and decision-making authority for, at its cost and expense, the Development, Manufacture, and Commercialization of the Products in the Territory. Journey shall, directly and/or by or with an Affiliate and/or a Sublicensee, conduct all Development, Manufacturing, and Commercialization activities related to the Product in a good scientific manner and comply in all material respects with Applicable Laws, including GMP, GCP and GLP, as applicable.
6.3 Cross-Territorial Restrictions.
(a) Journey Restrictions. As permitted by Applicable Law, Journey shall not, and shall ensure that its Affiliates and Sublicensees will not, either directly or indirectly, knowingly promote, market, distribute, import, sell or have sold the Product, including via internet or mail order, into the DRL Territory. As to the DRL Territory, Journey shall not, and shall ensure that its Affiliates and Sublicensees will not: (i) engage in any advertising or promotional activities relating to any Product that are directed primarily to customers or other purchasers or users of the Product located in the DRL Territory, (ii) solicit orders for the Product from any prospective purchaser located in the DRL Territory, and/or (iii) sell or distribute any Product to any Person in the Territory who it knows intends to sell the Product in the DRL Territory. If Journey receives any order from a prospective purchaser located in the DRL Territory, then Journey shall immediately refer that order to DRL, and Journey shall not accept any such orders unless otherwise agreed to in writing by DRL. Journey shall not deliver or tender (or cause to be delivered or tendered) any Product for sale into the DRL Territory other than for use or Commercialization by or on behalf of DRL and its Affiliates in accordance with this Agreement.
(b) DRL Restrictions. As permitted by Applicable Law, DRL shall not, and shall ensure that its Affiliates will not, either directly or indirectly, knowingly promote, market, distribute, import, sell or have sold the Product, including via internet or mail order, into the Territory. As to the Territory, DRL shall not, and shall ensure that its Affiliates will not: (i) engage in any advertising or promotional activities relating to any Product that are directed primarily to customers or other purchasers or users of the Product located in the Territory, (ii) solicit orders from any prospective purchaser located in the Territory, and/or (iii) sell or distribute the Product to any Person in the DRL Territory who it knows intends to sell the Product in the Territory. If DRL receives any order from a prospective purchaser located in the Territory, then DRL shall immediately refer that order to Journey, and DRL shall not accept any such orders. DRL shall not deliver or tender (or cause to be delivered or tendered) the Product into the Territory.
(c) Cooperation in Stopping Importation of Other Party’s Products. Neither Party will be liable to the other Party for internet information available to persons outside of the Territory in the case of Journey and outside of the DRL Territory in the case of DRL or that is broadcast outside of the Territory or DRL Territory, respectively, due to regular cross-border television and/or radio broadcasting or other broadly distributed media. Throughout the Term, the Parties shall promptly cooperate in good faith and at no cost to the other Party in implementing good faith Commercially Reasonable procedures and taking any other Commercially Reasonable requested actions to prevent the sale and distribution in the Territory of any version of the Product sold by DRL in the DRL Territory and the sale and distribution in the DRL Territory of any version of the Product sold by Journey in the Territory.
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6.4 Development, Manufacturing and Commercialization Updates. Once per Calendar Year, at the reasonable written request of DRL, Journey shall provide reasonable written updates to DRL regarding the status of Regulatory Authority approval of the Product and its Development, Manufacturing and Commercialization activities with respect to the Products in the Territory.
6.5 Regulatory Matters after the Transfer Date.
(a) Cooperation. After the Transfer Date, upon a Party’s reasonable request, each Party shall provide the other Party with any reasonably requested assistance and cooperation (i) to enable such other Party to obtain Regulatory Approval for the Products in the Territory or DRL Territory, as applicable, and (ii) in furtherance of effecting such other Party’s rights and licenses granted pursuant to Section 2.2, which shall in each case ((i) and (ii)) include each Party providing access to the such Party’s Regulatory Materials, as well as supplying the other Party with Product, at no cost to the requesting Party.
(b) Clinical Trials; Regulatory Approvals.
(i) If, after the Transfer Date, (A) DRL conducts a Clinical Study for the Product for a Regulatory Approval in the DRL Territory, or (B) Journey conducts a Clinical Study for the Product for a Regulatory Approval in the Territory, then the Party conducting such Clinical Study will be the “sponsor” of such Clinical Study.
(ii) As between the Parties, after the Transfer Date, (A) DRL shall have the sole right to (1) prepare, obtain, and maintain Regulatory Approvals and other submissions, and (2) approve any communications with any Regulatory Authority, in each case, for the Product in the DRL Territory, and (B) Journey shall have the sole right to (1) prepare, obtain, and maintain Regulatory Approvals and other submissions, and (2) approve any communications with any Regulatory Authority, in each case, for the Product in the Territory.
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(iii) At either Party’s reasonable request, the other Party shall provide the requesting Party with copies of all Regulatory Materials filed by or on behalf of it with Regulatory Authorities to the extent necessary or useful in allowing the requesting Party to seek, obtain, and/or maintain Regulatory Approval for the Products in the Field in the DRL Territory or Territory, as applicable, the information in which Regulatory Materials the requesting Party may solely use for the purpose of seeking, obtaining, and maintaining Regulatory Approval for the Products in the Field in the DRL Territory or Territory, as applicable.
(c) Communication with Regulatory Authorities. After the Transfer Date, in no event shall (i) Journey (A) own, obtain or maintain any IND or other Regulatory Approval with respect to the Product in the DRL Territory, or (B) communicate with any Regulatory Authority regarding the Product in the DRL Territory (1) in writing, without DRL’s prior written approval of the form and content of such written communication, or (2) orally (including in connection with any meeting, conference or discussion) with any Regulatory Authority other than with DRL’s prior written approval of the forum, form and content of such oral communication, or (ii) DRL (A) own, obtain or maintain any IND or other Regulatory Approval with respect to the Product in the Territory, or (B) communicate with any Regulatory Authority regarding the Product in the Territory (1) in writing, without Journey’s prior written approval of the form and content of such written communication, or (2) orally (including in connection with any meeting, conference or discussion) with any Regulatory Authority other than with Journey’s prior written approval of the forum, form and content of such oral communication At any time after the Transfer Date, if a Party receives any correspondence from any Regulatory Authority related to the Product sold by or on behalf of the other Party, such Party shall provide a copy of such correspondence to the other Party within five (5) days of such receipt. The other Party shall have the right to prepare any response to any Regulatory Authority with respect to such correspondence; provided that the other Party shall consider in good faith any comments received from such Party.
(d) Regulatory Costs. Journey shall be solely responsible for all Regulatory Costs incurred by or on behalf of Journey with respect to preparing, filing, obtaining, and maintaining Regulatory Approvals for the Products from the Regulatory Authorities in the Territory. DRL shall be solely responsible for all Regulatory Costs incurred by or on behalf of DRL with respect to preparing, filing, obtaining, and maintaining Regulatory Approvals for the Products from Regulatory Authorities in the DRL Territory.
(e) Notification of Threatened Action.
(i) By DRL. DRL shall immediately notify Journey of any information it receives regarding any threatened or pending action, inspection, and/or communication by or from any Regulatory Authority that may affect or otherwise relate to the Development, Commercialization, Manufacture, or Regulatory Approval of the Product in the Territory.
(ii) By Journey. Journey shall immediately notify DRL of any information it receives regarding any threatened or pending action, inspection, and/or communication by or from any Regulatory Authority that may affect or otherwise relate to the Development, Commercialization, Manufacture, or Regulatory Approval of the Product in the DRL Territory.
(iii) Procedure. Upon receipt of such information described in Section 6.5(e)(i) and 6.5(e)(ii), the Parties shall review and discuss a mutually acceptable procedure for taking appropriate action.
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(f) Recalls. DRL shall have the sole right to determine and initiate all recalls, market suspensions or market withdrawals undertaken for the Product in the DRL Territory, and DRL (or its designee) shall be solely responsible for the execution thereof. Journey shall have the sole right to determine and initiate all recalls, market suspensions or market withdrawals undertaken for the Product in the Territory, and Journey (or its Sublicensee or designee) shall be solely responsible for the execution thereof.
(g) Adverse Event Reporting and Safety Data Exchange. No later than one hundred eighty (180) days following the submission of the first Regulatory Approval Application for a Product in any country and/or other jurisdiction in the DRL Territory, and in any event prior to any Commercialization of the Product by DRL in the DRL Territory, the Parties shall define and finalize the actions that the Parties shall employ with respect to the Product to protect patients and promote their well-being in a written pharmacovigilance agreement (the “Pharmacovigilance Agreement”). In the event of any inconsistency between the provisions of the Pharmacovigilance Agreement and the provisions of this Agreement, the wording of the Pharmacovigilance Agreement shall govern any and all patient safety matters, and this Agreement shall govern all other matters.
ARTICLE 7
COMPENSATION
7.1 Upfront Payment. In consideration of DRL’s grant of the licenses granted to Journey under Section 2.1(a), Journey shall pay to DRL a one-time, non-refundable, upfront fee of Ten Million Dollars ($10,000,000) (the “Upfront Payment”). The Upfront Payment will be paid in two installments. The first installment of the Upfront Payment in the amount of Two Million Dollars ($2,000,000) (the “First Installment”) will be paid on the Effective Date. The second installment of the Upfront Payment in the amount of Eight Million Dollars ($8,000,000) (the “Second Installment”) will be paid by the ninetieth (90th) day following the Effective Date.
7.2 Development Milestone Payments. As further consideration for the grant of the licenses granted to Journey under Section 2.1(a) (with respect to Milestone Event No. 1), and as consideration of DRL’s transfer, assignment, sale, and conveyance of the Assigned Assets pursuant Section 5.1, Journey shall pay DRL the following one-time Development Milestone Payments within thirty (30) days after the first achievement of the corresponding “Milestone Event” as set forth in Table 7.2. The Milestone Payments set forth in this Section 7.2 are payable only once (i.e., the first time the applicable Milestone Event is achieved for the Product), and is non-refundable, non-creditable, once paid. For clarity, this means that the maximum Development Milestone Payment amount payable under this Section 7.2 is [***] ($[***]). DRL shall notify Journey promptly following the date of the occurrence of a Milestone Event.
Table 7.2 – Development Milestone Payments | ||
No. | Milestone Event | Milestone Payments |
1. | [***] | [***] |
2. | [***] | [***] |
For clarity, Milestone Event No. 2 set forth in Table 7.2 shall only be reduced in the event that one of the first two (2) Phase 3 Clinical Studies is not Successful, and Journey reasonably believes that Regulatory Approval for a rosacea Indication is unlikely without conducting a third (3rd) Phase 3 Clinical Study.
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7.3 Milestone for An Initial Non-Rosacea Indication. As further consideration of DRL’s transfer, sale, assignment, and conveyance of the Assigned Assets pursuant Section 5.1, Journey shall pay DRL the following one-time Development Milestone Payment within thirty (30) days after the first achievement by Journey (or its Affiliate, Sublicensee, or Acquiror) of the “Milestone Event” as set forth in Table 7.3. The Development Milestone Payment set forth in this Section 7.3 is payable only once (i.e., the first time the milestone event is achieved for the Product) and is non-refundable once paid. For clarity, this means that the maximum Development Milestone Payment amount payable under this Section 7.3 is [***] ($[***]). Journey shall notify DRL promptly following the date of the occurrence of the Milestone Event.
Table 7.3 – Development Milestone Payments | ||
No. | Milestone Event | Milestone Payments |
1. | [***] | [***] |
For the avoidance of doubt, Journey will have no obligation to obtain Regulatory Approval for any non-rosacea Indication that is not consistent with its application of Commercially Reasonable Efforts.
7.4 Launch Milestone Payments. As further consideration of DRL’s transfer, sale, assignment, and conveyance of the Assigned Assets pursuant Section 5.1, Journey shall pay DRL the following one-time launch Milestone Payments within thirty (30) days after the first achievement by Journey (or its Affiliate, Sublicensee or Acquiror) of a “Milestone Event” set forth in Table 7.4. Each Milestone Payment set forth in this Section 7.4 is payable only once (i.e., the first time the Milestone Event is achieved for the Product) and is non-refundable once paid. For clarity, this means that the maximum launch milestone amounts payable under this Section 7.4 is [***] ($[***]). Journey shall notify DRL promptly following the date of the occurrence of each Milestone Event. For the avoidance of doubt, Journey will have no obligation to obtain Regulatory Approval in any jurisdiction or country in the Territory outside of the United States and at least one country of the [***] that is not consistent with its application of Commercially Reasonable Efforts.
Table 7.4 – Launch Milestone Payments | ||
No. | Milestone Event | Milestone Payment |
1. | [***] | [***] |
2. | [***] | [***] |
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7.5 Net Sales Milestone Payments. As further consideration of DRL’s transfer, sale, assignment, and conveyance of the Assigned Assets pursuant Section 5.1, Journey shall pay DRL within thirty (30) days following the end of an applicable Calendar Year, the highest “Milestone Payment” set forth in Table 7.5 out of all of the “Milestone Events” achieved by Journey (or its Affiliate, Sublicensee or Acquiror) in such Calendar Year. Within twelve (12) months following the payment of such Milestone Payment, Journey will pay to DRL (a) the next highest unpaid “Milestone Payment(s)” set forth in Table 7.5 for any “Milestone Event” previously achieved by Journey (or its Affiliate, Sublicensee, or Acquiror) or (b) if Journey achieves a Milestone Event associated with a higher Milestone Payment in a year following a previous Milestone Payment, Journey will only pay DRL the higher Milestone Payment. Once a Milestone Payment has been triggered under this Section 7.5, Journey is obligated to make payment on Milestone Events for all lower Milestone Payments than the highest achieved Milestone Payment until all Milestone Payments set forth in this Section 7.5 have been paid. Each Milestone Payment set forth in this Section 7.5 is payable only once (i.e., the first time the Milestone Event is achieved) and is nonrefundable once paid. For clarity, this means that the maximum amount payable under this Section 7.5 is [***] ($[***]). Journey shall notify DRL promptly following the date of the occurrence of each Milestone Event.
Table 7.5 – Net Sales Milestone Payments | ||
No. | Milestone Event | Milestone Payment |
1. | [***] | [***] |
2. | [***] | [***] |
3. | [***] | [***] |
4. | [***] | [***] |
5. | [***] | [***] |
[***]
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7.6 Revenue Based Payments.
(a) Revenue Percentage Rates. As further consideration of DRL’s transfer, assignment and conveyance of the Assigned Assets pursuant Section 5.1, during the Revenue Percentage Term, Journey shall pay to DRL the applicable revenue percentage rate set forth in Table 7.6 (the “Revenue Percentage Rate”) of Net Sales in an applicable Calendar Quarter on a country-by-country basis (“Revenue Based Payments”), subject to adjustment as set forth in Section 7.6(c).
Table 7.6 – (Non-Generic) Revenue Based Payments | ||
No. | Aggregate Annual Net Sales |
Revenue
Percentage
Rate |
1. | [***] ($[***]) | [***] ([***]%) |
2. | [***] | [***] ([***]%) |
3. | [***] ($[***]) | [***] ([***]%) |
(b) Revenue Percentage Reports and Payments. Within thirty (30) days following the end of each Calendar Quarter, commencing with the Calendar Quarter in which the First Commercial Sale of the Product is made anywhere by Journey or its Affiliate or Sublicensee in the Territory, Journey shall provide DRL with a report (the “Revenue Percentage Report”) of the amount of Net Sales in each country or other jurisdiction the Territory during the applicable Calendar Year and a calculation of the amount of the Revenue Based Payment due for each such country or other jurisdiction in the Territory on such Net Sales for such Calendar Quarter. Concurrent with the delivery of the Revenue Percentage Report, Journey shall pay in Dollars the Revenue Based Payment due to DRL under this Section 7.6 with respect to Net Sales for such Calendar Quarter.
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(c) Revenue Based Payment Reduction for Generic Product. If in any country and/or other jurisdiction in the Territory during the Revenue Percentage Term a Generic Product with respect to the Product is launched in such country and/or other jurisdiction and there is (i) a sale of one or more Generic Products with respect to such Product in such country, and (ii) the Net Sales in a given twelve (12) month period following from the launch of a Generic Product are reduced by [***] ([***]%) from the twelve (12) month period immediately preceding the first sale of a Generic Product in a country, then the royalty rate for such Product with respect to such country shall thereafter be reduced by [***] ([***]%) from the applicable rate(s) set forth in Section 7.6(a). In the event that any Product Patent is challenged based on a claim of patent misuse or related legal theory based on the Revenue Based Payment provisions of this Agreement that poses any reasonable risk to the enforceability, validity, or other aspect of such Product Patents, the Parties will promptly negotiate a modification of the Revenue Based Payment provisions to eliminate such risk.
7.7 Protection Against Patent License Stacking. Journey shall be entitled to deduct, from any amounts otherwise owed to DRL as Revenue Based Payments, any royalties that Journey pays to Third Parties for any license or other right under any Third Party Patent that Journey determines is necessary for Journey to Exploit the Product in the Territory; provided that such deductions under this Section 7.7 shall not reduce the Revenue Based Payments in any Calendar Quarter by greater than [***] ([***]%).
7.8 Acquisition Consideration.
(a) Subject to Section 7.8(c), in the event that Journey, or its Affiliates, execute a definitive agreement for an Acquisition Event during the period beginning on the Effective Date and ending twenty-four (24) months after the Product Regulatory Approval, Journey shall pay to DRL an amount equal the following percentage of the Acquisition Product Value paid by an Acquiror within thirty (30) days after Acquiror makes such payment.
Table 7.8 – Acquisition Consideration | ||
No. |
Development
Stage of Product as of the
date of the Acquisition Event |
Percentage
of Acquisition
Product Value Payable to DRL |
1. | [***] | [***] ([***]%) |
2. | [***] | [***] ([***]%) |
(b) For purposes of clarity, (i) the payment to DRL under this Section 7.8 shall only be payable once upon the first Acquisition Event to occur, and (ii) the Second Installment and all of the other payments set forth in Sections 7.2, 7.3, 7.4, 7.5, and 7.6 shall still be due to DRL from Journey or its successor after an Acquisition Event, even if an applicable milestone is achieved, or sales of the Product are made, by Acquiror.
(c) If Journey has issued common stock (or is required to issue common stock) or made a payment (or is required to make a payment) to DRL pursuant to Section 7.9(a) prior to the occurrence of an Acquisition Event, Journey shall have no further obligation under Section 7.8(a).
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7.9 IPO / Uplisting Consideration.
(a) Subject to Section 7.9(c), if, at the close of the first trading day following the listing of Journey’s common stock on a national stock exchange (the “Uplisting”) (provided such Uplisting occurs after the Effective Date and before twenty-four (24) months after the Product Regulatory Approval), the market capitalization of all Journey equity securities, on a fully-diluted basis, is [***] ($[***]) or more, then Journey shall, at Journey’s option, within thirty (30) days either: (a) issue to DRL a number of shares of the Journey’s common stock with a dollar value equal to [***] ($[***]) as calculated using a fifteen (15) day volume weighted average price of Journey’s closing price, measured fifteen (15) days following the Uplisting, without any additional consideration (financial or otherwise) from DRL, or (b) make a cash payment to DRL equal to [***] ($[***]).
(b) For purposes of clarity, the Second Installment and all of the other payments set forth in Sections 7.2, 7.3, 7.4, 7.5, and 7.6 shall still be due to DRL from Journey after an Uplisting.
(c) If Journey has made a payment (or is obligated to make a payment) to DRL pursuant to Section 7.8(a) prior to the occurrence of an Uplisting, Journey shall have no further obligation under Section 7.9(a).
(d) In the event that upon issuance of any shares of Journey’s common stock, Journey requests that DRL enter into a lock-up agreement, the Parties shall negotiate such agreement in good faith, and DRL be required to enter into (i) a lock-up period of at least one-hundred eighty (180) days after the date of the Uplisting, (ii) restrictions on DRL to not, directly or indirectly, (1) offer for sale, sell, pledge, and/or otherwise dispose of (or enter into any transaction, agreement, or device that is designed to, or could be expected to, result in the disposition by any Person at any time in the future) any such shares or securities convertible into and/or exchangeable for such shares (2) enter into any swap or other derivatives transaction that transfers to any Person, in whole or in part, any of the economic benefits or risks of ownership of such shares, and (3) publicly disclose the intention to do any of the foregoing, in each case without the prior written consent of Journey, and (iii) other clauses that are customarily included in a lock-up agreement.
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7.10 Foreign Exchange. For the purpose of calculating any sums due under, or otherwise reimbursable pursuant to, this Agreement (including the calculation of applicable Net Sales expressed in currencies other than Dollars), a Party shall convert any amount expressed in a foreign currency into Dollar equivalents using its or its Affiliate’s or Sublicensee’s standard conversion methodology consistent with Accounting Standards.
7.11 Payment Method; Late Payments. Journey shall make all payments due hereunder in Dollars to DRL by wire transfer of immediately available funds into an account designated by DRL. If any payment due to either Party under this Agreement is not paid when due, then such paying Party shall pay interest thereon (before and after any judgment) at an annual rate (but with interest accruing on a daily basis) equal to [***] ([***]%) per annum simple interest to run from the date on which payment of such sum became due until payment thereof in full together with such interest.
7.12 Records. Journey shall keep (and shall ensure that its Affiliates and its Sublicensees keep) such records as are required to determine, in accordance with Accounting Standards, Applicable Law, and this Agreement, the amounts or credits due under this Agreement, including Net Sales. Journey shall retain all such books, records, and accounts until the later of (a) three (3) years after the end of the period to which such books, records and accounts pertain, and (b) the expiration of the applicable tax statute of limitations (or any extensions thereof), or for such longer period as may be required by Applicable Law.
7.13 Audits. DRL may have a nationally recognized, independent certified public accountant access and examine during normal business hours, and upon at least thirty (30) days’ prior written notice, those records of Journey (and its Affiliates and Sublicensees, as applicable) retained pursuant to Section 7.12 as may be reasonably necessary to determine, with respect to any Calendar Year ending not more than three (3) years before such request, the correctness or completeness of any report or payment made under this Agreement. If the audit report concludes that (a) additional amounts were owed by Journey, then Journey shall pay the additional amounts, or (b) excess payments were made by Journey, then DRL shall promptly issue a written credit for such excess payments which shall be applied to future payments, in either case ((a) or (b)), within forty-five (45) days after the date on which such audit report is delivered to both Parties. DRL shall bear the full cost of the performance of any such audit, unless such audit, which covers the entire Calendar Year, discloses a variance to the detriment of DRL that is the greater of (i) [***] ([***]%) of the amounts determined by the independent certified public accountant owed to DRL by Journey during such Calendar Year, or (ii) [***] ($[***]), in each of which cases ((i) and (ii)), Journey shall bear the full cost of the performance of such audit. The results of such audit will be binding on the Parties, absent manifest error. No such audit shall cover a Calendar Year(s) that has/have been previously audited. No audit will begin until Journey and the certified public accountant have entered into a suitable non-disclosure agreement and all information disclosed by Journey in such an audit will remain Confidential Information of Journey under this Agreement, provided, however, the results of audit shall be deemed the Confidential Information of both Parties and provided to both Parties by such auditor.
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7.14 Taxes.
(a) Taxes on Income. Each Party shall pay all taxes imposed on its share of income arising directly or indirectly from the efforts of, or the receipt of any payment by, such Party under this Agreement.
(b) Taxes. All amounts payable under this Agreement, including the Upfront Payment, Milestone Payments, Revenue Based Payments, and other payments, are exclusive of all taxes. Each Party will be responsible for payment of any applicable Taxes relating to this Agreement.
(c) Tax Cooperation. Journey agrees to cooperate with DRL and to use reasonable efforts to reduce or eliminate tax withholding or similar obligations in respect of the Upfront Payment, Milestone Payments, Revenue Based Payments, and other payments made by Journey to DRL under this Agreement. Journey will take into account the Tax Treaty when determining the rate at which withholding tax will be deducted hereunder. The Parties agree that the maximum withholding tax, as of the Effective Date, is [***] ([***]%). Within thirty (30) days of the Effective Date, DRL shall deliver to Journey a properly completed Internal Revenue Service Form W-8BEN-E. DRL shall provide Journey with any other tax forms that may be reasonably necessary in order for Journey not to withhold tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty a reasonable time prior to the date the applicable payment is due. Journey shall provide DRL with reasonable assistance to enable the recovery, as permitted by Applicable Law, of withholding taxes, value added taxes or similar obligations resulting from payments made under this Agreement, such recovery to be for the benefit of DRL.
7.15 No Joint Venture. For clarity, notwithstanding the Revenue Based Payments described in Section 7.6, the Parties acknowledge that they are not sharing any losses arising from the Parties’ performance of their respective obligations or exercise of their respective rights under this Agreement and nothing in this ARTICLE 7 shall be interpreted or construed to create an association, joint venture or partnership between the Parties.
ARTICLE 8
INTELLECTUAL PROPERTY MATTERS
8.1 Ownership of Existing Know-How and Patents. As between the Parties, all Information and Patents Controlled by a Party (with respect to DRL, except the Product IP) prior to the Effective Date or conceived, discovered, developed, or otherwise made separate and apart from this Agreement, shall be owned by the Party Controlling such Information and Patents.
8.2 Ownership of Product IP. As between the Parties, prior to the Transfer Date, all Product IP shall be owned by DRL. Subject to ARTICLE 5, as between the Parties, on and after the Transfer Date, all Product IP shall be owned by Journey.
8.3 Ownership of Journey Improvements. As between the Parties, Journey shall solely own any and all (a) Information that are conceived, discovered, developed, or otherwise made (i)(A) solely by or on behalf of a Party, and (B) jointly by or on behalf of Journey, on the one hand, and DRL, on the other hand, in each case ((A) and (B)), in the course of or as a direct result of the performance of the Development Plan, whether or not patentable, and/or (ii) by Journey during the Term that is (A) generally not known, and (B) necessary or used by Journey to Exploit the Products (collectively, the “Journey Know-How”), and (b) Patents directed to the Journey Know-How that are first disclosed in such Patent to the extent such Journey Know-How was conceived, discovered, developed or otherwise made before the Transfer Date (the “Journey Patents”) and any other intellectual property rights with respect to the Journey Know-How (together with the Journey Know-How and Journey Patents, the “Journey Improvements”).
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8.4 Inventorship. Except as otherwise set forth in this Agreement, inventorship of patentable inventions conceived, discovered, developed, or otherwise made during the performance of activities pursuant to this Agreement will be determined in accordance with U.S. patent laws.
8.5 Addition of Patents to the Licenses Granted to Journey; Information Inquiry.
(a) As of the Effective Date, there are no DRL Background Patents that Cover the Product. If during the Term of this Agreement either Party identifies a Patent in the Territory, other than a Product Patent, that is Controlled by DRL or any of its Affiliates, which contains claims that Cover a Product that Journey is Exploiting in the Territory, the Party that identifies such Patent shall notify the other Party of the existence of a potential DRL Background Patent or Product Patent. Within thirty (30) days after the receipt of such notice, the Parties will promptly discuss in good faith whether such Patent should be included in the licenses granted to Journey hereunder as a DRL Background Patent or a Product Patent. If the Parties agree to designate any such Patent as a DRL Background Patent or a Product Patent, the Parties will promptly enter into an amendment to this Agreement identifying such DRL Background Patent or Product Patent.
(b) After the Transfer Date, prior to Journey incurring any substantial additional cost in Exploiting the Product or realizing a substantial reduction to the value of the Assigned Assets, Journey may confer with DRL to determine whether any DRL Background Know-How that is reasonably necessary (as such term is defined in the definitions of Product Know-How and DRL Background Know-How) exists. For clarity, DRL shall not be responsible for any such additional cost in Exploiting the Product incurred by or on behalf Journey and/or reduction in value of the Assigned Assets realized by Journey, including if (i) Journey does not confer with DRL prior to incurring such additional cost and/or realizing such reduction in the Assigned Assets, and/or (ii) no applicable DRL Background Know-How exists.
8.6 Prosecution of Patents.
(a) Product Patents and Journey Patents. As between the Parties, Journey shall have the primary right and responsibility to prepare, file, prosecute (including any opt-in or out-out decisions under the Unified Patent Court Agreement and related regulations) and/or maintain the Product Patents and Journey Patents. Within thirty (30) days of the Effective Date, DRL will provide Journey’s designated outside counsel with power of attorney to prosecute, maintain, defend, and, if applicable, file and prosecute additional Product Patents. Journey shall bear all costs and expenses in connection with the preparation, filing, prosecution, and/or maintenance of any Product Patents and Journey Patents. Prior to the Transfer Date, Journey shall use outside counsel reasonably acceptable to DRL to prepare, file, prosecute, defend, and/or maintain the Product Patents and Journey Patents. After the Transfer Date, Journey will have the right to prepare, file, prosecute, maintain, and/or defend Product Patents and Journey Patents using any counsel it chooses. If Journey decides not to prepare, file, prosecute, defend, and/or maintain a Product Patent or Journey Patent in any country or other jurisdiction, Journey shall provide reasonable prior written notice to DRL of such decision. DRL shall thereupon have the option, in its sole discretion, to assume the control and direction of the preparation, filing, prosecution, and/or maintenance of such Product Patent or Journey Patent at DRL’s expense in such country or other jurisdiction, except that if the Patent that DRL assumes control of is or subsequently becomes an issued patent containing one or more claims that Cover Products Commercialized by Journey then Journey will reimburse DRL for its expenses in preparing, filing, prosecuting, defending, and/or maintaining such Patent. Journey shall reasonably cooperate with DRL in such country or other jurisdiction as provided under Section 8.6(a).
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(b) DRL Background Patents. As between the Parties, DRL shall have the sole right, but not the obligation, to prepare, file, prosecute (including any opt-in or out-out decisions under the Unified Patent Court Agreement and related regulations) and maintain DRL Background Patents. DRL shall bear all costs and expenses in connection with the preparation, filing, prosecution, and/or maintenance of any DRL Background Patents that do not solely and exclusively relate to the Product. Journey shall bear all costs and expenses in connection with the preparation, filing, prosecution, and/or maintenance of any DRL Background Patent that solely and exclusively relates to the Products. If DRL decides not to prepare, file, prosecute, defend, and/or maintain a DRL Background Patent that Journey has borne costs for under this Section 8.6(b), DRL shall provide reasonable prior written notice to Journey of such decision. Provided that DRL has provided written notice to Journey that, in its good faith sole discretion, it does not have any obligations to any Third Party with respect to any DRL Background Patent, Journey shall thereupon have the option, in its sole discretion, to assume the control and direction of the preparation, filing, prosecution, and/or maintenance of such DRL Background Patent at Journey’s expense in such country or other jurisdiction. DRL shall reasonably cooperate with Journey in such country or other jurisdiction as provided under this Section 8.6(b)
(c) Cooperation. The Parties agree to cooperate fully in the preparation, filing, prosecution, and/or maintenance of the Product Patents and Journey Patents under this Agreement. Such cooperation shall include:
(i) executing all papers and instruments, or requiring its employees or contractors to execute such papers and instruments, so as to (A) effectuate the ownership of intellectual property consistent with the terms and conditions of this Agreement; (B) enable the other Party to apply for and to prosecute Patent applications in the Territory or DRL Territory, as applicable; and (C) obtain and maintain any patent term extensions, supplementary protection certificates, and the like with respect to such Patents in the Territory or DRL Territory, as applicable, in each case ((A), (B), and (C)) to the extent provided for in this Agreement;
(ii) promptly informing the other Party of any matters coming to such Party’s attention that may materially affect the preparation, filing, prosecution, defense, and/or maintenance of any DRL Background Patents, Product Patents, and/or Journey Patents in the Territory or DRL Territory, as applicable; and
(iii) cooperating in the submission of information concerning this Agreement as a joint research agreement for purposes of U.S. patent law and for otherwise addressing any double patenting rejections, issues, and/or allegations that arise under U.S. law in connection with a Product Patent or Journey Patent.
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(d) Patent Term Extensions and Patent Listings. Journey shall be responsible for making decisions regarding patent term extensions, supplementary patent protection certificates and any other extensions that are now or become available in the future, wherever applicable, for any and all Product Patents and Journey Patents. Journey shall have the sole right to make all filings with Regulatory Authorities in the Territory with respect to all Product Patents and Journey Patents, including as required or allowed (i) in the United States, in the FDA’s Orange Book, and (ii) outside the United States, under the national implementations of Article 10.1(a)(iii) of Directive 2001/EC/83 or other international equivalents, provided that DRL will make any necessary Orange Book listing-related submission required to be submitted under Applicable Law prior to the Transfer Date based on reasonable agreement with Journey concerning any such Orange Book listing-related submission.
8.7 Review and Disclosure of Patent Filings. Journey will keep DRL reasonably informed of material steps with regard to (i) the Product Patents and any DRL Background Patents for which Journey has exercised its step-in rights pursuant to Section 8.6(b), and (ii) United States patent applications, Patent Cooperation Treaty patent applications, and/or other patent applications filed in any other country to be filed under this Agreement in the Journey Patents, (in each case (i) and (ii)) or the Exploitation thereof, including by providing DRL with a copy of any material communications to and from any patent authority regarding such Product Patents, DRL Background Patents and/or such patent applications to be filed, and by providing DRL with drafts of any proposed and/or actual material filings or responses to be made to such patent authorities sufficiently in advance of submitting such filings or responses so as to allow for a reasonable opportunity for DRL to review and comment thereon. Journey shall consider in good faith the requests and suggestions of DRL with respect to such drafts and communications. Journey shall promptly disclose to DRL any United States patent applications, Patent Cooperation Treaty patent applications and/or other patent applications filed in any other country filed under this Agreement in the Journey Patents and use reasonable efforts to ensure DRL receives such disclosure(s) in no more than thirty (30) days from any such filing. Prior to the Transfer Date, Journey will not abandon any Product Patents or Journey Patents without DRL’s written consent (provided that the abandonment of the application where a continuation, divisional, or similar continuing application is filed will not be considered an abandonment) and will use its best reasonable efforts to maximize the Coverage of the Product by the Product Patents and Journey Patents, and to not otherwise impair or limit such Patents. Neither Journey nor its counsel will have any attorney-client relationship with DRL or its Affiliates or owe any fiduciary or any other obligation related to the prosecution, maintenance, and defense of the Product Patents or Journey Patents. After the Transfer Date, the Parties will continue to reasonably communicate regarding the status of the Product Patents and Journey Patents, whenever reasonably requested by a Party, at no cost to the other Party.
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8.8 Patent and Know-How Enforcement in the Territory
(a) Notification. If either Party becomes aware of any existing or threatened infringement or misappropriation of any of Product IP, Journey Improvements, and/or DRL Background IP by a Third Party with respect to the Products (including any generic version
thereof) or the Exploitation thereof in the Territory or DRL Territory (“Infringement”), then such Party shall promptly notify the other Party in writing to that effect. For the avoidance of doubt, the term “Infringement” includes any counterclaims alleging that a Product Patent, Journey Patent, and/or DRL Background Patent is invalid or unenforceable or that a product or process does not infringe or misappropriate Product IP, Journey Improvements and/or DRL Background IP, as applicable.
(b) Enforcement Rights and Privilege. For any Infringement, each Party shall share with the other Party all non-privileged information available to it regarding such actual or alleged infringement. In the event that the Parties explicitly agree to consider disclosing potentially privileged information relating to Infringement, other activities relating to Journey Improvements, Product IP, and/or DRL Background IP, the Parties will only do so where both Parties reasonably believe that the facts and circumstances support the finding that they have a common interest/joint privilege in the subject matter related to such disclosure sufficient to reasonably maintain such privilege. Upon request of either Party, the Parties will negotiate and execute a Commercially Reasonable common interest agreement relating to such disclosures.
(i) Enforcement Rights prior to Transfer Date.
(A) As between the Parties, prior to the Transfer Date, with respect to the Product IP, DRL will have the first right, but not the obligation, to bring an appropriate suit or other action against any Person engaged in such Infringement; provided that Journey shall bear all reasonable and documented out-of-pocket costs incurred by DRL in connection with enforcing its rights against such Infringement in the Territory that substantially conform to a budget that is subject to Journey’s reasonable prior approval. If, prior to the Transfer Date, DRL fails to commence enforcement of any Product IP against an Infringement in the Territory within a period of twenty five (25) days after either Party has delivered a notice of Infringement, then Journey may commence a suit or take action in the Territory to enforce such Product IP against such Infringement at Journey’s sole cost and expense, and DRL shall take appropriate actions to enable Journey to commence such suit or take such actions (including allowing Journey to name DRL as a Party to any litigation related to such Infringement if reasonably required for purposes of standing or otherwise).
(B) As between the Parties, prior to the Transfer Date, with respect to any Journey Improvements, Journey will have the first right, but not the obligation, to bring an appropriate suit or other action against any Person engaged in such Infringement, and DRL shall take appropriate actions to enable Journey to commence such suit or take such actions. If, prior to the Transfer Date, Journey fails to commence enforcement of any Journey Improvements against an Infringement in the DRL Territory within a period of twenty five (25) days after a request from DRL to do so, then DRL may commence a suit or take action in the DRL Territory to enforce such Journey Improvements against such Infringement at its sole cost and expense, and Journey shall take appropriate actions to enable DRL to commence such suit or take such actions (including allowing Journey to name DRL as a Party to any litigation related to such Infringement if reasonably required for purposes of standing or otherwise).
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(C) As between the Parties, prior to the Transfer Date, with respect to the DRL Background IP, DRL will have the first right, but not the obligation, to bring an appropriate suit or other action against any Person engaged in such Infringement; provided that Journey shall bear all reasonable and documented out-of-pocket costs incurred by DRL in connection with enforcing its rights against such Infringement in the Territory and substantially conforming to a budget subject to Journey’s reasonable prior approval. Provided that DRL has provided written notice to Journey that, in its good faith sole discretion, it does not have any obligations to any Third Party with respect to any DRL Background Patent, if, prior to the Transfer Date, DRL fails to commence enforcement of any DRL Background Patent against an Infringement in the Territory within a period of twenty five (25) days after either Party has delivered a notice of Infringement, then Journey may commence a suit or take action in the Territory to enforce such DRL Background Patent against such Infringement at Journey’s sole cost and expense, and DRL shall take appropriate actions to enable Journey to commence such suit or take such actions (including allowing Journey to name DRL as a Party to any litigation related to such Infringement if reasonably required for purposes of standing or otherwise); provided that Journey shall keep DRL reasonably informed with regard to such Infringement, including by providing DRL with a copy of material documentation relating to such Infringement. Journey shall incorporate the reasonable requests and suggestions of DRL with respect to such Infringement.
(ii) Enforcement Rights after Transfer Date.
(A) On and after the Transfer Date with respect to the DRL Background IP, DRL will have the sole right, but not the obligation, to bring an appropriate suit or other action against any Person engaged in Infringement; provided that Journey shall bear all reasonable and documented out-of-pocket costs incurred by DRL in connection with enforcing its rights against such Infringement in the Territory and substantially conforming to a budget subject to Journey’s reasonable prior approval. Provided that DRL has provided written notice to Journey that, in its good faith sole discretion, it does not have any obligations to any Third Party with respect to any DRL Background Patent, if, after the Transfer Date, DRL fails to commence enforcement of any DRL Background Patent against an Infringement in the Territory within a period of twenty five (25) days after either Party has delivered a notice of Infringement, then Journey may commence a suit or take action in the Territory to enforce such DRL Background Patent against such Infringement at Journey’s sole cost and expense, and DRL shall take appropriate actions to enable Journey to commence such suit or take such actions (including allowing Journey to name DRL as a Party to any litigation related to such Infringement if reasonably required for purposes of standing or otherwise); provided that Journey shall keep DRL reasonably informed with regard to such Infringement, including by providing DRL with a copy of material documentation relating to such Infringement. Journey shall incorporate the reasonable requests and suggestions of DRL with respect to such Infringement.
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(B) As between the Parties, on and after the Transfer Date, with respect to the Product IP and/or Journey Improvements, Journey will have the first right to bring a suit or other action against any Person engaged in Infringement and Journey will be responsible for all costs associated with any such suit or other action. If, on and after the Transfer Date, Journey fails to commence enforcement of the Product IP and/or Journey Improvements against an Infringement within twenty five (25) days following a request from DRL to do so, then DRL may commence a suit or take action to enforce such Product IP and/or Journey Improvements against such Infringement, and Journey shall take appropriate actions to enable DRL to commence such suit or take such actions; provided that Journey shall bear all reasonable and documented out-of-pocket costs incurred by DRL in connection with enforcing its rights against such Infringement in the Territory.
(C) Settlement and Recovery. Neither Party will settle any claim, suit, or action that it brought under this Section 8.8 with respect to Product IP and/or Journey Improvements in any manner that (1) imposes any costs or liability on, or involves any admission by, the other Party, or (2) materially limits the scope, enforceability, patentability, or term of the Product IP and/or Journey Improvements without the other Party’s written approval, which approval will not be unreasonably withheld, conditioned, and/or delayed. For clarity, Journey shall not have any right to settle any claim, suit, or action with respect to DRL Background IP. Any and all recoveries obtained by a Party will first be allocated first to the reimbursement of any expenses incurred by the Parties in connection with such claim, suit, or action. Thereafter, to the extent that any remaining recoveries are directly based on lost profits on sales of a Product any such lost profits will be treated as Net Sales of a Product. All other recoveries will be retained by the Party that obtained such recoveries from the claim, suit, or action.
(iii) Cooperation in Enforcement. Each Party shall provide to a Party enforcing intellectual property rights against Infringement in the Territory any reasonable assistance in such enforcement, at such enforcing Party’s request and expense, including joining such action as a party plaintiff if required by Applicable Law to pursue such a suit or other action.
(iv) Rights of a Party with the First Right of Enforcement when It Elects Not to Enforce to Stop Infringement in the Territory. In any suit or other action under this Section in which the Party with the first right to initiate suit or other action (the “Non-Enforcing Party”) has not instituted a suit or other action to stop Infringement in the Territory, the enforcing Party shall (X) keep the Non-Enforcing Party regularly informed of the status and progress of such enforcement efforts, and (Y) reasonably consider the Non-Enforcing Party’s comments on any such enforcement efforts. The Non-Enforcing Party in such suits or actions may obtain separate representation in such matter by counsel of its own choice and at its own cost and expense, but such Non-Enforcing Party shall at all times cooperate fully with the enforcing Party. The enforcing Party bringing any such suit or other action will be entitled to all recoveries arising from such suit or other action.
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8.9 Infringement of Third Party Claim.
(a) If the Product becomes the subject of a Third Party’s claim or assertion of infringement of a Patent (each such claim or assertion, a “Third Party Infringement Claim”) granted by a jurisdiction within the Territory, then Journey shall have the sole right and responsibility to resolve such Third Party Infringement Claim at its sole cost and expense. DRL shall reasonably assist Journey in such defense if requested by Journey, at Journey’s sole cost and expense.
(b) Journey shall keep DRL reasonably informed with respect to the defense and settlement of Third Party Infringement Claims pursuant to this Section 8.9.
8.10 Invoices. In the event that a Party is entitled to reimbursement of costs and expenses pursuant to this ARTICLE 8 (and such costs and expenses are not DRL Development Costs, which shall be invoiced and paid in accordance with Section 4.2(g)), the Party entitled to reimbursement shall invoice the other Party for all such costs and expenses along with suitable documentation evidencing each such cost and expense and such other Party shall pay all undisputed costs and expenses within thirty (30) calendar days of receipt of an applicable invoice.
8.11 Trademarks. Except as otherwise set forth in this Agreement, no rights to any trademarks or trade dress are granted in this Agreement. Journey shall have the right to determine all Product Trademarks to be used with respect to the Exploitation of the Products in the Territory and DRL shall have the sole right to determine DRL Territory Trademarks to be used with respect to the Exploitation of the Product in the DRL Territory. Each Party will present proposed Trademarks for the Product for use in the Territory or DRL Territory for the Product, as applicable. Each Party will ensure that any Trademarks used by such Party are not reasonably likely to be considered confusingly similar to any Trademarks that are already in commercial use by the other Party or for which such other Party has filed a Trademark application or registration. If a Trademark for the Product of a Party is reasonably likely to be considered confusingly similar to a Trademark for the Product of the other Party that is already in use by such other Party or such other Party has already filed a Trademark application or registration, such non-using Party (or the Party that does not own the filed Trademark application or registration) shall not proceed with the use of such Trademark.
8.12 Domain Names. Journey may, at its cost, register as domain names the Product Trademarks in any country or other jurisdiction in the Territory using any available generic top-level domain or country-code top-level domain. DRL may, at its cost, register as domain names the DRL Territory Trademarks in the DRL Territory using the country-code top-level domain. Neither Party will actively use any web site associated with a domain name that incorporates a Trademark of the other Party, its Affiliates, or sublicensees, that is associated with Products.
ARTICLE 9
REPRESENTATIONS AND WARRANTIES; COVENANTS
9.1 Mutual Representations and Warranties. Each Party hereby represents and warrants to the other Party as follows, as of the Effective Date:
(a) Corporate Existence. It is a company or corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction in which it was incorporated or formed;
(b) Corporate Power. It has the corporate power and authority and the legal right to enter into this Agreement and perform its obligations hereunder;
(c) Authority. It has taken all necessary corporate action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder;
(d) Binding Agreement. This Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, and binding obligation of such Party that is enforceable against it in accordance with its terms, subject to enforcement of remedies under applicable bankruptcy, insolvency, reorganization, moratorium, and/or similar laws affecting generally the enforcement of creditors’ rights and subject to a court’s discretionary authority with respect to the granting of a decree ordering specific performance or other equitable remedies;
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(e) Good Faith and Fair Dealing. Nothing in this Agreement shall be deemed a waiver of the implied duty of good faith and fair dealing under Applicable Law;
(f) No Conflict. The execution and delivery of this Agreement, the performance of such Party’s obligations hereunder, and the rights, licenses, and sublicenses to be granted pursuant to this Agreement (i) do not and will not conflict with or violate any requirement of Applicable Law; (ii) do not and will not conflict with or violate the certificate of incorporation, by-laws, and/or other organizational documents of such Party; and (iii) do not and will not conflict with, violate, breach, and/or constitute a default under any contractual obligations of such Party or any of its Affiliates;
(g) No Consents. No authorization, consent, and/or approval of a Third Party, nor any license, permit, exemption of or filing or registration with or notification to any court or Governmental Authority is or will be necessary for the (i) valid execution, delivery, and/or performance of this Agreement by either Party; or (ii) the consummation by each Party of the transactions contemplated hereby;
(h) Other Rights. Neither Party nor any of their respective Affiliates is a party to or otherwise bound by any oral or written contract or agreement that will result in any Third Party obtaining any interest in, or that would give to any other person any right to assert any claim in or with respect to, any of such Party’s rights under this Agreement; and
(i) No Debarment. None of such Party’s employees, consultants, and/or contractors:
(i) is debarred under Section 306(a) or 306(b) of the FD&C Act and/or by the analogous laws of any Regulatory Authority;
(ii) has, to such Party’s knowledge, been charged with, or convicted of, any felony or misdemeanor within the ambit of 42 U.S.C. §§1320a-7(a), 1320a-7(b)(l)-(3), or pursuant to the analogous laws of any Regulatory Authority, and/or is proposed for exclusion, or the subject of exclusion or debarment proceedings by a Regulatory Authority; and
(iii) is excluded, suspended, and/or debarred from participation, or otherwise ineligible to participate, in any U.S. or non-U.S. healthcare programs (or has been convicted of a criminal offense that falls within the scope of 42 U.S.C. §1320a-7 but not yet excluded, debarred, suspended, and/or otherwise declared ineligible), or excluded, suspended, and/or debarred by a Regulatory Authority from participation, or otherwise ineligible to participate, in any procurement or non-procurement programs.
9.2 Fundamental Representations and Warranties of DRL. DRL represents warrants to Journey, the following, as of the Effective Date (collectively, the “Fundamental Representations and Warranties”):
(a) Title; Encumbrances. (i) DRL is the sole and exclusive owner of the entire right, title and interest in the Product Patents, the Product Know-How, and the Product Regulatory Materials; (ii) to DRL’s Knowledge, no Third Party has taken any action or threatened to take any action before any patent or trademark office (or court or other Governmental Authority) that would render any of the Product IP invalid, unpatentable, or unenforceable, or that would change the ownership of any Product Patents (including changing the inventorship of any Product Patents to an inventor not currently named in any Product Patents); (iii) DRL is entitled to grant the licenses and to make the assignments, conveyances, sales, and transfers specified herein; (iv) DRL holds the Product Patents and Product Regulatory Materials free and clear from any Encumbrances, and (v) DRL has not granted any licenses or other rights to any Third Party that include any of the Assigned Assets, or taken any other actions inconsistent with the grants of rights to Journey in this Agreement;
(b) Completeness of the Product Patents. The Product Patents are the only Patents Controlled by DRL or its Affiliates in the Territory that contain claims that Cover the Products; and
(c) No Grant of Rights to Third Parties. Neither DRL nor any of its Affiliates has granted any rights with respect to the Assigned Assets (including by granting any covenant not to sue with respect to the Product IP);
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9.3 Additional Representations and Warranties of DRL. DRL additionally represents warrants to Journey, the following, as of the Effective Date:
(a) No Infringement or Misappropriation. DRL has not received any written notice from any Third Party asserting or alleging and to DRL’s Knowledge no Third Party has otherwise asserted or alleged that (i) any Exploitation of the Product by DRL before the Effective Date infringed or misappropriated the intellectual property rights of a Third Party in the Territory, or (ii) any Manufacturing and/or Commercialization of the Product in the Territory after issuance of a Regulatory Approval by FDA would infringe or misappropriate the intellectual property rights of any Third Party;
(b) Prosecution and Maintenance of Product Patents. To DRL’s Knowledge, the Product Patents have been diligently prosecuted in accordance with Applicable Law in the respective patent offices in the Territory in which such Patents have been filed;
(c) Patent Disclosures. DRL has accurately and completely disclosed to the US Patent and Trademark Office all references or other evidence material to patentability under Applicable Law, of which DRL has Knowledge;
(d) IP Invalidity, Unenforceability, or Unpatentability Claims. No Third Party, except a patent examiner and/or patent office in the ordinary course of patent prosecution, has alleged either in writing or to DRL’s Knowledge otherwise that any Product Patent is invalid, unpatentable, and/or unenforceable;
(e) Inventors. To DRL’s Knowledge, each of the Patents listed on Exhibit D properly identifies each and every inventor of the claims thereof as determined in accordance with the laws of the jurisdiction in which such Patent is issued, or such application is pending;
(f) Infringement by Third Parties. To DRL’s Knowledge, no Person is infringing and/or misappropriating or threatening to infringe or misappropriate the Product IP;
(g) No Unauthorized Use. Neither DRL nor any of its Affiliates has received any written notice of or, to DRL’s Knowledge, is otherwise aware of any actual or threatened unauthorized use, infringement, or misappropriation by any Person, including any current or former employee or consultant of DRL or any of its Affiliates, of the Product IP or the Product;
(h) No Undisclosed Material Obligations. To DRL’s Knowledge, DRL has in good faith disclosed to Journey all current material Obligations with respect to the Assigned Assets that exist as of the Effective Date (for the avoidance of doubt, DRL has no obligation under this representation and warranty to disclose to Journey any anticipated Obligations, including any such Obligation that Journey may incur after the Effective Date in Exploiting the Products that are not specific to the Assigned Assets, such as any general risks relating to failure in conducting Clinical Studies, prosecuting and enforcing Patents, and similar risks that generally arise in the ordinary course of Developing and otherwise Exploiting pharmaceutical products);
(i) Development Cost Estimate and Estimated Budget. To DRL’s Knowledge and taking into account (i) the costs estimates submitted by Third Parties, (ii) the “Notes and Assumptions” set forth in the Draft Development Plan, and (iii) any other factors over which DRL has no control, the costs in the estimated budget in the Draft Development Plan reflect DRL’s good faith estimate of the Development Costs that would reasonably be incurred by DRL in its performance of the Draft Development Plan, in the manner that DRL would reasonably perform the Draft Development Plan in the absence of this Agreement;
(j) Compliance with Laws; Good Practices. To DRL’s Knowledge, DRL’s Development and Manufacture of the Products and development of the Assigned Assets has been carried out in accordance with all Applicable Laws in all material respects, including GLP, GCP and GMP;
(k) Safety Issues. To DRL’s Knowledge, there are no material safety issues, including any facts, data, findings, analysis, information, or belief that there is a substantial risk of Products Exploited by DRL prior to the Effective Date posing a risk to patient health or safety; and
(l) Regulatory and Development Records. DRL has disclosed true, accurate, and complete copies of all material Regulatory Materials, and any documents and/or other records in Product Know-How that are material to Development, Manufacture, Commercialization, and/or Exploitation of the Product to Journey, including all material chemistry, manufacturing, and control (CMC) records.
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9.4 Additional Representations and Warranties of Journey. Journey represents warrants to DRL, the following, as of the Effective Date:
(a) Journey has been provided all opportunity to review the Draft Development Plan and to ask of DRL any questions, and request any further information, related to the Development of the Product.
(b) Prior to the Effective Date, Journey has provided DRL with unaudited financial statements that are true, accurate and complete in all material respects and fairly present in all material respects the financial condition of Journey as of the quarter ended March 31, 2021 and the year ended December 31, 2020.
9.5 Additional Specific Covenants.
(a) No Debarment. In the course of the Development, Manufacturing, and/or Commercialization of the Product, neither Party nor their respective Affiliates (and, as it relates to Journey, any Sublicensees) shall use any employee, consultant, or other contractor:
(i) who has been debarred under Section 306(a) or 306(b) of the FD&C Act or pursuant to the analogous Applicable Laws of any Regulatory Authority;
(ii) who, to such Party’s knowledge, has been charged with, and/or convicted of, any felony or misdemeanor within the ambit of 42 U.S.C. §§1320a-7(a), 1320a-7(b)(l)-(3), or otherwise pursuant to the analogous laws of any Regulatory Authority, or is proposed for exclusion, or the subject of exclusion or debarment proceedings by a Regulatory Authority, during the employee’s or consultant’s employment or contract term with such Party; and/or
(iii) who is excluded, suspended, and/or debarred from participation, and/or otherwise ineligible to participate, in any U.S. or non-U.S. healthcare programs (or who has been convicted of a criminal offense that falls within the scope of 42 U.S.C. §1320a-7 but has not yet been excluded, debarred, suspended or otherwise declared ineligible), and/or excluded, suspended or debarred by a Regulatory Authority from participation, and/or otherwise ineligible to participate, in any procurement or non-procurement programs.
(b) Notice. Each Party shall notify the other Party promptly, but in no event later than three (3) Business Days, upon becoming aware that any of its employees, consultants, and/or contractors has been excluded, debarred, suspended, and/or is otherwise ineligible, and/or is the subject of exclusion, debarment, and/or suspension proceedings by any Regulatory Authority.
(c) No Violation. Neither Party nor any of its Affiliates will enter into any obligation to any Person, contractual or otherwise, that, by its terms, directly conflicts with and/or is inconsistent with in any material respect of the terms of this Agreement and/or would materially impede the fulfillment of such Party’s obligations hereunder.
(d) Healthcare, Anti-Bribery and Anti-Corruption Compliance.
(i) Each Party shall perform and shall cause all of its employees and agents to perform, its obligations under this Agreement in full compliance with all Healthcare Laws and Anti-Corruption Laws.
(ii) Each Party shall not, in connection with the performance of its obligations under this Agreement, (A) make or submit any claim, bill, and/or other document seeking payment from Medicare, Medicaid, and/or any similar governmental program, constituting a false claim, as defined by the Federal False Claims Act, and all such claims, bills or other documents shall comply with all applicable billing and service requirements, (B) be party to any unlawful contract, lease, agreement, joint venture, and/or other arrangement with any health system, hospital, ambulatory surgery center, and/or other health care facility, physician, or other healthcare provider, and/or immediate family member thereof, and/or other Person who is in a position to make or influence referrals to or otherwise generate business for such Party, except in compliance in all material respects with all Applicable Laws, and/or (C) pay any remuneration, in cash or in kind, to any physician or provider except in accordance with the express terms of such physician or provider’s written agreement with such Party and/or any Affiliate thereof.
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(iii) Each Party, on behalf of itself, its officers, directors, and employees and on behalf of its Affiliates, agents, representatives, consultants, and subcontractors hired in connection with the subject matter of this Agreement (together with such Party and with respect to each Party, “Party Representatives”) agrees that in connection with the performance of its obligations hereunder, the Party Representatives shall not directly or indirectly pay, offer or promise to pay, and/or authorize the payment of any money, or give, offer, and/or promise to give, and/or authorize the giving of anything else of value, to:
(A) any Government Official in order to influence official action;
(B) any Government Official (1) to influence such Person to act in breach of a duty of good faith, impartiality, and/or trust (“acting improperly”), (2) to reward such Person for acting improperly, and/or (3) where such Person would be acting improperly by receiving the money or other thing of value;
(C) any political party, official of a political party, and/or candidate unless authorized under Applicable Law;
(D) any other Person while knowing or having reason to believe that all or any portion of the money or other thing of value will be paid, offered, promised, and/or given to, or will otherwise benefit, a Government Official or political party, official of a political party, and/or candidate in order to influence official action for or against either Party in connection with the matters that are the subject of this Agreement; and/or
(E) any other Person in a corrupt or improper effort to obtain or retain business or any commercial advantage, such as receiving a permit or license.
(iv) In connection with performing its obligations under this Agreement, each Party Representative shall not, directly or indirectly, solicit, receive, and/or agree to accept any payment of money or anything else of value that constitutes an Anti-Corruption Law Violation.
(v) Each Party will, and will cause its Party Representatives to, keep and maintain accurate books and reasonably detailed records reasonably required to establish compliance with Sections 9.1(i)(iii), 9.5(d)(i), and 9.5(d)(iv) during the Term and for a period of three (3) years thereafter.
(vi) Each Party will, and will cause all Persons acting on its behalf to, comply with the Healthcare Laws and Anti-Corruption Laws in connection with all work under this Agreement and each Party shall be responsible for any breach of any representation, warranty, covenant, or undertaking in this Section 9.4(d), or of the Healthcare Laws or Anti-Corruption Laws by any of its Party Representatives.
(vii) Each Party may disclose applicable terms and conditions of this Agreement or any action taken under this Section 9.4(d) to prevent a potential violation or address a continuing violation of applicable Healthcare Law or Anti-Corruption Laws solely as set forth with Section 11.2.
9.6 Non-Competition. During any portion of the Term of this Agreement following the Transfer Date:
(a) DRL will not, directly or indirectly, Commercialize, or aid, solicit, or otherwise cause any Person to Commercialize, in the Territory, Products or any other product containing minocycline or any salt of minocycline as the active pharmaceutical ingredient and that (i) has the same dosage strength (equal to or greater than 10 mg and less than or equal to 40 mg) and route and mode of administration (which is oral solid) as the Products and/or (ii) is approved by a Regulatory Authority in the Territory for the treatment of any aspect of rosacea (“Competing Product”); and
(b) Journey will not, directly or indirectly, Commercialize, or aid, solicit, or otherwise cause any Person to Commercialize, in the DRL Territory, the Products or any Competing Products.
9.7 No Parallel Importation. DRL, its Affiliates, and sublicensees will not engage in any activity that would lead to importation of the Product from the DRL Territory into the Territory, nor will DRL, its Affiliates, and sublicensees assist any Third Party to import Products from the DRL Territory into the Territory except in connection with any Development permitted under this Agreement. Journey, its Affiliates, and Sublicensees will not engage in any activity that would lead to importation of Products from the Territory into the DRL Territory, nor will Journey, its Affiliates, and Sublicensees assist any Third Party to import Products from the Territory into the DRL Territory except in connection with any Development permitted under this Agreement.
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9.8 No Other Representations or Warranties. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, AND OTHER THAN IN CIRCUMSTANCES CONSTITUTING FRAUD, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR NON-MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS, ARE MADE OR GIVEN BY OR ON BEHALF OF A PARTY, AND ALL SUCH ADDITIONAL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY EXPRESSLY EXCLUDED.
ARTICLE 10
INDEMNIFICATION
10.1 Survival of Representations, Warranties and Covenants. The representations, warranties, and covenants of DRL contained in this Agreement and all claims with respect thereto shall survive for a period of [***] months from the Effective Date; except that (a) the covenants set forth in ARTICLE 4 shall survive until the Transfer Date, (b) the Fundamental Representations and Warranties shall survive for a period of [***] years from the Effective Date; (c) the representations and warranties set forth in Section 9.1 shall survive until the expiration of the applicable statute of limitations, and (d) the representations, warranties, and/or covenants set forth in ARTICLE 6, ARTICLE 8, Section 9.6 and 9.7 and ARTICLE 11, shall survive until this Agreement expires or is terminated or as set forth in Section 12.11, whichever is longer. Any right of indemnification pursuant to this ARTICLE 10 with respect to a claimed breach of a representation, warranty or covenant shall expire at the date of termination of the representation, warranty, or covenant claimed to be breached.
10.2 Indemnification by DRL. DRL shall, at its sole expense, defend, indemnify, and hold Journey, its Affiliates, and their respective officers, directors, employees and agents (the “Journey Indemnitees”) harmless from and against any and all damages, losses, liabilities, taxes, costs, expenses (including court costs and reasonable attorneys’ fees and expenses) and recoveries (collectively, “Losses”) arising from claims, suits, and/or proceedings brought by Third Parties (collectively, “Claims”) arising out of, based on, and/or resulting from (a) the material breach of any of DRL’s obligations under this Agreement, including DRL’s representations, warranties, and/or covenants hereunder, (b) the Commercialization of the Products by or on behalf of DRL in the DRL Territory, or (c) the willful misconduct and/or grossly negligent acts of DRL or any DRL Indemnitee. The foregoing indemnity obligation will not apply (i) to the extent that such Claims or Losses arise out of or result from the fraud, gross negligence, and/or willful misconduct of a Journey Indemnitee, and/or any related breach by Journey of its representations, warranties, and/or covenants hereunder; and/or (ii) to Claims or Losses for which DRL has an obligation to indemnify Journey pursuant to Section 10.3, as to which Claims or Losses each Party shall indemnify the other to the extent of its respective liability for such Claims or Losses.
10.3 Indemnification by Journey. Journey shall, at its sole expense, defend, indemnify and hold DRL and its Affiliates and their respective officers, directors, employees, and agents (the “DRL Indemnitees”) harmless from and against any and all Losses arising from Claims to the extent that such Claims arise out of, are based on, and/or result from (a) the material breach of any of Journey’s obligations under this Agreement, including Journey’s representations and warranties, and/or covenants, (b) the willful misconduct and/or grossly negligent acts of Journey or any Journey Indemnitee, (c) any acts or omissions of Journey (or its designee) and/or its Affiliates and Journey’s and/or its Affiliates’ respective Sublicensees, or its Acquiror, while acting as DRL’s “regulatory agent” in accordance with Section 4.1(a)(iv), (d) the Development of the Products by or on behalf of Journey and/or its Affiliates and Journey’s and/or its Affiliates’ respective Sublicensees, or its Acquiror, (e) the Assumed Liabilities, and (f) the Exploitation of the Products in the Territory by or on behalf (including by Third Party Suppliers) of Journey or its Affiliates, its or their respective Sublicensees, or its Acquiror. The foregoing indemnity obligation will not apply (i) to the extent that such Claims or Losses arise out of or result from the fraud, gross negligence, and/or willful misconduct of DRL or its Affiliates, and/or any related breach by DRL of its representations, warranties, and/or covenants hereunder; and/or (ii) to Claims or Losses for which DRL has an obligation to indemnify Journey pursuant to Section 10.1, as to which Claims or Losses each Party shall indemnify the other to the extent of its respective liability for such Claims or Losses.
10.4 Indemnification Procedures. The Party claiming indemnity under this ARTICLE 10 (the “Indemnified Party”) shall give written notice to the Party from whom indemnity is being sought (the “Indemnifying Party”) promptly after learning of such Claim or Loss; provide that no delay on the part of the Indemnified Party in notifying the Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then only to the extent that) the Indemnifying Party is prejudiced thereby. The Indemnified Party shall provide the Indemnifying Party with reasonable assistance, at the Indemnifying Party’s sole cost and expense, in connection with the defense of a Claim for which indemnification is being sought. The Indemnified Party may participate in and monitor such defense with counsel of its own choosing at its sole cost and expense. The Indemnifying Party shall not settle any Claim without the prior written consent of the Indemnified Party, not to be unreasonably conditioned, withheld, and/or delayed, unless the settlement involves only the payment of money and includes a complete release of claims for the Indemnified Party. If the Indemnifying Party is actively defending the Claim in good faith, the Indemnified Party shall not settle or compromise any such Claim without the prior written consent of the Indemnifying Party. If the Indemnifying Party does not assume and conduct the defense of the Claim within thirty (30) days after receipt of written notice thereof from the Indemnified Party, then (a) the Indemnified Party may defend against, consent to the entry of any judgment, or enter into any settlement with respect to such Claim in any manner the Indemnified Party may deem reasonably appropriate (and the Indemnified Party need not consult with, but will obtain any consent (not to be unreasonably withheld) from, the Indemnifying Party in connection therewith) and (b) the Indemnifying Party will remain responsible to indemnify the Indemnified Party as provided in this ARTICLE 10.
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10.5 Limitation of Liability.
(a) Exclusion of Certain Damages. NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR INDIRECT DAMAGES ARISING FROM OR RELATING TO THIS AGREEMENT, WHETHER ARISING FROM A DIRECT CLAIM OR THIRD PARTY CLAIM, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES OR WHETHER SUCH PARTY SHOULD HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGES, INCLUDING FOR ANY SUCH LOST PROFITS, LOST REVENUE, OR LOST BUSINESS, EXCEPT FOR (I) BREACHES OF A PARTY’S OBLIGATIONS UNDER SECTIONS 4.1(a)(iv), 4.3(c) (SOLELY WITH RESPECT TO THE OBLIGATIONS OF DRL UNDER SECTION 4.3(c) WITHIN DRL’S REASONABLE CONTROL), 5.1, 6.3 (WITH RESPECT TO 6.3(b)-(c), SOLELY WITH RESPECT TO CONDUCT BY DRL AND/OR ITS AFFILIATES), 9.1, 9.2, 9.3, 9.4, 9.5, 9.6(a) (SOLELY WITH RESPECT TO CONDUCT BY DRL), 9.6(b) (SOLELY WITH RESPECT TO CONDUCT BY JOURNEY AND/OR ITS AFFILIATES), 9.7 (SOLELY WITH RESPECT TO CONDUCT BY DRL AND/OR ITS AFFILIATES), AND ARTICLE 11, (II) ANY SUCH DAMAGES ARISING IN CONNECTION WITH A PARTY’S OBLIGATIONS UNDER SECTIONS 10.2 AND 10.3, RESPECTIVELY.
(b) Basket and Cap. IN NO EVENT SHALL DRL BE LIABLE TO JOURNEY FOR ANY LOSSES RELATING TO THIS AGREEMENT, WHETHER ARISING FROM A DIRECT CLAIM OR THIRD PARTY CLAIM, (i) UNTIL SUCH LOSSES EXCEED [***] ($[***]) (AND THEN JOURNEY SHALL BE ENTITLED TO LOSSES ONLY FOR THE PORTION OF THE LOSSES THAT EXCEED SUCH AMOUNT), AND (ii) THE AMOUNT OF LOSSES THAT JOURNEY MAY CLAIM SHALL BE CAPPED AT THE FOLLOWING PERCENTAGE OF THE AMOUNTS ACTUALLY PAID TO DRL AS OF THE DATE THE EVENT GIVING RISE TO THE CLAIM AROSE: (A) UP TO [***] ([***]%) OF THE ACTUAL FTE COST PAID BY JOURNEY TO DRL FOR A CLAIM THAT DRL BREACHED ARTICLE 4 (B) [***] ([***]%) FOR A CLAIM THAT DRL BREACHED SECTION 9.1 OR SECTION 9.2, AND (C) [***] ([***]%) FOR A CLAIM THAT DRL BREACHED ANY OTHER SECTION OF THIS AGREEMENT. FOR CLARITY, ONCE JOURNEY HAS BEEN PAID BY DRL IN SATISFACTION OF A CLAIM PURSUANT TO (ii) ABOVE, JOURNEY SHALL ONLY BE ENTITLED TO THE DIFFERENCE BETWEEN DRL’S CAPPED LIABILITY FOR ANY SUBSEQUENT CLAIM AND THE AMOUNT(S) ALREADY PAID BY DRL, IF THE DIFFERENCE IS A POSITIVE NUMBER. FOR FURTHER CLARITY, THE FOREGOING LIMITATIONS SHALL NOT APPLY IN THE EVENT OF FRAUD OR FOR BREACHES OF DRL’S OBLIGATIONS UNDER SECTIONS 4.3(b), 4.3(c), 6.3, 8.11, 8.12, 9.6, 9.7, AND ARTICLE 11.
(c) NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 10.5 IS INTENDED TO LIMIT OR RESTRICT DAMAGES OR LOSSES ARISING FROM A PARTY’S FRAUD (INCLUDING INEQUITABLE CONDUCT), GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT.
10.6 Insurance. Each Party shall procure and maintain insurance, including product liability insurance and clinical trial insurance, or shall self-insure, in each case, in a manner adequate to cover its obligations hereunder and consistent with normal business practices of prudent pharmaceutical companies similarly situated at all times during which the Product is being clinically tested or commercially distributed or sold by or on behalf of a Party (including if reasonably requested adding the other Party as an additional insured on such policies). Each Party shall procure insurance or self-insure at its own expense. Each Party will disclose reasonable details concerning its compliance with this Section 10.6 upon the reasonable request of the other Party. Such insurance does not create a limit of either Party’s liability with respect to its indemnification obligations under this ARTICLE 10. Each Party shall provide the other Party with written evidence of such insurance or self-insurance upon request.
ARTICLE 11
CONFIDENTIALITY
11.1 Confidentiality. Each Party agrees that, during the Term and for the later of (i) a period of five (5) years thereafter or (ii) in the case of any Confidential Information that is a trade secret under Applicable Law for so long as such information maintains its status as a trade secret, it and its Affiliates shall keep confidential and shall not publish or otherwise disclose and shall not use for any purpose other than to exercise its rights or perform its obligations under this Agreement (which includes the exercise of any rights or the performance of any obligations hereunder or thereunder) any Confidential Information furnished to it or its Affiliate by the other Party or its Affiliate pursuant to this Agreement, except to the extent expressly authorized by this Agreement or as otherwise agreed to in writing by the Parties. Each Party shall further require its Affiliates, and to ensure its and their respective directors, officers, employees, agents, consultants, sublicensees, contractors, partners, Acquirors, assignees, and distributors (collectively, “Recipients”) who receive the other Party’s Confidential Information either agree, in writing, or are otherwise subject to legal professional ethical obligations requiring such Persons, to be bound by duties and obligations of confidentiality and non-use no less stringent than those contained in this Section 11.1. The foregoing confidentiality and non-use obligations do not apply to any portion of the disclosing Party’s Confidential Information that the receiving Party can demonstrate by competent written proof maintained in the ordinary course of business:
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(a) was already known to or otherwise in the possession of, the receiving Party, other than under an obligation of confidentiality, prior to the time of disclosure by the disclosing Party or its Affiliate, as evidenced by contemporaneous writing;
(b) was part of the public domain at the time of its disclosure to the receiving Party or any of its Recipients;
(c) became part of the public domain after its disclosure and other than through any act or omission of the receiving Party or any of its Recipients in breach of this Agreement;
(d) was disclosed to the receiving Party on a non-confidential basis by a Third Party who, to the receiving Party’s knowledge after due inquiry, had a legal right to make such disclosure; or
(e) was independently discovered or developed by the receiving Party or its Affiliate without aid, application, reference to or use of the disclosing Party’s Confidential Information, as evidenced by a contemporaneous writing.
11.2 Authorized Disclosure. Notwithstanding the obligations set forth in Section 11.1, a Party or its Affiliate may disclose the other Party’s Confidential Information and the terms of this Agreement to the extent:
(a) such disclosure is reasonably necessary (i) for the filing or prosecuting of Patent rights as contemplated by this Agreement; (ii) to comply with the requirements of Regulatory Authorities with respect to obtaining and maintaining Regulatory Approval of the Product or submission of information to tax or other Governmental Authorities; or (iii) for prosecuting or defending litigation as contemplated by this Agreement (including enforcing trade secret rights in the Product Know-How);
(b) such disclosure is reasonably necessary to its officers, directors, employees, agents, consultants, contractors, licensees, sublicensees, attorneys, accountants, sources of debt or equity financing, insurers, or licensors who need to know such information in order for such Party to perform its obligations or exercise its rights under this Agreement or the Material Transfer Agreement; provided that in each case, the disclosees are bound by written obligations or legal professional ethical duties and obligations of confidentiality and non-use no less stringent than those of this Agreement with a reasonable duration based on customary terms;
(c) such disclosure is reasonably necessary to any bona fide potential or actual investor, Acquiror, merger partner, or other financial or commercial partner for the sole purpose of evaluating an actual or potential investment, acquisition, or other business relationship; provided that, in each case, the disclosees are bound by written obligations of confidentiality and non-use no less stringent than to those of this Agreement with a reasonable duration based on customary terms, and further provided, that in the case of any such disclosure of Confidential Information to any actual or potential competitor of either Party, all competitively sensitive information (including, for the avoidance of doubt, all financial information) herein shall be redacted until, subject to Applicable Laws, the execution of a definitive agreement with such actual or potential competitor to implement a transaction with the receiving Party is imminent; or
(d) such disclosure is reasonably necessary to comply with Applicable Laws, including regulations promulgated by applicable security exchanges, court order, administrative subpoena, or other order.
Notwithstanding the foregoing, if a Party or its Affiliate is required to make a disclosure of the other Party’s Confidential Information pursuant to Section 11.2(a) or 11.2(d), then such disclosing Party shall (i) use its best efforts to promptly notify the other Party of such required disclosure, (ii) give the other Party an opportunity to seek confidential treatment and, upon the other Party’s request, such disclosing Party and its Affiliates and their respective Recipients shall use reasonable efforts to obtain, or to assist the other Party in obtaining, a protective order and/or other protection preventing the disclosure, protecting the confidentiality of the Confidential Information, and/or limiting the required disclosure and (iii) if the other Party is unsuccessful in its efforts pursuant to subsection (ii), disclose only that portion of the Confidential Information that such Party is legally required to disclose and under conditions that maximize the confidentiality of such disclosure wherever available.
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11.3 Technical Publication. The Parties acknowledge that scientific publications must be strictly monitored to prevent any adverse effect from premature publication of results of the Development activities hereunder. Accordingly, neither DRL nor any of its Affiliates or their respective contractors shall submit for publication, publish, and/or present an abstract or presentation with respect to the activities contemplated by the Development Plan (each of the foregoing, a “Publication”) without prior review and written approval by Journey. In connection with the foregoing, Journey shall apply the same standards and guidelines to its review and approval of Publications submitted by DRL or its Affiliates that Journey applies to its review and approval of Publications submitted by any of its employees.
11.4 Publicity; Terms of Agreement.
(a) Terms of Agreement. The Parties agree that the existence and terms of this Agreement are the Confidential Information of both Parties, subject to the special authorized disclosure provisions set forth in this Section 11.4.
(b) Initial Public Announcement. Journey may make a public announcement of the execution of this Agreement, which may be issued on or promptly after the Effective Date; provided that such public announcement is in the form attached hereto as Exhibit G.
(c) Subsequent Public Announcements. After release of such press release, if either Party or its Affiliates desire to make a public announcement concerning the existence or terms of this Agreement, or any clinical or regulatory announcements, then such Party shall provide a copy of the proposed text of such announcement to the other Party for its prior review and approval (except as otherwise provided), such approval not to be unreasonably withheld, conditioned, and/or delayed. A Party commenting on such a proposed announcement shall provide its comments, if any, within five (5) Business Days after receiving the announcement for review. In addition, where, in the opinion of the disclosing Party’s counsel, required by Applicable Laws, including regulations promulgated by applicable security exchanges, such Party or its Affiliate may, subject to Section 11.4(d), make a public announcement, press release, and/or other public disclosure under this Agreement. Notwithstanding anything to the contrary set forth in this Agreement, Journey, its Affiliates and its and their respective Sublicensees shall have the right to publicly disclose research, development, and commercial information (including with respect to regulatory matters) regarding the Products; provided, that (a) such disclosure is subject to the provisions of ARTICLE 11 with respect to DRL’s Confidential Information, and (b) except as required by Applicable Law, neither Party shall use the name of the other party or its Affiliates (or insignia, or any contraction, abbreviation or adaptation thereof) without the other Party’s prior written permission. Neither Party nor their Affiliates are required to seek the permission of the other Party to repeat any information regarding the terms of this Agreement that has already been publicly disclosed by such Party or its Affiliate, or by the other Party or its Affiliate, in accordance with this Section 11.4, if such information remains accurate as of such time.
(d) Required Disclosures. The Parties acknowledge that either or both Parties may be obligated to file under Applicable Laws a copy of this Agreement with the United States Securities and Exchange Commission or other Governmental Authorities and that either Party may be required to disclose information concerning this Agreement or portions of this Agreement with Governmental Authorities involved in the examination or enforcement of Patent rights or Regulatory Authorities in connection with the rights granted under this Agreement. Each Party may make such a required filing and shall use reasonable efforts to request confidential treatment of the commercial terms and sensitive technical terms hereof and thereof to the extent such confidential treatment is reasonably available to such Party under Applicable Law. In the event of any such filing, each Party shall provide the other Party with a copy of this Agreement marked to show provisions for which such Party intends to seek confidential treatment and shall reasonably consider and incorporate the other Party’s comments thereon to the extent consistent with the legal requirements and provided within ten (10) Business Days after provision of such copy (or such shorter period of time as may be required to comply with Applicable Law), with respect to the filing Party, governing disclosure of material agreements and material information that must be publicly filed and/or otherwise recorded.
11.5 Prior Confidentiality Agreements. The Parties are parties to that certain confidentiality agreement between the Parties with an Effective Date of November 29, 2018 entered into by Journey and DRL’s Affiliate, Promius Pharma, LLC (the “Prior CDA”). This Agreement, including this ARTICLE 11 shall supersede the Prior CDA and all Confidential Information disclosed pursuant to the Prior CDA shall be considered Confidential Information under this Agreement and subject to the obligations set forth in this ARTICLE 11.
11.6 Destruction of Confidential Information. Except as otherwise set forth in this Agreement, upon termination or expiration of this Agreement, the receiving Party will, at disclosing Party’s option and instruction, promptly destroy all of the disclosing Party’s Confidential Information in its possession, including all reproductions and copies thereof in any medium, except that the receiving Party may retain one copy for its legal files solely to monitor its continuing obligations and/or as reasonably necessary or useful to exercise its rights that expressly survive the termination or expiration of this Agreement.
11.7 Unauthorized Use. If either Party becomes aware or has knowledge of any unauthorized use and/or disclosure of the other Party’s Confidential Information, then it will promptly notify the other Party of such unauthorized use and/or disclosure.
11.8 Exclusive Property. Except where otherwise provided in this Agreement, all of the disclosing Party’s Confidential Information is the sole and exclusive property of the disclosing Party and the permitted use thereof by the receiving Party for purposes of its performance hereunder will not be deemed a license or other right of the receiving Party to use any such Confidential Information for any other purpose.
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ARTICLE 12
TERM AND TERMINATION
12.1 Term. This Agreement becomes effective on the Effective Date, and, unless sooner cancelled or terminated as specifically provided in this Agreement, continues in effect on a country-by-country basis until the expiration of the Revenue Percentage Term in a country and expires in its entirety upon the expiration of the Revenue Percentage Term in the last country in the Territory (the “Term”).
12.2 Termination for Bankruptcy. Subject to the applicable Bankruptcy Code in the country in which each Party exists under Applicable Law, each Party may terminate this Agreement in its entirety prior to the Transfer Date upon immediate written notice if the other Party (a) applies for or consents to the appointment of, or the taking of possession by, a receiver, custodian, trustee, and/or liquidator of itself or of all or a substantial part of its property, (b) makes a general assignment for the benefit of its creditors, (c) commences a voluntary case under the Bankruptcy Code of any country, (d) files a petition seeking to take advantage of any laws relating to bankruptcy, insolvency, reorganization, winding-up or composition or readjustment of debts, (e) fails to controvert in a timely and appropriate manner, or acquiesces in writing to, any petition filed against it in any involuntary case under the Bankruptcy Code of any country, (f) takes any corporate action to effect any of the foregoing, (g) has a proceeding or case commenced against it in any court of competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of all or any substantial part of its assets or (iii) similar relief under the Bankruptcy Code of any country, or an order, judgment, or decree approving any of the foregoing is entered, and, in each case ((i) through (iii)), such proceeding or case continues unstayed for a period of sixty (60) days, and/or (h) has an order for relief against it entered in an involuntary case under the Bankruptcy Code of any country.
12.3 Termination for Material Breach.
(a) Notice. If prior to the Transfer Date a Party materially breaches its obligations under this Agreement with respect to a Product or country or other jurisdiction in the Territory (the “Breaching Party”), then the other Party (the “Non-Breaching Party”) may give written notice to the Breaching Party identifying such material breach in reasonable detail (a “Default Notice”) and, other than material breaches related to failure to make payments due under this Agreement which shall be cured by the Breaching Party (a) within thirty (30) days with respect to any payments under ARTICLE 7, (b) seventy-five (75) days with respect to payment of any Development Costs under ARTICLE 4 and Section 8.10, and (c) one hundred and twenty (120) days with respect to payment to any Third Party by Journey that is performing any activities under the Development Plan, the Breaching Party shall cure such material breach within ninety (90) days after delivery of the Default Notice, provided that if such material breach is not reasonably capable of cure within such ninety (90) day period, then the Breaching Party may submit, within thirty (30) days after delivery of the Default Notice, a reasonable cure plan to remedy such material breach as soon as possible that is reasonably acceptable to the Non-Breaching Party, and upon such submission, the ninety (90) day cure period will be automatically extended for so long as the Breaching Party continues to use Commercially Reasonable Efforts to cure such material breach in accordance with such cure plan (subject to the dispute resolution procedures set forth in Section 12.3(b)). For clarity, uncured failure by Journey to timely pay any Journey Development Costs and/or DRL Development Costs is deemed to be a material breach of this Agreement.
(b) Process for Disputes. If a Non-Breaching Party provides a Default Notice to the Breaching Party pursuant to Section 12.3(a) as a result of a material breach (or alleged material breach) then, on or before the end of the cure period therefor, either Party shall have the right to refer the matter to the designated executive officer of DRL and the designated executive officer of Journey (or their respective designees) (the “Executive Officers”) pursuant to Section 13.1 before terminating this Agreement in accordance with the process set forth in Section 12.3(c). The cure period set forth in Section 12.3(a) shall be tolled during the pendency of any such dispute, and all of the terms of this Agreement will remain in effect and the Parties will continue to perform all of their respective obligations hereunder.
(c) Process for Termination. If the material breach is so cured within the remainder of the cure period, whether without or after the procedure set forth in Section 12.3(b), then this Agreement will remain in full force and effect. If the material breach is not cured within the remainder of the cure period or settled pursuant to Section 12.3(b), then, within thirty (30) days after the end of such cure period, the Non-Breaching Party shall send written notice to the Breaching Party advising of the termination of this Agreement in the applicable country in accordance with this Section 12.3(c).
12.4 Termination for Failure to Pay Second Installment. In the event that Journey has not paid the Second Installment to DRL on or within ninety (90) days from the Effective Date, DRL may immediately terminate this Agreement upon written notice to Journey. For clarity, in the event that this Agreement is terminated by DRL pursuant to this Section 12.4, except with regard to a breach by Journey of its obligations under ARTICLE 11, or fraud or willful misconduct of Journey, DRL’s sole remedy with respect to a claim that Journey breached its obligations under this Agreement shall be DRL’s right to keep the First Installment.
12.5 Termination for Cessation of Development. If at any time during the Development Period, Journey has ceased Development of the Product in the United States for six (6) consecutive months, then DRL may terminate this Agreement upon thirty (30) days’ written notice to Journey; provided that if Journey cures such cessation of Development of the Product in the United States during such thirty (30) day period, Journey shall be deemed to have not ceased Development of the Product in the United States. As used herein “ceased Development” means that Journey has not materially progressed Development of the Product in the United States as evidenced by protracted inactivity by Journey and is not caused by (i) DRL, (ii) Applicable Laws, (iii) action or inaction of any Third Party (including any Regulatory Authority) that is reasonably beyond Journey’s control, and/or (iv) due to an event that would constitute force majeure under Section 14.3.
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12.6 Termination for Patent Challenge. In the event that Journey or its Affiliates or Sublicensees (individually or in association with any other person or entity) initiates or otherwise is responsible for a Patent Challenge of any claim in (a) prior to the Transfer Date, any Product Patent or DRL Background Patents, or (b) on or after the Transfer Date, any DRL Background Patents, in either case, in a country, DRL shall have the right to terminate this Agreement in the applicable country upon written notice to Journey if such Patent Challenge is not subject to Journey’s withdrawal or cancellation under Applicable Law or, within thirty (30) days of an initial notice of breach by DRL, Journey has not cured the breach by withdrawing or cancelling such Patent Challenge.
12.7 Termination for Failure to Develop the Product in the European Union. If Journey fails to (a) initiate Development of the Product in the Field in the European Union within twenty-four (24) months from the receipt of Product Regulatory Approval, or (b) cause the First Commercial Sale of the Product to occur in at least one country the European Union within the European Union Approval Period, then in either case (a) or (b), DRL shall have the right to terminate this Agreement solely with respect to the European Union upon thirty (30) days’ written notice to Journey unless Journey, at Journey’s sole discretion, pays DRL the Launch Milestone Payment set forth as item number 1 in Table 7.4 (which applies to First Commercial Sale of the Product in the European Union).
12.8 No Other Termination after Transfer Date. Other than as provided for in Section 12.6 or Section 12.7, after the Transfer Date this Agreement cannot be terminated, in whole or in part, except by express written consent of both Parties.
12.9 Effect of Expiration or Termination.
(a) Expiration. Upon expiry of the Term on a country or other jurisdiction-by-country or other jurisdiction basis, all rights and licenses granted by a Party to the other Party under this Agreement with respect to the Product shall remain in effect in accordance with their terms and shall become irrevocable, unrestricted, and perpetual and all licenses related thereto will be fully paid up.
(b) Termination for any Reason. Upon termination of this Agreement by either Party for any reason, Journey shall not be entitled to any refund of any payments made by Journey to DRL. For clarity, this Section 12.9(b) shall not restrict Journey’s rights and remedies available at law or in equity.
(c) Certain Terminations by Journey prior to Transfer Date. In the event this Agreement is terminated by Journey pursuant to Section 12.2 (for DRL bankruptcy) or Section 12.3 (for DRL material breach) prior to the Transfer Date, all rights and licenses granted to DRL by Journey under this Agreement shall immediately terminate and be of no force or effect.
(d) Certain Terminations by DRL prior to Transfer Date. In the event this Agreement is terminated by DRL pursuant to Section 12.2 (for Journey bankruptcy) or Section 12.3 (for Journey material breach), Section 12.4 (for failure to pay Second Installment), Section 12.5 (for cessation of Development) or Section 12.6 (for patent challenge) prior to the Transfer Date, then each of the following shall apply:
(i) all rights and licenses granted to DRL by Journey under this Agreement shall immediately terminate and be of no force or effect;
(ii) subject to the terms and conditions of this Agreement, Journey hereby grants to DRL and its Affiliates an exclusive (even as to Journey), royalty-free, fully paid up, transferrable, and sublicensable license under the Journey Improvements to Exploit the Product anywhere in the world; and
(iii) if DRL determines, in its sole discretion, to wind down the activities under the Development Plan, DRL shall promptly commence winding down its activities under the Development Plan at Journey’s sole cost and expense, provided that Journey’s obligations with respect to such cost and expense will be limited to the cost and expense actually incurred by DRL in performing activities during the Wind Down Period and will not exceed the cost and expense of such activities as estimated during the Development Period and provided for in the Development Plan.
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(e) Termination after the Transfer Date.
(i) In the event this Agreement is terminated in the European Union by DRL pursuant to Section 12.7 (for Journey’s failure to Develop the Product in the European Union), then each of the following shall apply:
(A) all rights and licenses granted by DRL to Journey under this Agreement with respect to the European Union shall immediately terminate and be of no force or effect.
(B) subject to the terms and conditions of this Agreement, Journey hereby grants to DRL and its Affiliates an exclusive (even as to Journey), royalty-free, fully paid-up, transferable, sublicensable, perpetual and irrevocable license under the Product IP and Journey Improvements to Exploit the Product in the European Union.
(C) Journey, at its sole cost and expense, shall (A) promptly commence winding down its Commercialization activities in the European Union, and (B) use good faith efforts to complete any and all such wind-down Commercialization activities within three (3) months after the effective date of termination of this Agreement with respect to the European Union.
(D) To the extent requested by DRL, Journey, at its sole cost and expense, shall transfer, assign and convey to DRL all or part, as determined by DRL each of the following as they relate to the European Union: (A) the Product IP, (B) the Product Trademarks, (C) the Regulatory Approvals (or applications therefor), the Regulatory Materials, and the related clinical data contained or relied upon in any of the foregoing in Controlled by DRL as of the effective date of the termination of this Agreement with respect to the European Union, and (D) the contracts that relate to the Product, including any sublicenses to any Sublicensee.
(E) Journey shall provide assistance as may be requested by DRL and as is reasonably necessary or useful for DRL to continue Exploit the Products in the European Union, including (A) furnishing to DRL all Journey Know-How to the extent not already possessed by DRL relating to the European Union, (B) assigning or amending as appropriate and practicable, upon request of DRL, any agreements or arrangements with Third Party contractors to distribute, sell or otherwise Commercialize or Manufacture the Products in the European Union. To the extent that any such contract between Journey and a Third Party is not assignable to DRL or covers products in addition to the Products, Journey shall reasonably cooperate to the extent practicable with DRL to arrange to continue to provide such services for a reasonable time after the termination of this Agreement.
(ii) In the event this Agreement is terminated by DRL pursuant to Section 12.6 (for patent challenge) on or after the Transfer Date, then each of the following shall apply:
(A) all rights and licenses granted by DRL to Journey under this Agreement shall immediately terminate and be of no force or effect.
(B) all financial obligations of Journey pursuant to ARTICLE 7 shall remain in full force and effect.
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12.10 Rights in Bankruptcy.
(a) Applicability of 11 U.S.C. § 365(n). All rights and licenses (collectively, the “Intellectual Property”) granted by each Party to the other Party under or pursuant to this Agreement, including all rights and license to use improvements and enhancements developed during the Term, are intended to be, and shall otherwise be deemed to be, for purposes of the Bankruptcy Code or any analogous provisions in any other country or other jurisdiction, licenses of rights to “intellectual property” as defined under Section 101(35A) of the Bankruptcy Code. The Parties agree that the licensee of such Intellectual Property under this Agreement shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code, including Section 365(n) of the Bankruptcy Code, or any analogous provisions in any other country or other jurisdiction. All of the rights granted to either Party under this Agreement shall be deemed to exist immediately before the occurrence of any bankruptcy case in which the other Party is the debtor.
(b) Rights of non-Debtor Party in Bankruptcy. If a bankruptcy proceeding is commenced by or against either Party under the Bankruptcy Code or any analogous provisions in any other country or other jurisdiction, the non-debtor Party shall be entitled to a complete duplicate of (or complete access to, as appropriate) any Intellectual Property and all embodiments of such Intellectual Property, which, if not already in the non-debtor Party’s possession, shall be delivered to the non-debtor Party within five (5) Business Days of such request; provided, that the debtor Party is excused from its obligation to deliver the Intellectual Property to the extent the debtor Party continues to perform all of its obligations under this Agreement and the Agreement has not been rejected pursuant to the Bankruptcy Code or any analogous provision in any other country or other jurisdiction.
12.11 Survival. Termination or expiration of this Agreement (either in its entirety or with respect to one (1) or more countries) for any reason shall be without prejudice to any rights that shall have accrued to the benefit of a Party prior to such termination or expiration. For clarity, termination for breach by either Party under Section 12.3, shall not preclude the terminating Party from pursuing all rights and remedies it may have hereunder or at law or in equity with respect to any breach of this Agreement nor prejudice either Party’s right to obtain performance of any obligation. Notwithstanding anything to the contrary, in addition to those specified in Section 12.9, the following provisions will survive any expiration or termination of this Agreement: ARTICLE 1 (Definitions), ARTICLE 10 (Indemnification), ARTICLE 11 (Confidentiality), ARTICLE 13 (Dispute Resolution), ARTICLE 14 (Miscellaneous), and Sections 2.2(b) and (d) (Journey License Grant to DRL), 7.10 (Foreign Exchange), 7.11 (Payment Method; Late Payments), 7.12 (Records), 7.13 (Audits), 7.14 (Taxes), 7.15 (No Joint Venture), 8.1 (Ownership of Existing Know-How and Patents), 8.3 (Ownership of Journey Improvements), 8.6(c) (Cooperation), 8.9 (Infringement of Third Party Claim) (but with respect to Section 8.6(c) and 8.9, solely with respect to actions that are ongoing at the time of such termination), 12.9 (Effects of Termination) and 12.11 (Survival). Except as expressly set forth herein, all rights and obligations of the Parties hereunder shall terminate on the expiration or termination of this Agreement.
ARTICLE 13
DISPUTE RESOLUTION
13.1 Referral of Disputes to Parties Executive Officers; Arbitration. In the event of any disputes, controversies, and/or differences between the Parties, arising out of, in relation to, or in connection with this Agreement, including any alleged failure to perform, or breach, of this Agreement, or any issue relating to the validity, construction, interpretation, enforceability, performance, application, and/or termination of this Agreement (each a “Dispute”), then upon the written request of either Party, which request shall set forth the nature of the Dispute in sufficient detail to allow for meaningful good faith negotiations, the Dispute shall be first submitted to the Executive Officers of each Party, who shall have full authority to negotiate for and bind their respective Party, for attempted resolution by good faith negotiations within thirty (30) days. If the Dispute is not resolved within thirty (30) days following the written request for amicable resolution, or such other time as the Parties may mutually agree in writing, then (a) if the Dispute is an intellectual property Dispute relating to the scope, validity, enforceability, or infringement of any Patent or Trademark rights covering the Manufacture, use, importation, offer for sale, sale or other Exploitation of the Product, then such Dispute shall be resolved pursuant to Section 13.5, and (b) for any Dispute that is not one of the foregoing, then either Party may, initiate an arbitration pursuant to Exhibit H. Any determination pursuant to this Section 13.1 that a Party is in material breach of its material obligations hereunder shall specify a (nonexclusive) set of actions to be taken to cure such material breach, if feasible. Notwithstanding anything herein to the contrary, nothing in this Section 13.1 shall preclude either Party from seeking interim or provisional relief, including a temporary restraining order, preliminary injunction, and/or other interim equitable relief concerning a Dispute in accordance with Section 13.2, if reasonably deemed by such Party necessary to protect the interests of such Party. Any Party may bring an action or proceeding in any court of competent jurisdiction seeking temporary injunctive or equitable relief (or their non-U.S. equivalents), or to prevent irreparable harm preserve the status quo until any arbitration is commenced. The Parties agree that any court action or proceeding to compel or in support of arbitration or for provisional remedies in aid of arbitration, including any action to enforce the provisions of this Section, may be brought in the federal or state courts located in New York, New York (the “New York Courts”). The Parties hereby unconditionally and irrevocably submit to the non-exclusive jurisdiction of the New York Courts for such purpose, and in any action to enforce any arbitration award rendered hereunder and waive any right to stay or dismiss any such actions or proceedings brought before the New York Courts based on forum non conveniens or improper venue. Except in a proceeding to enforce the results of the arbitration or as otherwise required by Applicable Laws, no Party nor any arbitrator may disclose the existence, content, or results of any arbitration hereunder without the prior written agreement of both Parties. This ARTICLE 13 shall be specifically enforceable in any court of competent jurisdiction.
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13.2 Equitable Relief. Notwithstanding Section 13.1, each Party acknowledges that its material breach of Sections 4.3(b), 6.1, 6.3, 8.6(c), 9.6, 9.7, and/or ARTICLE 11 may cause irreparable harm to the other Party, which cannot be reasonably or adequately compensated by damages in an action at law. By reason thereof, each Party agrees that the other Party may, in addition to any other remedies it may have under this Agreement or otherwise, seek preliminary and permanent injunctive and other equitable relief from the New York Courts to prevent or curtail any actual or threatened breach of any Article or Section referenced in this Section that is reasonably likely to cause it irreparable harm. For the avoidance of doubt, unless DRL has properly terminated this Agreement prior to the Transfer Date in accordance with this Agreement, if (a) DRL has received the Second Installment and all Milestone Payments in full owed by Journey pursuant to Section 7.2, (b) DRL has been reimbursed in full for all DRL Development Costs that are not disputed in good faith by Journey, and (c) Journey has provided DRL with the notice described in Section 5.1, then the Assignment Agreements shall become effective and Journey will be entitled to specific performance, if necessary, to ensure the complete sale, assignment, transfer, and conveyance of such rights, title, and interest, in and to the Assigned Assets and to obtain DRL’s reasonable assistance in confirming such sale, assignment, transfer, and conveyance of the Assigned Assets.
13.3 Governing Law. This Agreement and all disputes arising out of or related to this Agreement or any breach hereof are governed by and construed under the laws of the State of New York, without giving effect to any choice of law principles that would require the application of the laws of a different state. The Parties agree to exclude the application to this Agreement of the United Nations Convention on Contracts for the International Sale of Goods.
13.4 Waiver of Jury Trial. EACH PARTY HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.4.
13.5 Patent and Trademark Disputes. Notwithstanding Section 13.1, any Dispute relating to the scope, validity, enforceability or infringement of any Patent or Trademark rights covering the Manufacture, use, importation, offer for sale, sale or other Exploitation of the Product will be submitted to a court of competent jurisdiction in the country or other jurisdiction in which such Patent or Trademark rights were granted or arose.
ARTICLE 14
MISCELLANEOUS
14.1 Entire Agreement; Conflict; Amendment. This Agreement, including the Exhibits attached hereto, together with the Assignment Agreements, the Pharmacovigilance Agreement and any other documents delivered pursuant hereto or thereto sets forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions, and understandings between the Parties hereto and thereto and their Affiliates with respect to the subject matter hereof and supersedes, as of the Effective Date, all prior and contemporaneous agreements and understandings between the Parties with respect to the subject matter hereof, including the Prior CDA. If a conflict exists between this Agreement and any ancillary agreement, this Agreement shall control. No subsequent alteration, amendment, change or addition to this Agreement will be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party.
14.2 Licenses and Permits. Until the expiration or termination of this Agreement, on a country-by-country basis, each Party shall, at its sole cost and expense, maintain in full force and effect all necessary licenses, permits and other authorizations required by Applicable Law in order to carry out its obligations under this Agreement.
14.3 Force Majeure. Both Parties will be excused from the performance of their obligations under this Agreement to the extent that such performance is prevented by force majeure; provided the non-performing Party promptly provides notice of the start and stop of such force majeure event to the other Party. Such excuse will continue for so long as the condition constituting force majeure continues, provided the non-performing Party takes reasonable efforts to remove the condition as soon as possible. For purposes of this Agreement, force majeure is a condition beyond the reasonable control of the affected Party and without fault of such affected Party, including an act of God, war, civil commotion, terrorist act, epidemic, pandemic, inoperability or default of public utilities or common carriers, destruction of production facilities or materials by fire, earthquake, storm or like catastrophe, and orders by a Governmental Authority. Performance shall be excused only to the extent of and during the reasonable continuance of such force majeure event. Any deadline or time for performance that falls during or subsequent to the occurrence of any of the force majeure events referred shall be automatically extended for a period of time equal to the period of such event. If a force majeure persists for more than ninety (90) days, then the Parties will discuss in good faith the modification of the Parties’ obligations under this Agreement.
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14.4 Notices. Any notice required or permitted to be given under this Agreement will be in writing, will specifically refer to this Agreement, and will be addressed to the appropriate Party at the address specified below or such other address as may be specified by such Party in writing in accordance with this Section 14.4, and will be deemed to have been given for all purposes (a) when received, if hand-delivered or sent by a reputable courier service, or (b) four (4) Business Days after mailing, if mailed by first class certified or registered airmail, postage prepaid, return receipt requested.
If to DRL: Dr. Reddy’s Laboratories Ltd.
[***]
And
[***]
With copies to (which will not constitute notice):
[***]
And
[***]
If to Journey: Journey Medical Corporation
9237 East Via De Ventura Blvd., Suite 105
Scottsdale, AZ 85258, USA
Attn: President & CEO
[***]
With a copy to (which will not constitute notice):
Journey Medical Corporation
9237 East Via De Ventura Blvd., Suite 105
Scottsdale, AZ 85258, USA
Attn: General Counsel
[***]
14.5 No Strict Construction; Interpretation; Headings. The language in this Agreement is to be construed in all cases according to its fair meaning. Except where the context otherwise requires, wherever used, the singular includes the plural, the plural the singular, the use of any gender applies to all genders. The word “or” is used in the disjunctive sense and the word “and” is used in the conjunctive sense (except that any list of terms joined by “and,” such as “A, B, and C,” herein will mean “any or all of such terms” (such as “any or all of A, B, and C” (e.g., A, A and B, or all of A, B, and C))). Whenever “and/or” is used in this Agreement, it means “A or B or both.” Whenever this Agreement refers to a number of days, unless specifically designated as Business Days, such number refers to calendar days. The captions of this Agreement are for convenience of reference only and in no way define, describe, extend, or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement. The terms “including,” “include,” or “includes,” mean including, without limiting the generality of any description preceding such term. The term “in writing” regarding any representation or warranty made herein means in any written form, including in an e-mail communication to the applicable Party or its Affiliates. Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document will be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or therein), (b) any reference to any Applicable Laws will be construed as referring to such Applicable Laws as from time to time enacted, repealed or amended, (c) any reference to any Person will be construed to include the Person’s successors and permitted assigns, (d) the words “herein,” “hereof,” and “hereunder” and words of similar import will each be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) any reference to the words “mutually agree” or “mutual written agreement” will not impose any obligation on either Party to agree to any terms relating thereto or to engage in discussions relating to such terms except as such Party may determine in such Party’s sole discretion, (f) all references to Sections and Exhibits will be construed to refer to Sections and Exhibits to this Agreement, (g) the words “copy” and “copies” and words of similar import when used in this Agreement include, to the extent available, electronic copies, files, storage, or databases containing the information, files, items, documents, or materials to which such words apply, and (h) wherever used, the word “shall” and the word “will” are each understood to be imperative or mandatory in nature and are interchangeable with one another. In interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption will apply against the Party which drafted such terms and provisions.
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14.6 Assignment. Neither Party may assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the other Party, such consent not to be unreasonably withheld, conditioned, and/or delayed, except that (a) after the Transfer Date, DRL may make such an assignment or transfer without Journey’s consent to its Affiliates or to a Third Party successor that acquires all or substantially all of the assets of the business of DRL to which this Agreement relates, and (b) after payment by Journey for all DRL Development Costs in-full and of all of the Milestone Payments set forth in Sections 7.1, 7.2 and 7.3 (which may be paid early by Journey at Journey’s discretion), Journey may make an assignment or transfer without DRL’s consent to its Affiliates or to a Third Party successor that acquires all or substantially all of the assets of the business of Journey to which this Agreement relates or in connection with an Acquisition Event, so long as Journey or the acquiror thereof timely makes any applicable payment owed to DRL under Section 7.8; provided that Journey shall remain responsible for, and agrees to pay, perform and discharge any and all debts and liabilities accrued prior to, and remain accruing as of, the effective date of such assignment or transfer. Any successor or assignee of rights or obligations permitted hereunder will, in writing to the other Party, expressly assume performance of the rights or obligations of the Party assigning rights to it under this Agreement. This Agreement will be binding on the successor of the assigning Party. Any assignment or attempted assignment by either Party in violation of the terms of this Section 14.6 is null, void, and of no legal effect.
14.7 Performance by Affiliates and/or Sublicensees. Each Party may discharge any obligations and exercise any right hereunder through any of its Affiliates and/or Sublicensees. Each Party hereby guarantees the performance by its Affiliates and Sublicensees or sublicensees, as applicable, of such Party’s obligations under this Agreement and shall cause its Affiliates and Sublicensees to comply with the provisions of this Agreement in connection with such performance. Any breach by a Party’s Affiliate and/or Sublicensee of any of such Party’s obligations under this Agreement also is a breach by such Party, and the other Party may proceed directly against such Party and/or Sublicensee without any obligation to first proceed against such Party’s Affiliate and/or Sublicensee.
14.8 Further Assurances and Actions. The Parties agree to execute and deliver such other documents, certificates, agreements, and other writings and materials, and to take such other actions as may be reasonably necessary to consummate and implement expeditiously the express purposes and intent contemplated by this Agreement.
14.9 No Third Party Beneficiaries. Except for the rights to indemnification provided for under ARTICLE 10, (a) all rights, benefits, and remedies under this Agreement are solely intended for the benefit of DRL and Journey, and (b) no Third Party shall have any rights whatsoever to (i) enforce any obligation contained in this Agreement; (ii) seek a benefit or remedy for any breach of this Agreement; or (iii) take any other action relating to this Agreement under any legal theory, including actions in contract, tort (including negligence, gross negligence, and strict liability), or as a defense, setoff, and/or counterclaim to any action or claim brought or made by the Parties.
14.10 Severability. Each of the provisions contained in this Agreement will be severable, and the unenforceability of one will not affect the enforceability of any others or of the remainder of this Agreement. If any one or more of the provisions of this Agreement, or the application thereof in any circumstances, is held to be invalid, illegal, and/or unenforceable in any respect for any reason, the Parties shall negotiate in good faith with a view to the substitution therefor of a suitable and equitable solution to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid provision; provided that the validity, legality, and/or enforceability of any such provision in every other respect and of the remaining provisions of this Agreement will not be in any way impaired thereby, it being intended that all of the rights and privileges of the Parties hereto will be enforceable to the fullest extent permitted by Applicable Law. The Parties agree that if a court finds that the scope of any one or more of the provisions contained in this Agreement shall, for any reason, be invalid, illegal, excessively broad, unreasonable, and/or unenforceable in any respect, then the court may modify such provision and render it reasonable.
14.11 No Waiver. Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit therefrom, but no such waiver will be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. The waiver, delay, and/or the failure of any Party to enforce or exercise any term, condition, and/or part of this Agreement at any time and/or in any one or more instances will not be deemed to be or construed as a waiver of the same or any other term, condition, and/or part, nor will it forfeit any rights, power, and/or privilege to future enforcement thereof. No single or partial exercise of any right, power, and/or privilege will preclude any other or further exercise of such right, power, and/or privilege or the exercise of any other right, power, and/or privilege. To the maximum extent permitted by Applicable Law, (a) no claim or right arising out of this Agreement and/or any of the documents referred to in this Agreement can be discharged by one Party, in whole or in part, by a waiver and/or renunciation of the claim or right unless in writing signed by the other Party; (b) no waiver that may be given by a Party will be applicable except in the specific instance for which it is given; and (c) no notice to and/or demand on one Party will be deemed to be a waiver of any obligation of that Party or of the right of the Party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. Except as expressly set forth in this Agreement, all rights and/or remedies available to a Party, whether under this Agreement or afforded by Applicable Law or otherwise, will be cumulative and not in the alternative to any other rights or remedies that may be available to such Party.
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14.12 Relationship of the Parties. Neither Party will have any responsibility for the hiring, termination, and/or compensation of the other Party’s employees or for any employee benefits of such employee. No employee or representative of a Party will have any authority to bind and/or obligate the other Party to this Agreement for any sum or in any manner whatsoever, and/or to create or impose any contractual or other liability on the other Party without said Party’s approval. For all purposes, and notwithstanding any other provision of this Agreement to the contrary, DRL and Journey shall be independent contractors and the legal relationship between the Parties shall not constitute a partnership, joint venture, or agency, including for all tax purposes. This Agreement is not a partnership or deemed partnership or an Association of Person (“AOP”) agreement. Nothing in this Agreement will be construed to establish a relationship of partners, AOPs, or joint venturers between the Parties. Neither DRL nor Journey shall make any statements, representations, and/or commitments of any kind, and/or to take any action that is binding on the other, in each case, without the prior consent of the other Party to do so.
14.13 English Language. This Agreement was prepared and executed in the English language, which language governs the interpretation of, and any dispute regarding, the terms and conditions of this Agreement.
14.14 Counterparts. This Agreement may be executed in one or more counterparts, each of which is an original, but all of which together constitute one and the same instrument. Each Party may execute this Agreement in AdobeTM Portable Document Format (“PDF”) sent by electronic mail. In addition, PDF signatures of authorized signatories of any Party will be deemed to be original signatures and will be valid and binding, and delivery of a PDF signature by any Party will constitute due execution and delivery of this Agreement.
14.15 Expenses. Each of the Parties will bear its own direct and indirect expenses incurred in connection with the negotiation and preparation of this Agreement and, except as set forth in this Agreement, the performance of the obligations contemplated hereby and thereby.
14.16 Acknowledgments and Representations. Each of the Parties acknowledges and represents that it has been represented by legal counsel regarding its rights and obligations under this Agreement, has participated in the drafting hereof, and fully understands the terms and conditions of this Agreement.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be executed by their duly authorized offices as of the Effective Date.
DR. REDDY’S LABORATORIES, LTD. | ||
By: | /s/ Erez Israeli | |
Name: Erez Israeli | ||
Title Chief Executive Officer |
JOURNEY MEDICAL CORPORATION | ||
By: | /s/ Claude Maraoui | |
Name: Claude Maraoui | ||
Title President & CEO |
[Signature Page to Assignment License, and Collaboration Agreement]
Exhibit 10.15
SHARED SERVICES AGREEMENT
This SHARED SERVICES AGREEMENT (this “Agreement”) is made and entered into by and between Fortress Biotech, Inc., a Delaware corporation (“FBIO”) and Journey Medical Corporation, a Delaware corporation (“Journey”) as of [ ], 2021 (the “Effective Date”). Each of FBIO and Journey may be referred to herein as a “Party,” or collectively as the “Parties.”
WHEREAS, the Parties wish to realize cost efficiencies made available through sharing certain aspects of their operations, including particularly shared employees and personnel, as well as other miscellaneous costs as may be agreed; and
WHEREAS, the Parties wish to allocate costs generated by the Parties’ activities in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties to this Agreement hereby agree as follows:
SECTION 1. Effective Date; Termination. The term of this Agreement will commence on the Effective Date and will continue until terminated by either Party by providing fifteen (15) days’ prior written notice to the other Party (or sooner upon the Parties’ mutual written consent). In addition, either Party may terminate this Agreement upon seven (7) days’ notice to the other Party based upon the other Party’s material breach of this Agreement which is not cured within such notice period.
SECTION 2. Relationship of the Parties. The Parties agree to share the costs of certain services which they individually require for the operation of the respective companies. The arrangements made pursuant to this Agreement shall not be deemed to constitute a partnership, joint venture, or agency relationship between the Parties. All arrangements contemplated by this Agreement, including the specific arrangements set forth in Section 3, are subject to modification upon mutual agreement of the Parties so long as such arrangements, so modified, continue to be consistent with the principles set forth in this Section 2.
SECTION 3. Employee Sharing Arrangement. In furtherance of the general principles set forth in Section 2 above, the Parties have agreed to allocate the costs for employees and other personnel of FBIO who may be assigned to provide services to Journey (the “Assigned Employees”). The Assigned Employees will be identified and set forth on Schedule I hereto from time to time, together with a percentage reflecting the Parties’ expectation of the amount of such Assigned Employee’s business time that will be spent providing services for Journey (the “Applicable Percentage”). Following the conclusion of each month while this Agreement is in effect, Journey will pay to FBIO an amount reflecting the compensation and benefits paid by FBIO (calculated using monthly salary, or relevant prorated salary, plus FICA, plus benefits, less employee benefit contribution) to each Assigned Employee with respect to such period, multiplied by the Applicable Percentage for each such Assigned Employee; provided, however, on an annual basis a bonus recommendation shall be agreed upon by the Parties, which shall be split between FBIO and Journey based upon the Applicable Percentage with respect to such period. The Parties shall review the work being performed hereunder at least quarterly and will work in good faith to adjust the Applicable Percentage as may be necessary for any Assigned Employee. Notwithstanding the foregoing, Journey may cease its use of any Assigned Employee upon written notice to FBIO, subject only to payment for all services rendered by such Assigned Employee through the date of termination.
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SECTION 4. Agreements Regarding Employees. The following provisions will apply with respect to the services provided to Journey by the Assigned Employees.
(a) The Assigned Employees will remain employees of FBIO, and FBIO will be responsible for payment of all employment-related compensation, including any wages, salary, overtime compensation, bonuses, or any other type of remuneration for employment. FBIO will also be responsible for withholding taxes as required by applicable federal, state, or local law, and for payment of applicable employment taxes and unemployment contributions. FBIO will provide workers compensation coverage as required by law for the Assigned Employees. FBIO will provide employee benefits for the Assigned Employees (including but not limited to health, life, and disability insurance, vacation and holiday pay, and retirement benefits) to the extent required by law and in accordance with its applicable policies.
(b) Journey will have the authority to supervise the Assigned Employees and direct and control the day-to-day activities of the Assigned Employees while providing services to Journey hereunder. Without limiting the foregoing, Journey will have the right to control the Assigned Employees’ conduct as necessary to ensure safety and security and to prevent fraud, misconduct, conflict of interest, gross neglect of duty or other unprofessional or unethical conduct in connection with the services provided hereunder.
(c) Journey will use reasonable efforts to provide the Assigned Employees with safe working conditions, and will require the Assigned Employees to comply with reasonable safety rules and procedures applicable to Journey’s own employees. Journey will cooperate with FBIO’s workers’ compensation carrier and liability insurance carrier with regard to any claims made with respect to the Assigned Employees.
(d) The Parties agree that all personnel services shall be performed: (i) in a prudent and efficient manner, (ii) in all material respects in accordance with all applicable laws, regulations, codes, permits and licenses; and (iii) in accordance with the standard business practices and procedures utilized by each Party in its own business.
SECTION 5. Confidentiality.
(a) Confidential Information. Each Party acknowledges and agrees that as a result of the performance of this Agreement, each Party may receive confidential and/or proprietary information of the other Party, or such other Party’s representatives or clients, including, without limitation, data, reports, research, test results or methods, formulae, analyses, designs, drawings, computer software, specifications, proposals, plans, business plans, product information and developments, strategies, projections and forecasts, budgets, information of or relating to representatives of a Party, information regarding patents, copyrights, trademarks, service marks, trade secrets or other intellectual property rights (or the subject matter thereof) and other materials and information relating to the business of a Party or its representatives (all of the foregoing materials and information, collectively, “Confidential Information”). Confidential Information includes all forms in which information is preserved or delivered, including, without limitation, information received or communicated in written, electronic, or oral form. Notwithstanding anything to the contrary contained in this Agreement, Confidential Information shall not include (i) information in the public domain other than by reason of the improper disclosure thereof by a Party, (ii) information that was in the possession of a Party at the time of its disclosure to such Party, and (iii) information independently developed by a Party.
(b) Non-disclosure. Each Party acknowledges and agrees that the Confidential Information of the other Party is and shall be the sole and exclusive property of such other Party or such other Party’s representatives. Each Party further agrees that it shall not directly or indirectly communicate or disclose to any person or entity any Confidential Information of the other Party or such other Party’s representatives, or use any such Confidential Information for any purpose, in either case without the prior written consent of such other Party; provided, however, that Confidential Information may be disclosed by either Party to the extent required by law, if the disclosing Party gives the other Party as much prior notice as is reasonably possible of any such disclosure. Each Party shall require its representatives who have access to any Confidential Information of the other Party or the other Party’s representatives to comply with the provisions of this Section and each Party agrees that a breach of this Agreement (including this Section) by a Party’s representatives shall constitute a breach by such Party.
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SECTION 6. Ownership of Intellectual Property. FBIO acknowledges that Journey owns all rights, title and interests (including, without limitation, all intellectual property rights) in and to all: (a) documents, analysis, reports, information, data, graphics and other materials and work product created, written, developed or delivered by the Assigned Employees in the performance of the services for Journey hereunder, and (b) methods, processes and inventions first conceived by any of Assigned Employees in performance of the services for Journey hereunder (collectively, “Inventions”). All works of authorship arising out of the Assigned Employees’ performance of the services for Journey hereunder shall be works made for hire as that term is defined under U.S. copyright laws, and Journey is the sole author and owner thereof. In addition, FBIO hereby assigns, agrees to assign, and upon creation of all Inventions automatically does assign to Journey, its successors and assigns, all rights, title and interests in and to the Inventions, including but not limited to: (i) patents, patent applications and patent rights throughout the world; (ii) rights associated with works of authorship throughout the world, including copyrights, copyright applications, copyright registrations, mask work rights, mask work applications and mask work registrations; and (iii) rights analogous to those set forth herein and any other proprietary rights relating to intangible property. With respect to works of authorship included in the Inventions, the foregoing assignment is undertaken in part as a contingency against the possibility that any Invention may not, by operation of law, be considered a work made for hire by FBIO for Journey. From time to time upon Journey’s request, FBIO agrees to confirm such assignments by execution and delivery of such written instruments as Journey may request, without additional consideration. FBIO hereby irrevocably grants Journey power of attorney to execute and deliver any such documents on FBIO’s behalf in its name and to do all other lawfully permitted acts to confirm, vest or transfer rights in the Inventions to Journey and to further the transfer, issuance, prosecution and maintenance of all intellectual property rights therein. Notwithstanding the foregoing, this Agreement does not grant a Party any right to Inventions created solely by the other Party or its agents during the term of this Agreement, except as described above.
SECTION 7. Indemnification; Limitation of Liability; Disclaimer of Warranty.
(a) Indemnification. FBIO will indemnify and hold Journey, its directors, officers, employees and agents harmless from and against any and all claims, causes of action, suits, investigations, losses, penalties, liabilities, costs, damages and/or fees (including, without limitation, reasonable attorneys’ fees) asserted against or incurred by any such persons or entities arising out of or relating to (1) FBIO’s failure or alleged failure to comply with its obligations pursuant to this Agreement, and/or (2) any allegedly willful, intentional, reckless, or negligent acts of FBIO (and/or its agents). Because Journey is directing, controlling and supervising the Assigned Employees during their provision of services to Journey, Journey agrees to indemnify and hold FBIO, its directors, officers, employees and agents harmless from and against any and all claims, causes of action, suits, investigations, losses, penalties, liabilities, costs, damages and/or fees (including, without limitation, reasonable attorneys’ fees) asserted against or incurred by any such persons or entities arising out of or related to (i) Journey’s failure or alleged failure to comply with its obligations pursuant to this Agreement, (ii) any allegedly willful, intentional, reckless, or negligent acts of Journey (and/or its agents), and/or (iii) the Assigned Employees’ performance of services for Journey.
(b) Limitation of Liability. Nothing in this Agreement shall be construed as allowing the recovery of incidental, consequential, punitive or other exemplary damages by either Party for the breach of any obligation contained in this Agreement by the other Party, and the Parties hereby waive any claim for incidental, consequential, punitive or other exemplary damages against the other Party under this Agreement.
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(c) Disclaimer of Warranty. FBIO is not delivering a product or supplying a specific service, and the Assigned Employees are providing services to Journey under the direction, control and supervision of Journey. As such, FBIO makes no representations or warranties, express or implied, with regard to the Assigned Employees or the services they perform, and all such representations and warranties are hereby expressly disclaimed.
SECTION 8. Survival. The expiration or termination of this Agreement shall not affect either Party’s obligation to pay any fees accrued, or to reimburse any cost or expense incurred, prior to the effective date of expiration or termination, it being acknowledged and agreed that such covenant and obligation shall survive the expiration or termination of this Agreement. In addition and without limiting the foregoing, the provisions of Sections 5, 6, 7, 8, 10, 11, 12, 14, 16 and 17 hereof will survive the termination of this Agreement for any reason.
SECTION 9. Force Majeure. Notwithstanding anything contained in this Agreement to the contrary, no Party shall be liable to any other Party for a failure to perform any obligation under this Agreement if such Party shall be prevented from such performance by reason of fires, strikes, labor unrest, embargoes, civil commotion, acts of civil or military authorities, acts of God, or other contingencies beyond the reasonable control of the Parties, including equipment failures, and all provisions herein requiring performance within a specified period shall be deemed to have been modified in order to extend the period in which such performance shall be required in order to accommodate the period of the pendency of such contingency which shall prevent such performance.
SECTION 10. Severability. If any provision of this Agreement or the application thereof to any person or circumstances shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected thereby, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had not been contained herein and shall be enforced to the greatest extent permitted by law, except that if such invalidity, illegality or unenforceability should change the basic economic positions of the Parties, they shall negotiate in good faith such changes in other terms as shall be practicable in order to restore them to their prior positions.
SECTION 11. Notices. Any notice, payment, demand, or other communication required or permitted to be given by any provision of this Agreement shall be deemed to have been delivered and given for all purposes (i) when delivered personally to the Party, (ii) when received, if sent by registered or certified mail, return receipt requested, postage and charges prepaid, or (iii) when received, if sent by Federal Express or similar overnight national courier, in any case addressed as follows (or to such other address as a Party may designate by notice to the other):
To FBIO:
Fortress Biotech, Inc.
2
Gansevoort, 9th Floor
New
York, NY 10014
Attention: General Counsel
To Journey:
Journey Medical Corporation
9237 E Via De Ventura Blvd. Suite 105
Scottsdale,
AZ 85258
Attention: General Counsel
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SECTION 12. Assignment; Binding Agreement. No Party may assign its rights and obligations, either in whole or in part, without the prior written consent of the other Party. The covenants, conditions and provisions hereof are and shall be for the exclusive benefit of the Parties and their permitted successors and assigns, and nothing herein, express or implied, is intended or shall be construed to confer upon or to give any person or entity other than the Parties and their permitted successors and assigns any right, remedy or claim, legal or equitable, under or by reason of this Agreement.
SECTION 13. Authority. Each Party represents that it has the full power and authority to enter into and perform this Agreement.
SECTION 14. Entire Agreement; Amendments. This Agreement constitutes the entire agreement of the Parties with respect to its subject matter and supersedes all prior representations, negotiations, agreements, and understandings of the Parties, oral and written, with respect to the subject matter hereof, all of which are deemed to have been merged herein. This Agreement may be modified only by an agreement in writing executed by all of the Parties.
SECTION 15. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same agreement. Facsimile or PDF reproductions of original signatures will be deemed binding for the purpose of the execution of this Agreement.
SECTION 16. Governing Law. This Agreement will be construed in accordance with the laws of the State of New York, without giving effect to the choice of law provisions of any jurisdiction.
SECTION 17. Other Definitional Provisions; Interpretation. The terms “hereof,” “herein” and “hereunder” and terms of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement. Section references contained in this Agreement are references to Sections in this Agreement, unless otherwise specified. Each defined term used in this Agreement has a comparable meaning when used in its plural or singular form. Each gender-specific term used in this Agreement has a comparable meaning whether used in a masculine, feminine or gender-neutral form. Whenever the term “including” is used in this Agreement (whether or not that term is followed by the phrase “but not limited to” or “without limitation” or words of similar effect) in connection with a listing of items within a particular classification, that listing shall be interpreted to be illustrative only and shall not be interpreted as a limitation on, or an exclusive listing of, the items within that classification. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof will arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.
[Signature page follows]
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IN WITNESS WHEREOF, the Parties have executed this Shared Services Agreement as of the date first written above.
FORTRESS BIOTECH, INC. | JOURNEY MEDICAL CORPORATION | |||
BY: | BY: | |||
Name: | Lindsay A. Rosenwald, M.D. | Name: | Claude Maraoui | |
Title: | President & CEO | Title: | President & CEO |
[Signature page to Shared Services Agreement]
SCHEDULE I
Assigned Employee | Applicable Percentage | Services Commencement Date | Journey Commencement Initials | FBIO Commencement Initials | Services Termination Date | Journey Termination Initials | FBIO Termination Initials |
Exhibit 10.16
Journey Medical Corporation
FUTURE ADVANCE PROMISSORY NOTE
FOR AMOUNTS ADVANCED AS SHOWN
ON EXHIBIT A ATTACHED HERETO
1. Principal Amounts. Journey Medical Corporation (f/k/a Coronado Dermatology, Inc.) (the "Company"), for value received, pursuant to this Future Advance Promissory Note (the "Note") hereby promises to pay to the order of Fortress Biotech, Inc. ("Fortress"), in lawful money of the United States of America, the principal amount as may be or have been advanced from time to time by Fortress as shown on Exhibit A attached hereto, with zero interest payable on such principal amounts. All principal amounts shall be paid on or before December 31, 2024. Any or all unpaid principal on this Note may be prepaid at any time without penalty. By its signature below, the Company acknowledges the dates and amounts of all prior advances by Fortress as of the issuance of this Note.
2. Advances. Advances under this Note shall be subject to the following terms and conditions:
(a) | draws may be made upon request by the Company with at least three (3) days advance notice to Fortress; |
(b) | in its sole and absolute discretion, Fortress may refuse to make any advance hereunder; |
(c) | all advances, at the time made, shall be noted on Exhibit A of this Note and shall be signed by an authorized officer of the Company; and |
(d) | no advances will be made if the outstanding principal hereunder exceeds Twenty Million Dollars ($20,000,000) at the time a request is made by the Company. |
3. Attorneys' Fees. If the indebtedness represented by this Note or any part thereof is collected in bankruptcy, receivership or other judicial proceedings or if this Note is placed in the hands of attorneys for collection after default, the Company agrees to pay, in addition to the principal payable hereunder, reasonable attorneys' fees and costs incurred by Fortress.
4. Notices. Any notice, other communication or payment required or permitted hereunder shall be in writing and shall be deemed to have been given upon receipt by the other party.
5. Acceleration. This Note shall become immediately due and payable if (i) the Company commences any proceeding in bankruptcy or for dissolution, liquidation, winding-up, composition or other relief under state or federal bankruptcy laws; or (ii) such proceedings are commenced against the Company, or a receiver or trustee is appointed for the Company or a substantial part of its property; or (iii) there is any material breach of any material covenant, warranty, representation or other term or condition of this Note at any time that is not cured within the time periods permitted therein, or if no cure period therein, within five (5) days after the date on which such breach occurs.
6. No Dilution or Impairment. The Company will not, by amendment of its charter documents or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Note.
7. Waivers. Company hereby waives presentment, demand for performance, notice of nonperformance, protest, notice of protest and notice of dishonor. No delay on the part of Fortress in exercising any right hereunder shall operate as a waiver of such right or any other right. This Note is being delivered in and shall be construed in accordance with the laws of the State of Delaware, without regard to the conflicts of laws provisions thereof.
8. Governing Law. This Note is being delivered in and shall be construed in accordance with the laws of the State of New York, without regard to the conflicts of laws provisions thereof.
ISSUED as of June 6, 2015.
Journey Medical Corporation | ||
By: | /s/ Claude Maraoui | |
Claude Maraoui | ||
Chief Executive Officer |
EXHIBIT A
SCHEDULE OF ADVANCES
Date of Advance | Amount Advanced | Signature | ||
Exhibit 10.17
INDEMNITY AGREEMENT
This Indemnity Agreement (this “Agreement”) dated as of [ ], 2021, is made by and between Journey Medical Corporation a Delaware corporation (the “Company”), and _________________ (“Indemnitee”).
Recitals
A. The Company desires to attract and retain the services of highly qualified individuals as directors, officers, employees and agents.
B. The Company’s bylaws (the “Bylaws”) require that the Company indemnify its directors, and empowers the Company to indemnify its officers, employees and agents, as authorized by the Delaware General Corporation Law, as amended (the “Code”), under which the Company is organized and such Bylaws expressly provide that the indemnification provided therein is not exclusive and contemplates that the Company may enter into separate agreements with its directors, officers and other persons to set forth specific indemnification provisions.
C. Indemnitee does not regard the protection currently provided by applicable law, the Company’s governing documents and available insurance as adequate under the present circumstances, and the Company has determined that Indemnitee and other directors, officers, employees and agents of the Company may not be willing to serve or continue to serve in such capacities without additional protection.
D. The Company desires and has requested Indemnitee to serve or continue to serve as a director, officer, employee or agent of the Company, as the case may be, and has proffered this Agreement to Indemnitee as an additional inducement to serve in such capacity.
E. Indemnitee is willing to serve, or to continue to serve, as a director, officer, employee or agent of the Company, as the case may be, if Indemnitee is furnished the indemnity provided for herein by the Company.
Agreement
Now Therefore, in consideration of the mutual covenants and agreements set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions.
(a) Agent. For purposes of this Agreement, the term “agent” of the Company means any person who: (i) is or was a director, officer, employee or other fiduciary of the Company or a subsidiary of the Company; or (ii) is or was serving at the request or for the convenience of, or representing the interests of, the Company or a subsidiary of the Company, as a director, officer, employee or other fiduciary of a foreign or domestic corporation, partnership, joint venture, trust or other enterprise.
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(b) Expenses. For purposes of this Agreement, the term “expenses” shall be broadly construed and shall include, without limitation, all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’, witness, or other professional fees and related disbursements, and other out-of-pocket costs of whatever nature), actually and reasonably incurred by Indemnitee in connection with the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under this Agreement, the Code or otherwise, and amounts paid in settlement by or on behalf of Indemnitee, but shall not include any judgments, fines or penalties actually levied against Indemnitee for such individual’s violations of law. The term “expenses” shall also include reasonable compensation for time spent by Indemnitee for which he is not compensated by the Company or any subsidiary or third party (i) for any period during which Indemnitee is not an agent, in the employment of, or providing services for compensation to, the Company or any subsidiary; and (ii) if the rate of compensation and estimated time involved is approved by the directors of the Company who are not parties to any action with respect to which expenses are incurred, for Indemnitee while an agent of, employed by, or providing services for compensation to, the Company or any subsidiary.
(c) Proceedings. For purposes of this Agreement, the term “proceeding” shall be broadly construed and shall include, without limitation, any threatened, pending, or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, and whether formal or informal in any case, in which Indemnitee was, is or will be involved as a party or otherwise by reason of: (i) the fact that Indemnitee is or was a director or officer of the Company; (ii) the fact that any action taken by Indemnitee or of any action on Indemnitee’s part while acting as director, officer, employee or agent of the Company; or (iii) the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and in any such case described above, whether or not serving in any such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses may be provided under this Agreement.
(d) Subsidiary. For purposes of this Agreement, the term “subsidiary” means any corporation or limited liability company of which more than 50% of the outstanding voting securities or equity interests are owned, directly or indirectly, by the Company and one or more of its subsidiaries, and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary.
(e) Independent Counsel. For purposes of this Agreement, the term “independent counsel” means a law firm, or a partner (or, if applicable, member) of such a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “independent counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.
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2. Agreement to Serve. Indemnitee will serve, or continue to serve, as a director, officer, employee or agent of the Company or any subsidiary, as the case may be, faithfully and to the best of his or her ability, at the will of such corporation (or under separate agreement, if such agreement exists), in the capacity Indemnitee currently serves as an agent of such corporation, so long as Indemnitee is duly appointed or elected and qualified in accordance with the applicable provisions of the bylaws or other applicable charter documents of such corporation, or until such time as Indemnitee tenders his or her resignation in writing; provided, however, that nothing contained in this Agreement is intended as an employment agreement between Indemnitee and the Company or any of its subsidiaries or to create any right to continued employment of Indemnitee with the Company or any of its subsidiaries in any capacity.
The Company acknowledges that it has entered into this Agreement and assumes the obligations imposed on it hereby, in addition to and separate from its obligations to Indemnitee under the Bylaws, to induce Indemnitee to serve, or continue to serve, as a director, officer, employee or agent of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director, officer, employee or agent of the Company.
3. Indemnification.
(a) Indemnification in Third Party Proceedings. Subject to Section 10 below, the Company shall indemnify Indemnitee to the fullest extent permitted by the Code, as the same may be amended from time to time (but, only to the extent that such amendment permits Indemnitee to broader indemnification rights than the Code permitted prior to adoption of such amendment), if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding, for any and all expenses, actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such proceeding.
(b) Indemnification in Derivative Actions and Direct Actions by the Company. Subject to Section 10 below, the Company shall indemnify Indemnitee to the fullest extent permitted by the Code, as the same may be amended from time to time (but, only to the extent that such amendment permits Indemnitee to broader indemnification rights than the Code permitted prior to adoption of such amendment), if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding by or in the right of the Company to procure a judgment in its favor, against any and all expenses actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement, or appeal of such proceedings.
(c) Indemnification of Related Parties. To the extent that Indemnitee is serving on the Board of Directors of the Company at the direction of any stockholder of the Company who, pursuant to the Certificate of Incorporation or contractual arrangement, shall have the right to elect or appoint Indemnitee to the Board (an “Appointing Stockholder”), the Appointing Stockholder will be entitled to indemnification hereunder for reasonable expenses to the extent arising by reason of the fact that Appointing Stockholder has the ability to appoint or elect Indemnitee to the Board of Directors of the Company, provided however, that the terms of this Agreement as they relate to procedures for indemnification of Indemnitee and advancement of expenses shall apply to any such indemnification of Appointing Stockholder.
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4. Indemnification of Expenses of Successful Party. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any proceeding or in defense of any claim, issue or matter therein, including the dismissal of any action without prejudice, the Company shall indemnify Indemnitee against all expenses actually and reasonably incurred in connection with the investigation, defense or appeal of such proceeding.
5. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses actually and reasonably incurred by Indemnitee in the investigation, defense, settlement or appeal of a proceeding, but is precluded by applicable law or the specific terms of this Agreement to indemnification for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.
6. Advancement of Expenses. To the extent not prohibited by law, the Company shall advance the expenses incurred by Indemnitee in connection with any proceeding, and such advancement shall be made within twenty (20) days after the receipt by the Company of a statement or statements requesting such advances (which shall include invoices received by Indemnitee in connection with such expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditures made that would cause Indemnitee to waive any privilege accorded by applicable law shall not be included with the invoice) and upon request of the Company, an undertaking to repay the advancement of expenses if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. Advances shall be unsecured, interest free and without regard to Indemnitee’s ability to repay the expenses. Advances shall include any and all expenses actually and reasonably incurred by Indemnitee pursuing an action to enforce Indemnitee’s right to indemnification under this Agreement, or otherwise and this right of advancement, including expenses incurred preparing and forwarding statements to the Company to support the advances claimed. Indemnitee acknowledges that the execution and delivery of this Agreement shall constitute an undertaking providing that Indemnitee shall, to the fullest extent required by law, repay the advance if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. The right to advances under this Section shall continue until final disposition of any proceeding, including any appeal therein. This Section 6 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 10(b).
7. Notice and Other Indemnification Procedures.
(a) Notification of Proceeding. Indemnitee will notify the Company in writing promptly upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any proceeding or matter which may be subject to indemnification or advancement of expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise.
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(b) Request for Indemnification and Indemnification Payments. Indemnitee shall notify the Company promptly in writing upon receiving notice of any demand, judgment or other requirement for payment that Indemnitee reasonably believes to be subject to indemnification under the terms of this Agreement, and shall request payment thereof by the Company. Indemnification payments requested by Indemnitee under Section 3 hereof shall be made by the Company no later than sixty (60) days after receipt of the written request of Indemnitee. Claims for advancement of expenses shall be made under the provisions of Section 6 herein.
(c) Application for Enforcement. In the event the Company fails to make timely payments as set forth in Sections 6 or 7(b) above, Indemnitee shall have the right to apply to any court of competent jurisdiction for the purpose of enforcing Indemnitee’s right to indemnification or advancement of expenses pursuant to this Agreement. In such an enforcement hearing or proceeding, the burden of proof shall be on the Company to prove that indemnification or advancement of expenses to Indemnitee is not required under this Agreement or permitted by applicable law. Any determination by the Company (including its Board of Directors, stockholders or independent counsel) that Indemnitee is not entitled to indemnification hereunder, shall not be a defense by the Company to the action nor create any presumption that Indemnitee is not entitled to indemnification or advancement of expenses hereunder.
(d) Indemnification of Certain Expenses. The Company shall indemnify Indemnitee against all expenses incurred in connection with any hearing or proceeding under this Section 7 unless the Company prevails in such hearing or proceeding on the merits in all material respects.
8. Assumption of Defense. In the event the Company shall be requested by Indemnitee to pay the expenses of any proceeding, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, or to participate to the extent permissible in such proceeding, with counsel reasonably acceptable to Indemnitee. Upon assumption of the defense by the Company and the retention of such counsel by the Company, the Company shall not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that Indemnitee shall have the right to employ separate counsel in such proceeding at Indemnitee’s sole cost and expense. Notwithstanding the foregoing, if Indemnitee’s counsel delivers a written notice to the Company stating that such counsel has reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or the Company shall not, in fact, have employed counsel or otherwise actively pursued the defense of such proceeding within a reasonable time, then in any such event the fees and expenses of Indemnitee’s counsel to defend such proceeding shall be subject to the indemnification and advancement of expenses provisions of this Agreement.
9. Insurance. To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any subsidiary (“D&O Insurance”), Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.
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10. Exceptions.
(a) Certain Matters. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee on account of any proceeding with respect to (i) remuneration paid to Indemnitee if it is determined by final judgment or other final adjudication that such remuneration was in violation of law (and, in this respect, both the Company and Indemnitee have been advised that the Securities and Exchange Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication, as indicated in Section 10(d) below); (ii) a final judgment rendered against Indemnitee for an accounting, disgorgement or repayment of profits made from the purchase or sale by Indemnitee of securities of the Company against Indemnitee or in connection with a settlement by or on behalf of Indemnitee to the extent it is acknowledged by Indemnitee and the Company that such amount paid in settlement resulted from Indemnitee's conduct from which Indemnitee received monetary personal profit, pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, or other provisions of any federal, state or local statute or rules and regulations thereunder; (iii) a final judgment or other final adjudication that Indemnitee’s conduct was in bad faith, knowingly fraudulent or deliberately dishonest or constituted willful misconduct (but only to the extent of such specific determination); or (iv) on account of conduct that is established by a final judgment as constituting a breach of Indemnitee’s duty of loyalty to the Company or resulting in any personal profit or advantage to which Indemnitee is not legally entitled. For purposes of the foregoing sentence, a final judgment or other adjudication may be reached in either the underlying proceeding or action in connection with which indemnification is sought or a separate proceeding or action to establish rights and liabilities under this Agreement.
(b) Claims Initiated by Indemnitee. Any provision herein to the contrary notwithstanding, the Company shall not be obligated to indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought by Indemnitee against the Company or its directors, officers, employees or other agents and not by way of defense, except (i) with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or under any other agreement, provision in the Bylaws or Certificate of Incorporation or applicable law, or (ii) with respect to any other proceeding initiated by Indemnitee that is either approved by the Board of Directors or Indemnitee’s participation is required by applicable law. However, indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors determines it to be appropriate.
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(c) Unauthorized Settlements. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee under this Agreement for any amounts paid in settlement of a proceeding effected without the Company’s written consent. Neither the Company nor Indemnitee shall unreasonably withhold consent to any proposed settlement; provided, however, that the Company may in any event decline to consent to (or to otherwise admit or agree to any liability for indemnification hereunder in respect of) any proposed settlement if the Company is also a party in such proceeding and determines in good faith that such settlement is not in the best interests of the Company and its stockholders.
(d) Securities Act Liabilities. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee or otherwise act in violation of any undertaking appearing in and required by the rules and regulations promulgated under the Securities Act of 1933, as amended (the “Act”), or in any registration statement filed with the SEC under the Act. Indemnitee acknowledges that paragraph (h) of Item 512 of Regulation S-K currently generally requires the Company to undertake in connection with any registration statement filed under the Act to submit the issue of the enforceability of Indemnitee’s rights under this Agreement in connection with any liability under the Act on public policy grounds to a court of appropriate jurisdiction and to be governed by any final adjudication of such issue. Indemnitee specifically agrees that any such undertaking shall supersede the provisions of this Agreement and to be bound by any such undertaking.
11. Nonexclusivity and Survival of Rights. The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may at any time be entitled under any provision of applicable law, the Company’s Certificate of Incorporation, Bylaws or other agreements, both as to action in Indemnitee’s official capacity and Indemnitee’s action as an agent of the Company, in any court in which a proceeding is brought, and Indemnitee’s rights hereunder shall continue after Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the heirs, executors, administrators and assigns of Indemnitee. The obligations and duties of the Company to Indemnitee under this Agreement shall be binding on the Company and its successors and assigns until terminated in accordance with its terms. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her corporate status prior to such amendment, alteration or repeal. To the extent that a change in the Code, whether by statute or judicial decision, permits greater indemnification or advancement of expenses than would be afforded currently under the Company’s Certificate of Incorporation, Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, by Indemnitee shall not prevent the concurrent assertion or employment of any other right or remedy by Indemnitee.
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12. Term. This Agreement shall continue until and terminate upon the later of: (a) five (5) years after the date that Indemnitee shall have ceased to serve as a director or and/or officer, employee or agent of the Company; or (b) one (1) year after the final termination of any proceeding, including any appeal then pending, in respect to which Indemnitee was granted rights of indemnification or advancement of expenses hereunder.
No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against an Indemnitee or an Indemnitee's estate, spouse, heirs, executors or personal or legal representatives after the expiration of five (5) years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such five-year period; provided, however, that if any shorter period of limitations is otherwise applicable to such cause of action, such shorter period shall govern.
13. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who, at the request and expense of the Company, shall execute all papers required and shall do everything that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.
14. Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to Indemnitee to the fullest extent now or hereafter permitted by law.
15. Severability. If any provision of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of the Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 14 hereof.
16. Amendment and Waiver. No supplement, modification, amendment, or cancellation of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
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17. Notice. Except as otherwise provided herein, any notice or demand which, by the provisions hereof, is required or which may be given to or served upon the parties hereto shall be in writing and, if by telegram, telecopy or telex, shall be deemed to have been validly served, given or delivered when sent, if by overnight delivery, courier or personal delivery, shall be deemed to have been validly served, given or delivered upon actual delivery and, if mailed, shall be deemed to have been validly served, given or delivered three (3) business days after deposit in the United States mail, as registered or certified mail, with proper postage prepaid and addressed to the party or parties to be notified at the addresses set forth on the signature page of this Agreement (or such other address(es) as a party may designate for itself by like notice). If to the Company, notices and demands shall be delivered to the attention of the Secretary of the Company.
18. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of New York, as applied to contracts between New York residents entered into and to be performed entirely within New York.
19. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement. Only one such counterpart need be produced to evidence the existence of this Agreement.
20. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.
21. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, written and oral, between the parties with respect to the subject matter of this Agreement; provided, however, that this Agreement is a supplement to and in furtherance of the Company’s Certificate of Incorporation, Bylaws, the Code and any other applicable law, and shall not be deemed a substitute therefor, and does not diminish or abrogate any rights of Indemnitee thereunder.
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Exhibit 10.16
In Witness Whereof, the parties hereto have entered into this Agreement effective as of the date first above written.
COMPANY |
By: |
Name: | ||
Title: |
INDEMNITEE |
Signature of Indemnitee |
Print or Type Name of Indemnitee |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the use of our report dated July 21, 2021, with respect to the consolidated financial statements of Journey Medical Corporation, included herein and to the reference to our firm under the heading “Experts” in the prospectus.
/s/ KPMG LLP
Short Hills, New Jersey
October 22, 2021